þ
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
|
||
For the fiscal year ended
|
December 31, 2013
|
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
|
||
For the transition period from
|
____________________________________ to ________________________________________
|
||
Commission File Number:
|
333-173040
|
ENER-CORE, INC.
|
(Exact name of issuer as specified in its charter)
|
Nevada
|
46-0525350
|
|
(State or other jurisdiction of
incorporation or organization)
|
(I.R.S. Employer
Identification Number)
|
|
9400 Toledo Way
Irvine, California
|
92618
|
|
(Address of principal executive offices)
|
(Zip Code)
|
Registrant’s telephone number, including area code
|
(949) 616-3300
|
Title of each class
|
Name of each exchange on which registered
|
|
Common stock, $0.0001 par value
|
OTC QB
|
(Title of class)
|
Large Accelerated Filer
o
|
Accelerated Filer
o
|
|
Non-accelerated filer
o
|
Smaller reporting company
þ
|
BUSINESS.
|
·
|
Contribution Agreement among FlexEnergy, its other wholly-owned subsidiary FlexEnergy Energy Systems, Inc. (“
FEES
”), and Ener-Core Power (the “
Contribution Agreement
”), and a related side letter. These agreements document the spin-off and the transfer of the Gradual Oxidizer assets and the related intellectual property, as well as certain related liabilities, to Ener-Core Power. In that context, Ener-Core Power granted to FlexEnergy and FEES (for use in their micro-turbine business only) a worldwide, royalty-free, fully paid up right and license to use on a non-exclusive basis (a) controls-related intellectual property that had been transferred in the spin-off, to the extent that it had been used in FlexEnergy’s micro-turbine business as of the date of the spin-off, and (b) certain other controls-related intellectual property developed, invented, or otherwise derived by FlexEnergy (or its affiliates) as “dual-use technology” for use in both FlexEnergy’s micro-turbine business and Ener-Core Power’s Gradual Oxidizer business. The Contribution Agreement also provides that FlexEnergy and FEES would supply Ener-Core Power and its affiliates with certain micro-turbines, for a three-year period, at the lowest price at which FlexEnergy had sold such or similar products in the immediately preceding six-month period to its other customers that had ordered similar quantities and had similar credit ratings/risks, provided that FlexEnergy could additionally charge Ener-Core Power at generally applicable rates for any special engineering or product specialization required for such sales.
|
·
|
Restructuring Agreement between Ener-Core Power and its stockholders that owned a majority of its then-issued and outstanding capital stock (the “
Restructuring Agreement
”), which (in connection with the spin-off) documents the relative ownership of such capital stock on a post-spin-off basis.
|
·
|
Stockholders Agreement between Ener-Core Power and its various stockholders which set forth certain of their rights and obligations, and which terminated as of the closing of the Merger (as described below).
|
·
|
The Merger Sub would merge with and into Ener-Core Power, with Ener-Core Power as the surviving entity;
|
·
|
Each share of Ener-Core Power’s common stock outstanding immediately prior to the closing of the Merger (excluding any treasury shares and shares held by Ener-Core, the Merger Sub or any dissenting stockholders) would convert into the right to receive one share of Ener-Core’s common stock; and
|
·
|
Prior to and as a condition to closing the Merger, Ener-Core Power would receive no less than $4 million and no more than $5.5 million in aggregate proceeds from a private placement of its common stock at $0.75 per share.
|
·
|
Ener-Core was incorporated on April 29, 2010, as a Nevada corporation under the name “Inventtech Inc.” Prior to the Merger, it was focused on the development and marketing of a web-based, school peer-to-peer chat software. In contemplation of the Merger, Ener-Core:
|
·
|
Filed an Amended and Restated Articles of Incorporation on April 23, 2013, to change its name to “Ener-Core, Inc.,” and to increase its total number of authorized common stock from 100,000,000 to 200,000,000; and
|
·
|
Effectuated a 30-for-1 forward stock split of its issued and outstanding common stock on May 6, 2013, by way of a stock dividend.
|
|
·
|
Fuel gas is mixed with ambient air, diluting the fuel and air mixture to approximately 1.5% concentration of fuel by volume.
|
|
·
|
The approximately 1.5% fuel and air mixture is compressed through a radial compressor constituting an integral part of 250kW gas turbine. A small amount of the mixture flows through engineered cooling paths in the gas turbine. The mixture is then pre-heated in a high-temperature heat exchanger.
|
|
·
|
Next, the mixture enters our Gradual Oxidizer, a packed-bed reactor adapted from thermal oxidizer technology. The fuel in the mixture oxidizes, generating heat and oxidation byproducts (carbon dioxide and water). The Gradual Oxidation process is maintained such that the reaction is hot enough to destroy all carbon monoxide (“
CO
”), yet cold enough to preclude the formation of oxides of nitrogen (“
NO
x
”).
|
|
·
|
The hot, pressurized gas exiting the Gradual Oxidizer then expands through the turbine, generating electricity and heat with low emissions that meet the strictest NO
x
emissions standards, and most other air quality regulatory standards.
|
|
·
|
Ambient air feeds into the radial compressor of the gas turbine. A small amount of the compressed air flows through engineered cooling paths in the gas turbine. The compressed air then is pre-heated in a high-temperature heat exchanger. At this point, the fuel is injected into such high temperature, compressed and pre-heated air stream, such that approximately 1.5% concentration of fuel by volume is maintained in the mixture.
|
|
·
|
Next, all of the mixture enters our Gradual Oxidizer. The fuel in the mixture oxidizes, generating heat and oxidation byproducts (carbon dioxide and water). The Gradual Oxidation process is maintained such that the reaction is hot enough to destroy all CO, yet cold enough to preclude the formation of NO
x
.
|
|
·
|
The hot, pressurized gas exiting the Gradual Oxidizer then expands through the turbine, generating electricity and heat with ultra-low emissions of NO
x
, CO, and Volatile Organic Compounds (“
VOCs
”) that meet even the strictest air quality regulatory standards.
