e10vq
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2010
or
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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)
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Delaware
(State or other jurisdiction of
incorporation or organization)
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06-1393453
(I.R.S. Employer
Identification No.) |
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10 Middle Street, Suite 1100, Bridgeport, CT
(Address of principal executive offices)
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06604
(Zip Code) |
(203) 416-5290
(Registrants 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 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
o No o
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.
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Large accelerated filer o
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Accelerated filer o
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Non-accelerated filer o
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Smaller reporting company þ |
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(Do not check if a smaller reporting company.) |
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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 August 12, 2010, there were 8,213,988 outstanding shares of the registrants common
stock, par value $0.01 per share.
CLEAN DIESEL TECHNOLOGIES, INC.
Quarterly Report on Form 10-Q
for the Quarter Ended June 30, 2010
INDEX
2
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
CLEAN DIESEL TECHNOLOGIES, INC.
Unaudited Condensed Consolidated Balance Sheets
(In thousands, except share data)
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June 30, |
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December 31, |
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2010 |
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2009 |
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(Restated) |
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Note 1 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
8,106 |
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$ |
2,772 |
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Investments |
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11,725 |
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Accounts receivable, net of allowance of $214 and $232, respectively |
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218 |
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148 |
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Inventories, net |
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822 |
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1,059 |
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Other current assets |
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108 |
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294 |
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Total current assets |
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9,254 |
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15,998 |
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Patents, net |
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957 |
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898 |
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Fixed assets, net of accumulated depreciation of $425 and $369, respectively |
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239 |
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294 |
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Other assets |
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55 |
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57 |
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Total assets |
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$ |
10,505 |
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$ |
17,247 |
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LIABILITIES AND STOCKHOLDERS EQUITY |
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Current liabilities: |
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Accounts payable |
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$ |
454 |
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$ |
301 |
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Accrued expenses |
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567 |
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675 |
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Short-term debt |
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3,243 |
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7,693 |
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Total current liabilities |
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4,264 |
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8,669 |
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Commitments and contingencies (Note 7) |
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Stockholders equity: |
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Preferred stock, par value $0.01 per share: authorized 100,000; no shares issued and outstanding |
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Common stock, par value $0.01 per share: authorized 12,000,000; issued and outstanding
8,213,988 and 8,213,988 shares, respectively |
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82 |
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82 |
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Additional paid-in capital |
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74,751 |
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74,694 |
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Accumulated other comprehensive loss |
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(449 |
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(381 |
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Accumulated deficit |
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(68,143 |
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(65,817 |
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Total stockholders equity |
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6,241 |
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8,578 |
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Total liabilities and stockholders equity |
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$ |
10,505 |
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$ |
17,247 |
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The accompanying notes are an integral part of the condensed consolidated financial statements.
3
CLEAN DIESEL TECHNOLOGIES, INC.
Unaudited Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
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Three Months Ended |
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Six Months Ended |
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June 30, |
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June 30, |
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2010 |
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2009 |
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2010 |
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2009 |
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(Restated) |
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(Restated) |
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Note 1 |
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Note 1 |
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Revenue: |
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Product sales |
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$ |
370 |
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$ |
342 |
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$ |
982 |
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$ |
654 |
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Technology licensing fees and royalties |
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41 |
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33 |
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74 |
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67 |
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Total revenue |
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411 |
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375 |
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1,056 |
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721 |
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Costs and expenses: |
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Cost of product sales |
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220 |
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217 |
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685 |
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451 |
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Cost of licensing fees and royalties |
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Selling, general and administrative |
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1,512 |
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1,561 |
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2,733 |
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3,513 |
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Reimbursement of
expenses under grant program |
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(77 |
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(115 |
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Severance charge |
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(60 |
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(163 |
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510 |
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Research and development |
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136 |
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127 |
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189 |
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186 |
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Patent amortization and other expense |
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28 |
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140 |
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77 |
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209 |
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Operating costs and expenses |
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1,759 |
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2,045 |
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3,406 |
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4,869 |
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Loss from operations |
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(1,348 |
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(1,670 |
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(2,350 |
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(4,148 |
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Other income (expense): |
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Interest income |
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31 |
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49 |
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91 |
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141 |
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Other income (expense), net |
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(34 |
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442 |
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(67 |
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321 |
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Net loss |
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$ |
(1,351 |
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$ |
(1,179 |
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$ |
(2,326 |
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$ |
(3,686 |
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Basic and diluted loss per common share |
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$ |
(0.17 |
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$ |
(0.14 |
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$ |
(0.28 |
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$ |
(0.45 |
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Basic and diluted weighted-average
number of common shares outstanding |
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8,187 |
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8,138 |
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8,184 |
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8,138 |
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The accompanying notes are an integral part of the condensed consolidated financial statements
4
CLEAN DIESEL TECHNOLOGIES, INC.
Unaudited Condensed Consolidated Statements of Cash Flows
(In thousands)
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Six Months Ended |
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June 30, |
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2010 |
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2009 |
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(Restated) |
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Note 1 |
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Operating activities |
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Net loss |
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$ |
(2,326 |
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$ |
(3,686 |
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Adjustments to reconcile net loss to cash used in operating activities: |
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Depreciation and amortization |
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94 |
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93 |
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Compensation expense for options, warrants and stock awards |
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57 |
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418 |
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Recovery for doubtful accounts, net |
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(134 |
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Unrealized gain on investments, net |
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(161 |
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Loss on abandonment of patents |
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3 |
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150 |
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Changes in operating assets and liabilities: |
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Accounts receivable |
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(70 |
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424 |
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Inventories, net |
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237 |
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51 |
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Other current assets and other assets |
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188 |
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53 |
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Accounts payable, accrued expenses and other liabilities |
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45 |
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14 |
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Net cash used for operating activities |
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(1,772 |
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(2,778 |
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Investing activities |
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Sale of investments |
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11,725 |
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Patent costs |
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(95 |
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(48 |
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Purchase of fixed assets |
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(9 |
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(127 |
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Net cash provided by (used for) investing activities |
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11,621 |
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(175 |
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Financing activities |
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Proceeds from short-term debt |
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2,161 |
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3,471 |
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Repayment of short-term debt |
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(6,611 |
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(51 |
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Net cash (used for) provided by financing activities |
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(4,450 |
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3,420 |
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Effect of exchange rate changes on cash |
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(65 |
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44 |
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Net increase in cash and cash equivalents |
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$ |
5,334 |
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$ |
511 |
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Cash and cash equivalents at beginning of the period |
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2,772 |
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3,976 |
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Cash and cash equivalents at end of the period |
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$ |
8,106 |
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$ |
4,487 |
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Supplemental non-cash activities: |
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Accumulated amortization of abandoned assets |
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$ |
2 |
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$ |
4 |
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Supplemental disclosures: |
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Cash paid for interest |
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$ |
46 |
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$ |
29 |
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The accompanying notes are an integral part of the condensed consolidated financial statements.
5
CLEAN DIESEL TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Significant Accounting Policies
Basis of Presentation:
In this Quarterly Report on Form 10-Q, the terms CDT, Clean Diesel, Company, we, us,
or our mean Clean Diesel Technologies, Inc. and its wholly-owned subsidiary, Clean Diesel
International, LLC.
The accompanying unaudited condensed consolidated financial statements have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) and in
accordance with accounting principles generally accepted in the United States of America (GAAP) for
interim financial information. Certain information and note disclosures normally included in
financial statements prepared in accordance with GAAP have been omitted or condensed. These interim
condensed consolidated financial statements should be read in conjunction with Clean Diesels
consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for
the year ended December 31, 2009.
The unaudited condensed consolidated financial statements reflect all adjustments which, in
the opinion of management, are necessary for a fair statement of the results of operations,
financial position and cash flows for the interim periods presented. All such adjustments are of a
normal recurring nature. The results for interim periods are not necessarily indicative of results
which may be expected for any other interim period or for the full year.
Reclassifications:
Some
amounts in the prior period financial statements have been
reclassified to conform to current period presentation.
Revision of Prior Period Amounts:
In preparing its financial statements for the three months ended March 31, 2010, Clean Diesel
identified certain errors related to accounting for patents. These errors resulted in the
overstatement of Patents, net and the understatement of patent costs for 2009. In accordance with
SEC Staff Accounting Bulletin Nos. 99 and 108 (SAB 99 and SAB 108), Clean Diesel evaluated these
errors and determined that they were immaterial to each reporting period affected and, therefore,
amendment of previously filed reports was not required. However, if the adjustments to correct the
cumulative errors had been recorded in the first quarter 2010, Clean Diesel believes the impact
would have been significant to the quarter ended March 31, 2010 and would impact comparisons to
prior periods. As permitted by SAB 108, Clean Diesel revised in its first quarter 2010 filing and
will revise in future filings of its quarterly and annual consolidated financial statements
previously reported annual and quarterly results for 2009 for these immaterial amounts.
