Attached files
| file | filename |
|---|---|
| EX-32.1 - EXHIBIT 32.1 - CDTI ADVANCED MATERIALS, INC. | cdti-93017exhibit321.htm |
| EX-31.2 - EXHIBIT 31.2 - CDTI ADVANCED MATERIALS, INC. | cdti-93017exhibit312.htm |
| EX-31.1 - EXHIBIT 31.1 - CDTI ADVANCED MATERIALS, INC. | cdti-93017exhibit311.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2017
or
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: 001-33710
CLEAN DIESEL TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Delaware | 06-1393453 | |
(State or other jurisdiction of | (I.R.S. Employer | |
incorporation or organization) | Identification No.) | |
1621 Fiske Place
Oxnard, CA 93033
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (805) 639-9458
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 þ No o
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 þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definition of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer o | Accelerated filer o | Non-accelerated filer o | Smaller reporting company þ |
Emerging growth company o | |||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ
As of November 7, 2017, the outstanding number of shares of the registrant’s common stock, par value $0.01 per share, was 15,802,936.
CLEAN DIESEL TECHNOLOGIES, INC.
TABLE OF CONTENTS
Page | |
i
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements
CLEAN DIESEL TECHNOLOGIES, INC.
Condensed Consolidated Balance Sheets
(in thousands, except share and per share amounts)
(unaudited)
September 30, 2017 | December 31, 2016 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash | $ | 3,341 | $ | 7,839 | |||
Accounts receivable, net | 3,669 | 5,398 | |||||
Inventories | 3,534 | 7,125 | |||||
Prepaid expenses and other current assets | 961 | 968 | |||||
Total current assets | 11,505 | 21,330 | |||||
Property and equipment, net | 935 | 1,158 | |||||
Intangible assets, net | 1,158 | 1,483 | |||||
Deferred tax asset | 670 | 554 | |||||
Other assets | 326 | 305 | |||||
Total assets | $ | 14,594 | $ | 24,830 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Line of credit | $ | — | $ | 1,458 | |||
Shareholder notes payable | — | 1,803 | |||||
Accounts payable | 4,243 | 5,979 | |||||
Accrued expenses and other current liabilities | 3,972 | 6,345 | |||||
Income taxes payable | 765 | 642 | |||||
Total current liabilities | 8,980 | 16,227 | |||||
Commitments and contingencies (Note 14) | |||||||
Stockholders’ equity: | |||||||
Preferred stock, par value $0.01 per share: authorized 100,000; no shares issued and outstanding | — | — | |||||
Common stock, par value $0.01 per share: authorized 50,000,000 shares; issued and outstanding 15,802,936 and 15,703,301 shares at September 30, 2017 and December 31, 2016, respectively | 158 | 157 | |||||
Additional paid-in capital | 238,340 | 237,838 | |||||
Accumulated other comprehensive loss | (5,979 | ) | (6,329 | ) | |||
Accumulated deficit | (226,905 | ) | (223,063 | ) | |||
Total stockholders’ equity | 5,614 | 8,603 | |||||
Total liabilities and stockholders’ equity | $ | 14,594 | $ | 24,830 | |||
See accompanying notes to condensed consolidated financial statements.
1
CLEAN DIESEL TECHNOLOGIES, INC.
Condensed Consolidated Statements of Comprehensive Loss
(in thousands, except per share amounts)
(unaudited)
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
As Restated | As Restated | ||||||||||||||
Revenues | $ | 6,857 | $ | 10,132 | $ | 23,470 | $ | 28,284 | |||||||
Cost of revenues | 5,370 | 7,425 | 18,605 | 21,153 | |||||||||||
Gross profit | 1,487 | 2,707 | 4,865 | 7,131 | |||||||||||
Operating expenses: | |||||||||||||||
Research and development | 1,155 | 762 | 3,211 | 3,955 | |||||||||||
Selling, general and administrative | 1,877 | 2,322 | 6,519 | 8,549 | |||||||||||
Severance and other charges | 235 | 571 | (384 | ) | 1,945 | ||||||||||
Total operating expenses | 3,267 | 3,655 | 9,346 | 14,449 | |||||||||||
Loss from operations | (1,780 | ) | (948 | ) | (4,481 | ) | (7,318 | ) | |||||||
Other income (expense): | |||||||||||||||
Interest expense, net | (93 | ) | (458 | ) | (260 | ) | (1,541 | ) | |||||||
Gain on bifurcated derivative liability | — | — | — | 2,754 | |||||||||||
Loss on extinguishment of debt | — | (10,780 | ) | (194 | ) | (12,410 | ) | ||||||||
Gain (loss) on change in fair value of liability-classified warrants | 738 | (705 | ) | 404 | 883 | ||||||||||
Gain on sale of DuraFit | 805 | — | 805 | — | |||||||||||
Other (expense) income, net | (149 | ) | 196 | (67 | ) | 824 | |||||||||
Total other income (expense) | 1,301 | (11,747 | ) | 688 | (9,490 | ) | |||||||||
Loss from operations before income taxes | (479 | ) | (12,695 | ) | (3,793 | ) | (16,808 | ) | |||||||
Income tax (benefit) expense | (119 | ) | (113 | ) | 49 | (1,232 | ) | ||||||||
Net loss | (360 | ) | (12,582 | ) | (3,842 | ) | (15,576 | ) | |||||||
Foreign currency translation adjustments | 129 | (190 | ) | 350 | (460 | ) | |||||||||
Comprehensive loss | $ | (231 | ) | $ | (12,772 | ) | $ | (3,492 | ) | $ | (16,036 | ) | |||
Basic and diluted net loss per common share: | |||||||||||||||
Net loss | $ | (0.02 | ) | $ | (2.14 | ) | $ | (0.24 | ) | $ | (3.49 | ) | |||
Weighted average shares outstanding – basic and diluted | 15,760 | 5,876 | 15,724 | 4,462 | |||||||||||
See accompanying notes to the condensed consolidated financial statements.
2
CLEAN DIESEL TECHNOLOGIES, INC.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Nine Months Ended September 30, | |||||||
2017 | 2016 | ||||||
As Restated | |||||||
Cash flows from operating activities: | |||||||
Net loss | $ | (3,842 | ) | $ | (15,576 | ) | |
Adjustments to reconcile net loss to net cash used in operating activities: | |||||||
Depreciation and amortization | 511 | 599 | |||||
Stock-based compensation expense | 304 | 841 | |||||
Gain on sale of DuraFit business | (805 | ) | — | ||||
Gain on change in fair value of liability-classified warrants | (404 | ) | (883 | ) | |||
Loss on extinguishment of debt | 194 | 12,410 | |||||
Gain on change in fair value of bifurcated derivative liability | — | (2,754 | ) | ||||
Loss (gain) on foreign currency transactions | 92 | (813 | ) | ||||
Amortization of debt discount | — | 398 | |||||
Other | 8 | (20 | ) | ||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | 1,795 | (1,583 | ) | ||||
Inventories | 1,169 | (666 | ) | ||||
Prepaid expenses and other assets | 23 | 170 | |||||
Accounts payable, accrued expenses and other current liabilities | (3,772 | ) | 3,929 | ||||
Income taxes payable | — | (102 | ) | ||||
Net cash used in operating activities | (4,727 | ) | (4,050 | ) | |||
Cash flows from investing activities: | |||||||
Purchases of property and equipment | — | (116 | ) | ||||
Proceeds from sale of DuraFit business | 3,337 | — | |||||
Proceeds from sale of property and equipment | — | 130 | |||||
Net cash provided by investing activities | 3,337 | 14 | |||||
Cash flows from financing activities: | |||||||
Net payments under demand line of credit | (1,458 | ) | (201 | ) | |||
Payments of shareholder notes payable | (2,000 | ) | — | ||||
Proceeds from exercise of stock options | 42 | — | |||||
Proceeds from issuance of debt | — | 3,750 | |||||
Proceeds from exercise of warrants | 122 | 247 | |||||
Net cash (used in) provided by financing activities | (3,294 | ) | 3,796 | ||||
Effect of exchange rates on cash | 186 | (20 | ) | ||||
Net change in cash | (4,498 | ) | (260 | ) | |||
Cash at beginning of period | 7,839 | 2,958 | |||||
Cash at end of period | $ | 3,341 | $ | 2,698 | |||
See accompanying notes to the condensed consolidated financial statements.