|
|
·
|
Designed to operate on a wider range of fuels
. When configured for low-quality fuels, our system is designed to operate on gas with concentrations as low as 50 Btu/scf (1700 kJ/m3). By comparison, most turbine, engine, and fuel cell systems require fuel quality of significantly higher concentrations.
|
|
·
|
Less fuel conditioning may be required
. When configured for low-quality fuels, our system is designed to require minimal fuel pre-treatment or conditioning. When configured for ultra-low emissions, we may require some additional fuel conditioning. However, regardless of configuration, our system is designed to require substantially less fuel pre-treatment than competing systems.
|
|
·
|
Lower air emissions
. Particularly when configured for ultra-low emissions, our Gradual Oxidizer technology may produce substantially lower emissions of NO
x
, CO, and VOCs than competitive systems.
|
|
·
|
No chemicals or catalysts for emissions control
. Unlike other emissions control systems, such as selective catalytic reduction, our Gradual Oxidizer does not use chemicals or catalysts and, thus, cannot be rendered inactive from catalyst poisoning.
|
|
·
|
Low-quality fuels
– Within applications where the gas source has an energy density (BTU/ft3) below the minimum level required by reciprocating engines and standard gas turbines, our Gradual Oxidizer does not have a direct technological or manufacturing competitor. In these situations, the prospective customer can elect to do nothing and allow low BTU gas to simply be emitted into the atmosphere. Alternatively, the customer can purchase gas such as propane or natural gas, mix it with the low BTU gas to make combustion feasible, and then flare the mixture. Because such alternative results in the destruction of the low BTU gas instead of converting the gas into a form of energy that could be sold or monetized, we do not consider it a direct form of competition.
|
|
·
|
Ultra-low emissions
– Within applications where a customer is required, typically by national, regional or local legislation, to meet emissions regulations and controls limits, our systems compete with pollution control technologies, such as Selective Catalytic Reduction (SCR), Dry-Low-NO
x
, or Dry-Low-Emissions (DLN or DLE) systems, and in some cases, with low-emission flares and thermal oxidizers. As many of our competitors are large, well-established companies, they derive advantages from production economies of scale, worldwide presence, and greater resources, which they can devote to product development or promotion.
|
|
·
|
November 2008 – we tested and operated the first F100 development test unit in a San Diego, California test facility. This system was the first to combine the Gradual Oxidizer with a gas turbine (a 100 kilowatt gas turbine developed by Elliott Energy Systems, Inc.). Integration of the major components of the system required the design of proprietary software, hardware, and controls. Our team learned how to match the operating conditions of a gas turbine to the Gradual Oxidizer, which ultimately led to the scale up of the technology to our FP250.
|
|
·
|
April 2009 - we entered into an agreement with SRI to perform all detailed design, fabrication, and site integration procedures for the installation of a turbine/thermal oxidizer demonstration unit. In January 2010, the agreement was amended for us to provide two 200kw Flex Powerstations (known as Turbine 1 and Turbine 2) for installation at two DoD locations in the United States, and to provide field integration, basic operator and maintenance training, including on-site support for the first year of operation. We delivered Turbine 1 and installed the equipment in November 2011 and completed the operations and training phase in November 2012. The agreement was later amended again to require us to upgrade the engine of Turbine 1 as well as deliver the second unit. SRI subsequently cancelled the order for the second unit.
|
|
·
|
In August 2010, we commissioned the first F100 field test unit at the Lamb Canyon Landfill in Beaumont, California, with cooperation from the County of Riverside. This field test unit was the first successful operation of the Gradual Oxidizer in an active landfill environment. Internal emissions testing verified the ultra-low emissions profile of the Gradual Oxidation technology. This unit was the first to be evaluated for prolonged test periods, which led to significant improvements to key components.
|
|
·
|
In November 2010, as part of our agreement with SRI, we began testing the first FP250 alpha development test unit in a San Diego, California test facility. The purpose of this unit was to demonstrate the scalability of the Gradual Oxidizer technology to a 250 kilowatt gas turbine (developed by Ingersoll-Rand and FlexEnergy). We also completed our first development phase for software, controls, systems, and components, enabling the deployment of our field test unit.
|
|
·
|
In July 2011, we installed the second FP250 beta development test unit at the Portsmouth, New Hampshire, manufacturing facility of FlexEnergy, which was previously Ingersoll-Rand’s facility. The purpose of this unit was to complete our second development phase for software, controls, systems, and components. In September 2013, we shipped this unit to the University of California, Irvine, for additional product improvements, cost reductions, and testing of alternative fuel sources.
|
|
·
|
In November 2011, SRI commissioned the first FP250 field test unit at the U.S. Army base at Fort Benning, Georgia. The project was funded by the DoD Environmental Security Technology Certification Program (“
ESTCP
”), which seeks innovative and cost-effective technologies to address high-priority environmental and energy requirements for the DoD. As part of the ESTCP protocol, SRI conducted independent verification tests in October 2012. Exhaust emission measurements were taken in accordance with standard EPA reference methods. The FP250 emissions were far below the allowable NO
x
limits of the California Air Resources Board (“
CARB
”) 2013 waste gas standards, which standards are considered to be among the strictest in the world. To our knowledge, the FP250 is the only power generation solution to meet this standard using a gas turbine or reciprocating engine without chemical or catalytic enhancements. The field test unit is now the property of the base.
|
|
·
|
Develop the Dresser-Rand KG2
. We are currently in joint development with Dresser-Rand on the KG2, which incorporates our Gradual Oxidation technology with Dresser-Rand’s KG2-3G two megawatt gas turbine. We have completed system layout and analytic models integrating our Gradual Oxidizer with this turbine.
|
|
·
|
Scale up to other large gas turbines
. We have already established close working relationships with several other gas turbine manufacturers and large industrial partners to facilitate the potential development of additional systems. We have evaluated the feasibility of several larger gas turbines and have exchanged technical information and have received positive responses from manufacturers and industry partners.