The Consolidated Balance Sheet at December 31, 2009 was revised to reflect the cumulative
effect of these errors which resulted in an increase in Accumulated deficit of $185,000. Also, in
accordance with SAB 108, the Consolidated Statement of Operations and Consolidated Statement of
Cash Flows have been revised as follows:
Condensed Consolidated Balance Sheet December 31, 2009
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As previously |
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reported |
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Adjustment |
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Revised |
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(In thousands) |
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Patents, net |
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$ |
1,083 |
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$ |
(185 |
) |
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$ |
898 |
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Total assets |
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17,432 |
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(185 |
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17,247 |
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Accumulated deficit |
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(65,632 |
) |
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(185 |
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(65,817 |
) |
Total stockholders equity |
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8,763 |
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(185 |
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8,578 |
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Total liabilities and stockholders equity |
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17,432 |
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(185 |
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17,247 |
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6
Condensed Consolidated Statement of Operations Three Months Ended June 30, 2009
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As previously |
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reported |
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Adjustment |
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Revised |
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(In thousands) |
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Patent amortization and other expense |
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$ |
37 |
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$ |
103 |
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$ |
140 |
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Operating costs and expenses |
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1,942 |
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103 |
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2,045 |
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Loss from operations |
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(1,567 |
) |
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(103 |
) |
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(1,670 |
) |
Net loss |
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(1,076 |
) |
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(103 |
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(1,179 |
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Basic and diluted loss per common share |
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(0.13 |
) |
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(0.14 |
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Condensed Consolidated Statement of Operations Six Months Ended June 30, 2009
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As previously |
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reported |
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Adjustment |
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Revised |
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(In thousands) |
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Patent amortization and other expense |
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$ |
72 |
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$ |
137 |
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$ |
209 |
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Operating costs and expenses |
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|
4,732 |
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|
137 |
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4,869 |
|
Loss from operations |
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(4,011 |
) |
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(137 |
) |
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(4,148 |
) |
Net loss |
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(3,549 |
) |
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|
(137 |
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(3,686 |
) |
Basic and diluted loss per common share |
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(0.44 |
) |
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(0.45 |
) |
Condensed Consolidated Statement of Cash Flows Six Months Ended June 30, 2009
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As previously |
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reported |
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Adjustment |
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Revised |
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(In thousands) |
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Net loss |
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$ |
(3,549 |
) |
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$ |
(137 |
) |
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$ |
(3,686 |
) |
Loss on abandonment of patents |
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13 |
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137 |
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150 |
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Accumulated amortization of abandoned assets |
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4 |
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4 |
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Revenue Recognition:
The Company generates revenue from sales of emission reduction products including Purifier
system hardware; ARIS® advanced reagent injection system injectors and dosing systems;
fuel-borne catalysts, including the Platinum Plus® fuel-borne catalyst products and
concentrate; and license and royalty fees from the ARIS system and other technologies.
Revenue is recognized when earned. For technology licensing fees paid by licensees that are
fixed and determinable, accepted by the customer and nonrefundable, revenue is recognized upon
execution of the license agreement, unless it is subject to completion of any performance criteria
specified within the agreement, in which case it is deferred until such performance criteria are
met. Royalties are frequently required pursuant to license agreements or may be the subject of
separately executed royalty agreements. Revenue from royalties is recognized ratably over the
royalty period based upon periodic reports submitted by the royalty obligor or based on minimum
royalty requirements. Revenue from product sales is recognized when title has passed and our
products are shipped to our customer, unless the purchase order or contract specifically requires
us to provide installation for hardware purchases. For hardware projects in which we are
responsible for installation (either directly or indirectly by third-party contractors), revenue is
recognized when the hardware is installed and/or accepted, if the project requires inspection
and/or acceptance.
Generally, our license agreements are non-exclusive and specify the geographic territories and
classes of diesel engines covered, such as on-road vehicles, off-road vehicles, construction,
stationary engines, marine and railroad engines. At the time of the execution of our license
agreement, we assign the right to the licensee to use our patented technologies. The up-front fees
are not subject to refund or adjustment. We recognize the license fee as revenue at the inception
of the license agreement when we have reasonable assurance that the technologies transferred have
been accepted by the licensee and collectability of the license fee is reasonably
7
assured. The nonrefundable up-front fee is in exchange for the culmination of the earnings
process as the Company has accomplished what it must do to be entitled to the benefits represented
by the revenue. Under our license agreements, there is no significant obligation for future
performance required of the Company. Each licensee must determine if the rights to our patented
technologies are usable for their business purposes and must determine the means of use without
further involvement by the Company. In most cases, licensees must make additional investments to
enable the capabilities of our patents, including significant engineering, sourcing of and assembly
of multiple components. Our obligation to defend valid patents does not represent an additional
deliverable to which a portion of an arrangement fee should be allocated. Defending the patents is
generally consistent with our representation in the license agreement that such patents are legal
and valid.
Valuation of Accounts Receivable:
Management reviews the creditworthiness of a customer prior to accepting an initial order.
Upon review of the customers credit application and confirmation of the customers credit and bank
references, management establishes the customers terms and credit limits. Credit terms for payment
of products are extended to customers in the normal course of business and no collateral is
required. We receive order acknowledgements from customers confirming their orders prior to our
fulfillment of orders. To determine the allowance for doubtful accounts receivable which adjusts
gross trade accounts receivable downward to estimated net realizable value, management considers
the ongoing financial stability of the Companys customers, the aging of accounts receivable
balances, historical losses and recoveries, and general business trends and existing economic
conditions that impact our industry and customers. In cases where the Company is aware of
circumstances that may impair a specific customers ability to meet its financial obligations, we
record a specific allowance against amounts due from that customer, and thereby reduce the net
recognized receivable to the amount the Company reasonably believes will be collected. An account
is written off only after management has determined that all available means of collection,
including legal remedies, are exhausted.
Cost of Revenue:
Our cost of product sales includes the costs we incur to formulate our finished products into
saleable form for our customers, including material costs, labor and processing costs charged to us
by our outsourced blenders, installers and other vendors, packaging costs incurred by our
outsourced suppliers, freight costs to customers and inbound freight charges from our suppliers.
Our inventory is primarily maintained off-site by our outsourced suppliers. To date, our
purchasing, receiving, inspection and internal transfer costs have been insignificant and have been
included in cost of product sales. Cost of licensing fees and royalties is zero as there are no
incremental costs associated with the revenue.
Patent Expense:
Patents, which include all direct incremental costs associated with initial patent filings and
costs to acquire rights to patents under licenses, are stated at cost and amortized using the
straight-line method over the remaining useful lives, ranging from one to twenty years. During the
six months ended June 30, 2010, we capitalized $95,000 of patent costs and recognized a $3,000 loss
on the abandonment of certain patents and patent applications. Indirect and other patent-related
costs are expensed as incurred. Patent amortization expense for the three and six months ended June
30, 2010 was $17,000 and $33,000, respectively. For the three and six months ended June 30, 2009,
amortization expense was $15,000 and $26,000, respectively. At June 30, 2010 and December 31, 2009,
the Companys patents, net of accumulated amortization, were $957,000 and $898,000, respectively.
Basic and Diluted Loss per Common Share:
Basic loss per share is computed by dividing net loss by the weighted-average shares
outstanding during the reporting period. Diluted loss per share is computed in a manner similar to
basic earnings per share except that the weighted-average shares outstanding are increased to
include additional shares from the assumed exercise of stock options and warrants, if dilutive,
using the treasury stock method. The Companys computation of diluted net loss per share for the
three and six months ended June 30, 2010 and 2009 does not include common share equivalents
associated with 768,744 and 948,078 options, respectively, and 399,528 and 407,493 warrants,
respectively, as the result would be anti-dilutive. Further, per share effects of the 26,667 and
40,000 unvested restricted shares under a stock award have not been included in the diluted net
loss per share for the three and six months ended June 30, 2010 and 2009, respectively, as the
result would be anti-dilutive.
8
Income Taxes:
At June 30, 2010, there were no unrecognized tax benefits. It is the Companys policy to
classify in the financial statements accrued interest and penalties attributable to a tax position
as income taxes.
Utilization of CDTs U.S. federal tax loss carryforwards for the period prior to December 12,
1995 is limited as a result of the ownership change in excess of 50% attributable to the 1995
Fuel-Tech N.V. rights offering to a maximum annual allowance of $734,500. Utilization of CDTs U.S.
federal tax loss carryforwards for the period after December 12, 1995 and before December 30, 2006
is limited as a result of the ownership change in excess of 50% attributable to the private
placement which was effective December 29, 2006 to a maximum annual allowance of $2,518,985.
Utilization of CDTs tax losses subsequent to 2006 may be limited due to cumulative ownership
changes in any future three-year period.
We file our tax returns as prescribed by the tax laws of the jurisdictions in which we
operate. Our tax years after 2006 remain open to examination by various taxing jurisdictions as the
statute of limitations has not expired.