3
CLEAN DIESEL TECHNOLOGIES, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
1. Organization
Clean Diesel Technologies, Inc. is a leading provider of technology and solutions to the automotive emissions control markets. We possess market leading expertise in emissions catalyst design and engineering for automotive and off-road applications. In particular, we have a proven ability to develop proprietary materials incorporating various base metals that replace costly platinum group metals ("PGM") and rare earth metals in coatings on vehicle catalytic converters. Our business is driven by increasingly stringent global emission standards for internal combustion engines, which are major sources of a variety of harmful pollutants.
We deliver our catalyst technology through the supply of materials and technology used in the catalyst coating process as well as finished products such as coated substrates and emission control systems. We supply our proprietary catalyst technologies to catalyst manufacturers, vehicle and equipment manufacturers, integrators and retrofitters.
We produce coated substrates at our ISO Technical Specifications certified manufacturing facility in Oxnard, California. In some instances, the coated substrates we produce are integrated into exhaust systems by third-party manufacturers before being shipped to our end customer. We also supply coated substrates directly to exhaust systems manufacturers for incorporation in their own products.
Over the past decade, we have developed several generations of high performance catalysts, including our low-PGM mixed phase catalysts, or MPC® that are used on certain new Honda vehicles. During the same period we have developed the ability to deliver our catalyst technology to other catalyst manufacturers in the form of functional powders or material systems. Recently, we have expanded our offering of material systems beyond MPC® to include new synergized-PGM diesel oxidation catalysts, or SPGM™ DOCs, base-metal activated rhodium support, or BMARS™, and Spinel™ technologies. Most catalytic systems require significant amounts of costly PGMs to operate effectively. Our family of unique high-performance material systems, featuring inexpensive base-metals with low PGM content will enable further advances in catalyst performance. We are marketing these new catalyst technologies to other catalyst manufacturers in a proprietary powder form, which will allow them to capture the benefits of our advanced catalyst technology in their own manufacturing operations and will provide a new source of revenue for the Company.
2. Liquidity and Going Concern
The accompanying condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern. Therefore, the condensed consolidated financial statements contemplate the realization of assets and liquidation of liabilities in the ordinary course of business. The Company has suffered recurring losses and negative cash flows from operations since inception, resulting in an accumulated deficit of $226.9 million at September 30, 2017. The Company has funded its operations through asset sales, credit facilities and other borrowings and equity sales. At September 30, 2017, the Company had $3.3 million in cash.
The Company’s continuation as a going concern is dependent upon its ability to obtain adequate financing, which the Company has successfully secured since inception, including financing from equity sales and asset divestitures. However, there is no assurance that the Company will be able to achieve projected levels of revenue and maintain access to sufficient working capital, and accordingly, there is substantial doubt as to whether the Company’s existing cash resources and working capital are sufficient to enable it to continue its operations within one year from the financial statement issuance date. The Company is currently working towards obtaining a new credit facility that would provide the Company the flexibility it needs as it implements its new business strategy. If the Company is unable to obtain the necessary capital, it will be forced to license or liquidate its assets, significantly curtail or cease its operations and/or seek reorganization under the U.S. Bankruptcy Code.
On May 19, 2015, the Company filed a shelf registration statement on Form S-3 with the SEC, which was declared effective on November 17, 2015. The Form S-3 permits the Company to sell in one or more registered transactions up to an aggregate of $50.0 million of various securities not to exceed one-third of the Company’s public float in any 12-month period. As of September 30, 2017, the Company had sold an aggregate of $3.1 million using the Form S-3.
4
3. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the SEC for interim financial reporting. In the opinion of management, all normal recurring accruals and adjustments that are necessary for a fair presentation have been reflected. Intercompany transactions and balances have been eliminated in consolidation. The results reported in these unaudited condensed consolidated financial statements should not necessarily be taken as indicative of results that may be expected for the entire year. Certain financial information that is normally included in annual financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), but is not required for interim reporting purposes, has been condensed or omitted. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016, filed with the SEC on April 7, 2017.
On July 22, 2016, the Company effected a one-for-five reverse stock split. All share and per share information presented in these unaudited condensed consolidated financial statements for periods prior to July 22, 2016 has been retroactively adjusted to reflect the reverse stock split.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the U.S requires management of the Company to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent liabilities. These estimates and assumptions are based on management's best estimates and judgment. On an ongoing basis, the Company evaluates its estimates and assumptions, including those related to impairment of long-lived assets, stock-based compensation, the fair value of financial instruments including warrants, allowance for doubtful accounts, inventory valuation, taxes and contingent and accrued liabilities. The Company bases its estimates on historical experience and various other factors, including the current economic environment, which it believes to be reasonable under the circumstances. Estimates and assumptions are adjusted when facts and circumstances dictate. Actual results may differ from these estimates under different assumptions and conditions. Management believes that the estimates are reasonable.
Recent Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-9, "Revenue from Contracts with Customers (Topic 606)". ASU 2014-9 supersedes the revenue recognition requirements in "Revenue Recognition (Topic 605)". ASU 2014-9 requires entities to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. In July 2015, the FASB finalized the delay of the effective date by one year, making the new standard effective for interim periods and annual periods beginning after December 15, 2017. Early adoption is permitted, but it is not permitted earlier than the original effective date. ASU 2014-9 provides for either full retrospective adoption or a modified retrospective adoption by which it is applied only to the most current period presented. While the Company has not finalized the impact of the adoption of ASU 2014-9 on its consolidated financial statements, the Company does not expect the adoption to have a material impact.
In July 2015, the FASB issued ASU 2015-11, "Inventory (Topic 330): Simplifying the Measurement of Inventory". ASU 2015-11 changes the measurement principle for inventory from the "lower of cost or market" to "lower of cost and net realizable value." Net realizable value is defined as the "estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation." ASU 2015-11 eliminates the guidance that entities consider replacement cost or net realizable value less an approximately normal profit margin in the subsequent measurement of inventory when cost is determined on a first-in, first-out or average cost basis. It is effective for annual reporting periods beginning after December 15, 2016, including interim periods within those fiscal years. The Company implemented ASU 2015-11 in the first quarter 2017. The adoption of this provision did not have a material impact on the Company's consolidated financial statements.
In January 2016, the FASB issued ASU 2016-1, "Recognition and Measurement of Financial Assets and Financial Liabilities". ASU 2016-1 requires equity investments to be measured at fair value with changes in fair value recognized in net income; simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment; eliminates the requirement for public business entities to disclose the method(s) and
5
significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments; requires separate presentation of financial assets and financial liabilities by measurement category and form of financial assets on the balance sheet or the accompanying notes to the financial statements and clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity's other deferred tax assets. ASU 2016-1 is effective for financial statements issued for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company is evaluating the impact of adoption of ASU 2016-1 on its consolidated financial statements.
In February 2016, the FASB issued ASU 2016-2, "Leases (Topic 842)". ASU 2016-2 requires the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous U.S. generally accepted accounting principles. It is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. Entities are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The Company is evaluating the impact of adoption of ASU 2016-2 on its consolidated financial statements.
In March 2016, the FASB issued ASU 2016-09, “Compensation - Stock Compensation: Improvements to Employee Share-Based Payment Accounting”. ASU 2016-09 will change how companies account for certain aspects of share-based payments to employees. Entities will be required to recognize the income tax effects of awards in the statement of income when the awards vest or are settled, the guidance on employers’ accounting for an employee’s use of shares to satisfy the employer’s statutory income tax withholding obligation and for forfeitures is changing and the update requires companies to present excess tax benefits as an operating activity on the statement of cash flows rather than as a financing activity. ASU 2016-09 is effective for annual periods beginning after December 15, 2016 and interim periods within those annual periods. Early adoption is permitted. The Company adopted ASU 2016-09 in the first quarter of 2017. The Company elected to account for the forfeitures when they occur. The adoption of this provision did not have a material impact on the Company's consolidated financial statements.
In August 2016, the FASB issued ASU 2016-15, “Classification of Certain Cash Receipts and Cash Payments: a consensus of the Emerging Task Force”. ASU 2016-15 provides guidance on how certain cash receipts and payments are presented and classified in the statement of cash flows, including debt prepayment or debt extinguishment costs, contingent consideration payments made after a business combination, and separately identifiable cash flows and application of the predominance principle. The standard is intended to reduce current diversity in practice. The standard will be effective for annual reporting periods beginning after December 15, 2017, including interim periods within those reporting periods. Early adoption is permitted. The Company is currently evaluating the impact of the adoption of this accounting standard on its consolidated financial statements.
In October 2016, the FASB issued ASU 2016-16, “Intra-Entity Transfers of Assets of Other Than Inventory.” Current GAAP prohibits the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party. ASU 2016-16 updates the current guidance by requiring that entities recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The amendments in this ASU do not change GAAP for the pre-tax effects of an intra-entity asset transfer under Topic 810, Consolidation, or for the income tax effects of an intra-entity transfer of inventory. The standard will be effective for annual reporting periods beginning after December 15, 2017, including interim periods within those reporting periods. Early adoption is permitted. The Company is currently evaluating the impact of the adoption of this accounting standard on its consolidated financial statements.