|
|
·
|
Create test rig to simulate alternative fuel sources and oxidizer operating conditions
. We are currently planning for the installation of a test rig to provide a simulated environment to enhance further the performance, efficiency, and fuel flexibility of our Gradual Oxidizer (including potential application to coal mine VAM). We currently anticipate the test rig to be operational by late-2014.
|
|
·
|
Continued development of academic relationships
. Over the past five years, we have developed a number of strong research relationships with the University of Cincinnati and University of California, Irvine. In conjunction with the University of Cincinnati, we have developed analysis tools to simulate our Gradual Oxidation process. We currently anticipate further strengthening these relationships.
|
|
·
|
Filing Date: November 14, 2000
|
|
·
|
Issue Date: May 28, 2002
|
|
·
|
Expiration Date: November 14, 2020 (est.)
|
|
·
|
Filing Date: October 17, 2008
|
|
·
|
Issue Date: March 12, 2013
|
|
·
|
Expiration Date: October 17, 2028 (est.)
|
|
·
|
Filing Date: August 27, 2010
|
|
·
|
Issue Date: January 7, 2014
|
|
·
|
Expiration Date: August 27, 2030 (est.)
|
|
·
|
Filing Date: August 27, 2010
|
|
·
|
Issue Date: March 18, 2014
|
|
·
|
Expiration Date: March 18, 2028 (est.)
|
|
·
|
Filing Date: March 18, 2008
|
|
·
|
Issue Date: March 18, 2014
|
|
·
|
Expiration Date: March 9, 2032 (est.)
|
RISK FACTORS
|
|
·
|
customer reluctance to try a new product or concept;
|
|
·
|
regulatory requirements;
|
|
·
|
perceived cost competitiveness of our FP250 and other Gradual Oxidizer products that we may develop;
|
|
·
|
costs associated with the installation and commissioning of our FP250 and other Gradual Oxidizer products that we may develop;
|
|
·
|
maintenance and repair costs associated with our products;
|
|
·
|
economic downturns and reduction in capital spending;
|
|
·
|
customer perceptions of our products’ safety and quality;
|
|
·
|
emergence of newer, more competitive technologies and products;
|
|
·
|
financial stability of our turbine partners;
|
|
·
|
inability of our turbine partners to fulfill orders in a timely manner;
|
|
·
|
excessive warranty-related costs associated with parts replacement for Gradual Oxidizer or turbine components for power-stations operating in the field; and
|
|
·
|
decrease in domestic and international incentives.
|
|
·
|
effective use and integration of new technologies;
|
|
·
|
continual development of our technical expertise;
|
|
·
|
enhancement of our engineering and system designs;
|
|
·
|
retention of key engineering personnel, which have played a critical role in the development of our technology;
|
|
·
|
development of products that meet changing customer needs;
|
|
·
|
advertisements and marketing of our products; and
|
|
·
|
influence of and response to emerging industry standards and other changes.
|
|
·
|
laws and policies affecting trade, investment, and taxes, including laws and policies relating to the repatriation of funds and withholding taxes, and changes in these laws;
|
|
·
|
changes in local regulatory requirements, including restrictions on gas-to-heat and electricity conversions;
|
|
·
|
differing degrees of protection for intellectual property;
|
|
·
|
financial instability;
|
|
·
|
instability of foreign economies and governments; and
|
|
·
|
war and acts of terrorism.
|
|
·
|
our status as a company with a limited operating history and limited revenues to date, which may make risk-averse investors more inclined to sell their shares on the market more quickly and at greater discounts than would be the case with the shares of a seasoned issuer in the event of negative news or lack of progress;
|
|
·
|
announcements of technological innovations or new products by us or our competitors;
|
|
·
|
the timing and development of our products;
|
|
·
|
general and industry-specific economic conditions;
|
|
·
|
actual or anticipated fluctuations in our operating results;
|
|
·
|
liquidity;
|
|
·
|
actions by our stockholders;
|
|
·
|
changes in our cash flow from operations or earnings estimates;
|
|
·
|
changes in market valuations of similar companies;
|
|
·
|
our capital commitments; and
|
|
·
|
the loss of any of our key management personnel.
|
|
·
|
market acceptance of our products and those of our competitors;
|
|
·
|
our ability to attract and retain key personnel;
|
|
·
|
development of new designs and technologies; and
|
|
·
|
our ability to manage our anticipated growth and expansion.
|
|
·
|
24,972,514 of such total shares are freely tradable in the public market, should one develop and be maintained.
|
|
o
|
2,497,992 of such shares have been placed into an escrow that expires on June 30, 2014. Thereafter, such shares may be sold in the public market, should one develop and be maintained.
|
|
·
|
The remaining 47,581,660 shares constitute “restricted securities” and may be sold in the public market only if they have been registered or if they qualify for an exemption from registration under Rule 144 of the Securities Act.
|
|
o
|
On January 16, 2014, our registration statement to register the resale of approximately 7,537,949 shares of our common stock was declared effective by the Commission. Such shares represent the shares sold and issued in connection with the Merger-related private placement. As of the Effective Date, the restricted securities became eligible to be sold in the public market.
|
|
o
|
39,180,652 of such shares represent the shares of Ener-Core Power (the operating company) that were outstanding prior to the Merger-related private placement and exchanged for a like number of shares of our common stock in the Merger. Commencing July 10, 2014, such shares will be eligible to be sold in the public market, subject to certain limitations, under Rule 144 under the Securities Act.
|
UNRESOLVED STAFF COMMENTS
|
PROPERTIES
|
|
·
|
$26,044 by September 30, 2013, to be applied to the December 2014 rent payment, and
|
|
·
|
$26,825 by July 31, 2014, to be applied to the December 2015 rent payment.