Fair Value of Financial Instruments:
The Companys assets carried at fair value on a recurring basis are its investments (see Note
2). The investments have been classified within level 3 in the valuation hierarchy as their
valuation requires substantial judgment and estimation of factors that are not currently observable
in the market due to the lack of trading in the securities. The valuation may be revised in future
periods as market conditions evolve.
Certain financial instruments are carried at cost on our condensed consolidated balance
sheets, which approximates fair value due to their short-term, highly liquid nature. These
instruments include cash and cash equivalents, accounts receivable, prepaid expenses, accounts
payable, customer deposits, accrued expenses and short-term debt.
Recently Adopted and Recently Issued Accounting Pronouncements:
In January 2010, the Financial Accounting Standards Board (FASB) published Accounting
Standards Update (ASU) 2010-06, Fair Value Measurements and Disclosures (Topic 820): Improving
Disclosures about Fair Value Measurements. ASU No. 2010-06 clarifies improved disclosure
requirements related to fair value measurements and disclosures in Overall Subtopic 820-10 of the
FASB Codification. The new disclosures and clarifications of existing disclosures are effective for
interim and annual reporting periods beginning after December 15, 2009, except for the disclosure
about purchases, sales, issuances, and settlements in the rollforward of activity in Level 3 fair
value measurements. Those disclosures are effective for fiscal years beginning after December 15,
2010, and for interim periods within those fiscal years. The adoption of this standard will not
have a material impact on the Companys financial position and results of operations.
Note 2. Investments
Classification of investments as current or non-current is dependent upon managements
intended holding period, the securitys maturity date and liquidity considerations based on market
conditions. At December 31, 2009, the Company classified all investments as current based on
managements intention and ability to liquidate the investments within twelve months.
At
December 31, 2009, the Companys investments consist of auction rate securities (ARS) and an auction rate
securities right (ARSR). The Company accounts for its ARS investments based upon accounting
standards that provide for determination of the appropriate classification of investments.
Available-for-sale securities are carried at fair value, with unrealized holding gains and losses,
net of tax, reported as a separate component of stockholders equity. Trading securities are
carried at fair value, with unrealized holding gains and losses included in other income (expense)
on our condensed consolidated statements of operations.
The Companys ARSR investment is accounted for based upon a standard that provides a fair
value option election that allows entities to irrevocably elect fair value as the initial and
subsequent measurement attribute for certain assets and liabilities. Changes in fair value are
recognized in earnings as they occur for those assets or liabilities for which the election is
made. The election is made on an instrument by instrument basis at initial recognition of an asset
or liability or upon an event that gives rise to a new basis of accounting for that instrument.
9
The Companys investments are reported at fair value in accordance with accounting standards
that accomplish the following key objectives:
|
|
|
Defines fair value as the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at the
measurement date; |
|
|
|
|
Establishes a three-level hierarchy (valuation hierarchy) for fair value measurements; |
|
|
|
|
Requires consideration of the Companys creditworthiness when valuing liabilities; and |
|
|
|
|
Expands disclosures about instruments measured at fair value. |
The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset
or liability as of the measurement date. A financial instruments categorization within the
valuation hierarchy is based upon the lowest level of input that is significant to the fair value
measurement. The three levels of the valuation hierarchy are as follows:
|
|
|
Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for
identical assets or liabilities in active markets. |
|
|
|
|
Level 2 inputs to the valuation methodology include quoted prices for similar assets
and liabilities in active markets, and inputs that are observable for the asset or
liability, either directly or indirectly, for substantially the full term of the financial
instrument. |
|
|
|
|
Level 3 inputs to the valuation methodology are unobservable and significant to the
fair value measurement. |
The Companys investments as of December 31, 2009 have been classified within level 3 as their
valuation requires substantial judgment and estimation of factors that are not currently observable
in the market due to the lack of trading in the securities. Investments are comprised of the
following:
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
|
(In thousands) |
|
Auction rate securities |
|
$ |
|
|
|
$ |
10,577 |
|
Auction rate securities right |
|
|
|
|
|
|
1,148 |
|
|
|
|
|
|
|
|
Total investments |
|
$ |
|
|
|
$ |
11,725 |
|
Classified as current assets |
|
|
|
|
|
|
11,725 |
|
|
|
|
|
|
|
|
Classified as non-current assets |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
Our ARS are variable-rate debt securities, most of which are AAA/Aaa rated, that are
collateralized by student loans substantially guaranteed by the U.S. Department of Education. While
the underlying securities have a long-term nominal maturity, the interest rate is reset through
dutch auctions that are typically held every 28 days. The contractual maturities of our ARS range
from 2027 to 2047. Auctions for our ARS have failed since February 2008 resulting in illiquid
investments for the Company. Our ARS were purchased and held through UBS. In October 2008, the
Company received an offer (the Offer) from UBS AG for a put right permitting us to sell to UBS at
par value all ARS previously purchased from UBS at a future date (any time during a two-year period
beginning June 30, 2010). The Offer also included a commitment to loan us 75% of the UBS-determined
value of the ARS at any time until the put is exercised. We accepted the Offer on November 6, 2008.
Our right under the Offer is in substance a put option (with the strike price equal to the par
value of the ARS) which we recorded as an asset, measured at its fair value, with the resultant
gain recognized in our statement of operations.
For the period through the date the Company accepted the Offer, the Company classified the ARS
as available-for-sale; thereafter, the Company transferred the ARS to the trading category.
The fair value of the ARS was approximately $10.6 million at December 31, 2009. The fair value
of the ARS was determined utilizing a discounted cash flow approach and market evidence with
respect to the ARSs collateral, ratings and insurance to assess default risk, credit spread risk
and downgrade risk. The Company also recorded the ARSR at an initial fair value of $1.3 million.
The fair value of the ARSR was based on an approach in which the present value of all expected
future cash flows were subtracted from the current fair market value of the securities and the
resultant value was calculated as a future value at an interest rate reflective of
10
counterparty risk. In the three and six months ended June 30, 2010, recognized gains on
the ARS were directly offset by losses on the ARSR, resulting in no impact on our results of
operations. In the three and six months ended June 30, 2009, we recorded a gain of $377,000 and
$411,000, respectively, on the ARS and a loss of $144,000 and $250,000, respectively, on the ARSR,
resulting in a $233,000 and $161,000 net gain, respectively, included in other income (expense) on
our unaudited condensed consolidated statements of operations.
During the first quarter of 2010, UBS began purchasing certain of our ARS investments at par value and on June
30, 2010 we exercised our put option under the Offer and sold to UBS our remaining ARS for
approximately $5.2 million, representing par value. Of this amount, approximately $3.2 million was
used in July 2010 to pay down the Companys outstanding borrowings to UBS.
Interest income for the three months ended June 30, 2010 and 2009 was approximately $31,000
and 49,000, respectively, and for the six-month periods then ended was approximately $91,000 and
$141,000, respectively. Accrued interest receivable at June 30, 2010 and December 31, 2009 was
approximately $3,000 and $7,000, respectively.
The table below includes a roll-forward of the Companys investments in ARS and ARSR for the
six months ended June 30, 2010:
|
|
|
|
|
|
|
2010 |
|
|
|
Significant |
|
|
|
Unobservable |
|
|
|
Inputs |
|
|
|
(Level 3) |
|
|
|
(In thousands) |
|
Fair value at beginning of period |
|
$ |
11,725 |
|
Purchases |
|
|
|
|
Sales |
|
|
(11,725 |
) |
Transfers (out) in |
|
|
|
|
Unrealized gain (loss) included in statement of operations |
|
|
|
|
|
|
|
|
Fair value at end of period |
|
$ |
|
|
|
|
|
|
Change in unrealized gain (loss) |
|
$ |
|
|
|
|
|
|
Note 3. Inventories
Inventories are stated at the lower of cost or market with cost determined using the average
cost method. Inventories consist of the following:
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
|
(In thousands) |
|
Finished Platinum Plus fuel-borne catalyst |
|
$ |
164 |
|
|
$ |
85 |
|
Platinum concentrate/metal |
|
|
251 |
|
|
|
449 |
|
Hardware |
|
|
413 |
|
|
|
587 |
|
Other |
|
|
63 |
|
|
|
11 |
|
|
|
|
|
|
|
|
|
|
$ |
891 |
|
|
$ |
1,132 |
|
Less: inventory reserves |
|
|
(69 |
) |
|
|
(73 |
) |
|
|
|
|
|
|
|
Inventories, net |
|
$ |
822 |
|
|
$ |
1,059 |
|
|
|
|
|
|
|
|
Note 4. Short-term Debt
On July 25, 2008, the Company borrowed $3.0 million from the demand loan facility with UBS
collateralized by our ARS, a facility we had arranged in May 2008. Management determined to draw
down the entire facility as a matter of financial prudence to secure available cash. The loan
facility was available for our working capital purposes and required that we continue to meet
certain collateral maintenance requirements, such that our outstanding borrowings could not exceed
50% of the value of our ARS as determined by the lender. No facility fee was required. Borrowings
bore interest at a floating interest rate per annum equal to the sum of the prevailing daily 30-day
Libor plus 25 basis points.