On May 10, 2017, the FASB issued ASU 2017-09, Compensation-Stock Compensation (Topic 718) - Scope of Modification Accounting. The guidance clarifies when to account for a change to the terms or conditions of a share-based payment award as a modification. Under the new guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award (as equity or liability) changes as a result of the change in terms or conditions. The standard is effective for financial statements issued for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. The Company believes the adoption of ASU 2017-09 will not have a significant impact on its consolidated financial statements.
In July 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815). The amendments in Part I of this Update change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. The amendments in Part II of this
6
Update recharacterize the indefinite deferral of certain provisions of Topic 480 that now are presented as pending content in the Codification, to a scope exception. Those amendments do not have an accounting effect. For public business entities, the amendments in Part I of this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted for all entities, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The Company is currently evaluating the impact that ASU 2017-11 will have on its consolidated financial statements.
4. Sale of DuraFit business
On September 8, 2017, the Company entered into an Asset Purchase Agreement with AP Emissions Technologies, LLC (“AP") wherein the Company sold substantially all of the assets of its DuraFit and private label OEM replacement diesel particulate filter ("DPF") and diesel oxidation catalysts ("DOC") business for approximately $3.3 million in cash. The assets sold included all tangible and intangible assets of that business, including brands, intellectual property, equipment, customer agreements, private label programs and inventory. As a result of the transaction, for the three and nine months ended September 30, 2017, the Company recorded a gain on sale of DuraFit of approximately $0.8 million. The Company will continue to serve this market through coating arrangements and its powder-to-coat technology.
Concurrently with the sale of the DuraFit business, the Company repaid in full all indebtedness owed to FGI Worldwide LLC, successor to Faunus Group International, Inc. ("FGI"), and terminated the Company's loan agreements with FGI and all commitments thereunder. In connection with termination of the loan agreements, FGI terminated and released all of its security interests in and liens on all of the assets of the Company and its subsidiaries. Of the proceeds received by the Company from the sale of the DuraFit business, the Company applied approximately $315,000 in repayment of the outstanding indebtedness to FGI. The Company did not incur any prepayment or early termination penalties in connection with termination of the FGI loan agreements.
5. Inventories
Inventories consists of the following (in thousands):
September 30, 2017 | December 31, 2016 | ||||||
Raw materials | $ | 1,372 | $ | 3,291 | |||
Work in process | 437 | 790 | |||||
Finished goods | 1,725 | 3,044 | |||||
Total inventories | $ | 3,534 | $ | 7,125 | |||
6. Goodwill and Intangible Assets
Goodwill
The Company recognized an impairment charge of $4.7 million for the year ended December 31, 2016. As such, the Company has no goodwill at September 30, 2017 and December 31, 2016, respectively.
Intangible Assets
Intangible assets consist of the following (in thousands):
Useful Life in Years | September 30, 2017 | December 31, 2016 | |||||||
Trade name | 15 - 20 | $ | 1,209 | $ | 1,204 | ||||
Patents and know-how | 5 - 12 | 4,113 | 4,090 | ||||||
Customer relationships | 4 - 8 | 752 | 721 | ||||||
6,074 | 6,015 | ||||||||
Less accumulated amortization | (4,916 | ) | (4,532 | ) | |||||
$ | 1,158 | $ | 1,483 | ||||||
7
The Company recorded amortization expense related to amortizable intangible assets of $0.1 million and $0.1 million during the three months ended September 30, 2017 and 2016, respectively and $0.3 million and $0.3 million for the nine months ended September 30, 2017 and 2016, respectively.
Estimated amortization expense for each of the next five years is as follows (in thousands):
Years ending December 31: | |||
Remainder of 2017 | $ | 105 | |
2018 | 161 | ||
2019 | 161 | ||
2020 | 161 | ||
2021 | 161 | ||
Thereafter | 409 | ||
$ | 1,158 | ||
7. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consist of the following (in thousands):
September 30, 2017 | December 31, 2016 | ||||||
Accrued salaries and benefits | $ | 526 | $ | 759 | |||
Accrued severance and other charges (1) | 392 | 1,738 | |||||
Accrued warranty (2) | 65 | 338 | |||||
Warrant liability (3) | 788 | 1,226 | |||||
Liability for consigned precious metals | 1,695 | 1,282 | |||||
Other | 506 | 1,002 | |||||
$ | 3,972 | $ | 6,345 | ||||
(1) | For additional information, refer to Note 8, “Severance and Other Charges”. |
(2) | For additional information, refer to Note 9, “Accrued Warranty”. |
(3) | For additional information, refer to Note 11, “Warrants” and Note 12, “Fair Value Measurements”. |
8. Severance and Other Charges
Severance and other charges consist of employee severance expense and lease exit costs, and the following summarizes the activity (in thousands):
Severance | Lease Exit Costs | Total | |||||||||
December 31, 2015 | $ | 1,092 | $ | — | $ | 1,092 | |||||
Provision | 791 | 570 | 1,361 | ||||||||
Payments | (1,000 | ) | — | (1,000 | ) | ||||||
September 30, 2016 | $ | 883 | $ | 570 | $ | 1,453 | |||||
Severance | Lease Exit Costs | Total | |||||||||
December 31, 2016 | $ | 718 | $ | 1,020 | $ | 1,738 | |||||
Provision (reversals) | 235 | (619 | ) | (384 | ) | ||||||
Payments | (576 | ) | (386 | ) | (962 | ) | |||||
September 30, 2017 | $ | 377 | $ | 15 | $ | 392 | |||||
8
At September 30, 2017 and December 31, 2016, the balance of severance and other charges were recorded in accrued expenses and other liabilities in the condensed consolidated balance sheet. In the third quarter of 2017, the Company incurred severance charges related to the sale of its Durafit business as well as the contraction in its operations team in response to the permanent decrease in sales to Honda. In the second quarter of 2017, the Company reached an agreement with the property owner of its former Canadian facility to exit the lease prior to its December 2018 termination. Severance and other charges reflect the reduction of the liability for the remaining estimated costs relative to the closed facility.
9. Accrued Warranty
The Company establishes reserves for future product warranty costs that are expected to be incurred pursuant to specific warranty provisions with its customers. The Company generally warrants its products against defects between one and five years from date of shipment, depending on the product. The warranty reserves are established at the time of sale and updated throughout the warranty period based upon numerous factors including historical warranty return rates and expenses over various warranty periods. Historically, warranty returns have not been material.
The following summarizes the activity in the Company’s accrual for product warranty (in thousands):
Nine Months Ended September 30, | |||||||
2017 | 2016 | ||||||
Balance at beginning of period | $ | 338 | $ | 228 | |||
Accrued warranty expense | (16 | ) | 387 | ||||
Warranty claims paid | (152 | ) | (301 | ) | |||
Transferred in sale of DuraFit | (110 | ) | — | ||||
Translation adjustment | 5 | — | |||||
Balance at end of period | $ | 65 | $ | 314 | |||
At September 30, 2017 and December 31, 2016, the balance of accrued warranty was recorded in accrued expenses and other liabilities in the condensed consolidated balance sheet. As part of the sale of its Durafit product line, the Company transferred its warranty liability for Durafit to the buyer.
10. Debt
Notes payable consists of the following (in thousands):
September 30, 2017 | December 31, 2016 | ||||||
Line of credit with FGI | $ | — | $ | 1,458 | |||
$2.0 million, 8% shareholder note due 2017 (Kanis S.A.) (1) | — | 1,803 | |||||
— | 3,261 | ||||||
Less current portion | — | (3,261 | ) | ||||
$ | — | $ | — | ||||
(1) | Debt discount related to extinguishment and amendment of previous outstanding debt. The aggregate amount of unamortized debt discount was $0.2 million at December 31, 2016. For additional information, refer to the respective discussions below. |
Line of credit with FGI
The Company maintained a $7.5 million secured demand facility with FGI backed by the Company's receivables and inventory. The Company also granted FGI a first lien collateral interest in substantially all of the Company's assets. On September 8, 2017, concurrent with the sale of the DuraFit business (see Note 4), the Company repaid all outstanding balances under this demand facility and terminated the loan agreements and all commitments thereunder. In connection with termination of the loan agreements, FGI terminated and released all of its security interests in and liens on all of the assets of the Company and its subsidiaries.