|
LEGAL PROCEEDINGS
|
MINE SAFETY DISCLOSURES
|
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASE OF EQUITY SECURITIES
|
Closing Bid
|
||||||||
High ($)
|
Low ($)
|
|||||||
Year ending December 31, 2013
|
||||||||
First Quarter
|
.50
|
.50
|
||||||
Second Quarter (through May 6, 2013)
|
1.50
|
.50
|
||||||
Second Quarter (May 7, 2013, through June 28, 2013)
|
.75
|
.15
|
||||||
Third Quarter
|
1.50
|
1.00
|
||||||
Fourth Quarter
|
1.54
|
1.46
|
SELECTED FINANCIAL DATA
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
|
·
|
Level 1: Valuations based on unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. Currently, we do not have any items classified as Level 1.
|
·
|
Level 2: Valuations based on observable inputs (other than Level 1 prices), such as quoted prices for similar assets at the measurement date quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability. Funds maintained in our money market account are classified as Level 2.
|
|
·
|
Level 3: Valuations based on inputs that require inputs that are both significant to the fair value measurement and unobservable and involve management judgment (i.e., supported by little or no market activity). Currently, we do not have any items classified as Level 3.
|
Successor
|
Predecessor
(carve-out)
|
|||||||||||
Year ended
December 31,
2013
|
November 12 - December 31,
2012
|
January 1 -
November 11,
2012
|
||||||||||
Net loss
|
$
|
(7,130,000
|
)
|
$
|
(375,000
|
)
|
$
|
(6,548,000
|
)
|
|||
Weighted average number of common shares outstanding:
|
||||||||||||
Basic and diluted
|
67,803,000
|
60,883,000
|
—
|
|||||||||
Net loss attributable to common stockholders per share:
|
||||||||||||
Basic and diluted
|
$
|
(0.11
|
)
|
$
|
(0.01
|
)
|
$
|
—
|
Successor
|
Predecessor (carve-out)
|
|||||||||||
Year Ended
December 31, 2013
|
November 12 -
December 31,
2012
|
January 1 -
November 11,
2012
|
||||||||||
Revenues:
|
||||||||||||
Revenues from unrelated parties
|
$ | 7,000 | $ | 991,000 | $ | — | ||||||
Revenues from related parties
|
9,000 | — | — | |||||||||
Total revenues
|
16,000 | 991,000 | — | |||||||||
Cost of Goods Sold
|
||||||||||||
Cost of goods sold to unrelated parties
|
106,000 | 991,000 | — | |||||||||
Cost of goods sold to related parties
|
6,000 | — | — | |||||||||
Total costs of goods sold
|
112,000 | 991,000 | ||||||||||
Gross Profit (Loss)
|
(96,000 | ) | — | — | ||||||||
Operating expenses:
|
||||||||||||
Selling, general, and administrative
|
4,802,000 | 237,000 | 2,887,000 | |||||||||
Research and development
|
2,257,000 | 138,000 | 2,301,000 | |||||||||
Impairment loss of long-lived assets
|
— | — | 329,000 | |||||||||
Total operating expenses
|
7,059,000 | 375,000 | 5,517,000 | |||||||||
Operating loss
|
(7,155,000 | ) | (375,000 | ) | (5,517,000 | ) | ||||||
Other income (expenses):
|
||||||||||||
Other income, net
|
36,000 | — | — | |||||||||
Interest expense – related party
|
(10,000 | ) | — | (1,031,000 | ) | |||||||
Total other income (expenses), net
|
26,000 | — | (1,031,000 | ) | ||||||||
Loss before provision for income taxes
|
(7,129,000 | ) | (375,000 | ) | (6,548,000 | ) | ||||||
Provision for income taxes
|
1,000 | — | — | |||||||||
Net loss
|
$ | (7,130,000 | ) | $ | (375,000 | ) | $ | (6,548,000 | ) | |||
Loss per share – basic and diluted
|
$ | (0.11 | ) | $ | (0.01 | ) | $ | — | ||||
Weighted average common shares – basic and diluted
|
67,803,000 | 60,883,000 | — |
·
|
Employee, occupancy and related costs: $3.4 million
|
·
|
Professional fees and business development costs: $1.6 million
|
·
|
Research and development programs: $3.5 million
|
·
|
Corporate filings: $0.5 million
|
·
|
Working capital: $1.5 million
|
Estimated amounts due ($)
|
less than 1 year
|
1-3 years
|
3-5 years
|
Total
|
||||||||||||
|
|
|
||||||||||||||
Capital lease payables
|
$ | 9,000 | $ | 21,000 | $ | 8,000 | $ | 38,000 | ||||||||
Lease and other commitments
|
$ | 333,000 | $ | 648,000 | $ | 5,000 | $ | 986,000 | ||||||||
Total
|
$ | 342,000 | $ | 669,000 | $ | 13,000 | $ | 1,024,000 |
Warrants
Outstanding
|
||||||||
Number of
Warrants
|
Weighted-Average
Exercise Price
per Share
|
|||||||
Balance outstanding at January 1, 2013 and January 1, 2012
|
— | $ | — | |||||
Warrants issued
|
631,087 | 0.80 | ||||||
Warrants exercised
|
— | — | ||||||
Balance outstanding at December 31, 2013
|
631,087 | $ | 0.80 |
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
|
CONTROLS AND PROCEDURES
|
1.
|
We do not have written documentation of our internal control policies and procedures. Management evaluated the impact of our failure to have written documentation of our internal controls and procedures on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.
|
2.
|
We do not have sufficient segregation of duties within accounting functions, which is a basic internal control. Due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. However, to the extent possible, the initiation of transactions, the custody of assets and the recording of transactions should be performed by separate individuals. Management evaluated the impact of our failure to have segregation of duties on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.
|
3.
|
We did not maintain sufficient process controls over changes to our bill of materials and inventory management. Specifically, production and bill of material changes were not documented and accounted for properly, research and development parts were incorrectly identified in the warehouse and the year-end physical inventory was not properly conducted.
|
●
|
We are in the process of further enhancing our internal finance and accounting organizational structure, which includes hiring additional resources.
|
●
|
We are in the process of further enhancing the supervisory procedures to include additional levels of analysis and quality control reviews within the accounting and financial reporting functions.