In November 2008, we accepted the Offer from UBS AG (see Note 2). UBS committed to loan us 75%
of the value of the ARS as determined by UBS at any time until the ARSR is exercised. We applied
for the loan which UBS committed would be on a no net cost basis to the Company. UBS approved our
credit application on January 14, 2009 and approved a $6.5 million credit facility pursuant to its
Offer. On September 4, 2009, we arranged an increase of the credit line to $7.7 million.
11
The outstanding balance of the short-term debt at June 30, 2010 and December 31, 2009 was $3.2
million and $7.7 million, respectively. In July 2010, pursuant to the terms of our agreement with
UBS, we used a portion of the proceeds from our sale of ARS investments to pay down the remaining
UBS borrowings.
Interest expense was approximately $20,000 and $12,000 for the three months ended June 30,
2010 and 2009, respectively and $47,000 and $32,000 for the six months ended June 30, 2010 and 2009
respectively. Accrued interest payable at June 30, 2010 was approximately $1,000.
Note 5. Stockholders Equity
In March 2009, we issued 40,000 restricted shares of our common stock under our Incentive Plan
(see Note 6).
In the first six months of 2010, 7,965 of the Companys outstanding warrants expired. At June
30, 2010, the Company had 399,528 warrants outstanding, exercisable at a weighted-average exercise
price of $11.52 with a weighted-average remaining life of 2.0 years.
Note 6. Stock-Based Compensation
The Company maintains a stock award plan approved by its stockholders, the Incentive Plan (the
Plan). Under the Plan, awards may be granted to participants in the form of incentive stock
options, non-qualified stock options, stock appreciation rights, restricted stock, performance
awards, bonuses or other forms of share-based awards or cash, or combinations of these as
determined by the board of directors. Awards are granted at fair market value on the date of grant
and typically expire ten years after date of grant. Participants in the Plan may include the
Companys directors, officers, employees, consultants and advisors (except consultants or advisors
in capital-raising transactions) as the board of directors may determine. The maximum number of
awards allowed under the Plan is 17.5% of the Companys outstanding common stock less the then
outstanding awards, subject to sufficient authorized shares.
Share-based compensation cost recognized under ASC 718 was approximately $27,000 and $212,000
for the three months ended June 30, 2010 and 2009, respectively and $57,000 and $418,000 for the
six months ended June 30, 2010 and 2009, respectively. As of June 30, 2010, there was approximately
$0.1 million of unrecognized compensation cost related to stock options and restricted shares
granted under the Plan. The cost is expected to be recognized over a weighted-average period of 0.7
years.
The following table summarizes information concerning stock options outstanding including the
related transactions under the Plan for the six months ended June 30, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted- |
|
|
|
|
|
|
|
|
|
|
Weighted- |
|
|
Average |
|
|
|
|
|
|
|
|
|
|
Average |
|
|
Remaining |
|
|
Aggregate |
|
|
|
Number of |
|
|
Exercise |
|
|
Contractual |
|
|
Intrinsic |
|
|
|
Shares* |
|
|
Price |
|
|
Term in Years |
|
|
Value |
|
Options Outstanding as of December 31, 2009 |
|
|
876,410 |
|
|
$ |
10.40 |
|
|
|
|
|
|
|
|
|
Granted |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
Exercised |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
Forfeited |
|
|
(6,667 |
) |
|
$ |
2.71 |
|
|
|
|
|
|
|
|
|
Expired |
|
|
(100,999 |
) |
|
$ |
11.98 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding as of June 30, 2010 |
|
|
768,744 |
|
|
$ |
10.26 |
|
|
|
3.7 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable as of June 30, 2010 |
|
|
738,411 |
|
|
$ |
10.52 |
|
|
|
3.5 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Table does not include 40,000 shares issued in 2009 as a restricted
stock award under the Plan. |
The aggregate intrinsic value (market value of stock less option exercise price) in the
preceding table represents the total pretax intrinsic value, based on the Companys closing stock
price on June 30, 2010, which would have been received by the holders had all holders of awards and
options in the money exercised their options as of that date.
No stock options were exercised in the six months ended June 30, 2010 and 2009.
In 2009, the board of directors awarded 40,000 shares to the newly-elected Chief Executive
Officer at an average market price of $1.625 per share, representing the high and low market price
on the date of award, March 30, 2009. These shares vest as to one-third
12
of the total on each of February 10, 2010, 2011 and 2012. The total fair value of the award
was $65,000 which is being charged to expense over the vesting period.
The Company estimates the fair value of stock options using a Black-Scholes option pricing
model. Key input assumptions used to estimate the fair value of stock options include the expected
term, expected volatility of the Companys stock, the risk free interest rate, option forfeiture
rates, and dividends, if any. The expected term of the options is based upon the historical term
until exercise or expiration of all granted options. The expected volatility is derived from the
historical volatility of the Companys stock on the U.S. NASDAQ Capital Market (the
Over-the-Counter market prior to October 3, 2007) for a period that matches the expected term of
the option. The risk-free interest rate is the constant maturity rate published by the U.S. Federal
Reserve Board that corresponds to the expected term of the option. ASC 718 requires forfeitures to
be estimated at the time of grant in order to estimate the amount of share-based awards that will
ultimately vest. The estimate is based on the Companys historical rates of forfeitures. ASC 718
also requires estimated forfeitures to be revised, if necessary, in subsequent periods if actual
forfeitures differ from those estimates. The dividend yield is assumed as 0% because the Company
has not paid dividends and does not expect to pay dividends in the future.
Note 7. Commitments and Contingencies
Legal Proceedings
From time to time, the Company is involved in legal proceedings in the ordinary course of its
business. The litigation process is inherently uncertain, and the Company cannot guarantee that the
outcome of existing proceedings will be favorable for the Company or that they will not be material
to the Companys business, results of operations or financial position. However, the Company does
not currently believe these matters will have a material adverse effect on its business, results or
financial position.
On April 30, 2010, the Company received a complaint from the Hartford, Connecticut office of
the U.S. Department of Labor under Section 806 of the Corporate and Criminal Fraud Accountability
Act of 2001, Title VIII of the Sarbanes-Oxley Act of 2002, alleging that Ms. Ann B. Ruple, former
Vice President, Treasurer and Chief Financial Officer of Clean Diesel, had been subject to
discriminatory employment practices. The Companys Board of Directors terminated Ms. Ruples
employment on April 19, 2010. The complainant in this proceeding does not demand specific relief.
However, the statute provides that a prevailing employee shall be entitled to all relief necessary
to make the employee whole, including compensatory damages which may be reinstatement, back pay
with interest, front pay, and special damages such as attorneys and expert witness fees. The
Company responded on June 14, 2010, denying the allegations of the complaint. Based upon current
information, management, after consultation with legal counsel defending the Companys interests,
believes the ultimate disposition will have no material effect upon the Companys business, results
or financial position.
Note 8. Related Party Transactions
Mr. Park, our Chairman, is also a principal and chairman of Innovator Capital Limited, a
financial services company based in London, England, which firm has provided services to the
Company. On November 20, 2009, the Company entered into an engagement letter with Innovator to
provide financing and merger and acquisition services (Engagement Letter). The Engagement Letter
had an initial three month term during which Innovator would (i) act for the Company in arranging a
private placement financing of $3.0 million to $4.0 million from the sale of the Companys common
stock and warrants and (ii) assist the Company in merger and acquisition activities. Effective
February 20, 2010, the Company extended the term of the Engagement Letter to June 30, 2010 and
revised the minimum and maximum range of private placement financing to $1.0 million to $1.5
million.
For its financing services, Innovator will receive (i) a placing commission of five percent
(5%) of all monies received by the Company and (ii) financing warrants to acquire shares of common
stock of the Company equal in value to fifteen percent (15%) of the total gross proceeds received
by the Company in the financing, such financing warrants to be exercisable at a price equal to a
ten percent (10%) premium to the price per share of common stock in the financing. Issuance of the
financing warrants is contingent on the stockholders of the Company authorizing additional common
stock.
For its merger and acquisition services, Innovator will receive monthly retainer fees of
$10,000 and success fees as a percentage of transaction value of five percent (5%) on the first
$10.0 million, four percent (4%) on the next $3.0 million, three percent (3%) on the next $2.0
million, and two percent (2%) on amounts above $15.0 million in connection with possible merger and
acquisition transactions. Success fees are payable in cash or shares or a combination of cash or
shares as determined by the Board of the Company (see Note 14).
13
The Engagement Letter further provides that retainer fees may be deducted from success fees,
that Innovator shall be reimbursed for its ordinary and necessary out of pocket expenses, that the
Engagement Letter is subject to Delaware law, and that disputes between the parties are subject to
arbitration.
Selling, general and administrative expenses for the three and six months ended June 30, 2010
include $30,000 and $60,000, respectively, related to services rendered by Innovator Capital under
the terms of the Engagement Letter.