9
The interest rate on advances or borrowings under the FGI facility was the greater of (i) 6.50% per annum and (ii) 2.50% per annum above the prime rate, as defined in the FGI facility and was 6.50% at December 31, 2016.
Kanis S. A. Indebtedness
On April 1, 2016, the Company borrowed $2.0 million from Kanis S.A. pursuant to a promissory note with an interest rate of 8% per annum and a maturity date of September 30, 2017 (see Note 18).
In January 2017, the Company repaid the entire $2.0 million balance and recorded a loss on extinguishment of $0.2 million.
11. Warrants
Warrants outstanding and exercisable are summarized as follows:
Shares(1) | Weighted Average Exercise Price | Range of Exercise Prices | ||||||
Outstanding at December 31, 2016 | 979,869 | $ | 6.36 | $2.20-$21.00 | ||||
Exercised | (75,399 | ) | $ | 19.46 | $13.25-$21.00 | |||
Expired | — | $ | — | $— | ||||
Outstanding at September 30, 2017 | 904,470 | $ | 5.27 | $2.20-$21.00 | ||||
Exercisable at September 30, 2017 | 904,470 | $ | 5.27 | $2.20-$21.00 | ||||
(1) Outstanding and exercisable information includes 21,920 equity-classified warrants.
Warrant Liability
The Company's warrant liability is carried at fair value and is classified as Level 3 in the fair value hierarchy because the warrants are valued based on unobservable inputs.
The Company determines the fair value of its warrant liability using the Black-Scholes option-pricing model unless the awards are subject to market conditions, in which case it uses a Monte Carlo simulation model, which utilizes multiple input variables to estimate the probability that market conditions will be achieved. These models are dependent on several variables such as the instrument's expected term, expected strike price, expected risk-free interest rate over the expected term of the instrument, expected dividend yield rate over the expected term and the expected volatility. The expected strike price for warrants with full-ratchet down-round price protection is based on a weighted average probability analysis of the strike price changes expected during the term as a result of the full-ratchet down-round price protection.
The assumptions used in the Black-Scholes option-pricing model to estimate the fair value of the warrant liability as of September 30, 2017 were as follows:
Expected volatility | 88.7-101.0 |
Risk-free interest rate | 1.47%-1.80% |
Dividend yield | — |
Expected life in years | 2.0-4.2 |
10
The assumptions used in the Monte Carlo simulation model to estimate the fair value of the warrant liability as of September 30, 2017 were as follows:
Expected volatility | 62.0-89.7 |
Risk-free interest rate | 1.26%-1.49% |
Dividend yield | — |
Expected life in years | 0.8-2.1 |
The warrant liability, included in accrued expenses and other current liabilities in the accompanying consolidated balance sheets, is re-measured at the end of each reporting period with changes in fair value recognized in other income (expense), net in the consolidated statements of comprehensive loss. Upon the exercise of a warrant that is classified as a liability, the fair value of the warrant exercised is re-measured on the exercise date and reclassified from warrant liability to additional paid-in capital.
12. Fair Value Measurements
The Company measures certain financial assets and liabilities at fair value in accordance with a hierarchy which requires an entity to maximize the use of observable inputs which reflect market data obtained from independent sources and minimize the use of unobservable inputs. There are three levels of inputs that may be used to measure fair value:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2: Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable including quoted prices for similar instruments in active markets and quoted prices for identical or similar instruments in markets that are not active; and
Level 3: Unobservable inputs in which little or no market activity exists, therefore requiring an entity to develop its own assumptions about the assumptions that market participants would use in pricing.
Assets and liabilities measured at fair value on the Company’s balance sheet on a recurring basis include the following at September 30, 2017 and December 31, 2016 (in thousands):
Warrant Liability | Level 1 | Level 2 | Level 3 | ||||||
September 30, 2017 | — | — | $ | 788 | |||||
December 31, 2016 | — | — | $ | 1,226 | |||||
There were no transfers in or out of Level 1, Level 2 or Level 3 fair value measurements during the three and nine months ended September 30, 2017.
The following is a reconciliation of the warrant liability, included in accrued expenses and other current liabilities in the accompanying unaudited condensed consolidated balance sheets, measured at fair value using Level 3 inputs (in thousands):
Nine Months Ended September 30, | |||||||
2017 | 2016 | ||||||
Balance at beginning of period | $ | 1,226 | $ | 3,072 | |||
Exercise of common stock warrants | (34 | ) | (1,224 | ) | |||
Remeasurement of common stock warrants | (404 | ) | (883 | ) | |||
Balance at end of period | $ | 788 | $ | 965 | |||
The fair values of the Company’s cash, accounts receivable, prepaid expenses and other current assets, accounts payable and accrued expenses and other current liabilities approximate carrying values due to the short maturity of these instruments. The fair value of the line of credit approximates its carrying value due to the variable interest rates.
11
The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of assets and liabilities and their placement within the fair value hierarchy.
13. Loss per Share
Basic net loss per share is computed using the weighted average number of common shares outstanding during the period. Diluted net loss per share is computed using the weighted average number of common shares plus potentially dilutive common shares. Potentially dilutive common shares include employee stock options and restricted share units and warrants and debt that are convertible into the Company’s common stock.
Because the Company incurred net losses in the three and nine months ended September 30, 2017 and 2016, the effect of potentially dilutive securities has been excluded in the computation of diluted loss per share as their impact would be anti-dilutive. Potentially dilutive common stock equivalents excluded were 2.0 million shares during the three and nine months ended September 30, 2017. Potentially dilutive common stock equivalents excluded were 4.8 million and 4.3 million shares during the three and nine months ended September 30, 2016, respectively.
14. Commitments and Contingencies
The Company leases facilities under non-cancellable operating leases. The leases expire at various dates through fiscal 2018 and frequently include renewal provisions for varying periods of time, provisions which require us to pay taxes, insurance and maintenance costs, and provisions for minimum rent increases. Minimum lease payments, including scheduled rent increases are recognized as rent expense on a straight-line basis over the term of the lease.
Litigation
The Company is involved in legal proceedings from time to time in the ordinary course of its business. Management does not believe that any of these claims and proceedings against it is likely to have, individually or in the aggregate, a material adverse effect on the Company’s condensed consolidated financial condition, results of operations or cash flows. Accordingly, the Company cannot determine the final amount, if any, of its liability beyond the amount accrued in the unaudited condensed consolidated financial statements as of September 30, 2017, nor is it possible to estimate what litigation-related costs will be in the future.
For information related to commitments and contingencies related to Applied Utility Systems, a former subsidiary of the Company that was sold in 2009, refer to Note 17, “Discontinued Operations”.
15. Geographic Information
Net sales by geographic region based on the location of the Company’s point of sale is as follows (in thousands):
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
United States | $ | 3,909 | $ | 7,354 | $ | 13,969 | $ | 18,719 | |||||||
Canada | 1,844 | 2,084 | 6,748 | 7,143 | |||||||||||
Europe | 1,104 | 694 | 2,753 | 2,422 | |||||||||||
Total international | 2,948 | 2,778 | 9,501 | 9,565 | |||||||||||
Total revenues | $ | 6,857 | $ | 10,132 | $ | 23,470 | $ | 28,284 | |||||||
16. Concentrations
For the three months ended September 30, 2017 and 2016, Honda accounted for 48% and 68%, respectively, of the Company's revenues. For the nine months ended September 30, 2017 and 2016, Honda accounted for 52% and 60%, respectively, of the Company's revenues. This customer accounted for 22% and 35% of the Company's accounts receivable at September 30, 2017 and December 31, 2016, respectively. Based on discussions with Honda, and acceleration of the Company's powder-to-coat strategy, the Company's supply of coated catalysts to Honda has begun to significantly decline in the second half of 2017, as certain current vehicle models are phased out. The Company does not anticipate significant revenue from Honda in 2018.
12
For the three months ended September 30, 2017, the Company had four suppliers that accounted for approximately 14%, 12%, 12%, and 11% of the Company's material purchases. For the three months ended September 30, 2016, the Company had two suppliers that accounted for approximately 36% and 12% of the Company's material purchases.
For the nine months ended September 30, 2017, the Company had two suppliers that accounted for approximately 18%, and 11% of the Company's material purchases. For the nine months ended September 30, 2016, the Company had one supplier that accounted for approximately 38% of the Company's material purchases.
17. Discontinued Operations
Applied Utility Systems, Inc.