|
●
|
We are in the process of strengthening our internal policies and enhancing our processes for ensuring consistent treatment and recording of reserve estimates and that validation of our conclusions regarding significant accounting policies and their application to our business transactions are carried out by personnel with an appropriate level of accounting knowledge, experience and training.
|
●
|
We are developing and implementing inventory control procedures.
|
OTHER INFORMATION
|
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|
Name
|
Age
|
Positions Held
|
||
Alain J. Castro
|
43
|
Chief Executive Officer and Director
|
||
Boris A. Maslov, Ph.D.
|
53
|
President, Chief Operating Officer, and Chief Technology Officer
|
||
Kelly Anderson
|
46
|
Treasurer/Chief Financial Officer and Secretary
|
||
Michael T. Levin
|
34
|
Vice President
|
||
Michael J. Hammons
|
43
|
Chairman of the Board of Directors
|
||
Christopher J. Brown, Ph.D.
|
36
|
Director
|
||
Stephen L. Johnson
|
62
|
Director, Chairman of the Compensation Committee
|
||
Bennet P. Tchaikovsky
|
44
|
Director, Chairman of the Audit Committee
|
|
·
|
meeting with our management periodically to consider the adequacy of our internal control over financial reporting and the objectivity of our financial reporting;
|
|
·
|
appointing our independent registered public accounting firm, determining its compensation and pre-approving its engagement for audit and non-audit services;
|
|
·
|
overseeing our independent registered public accounting firm, including reviewing independence and quality control procedures and experience and qualifications of audit personnel that are providing us audit services;
|
|
·
|
meeting with our independent registered public accounting firm and reviewing the scope and significant findings of the audits performed by them, and meeting with management and internal financial personnel regarding these matters; and
|
|
·
|
reviewing our financing plans, the adequacy and sufficiency of our financial and accounting controls, practices and procedures, the activities and recommendations of the auditors and our reporting policies and practices, and reporting to our Board.
|
EXECUTIVE COMPENSATION
|
Name and Principal Position
|
Fiscal
Year
Ended
|
Salary
($)
|
Bonus
($)
|
Stock
Awards ($)(1)
|
Option
Awards ($)(2)
|
Non-
Equity
Incentive
Plan
Comp ($)
|
Non-
qualified
Deferred
Comp
Earnings
($)
|
All
Other
Comp
($)
|
Total
($)
|
||||||||||||||||||||||||||
Alain J. Castro
|
2013
|
136,410
|
—
|
—
|
469,161
|
—
|
—
|
—
|
605,571
|
||||||||||||||||||||||||||
Chief Executive Officer (3)
|
2012
|
n/a
|
n/a
|
n/a
|
n/a
|
n/a
|
n/a
|
n/a
|
n/a
|
||||||||||||||||||||||||||
Boris A. Maslov
|
2013
|
225,000
|
67,875
|
68,817
|
168,436
|
—
|
—
|
—
|
530,128
|
||||||||||||||||||||||||||
President, COO, and CTO (4)
|
2012
|
225,000
|
—
|
—
|
146,493
|
—
|
—
|
—
|
371,493
|
||||||||||||||||||||||||||
James M. Thorburn, former
|
2013
|
—
|
—
|
—
|
—
|
—
|
—
|
154,388
|
154,388
|
||||||||||||||||||||||||||
interim Treasurer/Chief Financial Officer (5)
|
2012
|
n/a
|
n/a
|
n/a
|
n/a
|
n/a
|
n/a
|
n/a
|
n/a
|
||||||||||||||||||||||||||
Kelly Anderson
|
2013
|
21,875
|
—
|
—
|
32,240
|
—
|
—
|
—
|
54,115
|
||||||||||||||||||||||||||
Treasurer/Chief Financial Officer (6)
|
2012
|
n/a
|
n/a
|
n/a
|
n/a
|
n/a
|
n/a
|
n/a
|
n/a
|
||||||||||||||||||||||||||
Michael T. Levin
|
2013
|
162,400
|
13,470
|
8,044
|
63,163
|
—
|
—
|
—
|
247,077
|
||||||||||||||||||||||||||
VP Government Affairs (7)
|
2012
|
162,400
|
—
|
—
|
16,981
|
—
|
—
|
—
|
179,381
|
(1)
|
The amounts shown in this column represent the dollar amount recognized for financial statement reporting purposes for the years ended December 31 2013 and 2012 with respect to the shares issued pursuant to the stock option agreement that are subject to company buy-back rights.
|
(2)
|
The amounts shown in this column represent the dollar amount recognized for financial statement reporting purposes for the years ended December 31, 2013 and 2012 with respect to stock options granted, as determined pursuant to the accounting standards. See Note 9 of the notes to our audited consolidated financial statements for a discussion of valuation assumptions made in determining the grant date fair value and compensation expense of our stock options.
|
(3)
|
Mr. Castro became the Chief Executive Officer of the operating company under the terms of his employment agreement on April 25, 2013. His compensation is $200,000 per annum.
|
(4)
|
Dr. Maslov served in a variety of officer roles with Ener-Core Power subsequent to the spin-out and with FlexEnergy prior to the spin-out. His 2012 compensation represents Dr. Maslov’s compensation from FlexEnergy or Ener-Core Power, as relevant. His compensation for the current fiscal year remains unchanged. Effective December 31, 2012, Dr. Maslov was granted options under our 2012 Equity Incentive Plan for the purchase of up to 1,200,000 shares of Ener-Core Power’s Series D Preferred Stock and 187,500 shares of the operating company’s common stock, all of which he exercised in January 2013. The term was five years; the exercise price was $0.001; one-third of the options vest six months from the date of grant and the remainder vest ratably over the succeeding 30 months. The options could be exercised prior to vesting, but were subject to certain repurchase rights in favor of us. The shares of Series D Preferred Stock were converted into 1,500,000 shares of common stock of the Predecessor immediately prior to the Merger.
|
(5)
|
Mr. Thorburn was not affiliated with us or with Ener-Core Power (the “operating company”) during 2012. He became interim Treasurer/Chief Financial Officer of Ener-Core Power under the terms of his Consulting Agreement on May 8, 2013. Mr. Thorburn’s Consulting Agreement expired on November 11, 2013.