Effective January 27, 2010, we engaged David F. Merrion, a director of the Company, to perform
consulting services for us as an expert witness in an administrative proceeding related to a patent
application with respect to diesel engine technology. For these services, which commenced February
1, 2010 and were completed on March 16, 2010, Mr. Merrion was paid approximately $20,000, at the
rate of $300 per hour or a daily maximum of $3,000 per day.
Note 9. Significant Customers
For the three and six months ended June 30, 2010 and 2009, revenue derived from certain
customers comprised 10% or more of our consolidated revenue (significant customers) as set forth
in the table below:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
|
June 30, |
|
June 30, |
|
|
2010 |
|
2009 |
|
2010 |
|
2009 |
Customer A |
|
36.8% |
|
* |
|
49.2% |
|
* |
Customer B |
|
* |
|
13.3% |
|
* |
|
* |
Customer C |
|
* |
|
26.9% |
|
* |
|
14.0% |
Customer D |
|
* |
|
* |
|
* |
|
18.4% |
|
|
|
* |
|
Represents less than 10% revenue for that customer in the applicable
period. There were no other customers that represented 10% or more of
revenue for the periods indicated. |
At
June 30, 2010, Clean Diesel had two customers (not included in the
table above) that represented approximately 37.9% of its gross accounts receivable balance.
Note 10. Comprehensive Loss
Components of comprehensive loss follow:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
(in thousands) |
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
Net loss |
|
$ |
(1,351 |
) |
|
$ |
(1,179 |
) |
|
$ |
(2,326 |
) |
|
$ |
(3,686 |
) |
Other comprehensive income
(loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation
adjustment |
|
|
14 |
|
|
|
53 |
|
|
|
68 |
|
|
|
44 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss |
|
$ |
(1,337 |
) |
|
$ |
(1,126 |
) |
|
$ |
(2,258 |
) |
|
$ |
(3,642 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
14
Note 11. Geographic Information
CDT sells its products and licenses its technologies throughout the world. A geographic
distribution of revenue consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
(in thousands) |
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. |
|
$ |
118 |
|
|
$ |
157 |
|
|
$ |
218 |
|
|
$ |
378 |
|
U.K./Europe |
|
|
293 |
|
|
|
186 |
|
|
|
811 |
|
|
|
283 |
|
Asia |
|
|
|
|
|
|
32 |
|
|
|
27 |
|
|
|
60 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
411 |
|
|
$ |
375 |
|
|
$ |
1,056 |
|
|
$ |
721 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company has patent coverage in North and South America, Europe, Asia, Africa and
Australia. As of June 30, 2010 and December 31, 2009, the Companys assets comprise the following:
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
|
(In thousands) |
|
U.S. |
|
$ |
8,841 |
|
|
$ |
15,551 |
|
Foreign |
|
|
1,664 |
|
|
|
1,696 |
|
|
|
|
|
|
|
|
Total assets |
|
$ |
10,505 |
|
|
$ |
17,247 |
|
|
|
|
|
|
|
|
Note 12. Severance Charges
On February 10, 2009, the Companys Board of Directors elected Michael L. Asmussen as
President and Chief Executive Officer replacing Dr. Bernhard Steiner. As a consequence of his
termination of employment, Dr. Steiner was entitled to salary of approximately $315,445 (EUR
241,500) per annum until September 13, 2010, the remainder of his contract term, along with
specified expenses not to exceed an aggregate of approximately $4,300, to be paid in monthly
installments. During the three months ended March 31, 2009, the Company recognized a severance
charge of $510,000 for this obligation. As a result of Dr. Steiners death on June 26, 2010, the
Companys obligation under his severance arrangement ceased and the remaining severance accrual of
$60,000 was reversed into income.
On August 4, 2009, the Board of Directors adopted a plan to implement a company-wide reduction
in force effective August 7, 2009. In accordance with ASC 420, Exit or Disposal Cost Obligations,
the Company recognized approximately $448,000 in severance charges in the third quarter of 2009.
During the three months ended March 31, 2010, the Company reversed $103,000 of its severance
accrual to recognize a reduction in the Companys obligations under these severance arrangements.
A summary of the activity in the severance accrual is as follows:
|
|
|
|
|
|
|
(In thousands) |
|
Balance at December 31, 2009 |
|
$ |
389 |
|
Provisions (Reversals) |
|
|
(163 |
) |
Payments |
|
|
(226 |
) |
|
|
|
|
Balance at June 30, 2010 |
|
$ |
|
|
|
|
|
|
Note 13. Merger
On May 13, 2010, the Company entered into an Agreement and Plan of Merger (the Merger
Agreement) with Catalytic Solutions, Inc. (CSI) (AIM: CTS and CTSU), a global manufacturer and
distributor of emissions control systems and products based in Ventura, CA. The proposed merger is
a transaction that will result in the combination of the businesses of Clean Diesel and CSI,
whereby CSI will become a wholly-owned subsidiary of Clean Diesel (the Merger). Under the terms
of the Merger Agreement:
15
|
|
|
For accounting purposes, CSI is considered to be acquiring the Company. |
|
|
|
|
In exchange for their shares of CSI common stock, the shareholders of CSI will receive shares, and warrants to purchase shares, of Clean Diesel common stock. CSI shareholders will
receive such numbers of Clean Diesel common stock so that after the Merger, CSI will own
approximately 60% of the outstanding shares of Clean Diesel common stock. In addition, CSI
shareholders will receive warrants to purchase up to 3 million shares of Clean Diesel common
stock. |
|
|
|
|
The Merger is conditional among other matters on obtaining Clean Diesel stockholder
approval and CSI shareholder approval and also a number of further closing requirements
including that Clean Diesel and CSI each have $1.0 million in cash or equivalent at the time of
the Merger. |
|
|
|
|
The Company will amend its certificate of incorporation to effect a reverse stock split
in a ratio ranging from 1-for-3 to 1-for-8 of all issued and outstanding shares of Clean
Diesel common stock, the final ratio to be determined within the discretion of the Clean
Diesel Board of Directors, to occur immediately before the closing of the Merger. |
In connection with the Merger, if successful, Innovator Capital, an investment banking firm
described in Note 8, is estimated to receive a fee of approximately $761,000 (see Note 14).
The Merger Agreement may be terminated at any time prior to the effective time of the Merger
by mutual written consent. The Merger Agreement obligates each party to pay a termination fee of
$300,000 in cash plus reasonable costs and expenses not to exceed $350,000 in the aggregate, to the
counter party if either the Company or CSI fails to approve the merger under conditions stipulated
in the Merger Agreement.
Both CSI and Clean Diesel intend to issue additional securities prior to the Merger in order
that they can finance current operations. The Company has received commitment letters from existing
stockholders to raise approximately $1.0 million for the issuance of additional shares of common
stock and warrants in a Regulation S offering. Under the terms of the Companys private placement,
the closing of which is conditioned upon the consummation of the Merger, Clean Diesel will sell
units consisting of up to 654,118 shares of its common stock and warrants to purchase up to
1,000,000 shares of its common stock. In connection with this offering, Innovator Capital will
receive a fee of $50,000, in cash and 15% of the gross proceeds of the capital raise through the
issuance of 89,180 warrants to purchase common stock.
In connection with the Merger, the Company has entered into certain employee agreements,
including a Transition Services Agreement with Charles W. Grinnell, Vice President, General
Counsel, Corporate Secretary and a Director of the Registrant. The agreements provide for aggregate
retention and transition bonuses of $250,000. Each agreement contains a termination clause to the
effect that if the Merger does not occur on or before September 6, 2010, or such later date as
determined by the Company, the agreements will be void and no bonus will be paid.
Note 14. Subsequent Events
On July 15, 2010, the Company entered into an Employment Agreement (the Agreement) with
Michael L. Asmussen, our Chief Executive Officer, President and Director. The Agreement will become
effective upon the closing of the proposed Merger with CSI. Pursuant to the Agreement, Mr. Asmussen
will become the Vice President and Chief Commercial Officer of the Company and CSI, and will also
be a member of the board of directors. In addition, Mr. Asmussen will receive 40,000 restricted
shares under the Companys Incentive Plan. Mr. Asmussen is also entitled to certain relocation
benefits under the Agreement in order to facilitate Mr. Asmussens move to the vicinity of the
Companys relocated headquarters in California following the Merger. The Agreement will not become
effective if the Merger is not completed.
On July 21, 2010, the Companys board formed a Special Committee of Independent Directors
(Special Committee) to review and consider various matters in connection with the Companys
proposed merger with CSI.
On August 6, 2010, based upon a recommendation from the Special Committee, the Companys board
voted to extend the term of Innovator Capitals engagement to the earlier of September 30, 2010 or
the closing of the Merger and to determine the form of payment of Innovator Capitals fee for merger and
acquisition services. In connection with a successful merger with CSI, Innovator Capitals fee
will be comprised of $500,000 in cash (inclusive of monthly retainers) and 194,486 shares of Clean Diesel common stock.