The Company is undergoing a sales and use tax audit by the State of California (the “State”) on Applied Utility Systems, Inc. “AUS” for the period of 2007 through 2009. The audit has identified a project performed by the Company during that time period for which sales tax was not collected and remitted and for which the State asserts that proper documentation of resale may not have been obtained and that the Company owes sales tax of $1.5 million, inclusive of interest. The Company contends and believes that it received sufficient and proper documentation from its customer to support not collecting and remitting sales tax from that customer and is actively disputing the audit report with the State. On August 12, 2013, the Company appeared at an appeals conference with the State Board of Equalization (“BOE”). On July 21, 2014, the Company received a Decision and Recommendation (“D&R”) from the BOE. The D&R’s conclusion was that the basis for the calculation of the aforementioned $1.5 million tax due should be reduced from $12.2 million to $9.0 million with a commensurate reduction in the tax owed to the State. Based on a re-audit, the BOE lowered the tax due to $0.9 million, inclusive of interest. The Company continues to disagree with these findings based on the aforementioned reasons. However, in October 2015, the Company offered to settle this case for $0.1 million, which is based on the expected cost of continuing to contest this audit. Accordingly, an accrual was charged to discontinued operations during the year ended December 31, 2015. Should the Company not prevail with the offer to settle this case, it plans to continue with the appeals process. Further, should the Company not prevail in this case, it will pursue reimbursement from the customer for all assessments from the State. As of each of September 30, 2017 and December 31, 2016, the Company had $0.1 million, respectively, in accrued expenses on the condensed consolidated balance sheet.
18. Restatement of Prior Period Financial Statements
Subsequent to the issuance of the Company's consolidated financial statement for the quarterly period ended September 30, 2016, the Company identified immaterial errors that were the result of an incorrect assessment of the April 1, 2016 debt transaction with Kanis S.A.
On April 1, 2016, the Company executed a promissory note (the “Note”) in favor of Kanis S.A., pursuant to which Kanis S.A. loaned the Company $2.0 million (the “New Loan”). In addition, on April 1, 2016, the Company entered into an amendment to the loan agreement (the “Amendment”) with Kanis S.A., pursuant to which the Company and Kanis S.A. agreed to amend certain prior loans and amendments aggregating a principal balance of $7.5 million (the “Existing Loans”). The Amendment included the addition of a conversion feature to the Existing Loans, providing for their conversion into the Company’s common stock. Certain financial instruments of the Amendment required bifurcation and were determined to be an embedded derivative comprised of a conversion feature and a call option valued at $3.9 million using the Monte Carlo simulation model. The Company recorded the bifurcated derivative as a liability with a corresponding debt discount. During the three months ended June 30, 2016, the Company recognized $0.3 million of debt discount amortization, and on June 30, 2016, the Company marked to market the derivative liability resulting in a gain on the derivative liability of $2.8 million.
During the three months ended September 30, 2016, the Company received stockholder approval to complete the conversion of the Existing Loans into common stock, which conversion occurred on August 30, 2016. The Company accounted for the conversion of the Existing Loans as an extinguishment. The Company subsequently reviewed the accounting treatment of the Amendment and determined that the Amendment resulted in the extinguishment of the Existing Loans, and that the Company should have followed the accounting required for debt extinguishment and recorded the revalued Existing Loans on April 1, 2016.
As a result of its review, the Company determined that an extinguishment loss should have been recorded in other income (expense) with a corresponding decrease to Notes payable, net of debt discount and current portion in the second quarter of 2016 for $1.6 million as a result of the April 1, 2016 Amendment of the Existing Loans
13
The Company has restated the three months ending September 30, 2016 Condensed Consolidated Statement of Comprehensive Loss to correct for the extinguishment loss of $1.6 million and less than $0.1 million of amortization of discount within other income (expense). The Company has restated the nine months ending September 30, 2016 Condensed Consolidated Statement of Comprehensive Loss and Condensed Consolidated Statements of Cash Flows to correct for the extinguishment loss of $0.2 million and $0.1 million of amortization of discount within other income (expense).
The impact of this error in the prior year periods was not material to the consolidated financial statements in any of the periods affected. In addition, the Company properly reflected the extinguishment loss in its consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2016.
The revisions to the Company's Condensed Consolidated Statement of Comprehensive Loss for the three and nine months ended September 30, 2016 were as follows:
Three Months Ended September 30, 2016 | Nine Months Ended September 30, 2016 | ||||||||||||||
As Reported | As Restated | As Reported | As Restated | ||||||||||||
Other income (expense): | |||||||||||||||
Interest expense | (489 | ) | (458 | ) | (1,637 | ) | (1,541 | ) | |||||||
Gain on bifurcated derivative liability | — | — | 2,754 | 2,754 | |||||||||||
Loss on extinguishment of convertible debt | (12,572 | ) | (10,780 | ) | (12,572 | ) | (12,410 | ) | |||||||
Gain (loss) on warrant liability | (705 | ) | (705 | ) | 883 | 883 | |||||||||
Other income, net | 196 | 196 | 824 | 824 | |||||||||||
Total other income | (13,570 | ) | (11,747 | ) | (9,748 | ) | (9,490 | ) | |||||||
Income (loss) from continuing operations before income taxes | (14,518 | ) | (12,695 | ) | (17,066 | ) | (16,808 | ) | |||||||
Net income (loss) | (14,405 | ) | (12,582 | ) | (15,834 | ) | (15,576 | ) | |||||||
Comprehensive income (loss) | $ | (14,595 | ) | $ | (12,772 | ) | $ | (16,294 | ) | $ | (16,036 | ) | |||
Earnings/(loss) per common share: | |||||||||||||||
Basic | $ | (2.45 | ) | $ | (2.14 | ) | $ | (3.55 | ) | $ | (3.49 | ) | |||
Diluted | $ | (2.45 | ) | $ | (2.14 | ) | $ | (3.55 | ) | $ | (3.49 | ) | |||
The revisions to the Company's Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2016 were as follows:
Nine Months Ended September 30, 2016 | |||||||
As Reported | As Restated | ||||||
Cash flows from operating activities: | |||||||
Net loss | $ | (15,834 | ) | $ | (15,576 | ) | |
Adjustments to reconcile net loss to net cash used in operating activities: | |||||||
Loss on extinguishment of convertible debt | 12,572 | 12,410 | |||||
Amortization of debt discount | 494 | 398 | |||||
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q. This Quarterly Report on Form 10-Q should also be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended December 31, 2016.
14
As used in this Quarterly Report on Form 10-Q, the terms “CDTi” or the “Company” or “we,” “our” and “us” refer to Clean Diesel Technologies, Inc. and its consolidated subsidiaries.
In addition, this Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, adopted pursuant to the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve risks and uncertainties, as well as assumptions, which could cause our results to differ materially from those expressed or implied by such forward-looking statements. Forward-looking statements generally are identified by the words “may,” “will,” “project,” “might,” “expects,” “anticipates,” “believes,” “intends,” “estimates,” “should,” “could,” “would,” “strategy,” “plan,” “continue,” “pursue,” or the negative of these words or other words or expressions of similar meaning. All statements, other than statements of historical fact, are statements that could be deemed forward-looking statements. These forward-looking statements are based on information available to us, are current only as of the date on which the statements are made, and are subject to numerous risks and uncertainties that could cause our actual results, performance, prospects or opportunities to differ materially from those expressed in, or implied by, the forward-looking statements. For examples of such risks and uncertainties, please refer to the discussion under the caption “Risk Factors” contained in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2016 filed with the Securities and Exchange Commission (the “SEC”) on April 7, 2017 and our other filings with the SEC.
You should not place undue reliance on any forward-looking statements. Except as otherwise required by federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason. If we do update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to other forward-looking statements.
Overview
Clean Diesel Technologies, Inc. is a leading provider of technology and solutions to the automotive emissions control markets. We possess market leading expertise in emissions catalyst design and engineering for automotive and off-road applications. In particular, we have a proven ability to develop proprietary materials incorporating various base metals that replace costly platinum group metals ("PGM") and rare earth metals in coatings on vehicle catalytic converters. Our business is driven by increasingly stringent global emission standards for internal combustion engines, which are major sources of a variety of harmful pollutants.
We deliver our catalyst technology through the supply of materials and technology used in the catalyst coating process as well as finished products such as coated substrates and emission control systems. We supply our proprietary catalyst technologies to catalyst manufacturers, vehicle and equipment manufacturers, integrators and retrofitters.
We produce coated substrates at our ISO Technical Specifications certified manufacturing facility in Oxnard, California. In some instances, the coated substrates we produce are integrated into exhaust systems by third-party manufacturers before being shipped to our end customer. We also supply coated substrates directly to exhaust systems manufacturers for incorporation in their own products.