|
(6)
|
Ms. Anderson became our Treasurer and Chief Financial Officer effective November 15, 2013, to replace Mr. Thorburn. Her compensation is $175,000 per annum per the terms of her employment agreement.
|
(7)
|
Mr. Levin has resigned effective March 31, 2014. Prior to his resignation, Mr. Levin served as VP Legal and Secretary with FlexEnergy prior to the spin-out. His 2012 compensation represents Mr. Levin’s compensation from FlexEnergy or Ener-Core Power, as relevant. His compensation for the current fiscal year remains unchanged. Effective December 31, 2012, Mr. Levin was granted options under our 2012 Equity Incentive Plan for the purchase of up to 50,000 shares of the operating company’s Series D Preferred Stock and 135,333 shares of the operating company’s common stock, all of which he exercised in January 2013. The term was five years; the exercise price was $0.001; one-third of the options vest six months from the date of grant and the remainder vest ratably over the succeeding 30 months. The options could be exercised prior to vesting, but were subject to certain repurchase rights in favor of us. The shares of Series D Preferred Stock were converted into 62,500 shares of common stock of the Predecessor immediately prior to the Merger.
|
Option Awards (1)
|
Stock Awards
|
All Awards
|
|||||||||||||||||||||||
Name
|
Number of
securities
underlying
unexercised
options (#)
exercisable
|
Number of
securities
underlying
unexercised
options (#)
unexercisable
|
Equity
incentive
plan awards:
Number of
securities
underlying
unexercised
unearned
options
(#)
|
Weighted
Average
Option
Exercise
Price
($)
|
Option
Expiration
Date
|
Number of
Shares
or Units of
Stock That
Have Not
Vested (#)(2)
|
Value of
Shares or Units
of Stock That
Have Not Vested
($)(3)
|
||||||||||||||||||
Alain Castro
|
444,444
|
1,705,556
|
—
|
1.13
|
May 8, 2018
|
—
|
1,085,424
|
||||||||||||||||||
Boris Maslov
|
—
|
800,000
|
—
|
1.30
|
August 23, 2020
|
975,000
|
629,261
|
||||||||||||||||||
Kelly Anderson
|
—
|
—
|
1,000,000
|
1.53
|
November 15, 2020
|
—
|
1,081,212
|
||||||||||||||||||
Michael Levin
|
—
|
300,000
|
—
|
1.30
|
August 23, 2020
|
114,306
|
214,127
|
(1)
|
The shares referenced above are on an as-converted into common stock basis.
|
(2)
|
The shares referenced represent the shares issued pursuant to the stock option agreement that are subject to company buy-back rights.
|
(3)
|
Represents the remaining dollar amount to be recognized for financial statement reporting purposes with respect to all option awards and stock awards.
|
Director Compensation Table
|
||||||||||||||||||||||||||||||
Name
|
Fiscal
Year
ended
|
Fees Earned
or Paid in
Cash
($)
|
Stock
Awards
($)
|
Option
Awards
($)(2)
|
Non-Equity
Incentive Plan
Compensation
($)
|
Nonqualified
Deferred
Compensation
Earnings
($)
|
All Other
Compensation
($)
|
Total
($)
|
||||||||||||||||||||||
Alain J. Castro (1)
|
2013
|
-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
||||||||||||||||||||||
Michael J. Hammons
|
2013
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
||||||||||||||||||||||
Chris Brown
|
2013
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
||||||||||||||||||||||
Stephen L. Johnson
|
2013
|
-
|
-
|
54,115
|
-
|
-
|
-
|
54,115
|
||||||||||||||||||||||
Bennet P. Tchaikovsky
|
2013
|
-
|
-
|
6,245
|
-
|
-
|
-
|
6,245
|
(1)
|
Compensation is reflected in the Summary Compensation Table on page 40 above.
|
(2)
|
The amounts shown in this column represent the dollar amount recognized for financial statement reporting purposes for the years ended December 31, 2013 and 2012 with respect to stock options granted, as determined pursuant to the accounting standards. See Note 11 of the notes to our audited consolidated financial statements for a discussion of valuation assumptions made in determining the grant date fair value and compensation expense of our stock options.
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
|
Plan Category
|
Number of securities to be issued upon exercise of
outstanding options, warrants
and rights
|
Weighted-average exercise price of outstanding options, warrants and rights
|
Number of securities
remaining available
for future issuance
under equity
compensation plans
|
|||||||
Equity compensation plans approved by security holders
|
8.9 million
|
$ | 1.289 |
5.1 million
|
||||||
Equity compensation plans not approved by security holders
|
0.6 million
|
$ | 0.80 | — | ||||||
Total
|
9.5 million
|
$ | 1.289 |
5.1 million
|
(1)
|
Unless otherwise noted, the business address for the person is 9400 Toledo Way, Irvine, California 92618.
|
|
|
(2)
|
The applicable percentage ownership is based on 72,554,174 shares of common stock outstanding as at March 31, 2014. The number of shares of common stock owned are those “beneficially owned” as determined under the rules of the Commission, including any shares of common stock as to which a person has sole or shared voting or investment power and any shares of common stock that the person has the right to acquire within 60 days through the exercise of any option, warrant, or right.
|
|
|
(3)
|
Consists of 923,331 shares of common stock underlying options that are exercisable within 60 days of March 31, 2014. Does not include 1,226,669 shares of common stock underlying options that are not exercisable within 60 days of March 31, 2014. These stock options were granted to Mr. Castro on July 3, 2013 and August 23, 2013. As of the date hereof, all of such shares, if, when, and as the option is exercised, are subject to a right
|
|
of repurchase in favor of the Company.
|
|
|
(4)
|
Consists of shares subject to our repurchase right. 862,498 of such shares vested as of March 31, 2014, such that our repurchase rights have lapsed. In respect of the other 825,002 shares, 25,000 shares are vested and released from our repurchase right on a monthly basis. Consists of 302,220 shares of common stock underlying options that are exercisable within 60 days of March 31, 2014. Does not include 509,629 shares of common
|
|
stock underlying options that are not exercisable within 60 days of March 31, 2014.