16
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
Statements in this Quarterly Report on Form 10-Q that are not historical facts, so-called
forward-looking statements, are made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. Investors are cautioned that all forward-looking
statements involve risks and uncertainties, including those detailed in the Companys filings with
the Securities and Exchange Commission. See Item 1A, Risk Factors, and Item 7, Managements
Discussion and Analysis of Financial Condition and Results of Operations in the Companys Annual
Report on Form 10-K for the year ended December 31, 2009.
Results of Operations
Three Months ended June 30, 2010 Compared to Three Months ended June 30, 2009
Total
revenue in the three months ended June 30, 2010 was $411,000 compared to $375,000 in the
three months ended June 30, 2009, an increase of $36,000, or 9.6%, reflecting increased traction
in the Companys attempt to establish itself in the retrofit space. Revenue for the three months
ended June 30, 2010 consisted of approximately 90.0% in product
sales and 10.0% in technology licensing
fees and royalties. Of our operating revenue for the three months ended
June 30, 2009, approximately 91.2% was from product sales and 8.8% was from technology licensing
fees and royalties. The mix of our revenue sources during any reporting period may have a material
impact on our operating results. In particular, our execution of technology licensing agreements,
and the timing of the revenue recognized from these agreements, has not been predictable.
Product sales were $370,000 in the second quarter of 2010 compared to $342,000 in the same
quarter of 2009, an increase of $28,000. This increase in product sales was attributable primarily
to higher demand for our Platinum Plus Purifier Systems, a product comprised of a diesel
particulate filter along with our Platinum Plus fuel-borne catalyst. The sales of our Purifier
Systems provide us with recurring revenue from use of our Platinum Plus fuel-borne catalyst that
enables the regeneration of the diesel particulate filter. We believe we will have the opportunity
to expand this business opportunity as we build the certified product portfolio and infrastructure
required to address additional low emission zones throughout the globe.
Our technology licensing fees and royalties were slightly higher in 2010 with $41,000 in the
three months ended June 30, 2010 compared to $33,000 in the same quarter of 2009. These revenues
are primarily attributable to royalties related to our ARIS technologies. While we have not
executed new technology license agreements in 2010, we continue our efforts to consummate
technology license agreements with manufacturers and component suppliers for the use of our ARIS
technologies for control of oxides of nitrogen (NOx) using our selective catalytic reduction (SCR)
emission control, the combination of exhaust gas recirculation (EGR) with SCR technologies, and
hydrocarbon injection for lean NOx traps, NOx catalysts and diesel particulate filter regeneration.
Our total cost of revenue was $220,000 in the three month period ended June 30, 2010 compared
to $217,000 in the three month period ended June 30, 2009. The increase in our cost of sales is due
to higher product sales volume. Our gross profit as a percentage of
revenue was 46.5% and 42.1% for
the three month periods ended June 30, 2010 and 2009, respectively.
Our cost of revenue product sales includes the costs we incur to formulate our finished
products into saleable form for our customers, including material costs, labor and processing costs
charged to us by our outsourced blenders, installers and other vendors, packaging costs incurred by
our outsourced suppliers, freight costs to customers and inbound freight charges from our
suppliers. Our inventory is primarily maintained off-site by our outsourced suppliers. To date, our
purchasing, receiving, inspection and internal transfer costs have been insignificant and have been
included in cost of revenue product sales. In addition, in 2009 the costs of our warehouse of
approximately $21,000 per year were included in selling, general and administrative expenses. Our
gross margins may not be comparable to those of other entities, because some entities include all
of the costs related to their distribution network in cost of revenue and others like us exclude a
portion of such costs from gross margin, including such costs instead within operating expenses.
Cost of revenue licensing fees and royalties is zero as there are no incremental costs
associated with the revenue.
17
Selling, general and administrative expenses were $1,512,000 in the three months ended June
30, 2010 compared to $1,561,000 in the comparable 2009 period, a decrease of $49,000, or 3.1%. The
decrease in selling, general and administrative costs is primarily attributable to lower
compensation and benefits, travel, rent and related occupancy expenses. These cost reductions were
substantially offset by increased professional fees incurred in connection with our proposed merger
with Catalytic Solutions, Inc. Selling, general and administrative expenses are summarized as
follows:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
June 30, |
|
|
|
2010 |
|
|
2009 |
|
|
|
(In thousands) |
|
Compensation and benefits |
|
$ |
647 |
|
|
$ |
1,033 |
|
Non-cash stock-based compensation |
|
|
27 |
|
|
|
208 |
|
|
|
|
|
|
|
|
Total compensation and benefits |
|
|
674 |
|
|
|
1,241 |
|
Professional services |
|
|
616 |
|
|
|
171 |
|
Travel |
|
|
69 |
|
|
|
77 |
|
Occupancy |
|
|
101 |
|
|
|
209 |
|
Bad debt (recovery) provision |
|
|
|
|
|
|
(134 |
) |
Depreciation and all other |
|
|
52 |
|
|
|
(3 |
) |
|
|
|
|
|
|
|
Total selling, general and administrative expenses |
|
$ |
1,512 |
|
|
$ |
1,561 |
|
|
|
|
|
|
|
|
Excluding the non-cash stock-based charges, compensation and benefit expenses were $647,000
for the three months ended June 30, 2010 compared to $1,033,000 in the comparable prior year
period. This decrease of $386,000, or 37.4%, is due primarily to the reduction in force implemented
effective August 7, 2009. The reduction in non-cash stock-based compensation reflects a reduction
in the Companys workforce and related issuance of stock-based awards.
Expenses related to professional services increased by $445,000 to $616,000 in the three
months ended June 30, 2010 compared to $171,000 in the comparable prior year period. The increase
principally reflects legal, accounting and investment banking fees incurred in connection with our
proposed merger with Catalytic Solutions, Inc.
Reimbursement
of expenses under grant program represents amounts reimbursed under a
$961,000 diesel
emissions reduction technology development grant from the Houston Advanced Research Center (HARC).
The project goal is to develop and verify a Nitrogen Oxide-Particulate Matter
(NOx-PM) reduction retrofit system for on- and off-road engines, including those used in Class 8
type diesel fleets. The program is administered by HARC on behalf of the Texas Environmental
Research Consortium utilizing funding provided by the State of Texas. We anticipate completing the
HARC program by the first quarter of 2011.
As a result of our former Chief Executive Officers death on June 26, 2010, the Companys
obligation under his severance arrangement ceased. The remaining severance accrual of $60,000, was
reversed into income during the three months ended June 30, 2010.
Research and development expenses were $136,000 in the three months ended June 30, 2010
compared to $127,000 in the three months ended June 30, 2009, an increase of $9,000. Presently, we
are working to overcome gaps in our technology and product portfolios brought about by volatile
markets and past development setbacks. In addition to development of new products, our 2010
projects include field testing of fuel economy and emission control technologies in connection with
our HARC project. Total research and development expenses for the three months ended June 30, 2009
included $4,000 of non-cash charges for stock-based compensation.
Patent amortization and other patent related expense was $28,000 in the three months ended
June 30, 2010 compared to $140,000 in the same prior year period, a decrease of $112,000. The 2009
expense includes the write-off of $133,000 in capitalized costs related to the abandonment of
certain patents and patent applications not material to our business, the continued maintenance of
which was judged by management to be uneconomic.
At each reporting period, the Company evaluates the events or changes in circumstances that
may indicate that patents are not recoverable. The types of events and changes in circumstances
that would indicate the carrying value of our patents is not recoverable and therefore, impairment
testing would be triggered include the following: permanent elimination of mandated compliance with
emission reduction standards; reduction in overall market prevalence of diesel engines;
obsolescence of our technologies due to new discoveries and inventions; and an adverse action or
assessment against our technologies.
Our technology is comprised of patents, patent applications, trade or service marks, data and
know-how. We consider the life of our technologies to be commensurate with the remaining term of
our U.S. and corresponding foreign patents. Our patents have expiration dates ranging from 2010
through 2026, with the majority of the material patents upon which we rely expiring in 2018 and
beyond. We believe that we have sufficient patent coverage surrounding our core patents that
effectively serves to provide us longer proprietary protection. Our patents comprise technologies
that have been asserted as the technologies of choice by various automotive original
18
equipment manufacturers (OEMs) to meet mandates to comply with regulatory requirements that
went into effect starting in 2010 (EPA 2010). We monitor evolving technologies in the automotive
and other applicable industries to evaluate obsolescence of any of our patents.
Although we have seen certain suspensions and delays in mandated emissions requirements, we
expect sufficient revenue over the remaining life of the underlying patents to recover the carrying
value of our patents. We believe the emission reduction mandates will be phased in over time so
that despite volatility in our revenue streams, we should realize the expected revenue from our
patents. Our intellectual property strategy has been to build upon our base of core technology with
newer advanced technology patents developed or purchased by us. In many instances, we have
incorporated the technology embodied in our core patents into patents covering specific product
applications, including product design and packaging. We believe this building-block approach
provides greater protection to us and our licensees than relying solely on our core patents.