Over the past decade, we have developed several generations of high performance catalysts, including our low-PGM mixed phase catalysts, or MPC®, that are used on certain new Honda vehicles. During the same period we have developed the ability to deliver our catalyst technology to other catalyst manufacturers in the form of functional powders or material systems. Recently, we have expanded our offering of material systems beyond MPC® to include new synergized-PGM diesel oxidation catalysts, or SPGM™ DOCs, base-metal activated rhodium support, or BMARS™, and Spinel™ technologies. Most catalytic systems require significant amounts of costly PGMs to operate effectively. Our family of unique high-performance material systems, featuring inexpensive base-metals with low PGM content will enable further advances in catalyst performance. We are marketing these new catalyst technologies to other catalyst manufacturers in a proprietary powder form, which will allow them to capture the benefits of our advanced catalyst technology in their own manufacturing operations and will provide a new source of revenue for the Company.
Strategy
Over more than twenty years, we have developed the emissions control technology and manufacturing know-how to allow us to progress to delivering enabling technology for manufacturers serving the emissions catalyst market. The ability to deliver our advanced materials to other catalyst producers as functional powders allows us to achieve greater scale and higher return on our technology investment than would be possible as a manufacturer of emission control systems. The strategy to provide our
technology to other manufacturers has significantly increased the size of our addressable market and provides access to markets that would not be achievable as a catalyst producer. In the short term, we are focusing our efforts and resources by pursuing opportunities in fast growing markets in China and India, as well as North America, where we believe that we can serve profitably with our technology provider business model.
The Chinese market offers significant opportunity as the world’s single largest automotive market with over 24 million vehicles produced in 2016. There is an extensive emission control systems supply chain serving domestic and international automobile manufacturers in China. Somewhat unique to China, there are many domestic catalyst manufacturers serving the automotive market in competition with the large global catalyst producers. This segment of the market requires technology and know-how to adhere to increasingly stringent emissions standards and to deliver competitively priced catalysts. In addition, there is significant pressure for the Chinese automotive market to address increasing air pollution, an issue that has escalated to become a matter of public policy. We believe these factors provide a highly favorable environment for our products and technology.
Air quality is also an important market driver in India where annual vehicle production was over 4 million in 2016. India has a number of domestic vehicle manufacturers that are served by both global and local catalyst manufacturers. There is significant opportunity to provide enabling technology to domestic catalyst producers with the appropriate manufacturing expertise.
In North America and in Europe, our transition to a technology provider business model includes an initial commercial focus on aftermarket catalyst manufacturers. In North America, there is important opportunity for us to provide our advanced materials to producers of diesel particulate filters ("DPF") and diesel oxidation catalysts ("DOC") for the heavy duty diesel aftermarket and to manufacturers of aftermarket catalysts for the passenger car market. In Europe, we have begun commercialization of our technology for selective catalytic reduction (“SCR”) de-nox applications to catalyst manufacturers and systems integrators serving the heavy duty diesel aftermarket.
During the third quarter of 2017, we sold substantially all of the assets of our DuraFit and private label OEM replacement DPF and DOC business, completing the final step in facilitating our transformation into a provider of enabling technology to the emissions catalyst market by the end of 2017. Our advanced materials and specialty coating business model streamlines our infrastructure, supports higher margins and improves profitability. While we will begin with less revenue than under our previous model, we expect to drive growth in our new powder-to-coat business in 2018 and into 2019 by providing technology to our manufacturing partners in the U.S., China, India and Europe and to OEMs around the world. We believe our technology provider model is highly scalable, allowing us to contend for the more than 90 million vehicle market globally.
In support of this strategy, we have filed approximately 215 patents that underpin next-generation technology for our advanced zero-PGM or ZPGM and low-PGM catalysts, and during 2015 and 2016, we completed an initial series of vehicle tests to validate our next-generation technologies. Based on the success of these tests, we are beginning to make our new catalyst technologies available to OEMs, catalyst coaters and other participants in the emission reduction supply chain for use in proprietary powder form, and we foresee multiple paths to market our new technologies.
Financial Overview
For the three months ended September 30, 2017 revenues were $6.9 million, a decrease of approximately $3.3 million from the prior year largely attributable to the decrease in coated catalyst shipments to Honda, and loss from operations was $1.8 million, an increase of approximately $0.8 million from the prior year, primarily due to lower sales partially offset by lower severance and other charges for our remaining liability related to our closed Canadian manufacturing facility.
For the nine months ended September 30, 2017 revenues were $23.5 million, a decrease of approximately $4.8 million from the prior year largely attribuatble to the decrease in coated catalyst shipments to Honda, and loss from operations was $4.5 million, a decrease of approximately $2.8 million from the prior year primarily due to benefits from our 2016 cost reduction initiatives as well as a decrease in severance and other charges for our remaining liability related to our closed Canadian manufacturing facility.
Net cash used in operations was $4.7 million for the nine months ended September 30, 2017.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures in the financial statements. Critical accounting policies are those accounting policies that may be material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change, and that have a material impact on financial condition or operating performance. While we base our estimates and
16
judgments on our experience and on various other factors that we believe to be reasonable under the circumstances, actual results may differ from these estimates under different assumptions or conditions.
We believe that the assumptions, judgments and estimates involved in the accounting for revenue recognition, allowance for doubtful accounts, inventory valuation, product warranty reserves, accounting for income taxes, goodwill, impairment of long-lived assets other than goodwill, stock-based compensation and liability-classified warrants have the greatest potential impact on our unaudited condensed consolidated financial statements. Please refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2016 for a more complete discussion of our critical accounting policies and estimates.
Impact of Recent Accounting Pronouncements
For information with respect to recent accounting pronouncements and the impact of these pronouncements see Note 3, “Summary of Significant Accounting Policies – Recent Accounting Pronouncements” in the accompanying notes to the unaudited condensed consolidated financial statements.
Customer Dependency and Relationship with Honda
Historically, we have derived a significant portion of our revenue from a limited number of customers. Sales to Honda represented 52% and 60% of our revenues for the nine months ended September 30, 2017 and 2016, respectively. However, based on discussions with Honda, and acceleration of our powder-to-coat strategy, our supply of coated catalysts to Honda has begun to significantly decline in the second half of 2017, as certain current vehicle models are phased out. We do not anticipate significant revenue from Honda in 2018. Accordingly, it will be critical that our advanced materials business strategy produces revenue with new customers, which may include Honda, directly or indirectly, to replace revenues from our current core catalyst business.
Results of Operations
Comparison of Three and Nine Months Ended September 30, 2017 and 2016
(Amounts in tables in thousands, except percentages)
Revenues
Three Months Ended September 30, | ||||||||||||||||||||
2017 | 2016 | |||||||||||||||||||
$ | % of Revenues | $ | % of Revenues | Change | % Change | |||||||||||||||
Coated catalysts | $ | 3,456 | 50 | % | $ | 7,110 | 70 | % | $ | (3,654 | ) | (51 | )% | |||||||
Emission control systems | 2,948 | 43 | % | 2,778 | 27 | % | 170 | 6 | % | |||||||||||
Technology and advanced materials | 453 | 7 | % | 244 | 3 | % | 209 | 86 | % | |||||||||||
Total revenues | $ | 6,857 | 100 | % | $ | 10,132 | 100 | % | $ | (3,275 | ) | (32 | )% | |||||||
Nine Months Ended September 30, | ||||||||||||||||||||
2017 | 2016 | |||||||||||||||||||
$ | % of Revenues | $ | % of Revenues | Change | % Change | |||||||||||||||
Coated catalysts | $ | 12,747 | 55 | % | $ | 17,626 | 62 | % | $ | (4,879 | ) | (28 | )% | |||||||
Emission control systems | 9,500 | 40 | % | 9,565 | 34 | % | (65 | ) | (1 | )% | ||||||||||
Technology and advanced materials | 1,223 | 5 | % | 1,093 | 4 | % | 130 | 12 | % | |||||||||||
Total revenues | $ | 23,470 | 100 | % | $ | 28,284 | 100 | % | $ | (4,814 | ) | (17 | )% | |||||||
Coated catalyst revenues are generated from the sale of our high performance catalysts which reduce emissions from gasoline, diesel and natural gas combustion engines. Emission control systems revenues were generated from the sale of products in our
17
extensive line of heavy duty diesel aftertreatment systems for retrofit and aftermarket applications including the Purafilter TM and DuraFit TM brands. In September 2017, we sold our DuraFit product line although we continue to provide technology and materials to aftermarket participants. Technology and advanced materials revenues included licenses and royalties, as well as sales of our advanced materials platform. The timing and amounts of revenue generated from licensing agreements will fluctuate.