|
|
|
(5)
|
Does not include 1,000,000 shares of common stock underlying options that are not exercisable within 60 days of March 31, 2014. These stock options were granted to Ms. Anderson on November 15, 2013. As of the date hereof, all of such shares, if, when and as the option is exercised, are subject to a right of repurchase in favor of the Company.
|
|
|
(6)
|
Mr. Levin resigned as of March 31, 2014. Consists of shares subject to our repurchase right. 105,510 of such shares vested as of March 31, 2014, such that our repurchase rights have lapsed. The remaining 92,323 shares, will be repurchased as of March 31, 2014. Also includes 100,000 shares of common stock underlying options that are exercisable on March 31, 2014. Does not include 200,000 shares of common stock underlying options that are not exercisable on March 31, 2014, and will be forfeited.
|
|
|
(7)
|
Mr. Hammons is a partner of SAIL Venture Partners II, LLC, and, as such, is deemed to have shared voting and investment power in respect of the shares of common stock owned of record or beneficially by the SAIL Venture Partners II, LP.
SAIL Venture Partners II, LP, consists of 18,053,879 shares, of which 781,401 are 10 month options (expiring April 30, 2014), to acquire additional shares of our restricted common stock from one or more of our shareholders.
Mr. Hammon’s business address is 3161 Michelson Drive, Suite 750, Irvine, California 92612.
|
|
|
(8)
|
Dr. Brown is a principal of SAIL Capital Partners, LLC, and, as such, is deemed not to have any voting or investment power in respect of any of the shares of common stock owned of record or beneficially by the SAIL Entities. Dr. Brown’s business address is 3161 Michelson Drive, Suite 750, Irvine, California 92612.
|
|
|
(9)
|
Consists of 2,457 shares of common stock and 116,668 shares of common stock underlying options that are exercisable within 60 days of March 31, 2014. Does not include 133,332 shares of common stock underlying options that are not exercisable within 60 days of March 31, 2014. These stock options were granted to Mr. Johnson on July 3, 2013. As of the date hereof, all of such shares, if, when and as the option is exercised, are subject to a right of repurchase in favor of the Company. Mr. Johnson’s business address is 5922 Jefferson Blvd., Frederick, Maryland 21703.
|
|
|
(10)
|
Does not include 250,000 shares of common stock underlying options that are not exercisable within 60 days of March 31, 2014. These stock options were granted to Mr. Tchaikovsky on November 25, 2013. As of the date hereof, all of such shares, if, when and as the option is exercised, are subject to a right of repurchase in favor of the Company. Mr. Tchaikovsky’s business address is 6571 Morningside Drive, Huntington Beach, CA 92648.
|
|
|
(11)
|
SAIL Sustainable Partners of Louisiana, LLC, is the general partner of Louisiana Sustainability Fund, LP and SAIL Sustainable Louisiana II, LP, and, as such, is deemed to have shared voting and investment power in respect of the shares of common stock owned of record or beneficially Louisiana Sustainability Fund, LP and SAIL Sustainable Louisiana II, LP.
The chart below sets forth the record ownership of our common stock of the entities managed by SAIL Sustainable Partners of Louisiana, LLC. The record ownership in the aggregate is 12,906,333 shares of our common stock. SAIL Sustainable Partners of Louisiana LLC’s business address is 3161 Michelson Drive, Suite 750, Irvine, California 92612.
|
Louisiana Sustainability Fund, LP
|
12,773,000 | |||
SAIL Sustainable Louisiana II, LP
|
133,333 |
Louisiana Sustainability Fund, LP
|
13,443,842 | |||
SAIL Sustainable Louisiana II, LP
|
133,333 |
(12)
|
SAIL Capital Partners, LLC is the general partner of SAIL 2010 Co-Investment Partners, SAIL 2011 Co-Investment Partners and SAIL Pre-Exit Acceleration Fund, and, as such, is deemed to have shared voting and investment power in respect of the shares of common stock owned of record or beneficially by SAIL 2010 Co-Investment Partners, SAIL 2011 Co-Investment Partners and SAIL Pre-Exit Acceleration Fund. SAIL Capital Partners, LLC’s business address is 3161 Michelson Drive, Suite 750, Irvine, California 92612.
|
SAIL 2010 Co-Investment Partners, LP
|
44,513 | |||
SAIL 2011 Co-Investment Partners, LP
|
76,846 | |||
SAIL Pre-Exit Acceleration Fund, LP
|
1,118,109 |
SAIL 2010 Co-Investment Partners, LP
|
5,290 | |||
SAIL 2011 Co-Investment Partners, LP
|
9,134 |
SAIL 2010 Co-Investment Partners, LP
|
49,803
|
|||
SAIL 2011 Co-Investment Partners, LP
|
85,980
|
|||
SAIL Pre-Exit Acceleration Fund, LP
|
1,118,109
|
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
|
PRINCIPAL ACCOUNTING FEES AND SERVICES
|
2013
|
||||
Audit Fees (1)
|
$
|
220,380
|
||
Audit-related Fees (2)
|
8,650
|
|||
Tax Fees (3)
|
-
|
|||
All Other Fees (4)
|
2,500
|
|||
Total
|
$
|
231,530
|
2013
|
2012
|
|||||||
Audit Fees (1)
|
$
|
-
|
$
|
7,900
|
||||
Audit-related Fees (2)
|
-
|
- |
|
|||||
Tax Fees (3)
|
-
|
- |
|
|||||
All Other Fees (4)
|
1,800
|
- |
|
|||||
Total
|
$
|
1,800
|
$
|
7,900
|
(1)
|
Audit Fees
– This category includes the audit of our annual financial statements, review of financial statements included in our Quarterly Reports on Form 10-Q, and services that are normally provided by independent auditors in connection with statutory and regulatory filings or the engagement for fiscal years. This category also includes advice on audit and accounting matters that arose during, or as a result of, the audit or the review of interim financial statements.