Interest income was $31,000 in the three months ended June 30, 2010 compared to $49,000 in the
three months ended June 30, 2009, a decrease of $18,000, or 36.7%, principally due to lower
invested balances.
Other income (expense) was ($34,000) in the three months ended June 30, 2010 compared to
$442,000 in the comparable 2009 period, a decrease of $476,000. The 2010 other income (expense)
includes foreign currency transaction losses, net of gains of ($14,000), and interest expense of
($20,000). The 2009 other income (expense) is comprised of foreign currency transaction gains, net
of losses of $221,000, interest expense of ($12,000) and gain on the fair value of investments of
$233,000. In the three months ended June 30, 2009, the Company had an unrealized gain on the fair
value of its investment in ARS of $377,000 and an unrealized loss of ($144,000) on its ARSR,
resulting in a $233,000 net gain.
Six Months ended June 30, 2010 Compared to Six Months ended June 30, 2009
Total
revenue for the first half of 2010 was $1,056,000 compared to $721,000 in the first half
of 2009, an increase of $335,000, or 46.5%, reflecting an increase in product sales as well as
licensing fees and royalties. Operating revenue in the six months ended June 30, 2010 consisted of
approximately 93.0% in product sales and 7.0% in technology licensing fees and royalties. Total revenues in the six months ended June 30, 2009 consisted of approximately
90.7% in product sales and 9.3% in technology licensing fees and royalties. The mix of our revenue
sources during any reporting period may have a material impact on our operating results. In
particular, our execution of technology licensing agreements, and the timing of the revenue
recognized from these agreements, has not been predictable.
Product sales in the six months ended June 30, 2010 were $982,000 compared to $654,000 in the
same prior year period, an increase of $328,000 or 50.2%. The increase in product sales was
attributable primarily to higher demand for our Platinum Plus Purifier Systems, a product comprised
of a diesel particulate filter along with our Platinum Plus fuel-borne catalyst.
Our technology licensing fees and royalties were slightly higher in 2010 with $74,000 in the
six months ended June 30, 2010 compared to $67,000 in the same period of 2009. These revenues are
primarily attributable to royalties related to our ARIS technologies. We have not executed new
technology license agreements in 2010.
Our total cost of revenue was $685,000 in the six-month period ended June 30, 2010 compared to
$451,000 in the six-month period ended June 30, 2009. The increase in our cost of sales is due to
an increase in sales volume. Our gross profit as a percentage of
revenue was 35.1% and 37.4% for
six-month periods ended June 30, 2010 and 2009, respectively, with the decrease largely
attributable to the mix of revenues during the periods.
19
Selling, general and administrative expenses were $2,733,000 in the six months ended June 30,
2010 compared to $3,513,000 in the comparable 2009 period, a decrease of $780,000, or 22.2%. The
decrease in selling, general and administrative costs is primarily attributable to lower
compensation and occupancy expenses partially offset with an increase in professional services.
Selling, general and administrative expenses are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
|
2010 |
|
|
2009 |
|
|
|
(In thousands) |
|
Compensation and benefits |
|
$ |
1,267 |
|
|
$ |
2,049 |
|
Non-cash stock-based compensation |
|
|
57 |
|
|
|
410 |
|
|
|
|
|
|
|
|
Total compensation and benefits |
|
|
1,324 |
|
|
|
2,459 |
|
Professional services |
|
|
942 |
|
|
|
418 |
|
Travel |
|
|
120 |
|
|
|
188 |
|
Occupancy |
|
|
223 |
|
|
|
444 |
|
Bad debt (recovery) provision |
|
|
|
|
|
|
(134 |
) |
Depreciation and all other |
|
|
124 |
|
|
|
138 |
|
|
|
|
|
|
|
|
Total selling, general and administrative expenses |
|
$ |
2,733 |
|
|
$ |
3,513 |
|
|
|
|
|
|
|
|
The Companys aggregate non-cash charges for the fair value of stock options and warrants in
the six months ended June 30, 2010 were $57,000. This compares to $418,000 in total non-cash
stock-based compensation expense in the six months ended June 30, 2009, of which $410,000 was
included in selling, general and administrative expenses and $8,000 in research and development
expenses.
Excluding the non-cash stock-based charges, compensation and benefit expenses were $1,267,000
for the six months ended June 30, 2010 compared to $2,049,000 in the comparable prior year period,
a decrease of $782,000, or 38.2%.
Professional services include audit-related costs, legal fees, as well as investor relations
and financial advisory fees. The increase principally reflects legal, accounting and investment
banking fees incurred in connection with our proposed merger with Catalytic Solutions, Inc.
We relocated our U.S. corporate offices in January 2009 and incurred rent expense on both our
old and new U.S. headquarters due to the timing of our relocation and expiration of the old lease.
Reimbursement
of expenses under grant program represents amounts reimbursed under a
$961,000 diesel
emissions reduction technology development grant from the Houston Advanced Research Center (HARC).
The project goal is to develop and verify a Nitrogen Oxide-Particulate Matter
(NOx-PM) reduction retrofit system for on- and off-road engines, including those used in Class 8
type diesel fleets. The program is administered by HARC on behalf of the Texas Environmental
Research Consortium utilizing funding provided by the State of Texas. We anticipate completing the
HARC program by the first quarter of 2011.
On February 10, 2009, the Companys Board of Directors elected Michael L. Asmussen, as
President and Chief Executive Officer replacing Dr. Bernhard Steiner. Mr. Asmussen was also
appointed to serve as a Director of the Company. Effective February 11, 2009, Dr. Steiner resigned
as a Director of the Company. As a consequence of his termination of employment, Dr. Steiner was
entitled to salary of approximately $315,445 (EUR 241,500) per annum until September 13, 2010, the
remainder of his contract term, along with specified expenses not to exceed an aggregate of
approximately $4,300, to be paid in monthly installments. We recognized a severance charge of
$510,000 in the six months ended June 30, 2009 for this obligation.
Following Dr. Steiners death on June 26, 2010, the Companys obligation to provide severance
payments to him ceased. As a result, during the six months ended June 30, 2010, we reversed
$163,000 of our severance accrual to recognize a reduction in our obligations due Dr. Steiner as
well as certain severance arrangements related to our August 2009 workforce reduction.
Research and development expenses were $189,000 in the six months ended June 30, 2010 compared
to $186,000 in the six months ended June 30, 2009. Presently, we are working to overcome gaps in
our technology and product portfolios brought about by volatile markets and past development
setbacks. Research and development expenses in the six months ended June 30, 2009 include $8,000 of
non-cash charges for the fair value of stock options granted in accordance with ASC 718.
The U.S. Environmental Protection Agency (EPA) verifications were withdrawn on two of our
products in January 2009 because available test results were not accepted by EPA as meeting new
emissions testing requirements for NO2 measurement. Presently, we do not intend to seek
verification of these products. We have no assurance of the extent of additional testing that may
be required by EPA or whether it will be adequate to remove any remaining concern the EPA may have
regarding use of our fuel-borne catalyst.
We believe that it is an essential requirement of the U.S. retrofit market that emissions
control products and systems are verified under the U.S. EPA and/or the California Air Resources
Board (CARB) protocols in order to qualify for funding from EPA and/or
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CARB programs. Funding for these emissions control products and systems is generally limited
to those products and technologies that have already been verified. Verification is also useful for
commercial acceptability. We believe that the lack of CARB verification will result in a shift of
U.S. retrofit revenue into future periods. We are currently working to achieve CARB verification
and may have the opportunity to obtain a conditional CARB verification before all of our testing
has been concluded.
Without full CARB verification, our U.S. retrofit opportunities are limited although certain
jurisdictions have been satisfied with other of our certifications. We received the EPA
registration in December 1999 for the Platinum Plus fuel-borne catalyst for use in bulk fuel by
refiners, distributors and truck fleets. In 2000, we completed the certification protocol for
particulate filters and additives for use with particulate filters with VERT, the main recognized
authority in Europe that tests and verifies diesel particulate filters for emissions and health
effects. In 2001, the Swiss environmental agency BUWAL approved the Platinum Plus fuel-borne
catalyst for use with particulate filters. In 2002, the U.S. Mining, Safety and Health
Administration accepted Platinum Plus fuel-borne catalyst for use in all underground mines. In
2007, we received accreditation for our Purifier System, our Platinum Plus fuel-borne catalyst used
with a diesel particulate filter, to be sold for compliance with the emission reduction
requirements established for the London LEZ. In 2009, the German Federal Environment Agency, the
Umweltbundesamt (UBA), issued a non disapproval for sale of Platinum Plus fuel-borne catalyst for
use in conjunction with up to 2,000 diesel particulate filters in Germany; further work will be
required to remove the 2,000 unit restriction.