Coated catalyst revenues decreased for the three and nine months ended September 30, 2017 due to the decline in sales to Honda. We do not anticipate significant revenue from Honda in 2018. Emissions control systems revenue showed a a small increase for the three months ended 2017 and remained consistent with the prior year nine month period. Due to the sale of the DuraFit product line, emission control systems revenues will decrease in future periods. Technology and advanced materials revenues increased for the three and nine months ended September 30, 2017 primarily due to increased royalty payments under our licensing agreements.
Cost of revenues
Three Months Ended September 30, | ||||||||||||||||||||
2017 | 2016 | |||||||||||||||||||
$ | % of Revenues | $ | % of Revenues | Change | % Change | |||||||||||||||
Cost of revenues | $ | 5,370 | 78 | % | $ | 7,425 | 73 | % | $ | (2,055 | ) | (28 | )% | |||||||
Nine Months Ended September 30, | ||||||||||||||||||||
2017 | 2016 | |||||||||||||||||||
$ | % of Revenues | $ | % of Revenues | Change | % Change | |||||||||||||||
Cost of revenues | $ | 18,605 | 79 | % | $ | 21,153 | 75 | % | $ | (2,548 | ) | (12 | )% | |||||||
Cost of revenues includes the costs of materials and assembly labor, as well as assembly services, and labor and overhead costs associated with manufacturing and product procurement, planning and quality assurance. Our cost of revenues is affected by various factors, including product mix, volume, and provisions for excess and obsolete inventories, materials, labor and overhead costs, as well as manufacturing efficiencies. Our cost of revenues as a percentage of revenues is affected by these factors, as well as customer mix, volume, pricing and competitive pricing programs.
The increase in cost of revenues as a percentage of revenue for the three and nine months ended September 30, 2017 is primarily driven by the impact of overhead on lower sales as well as a less favorable revenue mix as compared to the same periods in prior years. We also saw a significant increase in the price of palladium in the first quarter of 2017, which impacted our PGM liability for the nine month period.
Operating expenses
Three Months Ended September 30, | ||||||||||||||||||||
2017 | 2016 | |||||||||||||||||||
$ | % of Revenues | $ | % of Revenues | Change | % Change | |||||||||||||||
Research and development | $ | 1,155 | 17 | % | $ | 762 | 8 | % | $ | 393 | 52 | % | ||||||||
Selling, general and administrative | 1,877 | 27 | % | 2,322 | 23 | % | (445 | ) | (19 | )% | ||||||||||
Severance and other charges | 235 | 3 | % | 571 | 6 | % | (336 | ) | * | |||||||||||
Total operating expenses | $ | 3,267 | 47 | % | $ | 3,655 | 37 | % | $ | (388 | ) | (11 | )% | |||||||
* Percentage not meaningful
18
Nine Months Ended September 30, | ||||||||||||||||||||
2017 | 2016 | |||||||||||||||||||
$ | % of Revenues | $ | % of Revenues | Change | % Change | |||||||||||||||
Research and development | $ | 3,211 | 14 | % | $ | 3,955 | 14 | % | $ | (744 | ) | (19 | )% | |||||||
Selling, general and administrative | 6,519 | 28 | % | 8,549 | 30 | % | (2,030 | ) | (24 | )% | ||||||||||
Severance and other charges | (384 | ) | (2 | )% | 1,945 | 7 | % | (2,329 | ) | * | ||||||||||
Total operating expenses | $ | 9,346 | 40 | % | $ | 14,449 | 51 | % | $ | (5,103 | ) | (35 | )% | |||||||
* Percentage not meaningful
Research and development expenses consist primarily of compensation expense for employees and contractors engaged in research, design and development activities, as well costs paid to outside parties for testing, validation and certification of our products. Selling, general and administrative expenses consist primarily of compensation expense, legal and professional fees, facilities expenses, and communication expenses. Severance and other charges relate primarily to the closure of our Canadian facility and the transfer of operations to our California facility, the sale of our Durafit product line, and the decrease in operations personnel in response to the decrease in sales to Honda and include severance costs, equipment disposal, moving costs, and building exit costs.
Research and development expenses
The increase in research and development expenses in the third quarter of 2017 is primarily a result of the timing of testing as we work with new customers on the implementation of our powder-to-coat technologies in their manufacturing facilities. For the nine month period, these expenses were lower compared to the prior year due to the timing of testing and validation requirements.
Selling, general and administrative expenses
We decreased general and administrative costs including consulting, payroll and benefits expenses, in both the three and nine months ended September 30, 2017 as a result of the closure of our Canadian facility and changes made at our California location. In the third quarter of 2017, we further decreased our sales and support staff upon the sale of our DuraFit product line.
Severance and other charges
In the third quarter of 2017, we recorded the severance expense relative to the elimination of sales and support positions impacted by the sale of our Durafit product line, as well as the decrease in our operations personnel in response to the decrease in our coated catalyst revenues. In the second quarter of 2017, we reached an agreement with the property owner of our former Canadian facility to exit our lease prior to its December 2018 termination which resulted in a decrease in our severance liability for the nine month period.
Other Income
Three Months Ended September 30, | |||||||||||||||||||
2017 | 2016 | ||||||||||||||||||
As Restated | |||||||||||||||||||
$ | % of Revenues | $ | % of Revenues | Change | % Change | ||||||||||||||
Interest expense, net | $ | (93 | ) | (1 | )% | $ | (458 | ) | (5 | )% | $ | 365 | (80)% | ||||||
Loss on extinguishment of debt | — | — | % | (10,780 | ) | (106 | )% | 10,780 | (100)% | ||||||||||
(Loss)/gain on change in fair value of liability-classified warrants | 738 | 11 | % | (705 | ) | (7 | )% | 1,443 | (205)% | ||||||||||
Gain on sale of DuraFit | 805 | 12 | % | — | — | % | 805 | * | |||||||||||
Other income, net | (149 | ) | (2 | )% | 196 | 2 | % | (345 | ) | (176)% | |||||||||
Total other income | $ | 1,301 | 20 | % | $ | (11,747 | ) | (116 | )% | $ | 13,048 | * | |||||||
19
* Percentage not meaningful
Nine Months Ended September 30, | |||||||||||||||||||
2017 | 2016 | ||||||||||||||||||
As Restated | |||||||||||||||||||
$ | % of Revenues | $ | % of Revenues | Change | % Change | ||||||||||||||
Interest expense, net | $ | (260 | ) | (1 | )% | $ | (1,541 | ) | (5 | )% | $ | 1,281 | (83)% | ||||||
Gain on bifurcated derivative liability | — | — | % | 2,754 | 10 | % | (2,754 | ) | (100)% | ||||||||||
Loss on extinguishment of debt | (194 | ) | (1 | )% | (12,410 | ) | (44 | )% | 12,216 | (98)% | |||||||||
(Loss)/gain on change in fair value of liability-classified warrants | 404 | 2 | % | 883 | 3 | % | (479 | ) | (54)% | ||||||||||
Gain on sale of DuraFit | 805 | 3 | % | — | — | % | 805 | * | |||||||||||
Other income, net | (67 | ) | — | % | 824 | 3 | % | (891 | ) | (108)% | |||||||||
Total other (expense)/income | $ | 688 | 3 | % | $ | (9,490 | ) | (33 | )% | $ | 10,178 | * | |||||||
For the three and nine months ended September 30, 2017, the decrease in other income was primarily due to the gain on bifurcated derivative liability partially offset by a loss on extinguishment of debt related to the Kanis S.A. $2.0 million promissory note and amendment of the Kanis S.A. loan agreement during the second quarter of 2016. We also recognized a gain in three and nine months ended September 30, 2017, due to the remeasurement of liability-classified warrants and incurred lower interest expense due to the decrease in debt outstanding during the respective periods.
Income Tax Expense (Benefit)
We incurred income tax (benefit)/expense of approximately $(0.1) million million and $0.0 million in the three and nine months ended September 30, 2017. For the three and nine months ended months ended September 30, 2016, we recognized an income tax benefit of approximately $(0.1) million and $(1.2) million respectively. The effective income tax rates were (24.8)% and (0.9%) for the three months ended September 30, 2017 and 2016, respectively. The effective income tax rates were 1.3% and (7.3%) for the nine months ended September 30, 2017 and 2016, respectively. For interim income tax reporting, we estimate our annual effective tax rate and apply it to our year-to-date pre-tax loss. Tax jurisdictions with a projected or year-to-date loss for which a tax benefit cannot be realized are excluded from the annualized effective tax rate. The difference between our effective tax rate and the U.S. statutory tax rate is primarily related to the valuation allowance offsetting the deferred tax assets in both the U.S. and United Kingdom jurisdictions as well as to a foreign tax rate differential related to Sweden and Canada.
Liquidity and Capital Resources
Historically, the revenue that we have generated has not been sufficient to fund our operating requirements and debt servicing needs. Notably, we have suffered recurring losses since inception. As of September 30, 2017, we had an accumulated deficit of $226.9 million compared to $223.1 million at December 31, 2016. We have also had negative cash flows from operations from inception. Our primary sources of liquidity in recent years have been asset sales, credit facilities and other borrowings and equity sales.
We had $3.3 million in cash at September 30, 2017 compared to $7.8 million at December 31, 2016. At September 30, 2017, $0.6 million of our cash was held by foreign subsidiaries in Canada, Sweden and the United Kingdom. If we decide to repatriate unremitted foreign earnings in the future, it could have negative tax implications.
Prior to September 8, 2017, we had a $7.5 million secured demand financing facility backed by our receivables and inventory with FGI. On September 8, 2017, the we repaid in full all indebtedness owed to FGI, terminated the FGI loan agreements and all commitments thereunder, and obtained the termination and release by FGI of all of its security interests in and liens on all of our assets and those of our subsidiaries. We have no outstanding debt at September 30, 2017.
On May 19, 2015, we filed a shelf registration statement on Form S-3 with the SEC, which was declared effective on November 17, 2015. Shelf registration statements are intended to provide us with additional flexibility to access capital markets for general corporate purposes, subject to market conditions and our capital needs. The Form S-3 permits us to sell in one or more registered transactions up to an aggregate of $50.0 million of various securities not to exceed one-third of our public float in any 12-month period. At September 30, 2017, we had sold an aggregate of $3.1 million using the Form S-3.
20
We believe the equity raise and the debt conversions completed in 2016, and the sale of our DuraFit product line in the third quarter of 2017, improved our overall net cash positions; however, there is no assurance that we will be able to achieve projected levels of revenue and maintain access to sufficient working capital. As a result there is substantial doubt as to whether our existing cash resources and working capital are sufficient to enable us to continue operations within one year from the financial statement issuance date. If necessary, we will seek to raise additional capital from the sale of equity securities or the increase of indebtedness. There can be no assurance that additional financing will be available to us on acceptable terms, or at all. Additionally, if we issue additional equity securities to raise funds, whether to potential customers or other investors, the ownership percentage of our existing stockholders would be reduced. New investors may demand rights, preferences or privileges senior to those of existing holders of common stock. Additionally, we may be limited as to the amount of funds we can raise pursuant to SEC rules and the continued listing requirements of NASDAQ. If we cannot raise needed funds, we might be forced to make substantial reductions in our operating expenses, which could adversely affect our ability to implement our business plan and ultimately our viability as a company. These consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might result from this uncertainty.
The following table summarizes our cash flows for the periods indicated.
Nine Months Ended September 30, | ||||||||||||||
Change | ||||||||||||||
2017 | 2016 | $ | % | |||||||||||
(unaudited) (in thousands, except percentages) | ||||||||||||||
Cash (used in) provided by : | ||||||||||||||
Operating activities | $ | (4,727 | ) | $ | (4,050 | ) | $ | (677 | ) | (17 | )% | |||
Investing activities | $ | 3,337 | $ | 14 | $ | 3,323 | * | |||||||
Financing activities | $ | (3,294 | ) | $ | 3,796 | $ | (7,090 | ) | (187 | )% | ||||
* Percentage not meaningful
Cash used in operating activities
Our largest source of operating cash flows is cash collections from our customers following the sale of our products and services. Our primary uses of cash for operating activities are for purchasing inventory in support of the products that we sell, personnel related expenditures, facilities costs and payments for general operating matters. During the nine months ended September 30, 2017, cash used in operations was $4.7 million. Cash flows were largely impacted by the loss from operations, adjusted for non-cash items, including depreciation and amortization, stock-based compensation, change in the fair value of the liability-classified warrant, gain on sale of DuraFit as well as the net effect of changes in net working capital and other balance sheet accounts. These changes include decreases in operating cash flows associated with lower accounts payable and accrued expenses. This decrease was partially offset by decreases in our accounts receivable and inventory balances.
Cash provided by investing activities
Cash provided by investing activities was $3.3 million for the nine months ended September 30, 2017. This amount represented the cash received from the sale of the DuraFit business discussed in Note 4.
Cash (used in) / provided by financing activities
Cash used in financing activities was due to a $3.3 million repayment of outstanding debt as well as net payments under our demand line of credit during the nine months ended September 30, 2017.
Cash provided by financing activities during the nine months ended September 30, 2016 was due to $2.0 million generated from the promissory note entered into with Kanis S.A. on April 1, 2016, $0.5 million generated from the promissory note entered into with Lon E. Bell, Ph.D., one of CDTi’s directors, on April 11, 2016 and $1.3 million generated from the convertible notes entered into with Haldor Topsøe on June 30, 2016. The Company also received approximately $0.2 million from the exercise of outstanding warrants in the nine months ended September 30, 2016. These were partially offset by net payments under our demand line of credit of approximately $0.2 million.
21
Description of Indebtedness
September 30, 2017 | December 31, 2016 | ||||||
(unaudited) (in thousands) | |||||||
Line of credit with FGI | $ | — | $ | 1,458 | |||
$2.0 million, 8% shareholder note due 2017 (Kanis S.A.) | — | 1,803 | |||||
$ | — | $ | 3,261 | ||||
On September 8, 2017, the Company repaid in full all outstanding indebtedness of the Company and its subsidiaries owed to FGI . We did not incur any prepayment or early termination penalties in connection with termination of the FGI Agreement.
Capital Expenditures
As of September 30, 2017, we had no material commitments for capital expenditures and no material commitments are anticipated in the near future.
Off-Balance Sheet Arrangements
As of September 30, 2017 and December 31, 2016, we had no off-balance sheet arrangements.
Commitments and Contingencies
As of September 30, 2017, other than office leases, we had no material commitments other than the liabilities reflected in our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. For additional information, refer to Note 14, “Commitments and Contingencies”.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to provide reasonable assurance that the information required to be disclosed in our filings under the Securities Exchange Act of 1934, as amended, or the Exchange Act, is (1) recorded, processed, summarized and reported within the time periods specified in SEC’s rules and forms, and (2) accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure.
Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our procedures or our internal controls will prevent or detect all errors and all fraud. Any internal control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of our controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.
Evaluation of Disclosure Controls and Procedures
As required by Rule 13a-15(b) of the Exchange Act, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the quarter covered by this report. Based on the foregoing, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
There has been no change in our internal control over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
22
PART II—OTHER INFORMATION
Item 1. Legal Proceedings
Refer to Note 13, “Commitments and Contingencies” to the unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q, which is incorporated herein by reference.
Item 1A. Risk Factors
This Quarterly Report on Form 10-Q contains forward-looking statements, which are subject to a variety of risks and uncertainties. Other actual results could differ materially from those anticipated in those forward-looking statements as a result of various factors, including those set forth in the risk factors relating to our business and common stock contained in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2016. There are no material changes to such risk factors as of the date of this report.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information.
None.
23
Item 6. Exhibits
Exhibit | Incorporated by Reference | Filed | ||||||||||
Number | Exhibit Description | Form | File Number | Exhibit | Filing Date | Herewith | ||||||
8-K | 001-33710 | 2.1 | 9/12/2017 | |||||||||
10-K | 001-33710 | 3.1 | 3/30/2016 | |||||||||
8-K | 001-33710 | 3.1 | 7/26/2016 | |||||||||
10-Q | 001-33710 | 3.1 | 11/10/2008 | |||||||||
X | ||||||||||||
X | ||||||||||||
X | ||||||||||||
101.INS | XBRL Instance Document | X | ||||||||||
101.SCH | XBRL Taxonomy Extension Schema Document | X | ||||||||||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | X | ||||||||||
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | X | ||||||||||
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | X | ||||||||||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | X | ||||||||||
# - | The information in this exhibit is furnished and deemed not filed with the Securities and Exchange Commission for purposes of section 18 of the Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of Registrant under the Securities Act of 1933, as amended, or the Exchange Act of 1934, as amended, whether made before or after the date hereof, regardless of any general incorporation language in such filing. |
24
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.
CLEAN DIESEL TECHNOLOGIES, INC. | |||
Date: | November 14, 2017 | By: | /s/ Matthew Beale |
Matthew Beale | |||
Chief Executive Officer | |||
(Principal Executive Officer) | |||
Date: | November 14, 2017 | By: | /s/ Tracy Kern |
Tracy Kern | |||
Chief Financial Officer | |||
(Principal Financial and Accounting Officer) | |||
25