In addition to emphasis on the global retrofit market, we continued to focus on fuel economy
opportunities in the U.S. in non-road sectors, including rail, marine, mining and construction, and
expect continued focus on these sectors by our distributors rather than through our direct selling
efforts. Our Platinum Plus fuel-borne catalyst is effective with regular sulfur diesel, ultra-low
sulfur diesel, arctic diesel (kerosene) and biodiesel. When used with blends of biodiesel and
ultra-low sulfur diesel, our Platinum Plus fuel-borne catalyst prevents the normal increase in
nitrogen oxides associated with biodiesel, as well as offering emission reduction in particulates
and reduced fuel consumption. Platinum Plus is used to improve combustion which acts to reduce
emissions and improve the performance and reliability of emission control equipment. Platinum Plus
fuel-borne catalyst takes catalytic action into engine cylinders where it improves combustion,
thereby reducing particulates, unburned hydrocarbons and carbon monoxide emissions, which also
results in improved fuel economy. Platinum Plus fuel-borne catalyst lends itself to a wide range of
enabling solutions including fuel economy, diesel particulate filtration, low emission biodiesel,
carbon reduction and exhaust emission reduction. The improvement attributable to Platinum Plus
fuel-borne catalyst may vary as a result of engine age, application in which the engine is used,
load, duty cycle, speed, fuel quality, tire pressure and ambient air temperature.
Patent amortization and other patent related expense was $77,000 in the six months ended June
30, 2010 compared to $209,000 in the same prior year period, a decrease of $132,000. The 2009
expense includes the write-off of $150,000 in capitalized costs related to the abandonment of
certain patents and patent applications not material to our business, the continued maintenance of
which was judged by management to be uneconomic.
Interest income was $91,000 in the six months ended June 30, 2010 compared to $141,000 in the
six months ended June 30,2009, a decrease of $50,000, or 35.5%, due to lower invested balances and
rates of return during the 2010 period.
Other income (expense) was ($67,000) in the six months ended June 30, 2010 and is comprised of
foreign currency transaction losses, net of gains of ($20,000) and interest expense of ($47,000).
The 2009 other income (expense) of $321,000 consists of foreign currency transaction gains, net of
losses of $192,000, interest expense of ($32,000) and net gain on investments of $161,000. In the
six months ended June 30, 2009, the Company had an unrealized gain on the fair value of its
investment in ARS of $411,000 and an unrealized loss of ($250,000) on our ARSR, resulting in a
$161,000 net gain.
Liquidity and Capital Resources
We require capital resources and liquidity to fund our global development and for working
capital. Our working capital requirements vary from period to period depending upon manufacturing
volumes, the timing of deliveries and payment cycles of our customers. At June 30, 2010, we had
cash and cash equivalents of $8.1 million to use for our operations. Our working capital was $5.0
million at June 30, 2010 compared to $7.3 million at December 31, 2009 reflecting a decrease of
$2.3 million primarily attributable to our operating losses during the period.
Net cash used for operating activities was $1.8 million in the six months ended June 30, 2010
and was used primarily to fund the net loss of $2.3 million, adjusted for non-cash items and
changes in working capital items. Included in the non-cash items was stock-based compensation
expense of $57,000 and depreciation and amortization of $94,000.
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Accounts receivable, net increased $70,000 to $218,000 at June 30, 2010 from $148,000 at
December 31, 2009 due primarily to increased sales activity. Inventories, net decreased $237,000,
reflecting increased product sales in the retrofit-market. Other current assets and other assets
decreased $188,000 at June 30, 2010 from the December 31, 2009 levels, principally reflecting
collections of other receivables. Our accounts payable, accrued expenses and other liabilities
increased at June 30, 2010 compared to December 31, 2009 reflecting increases in accounts payable
that were partially offset by decreases in accrued expenses and other liabilities. The decrease in
accrued expenses is principally due to the payment and adjustment of severance liabilities.
Net cash provided by investing activities was $11.6 million in the six months ended June 30,
2010, principally reflecting the sale of of our ARS investments. We also used cash for investments
in our patents, including patent applications in foreign jurisdictions. We expect to continue to
invest in our intellectual property portfolio.
Cash used in financing activities was approximately $4.5 million in the six months ended June
30, 2010 and was attributable to net repayment of borrowings under our demand loan facility with
UBS.
In October 2008, the Company received an offer (the Offer) from UBS for a put right
permitting us to sell to UBS at par value all ARS previously purchased from UBS at a future date
(any time during a two-year period beginning June 30, 2010). The Offer also included a commitment
to loan us 75% of the UBS- determined value of the ARS at any time until the put is exercised. The
Offer was non-transferable and expired on November 14, 2008. On November 6, 2008, the Company
accepted the Offer. The Companys right under the Offer is in substance a put option (with the
strike price equal to the par value of the ARS) which it recorded as an asset, measured at its fair
value.
Classification of investments as current or non-current is dependent upon managements
intended holding period, the securitys maturity date and liquidity considerations based on market
conditions. At December 31, 2009, the Company classified all investments as current based on
managements intention and ability to liquidate the investments within the next twelve months
through exercise of its put right with UBS. On June 30, 2010 we exercised our put option under the
Offer and sold to UBS all our remaining ARS investments for approximately $5.2 million,
representing par value. Of this amount, approximately $3.2 million was used in July 2010, to pay
down our outstanding borrowings to UBS.
Our management believes that our current cash and cash equivalents at June 30,
2010, will be sufficient to fund our operations for at least the next twelve months.
We have evaluated our cash burn and determined that we have sufficient resources to fund
operations for the next twelve months. We continue to pay our obligations in the ordinary course as
obligations become due. We continue the efforts begun in 2009 to contain our costs and eliminate
those costs that are redundant or considered unnecessary with strict controls over all
discretionary spending and travel costs. We have significantly reduced our ongoing cash
requirements by curtailment of expenses and a 44% reduction in our work force, effective August 7,
2009. We have also restructured the Company so that each employee will manage resources based upon
data-driven revenue expectations, and we have established processes to ensure organizational and
individual discipline and accountability.
We have incurred losses since inception aggregating $68.1 million, which amount includes $4.8
million of non-cash preferred stock dividends. We expect to incur losses through 2010. Although we
have generated revenue from sales of our Platinum Plus fuel-borne catalyst, Purifier Systems, ARIS
advanced reagent injector and dosing systems for selective catalytic reduction, catalyzed wire mesh
filters and from technology licensing fees and royalties, revenue to date has been insufficient to
cover our operating expenses, and we continue to be dependent upon sources other than operations to
finance our working capital requirements. Historically, we have been primarily dependent upon
funding from new and existing stockholders. The Company can provide no assurance that it will be
successful in any future financing effort to obtain the necessary working capital to support
operations or if such financing is available, that it will be on acceptable terms.
In the event that our business does not generate sufficient cash and external financing is not
available or timely, we would be required to substantially reduce our level of operations in order
to conserve cash and possibly seek joint ventures or other transactions, including the sale of
assets. These reductions could have an adverse effect on our relationships with our customers and
suppliers. Our long-term continuation is dependent upon the achievement of profitable operations
and the ability to generate sufficient cash from operations, equity financings and other funding
sources to meet our obligations.
No dividends have been paid on our common stock and we do not anticipate paying cash dividends
in the foreseeable future.
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Capital Expenditures
As of June 30, 2010, we had no commitments for capital expenditures and no material
commitments are anticipated in the near future.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Not required for smaller reporting companies.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Companys management, with the participation of the Chief Executive Officer and Chief
Financial Officer, evaluated the effectiveness of the Companys disclosure controls and procedures
(as defined in Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end
of the period covered by this Quarterly Report on Form 10-Q. Based upon that evaluation, the
Companys Chief Executive Officer and Chief Financial Officer concluded that Clean Diesel had
effective disclosure controls and procedures (as defined in Rule 15d-15(e) under the Securities
Exchange Act of 1934, as amended) as of the end of the period covered by this Quarterly Report on
Form 10-Q.
Changes in Internal Controls
In connection with the evaluation by the Companys Chief Executive Officer and Chief Financial
Officer of internal control over financial reporting that occurred during the Companys last fiscal
quarter, no change in the Companys internal control over financial reporting was identified that
has materially affected, or is reasonably likely to materially affect, the Companys internal
control over financial reporting.
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PART II. OTHER INFORMATION
Item 6. Exhibits
(a) Exhibits
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Exhibit |
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Number |
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Description |
31(a)
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Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) under the Exchange Act. |
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31(b)
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Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) under the Exchange Act. |
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32 |
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Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Rule 18 U.S.C. Section 1350. |
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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.
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CLEAN DIESEL TECHNOLOGIES, INC.
(Registrant)
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By: |
/s/ Michael L. Asmussen
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Michael L. Asmussen |
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Director, President and
Chief Executive Officer |
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Date: August 16, 2010
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By: |
/s/ John B. Wynne
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John B. Wynne |
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Interim Chief Financial Officer,
Vice President and Treasurer |
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Date: August 16, 2010
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