|
(2)
|
Audit-Related Fees
– This category consists of assurance and related services by our independent auditors that are reasonably related to the performance of the audit or review of our financial statements and are not reported above under “Audit Fees.” The services for the fees disclosed under this category include consultation regarding our correspondence with the SEC.
|
(3)
|
Tax Fees
– This category consists of professional services rendered by our independent auditors for tax compliance and tax advice. The services for the fees disclosed under this category include tax return preparation and technical tax advice.
|
(4)
|
All Other Fees
– This category consists of fees for other miscellaneous items.
|
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
|
(1)
|
Financial Statements
|
Reports of Independent Registered Public Accounting Firms
|
F-2 |
Consolidated Balance Sheets as of December 31, 2013 and 2012 (Successor) and November 11, 2012 (Predecessor)
|
F-3 |
Consolidated Statements of Operations for the Year Ended December 31, 2013 (Successor), the Period of November 12, 2012 through December 31, 2012 (Successor) and the period of January 1, 2012 through November 11, 2012 (Predecessor)
|
F-4 |
Consolidated Statements of Stockholders’ Equity for the Year Ended December 31, 2013 (Successor), the Period of November 12, 2012 through December 31, 2012 (Successor) and the period of January 1, 2012 through November 11, 2012 (Predecessor)
|
F-5 |
Consolidated Statements of Cash Flows for the Year Ended December 31, 2013 (Successor), the Period of November 12, 2012 through December 31, 2012 (Successor) and the period of January 1, 2012 through November 11, 2012 (Predecessor)
|
F-6 |
Notes to Condensed Consolidated Financial Statements
|
F-8 |
(2)
|
Financial Statement Schedules
|
(3)
|
Exhibits
|
EXHIBIT NO.
|
DESCRIPTION
|
|
2.1
|
(2)
|
Agreement and Plan of Merger, dated April 16, 2013, by and among the Registrant, Flex Merger Acquisition Sub, Inc., a Delaware corporation and wholly owned subsidiary of the Registrant, and Ener-Core Power, Inc., a Delaware corporation formerly known as Flex Power Generation, Inc.
|
3.1
|
(1)
|
Articles of Incorporation, filed with the Secretary of State of the State of Nevada on April 29, 2010.
|
3.1(a)
|
(3)
|
Amended and Restated Articles of Incorporation, filed with the Secretary of State of the State of Nevada on April 29, 2010.
|
3.2
|
(1)
|
Bylaws of the Registrant.
|
3.2(a)
|
(3)
|
Amendment to Bylaws of the Registrant.
|
3.2(b)
|
(4)
|
Amended and Restated Bylaws of the Registrant.
|
3.3
|
(4)
|
Articles of Merger as filed with the Secretary of State of the State of Delaware on July 1, 2013.
|
EXHIBIT NO. |
DESCRIPTION
|
|
10.1
|
(5)
|
Contribution Agreement by and among FlexEnergy, Inc., FlexEnergy Energy Systems, Inc., and Ener-Core Power, Inc. (then known as Flex Power Generation, Inc.), dated November 12, 2012.
|
10.1(a)
|
(4)
|
Side letter to Contribution Agreement by and among FlexEnergy, Inc., FlexEnergy Energy Systems, Inc., and Ener-Core Power, Inc. (then known as Flex Power Generation, Inc.), dated November 12, 2012.
|
10.2
|
(4)
|
Restructuring Agreement by and among Ener-Core Power, Inc. (then known as Flex Power Generation, Inc.), RNS Flex, LLC, SAIL Venture Partners II, L.P., Louisiana Sustainability Fund, Jay W. Decker, Energy Special Situations Fund II, L.P., ESS Participation Fund II, L.P., and Mark McComiskey, dated November 12, 2012.
|
10.3
|
(4)
|
Stockholders Agreement by and among Ener-Core Power, Inc. (then known as Flex Power Generation, Inc.), and the various stockholder signatories thereto, dated November 12, 2012.
|
10.4*
|
(4)
|
Executive Employment Agreement by and between Alain J. Castro and Ener-Core Power, Inc. (then known as Flex Power Generation, Inc.), dated April 25, 2013.
|
10.5*
|
(4)
|
Amended and Restated Executive Employment Agreement by and between Boris Maslov and Ener-Core Power, Inc. (then known as Flex Power Generation, Inc.), dated December 31, 2012.
|
10.6*
|
(4)
|
Consulting Agreement by and between James Thorburn and Ener-Core Power, Inc. (then known as Flex Power Generation, Inc.), dated May 30, 2013.
|
10.7*
|
(4)
|
2013 Equity Incentive Award Plan.
|
10.7(a)*
|
(6)
|
2013 Equity Incentive Award Plan, as amended.
|
10.8*
|
(4)
|
Stock Option Agreement for Alain J. Castro, dated July 3, 2013.
|
10.8(a)*
|
(6)
|
Stock Option Agreement for Alain J. Castro, dated July 3, 2013, as reformed on August 23, 2013.
|
10.9*
|
(4)
|
Stock Option Agreement for Stephen L. Johnson, dated July 3, 2013.
|
10.9(a)*
|
(6)
|
Stock Option Agreement for Stephen L. Johnson, dated July 3, 2013, as reformed on August 23, 2013.
|
10.10**
|
(12)
|
Original Equipment Packaging Agreement between Ener-Core Power, Inc. (then known as Flex Power Generation, Inc.), and Dresser-Rand a.s., with an Effective Date of January 2, 2013.
|
10.11
|
(5)
|
Purchase Order of Ener-Core Power, Inc. to FlexEnergy Energy Systems, Inc., dated June 26, 2013.
|
10.11(a)
|
(5)
|
Order acknowledgement, dated June 28, 2013.
|
10.12
|
(5)
|
Non-exclusive Placement Agent Agreement between Ener-Core Power, Inc. and Colorado Financial Service Corporation dated, July 16, 2013.
|
10.13
|
(5)
|
Commercial Lease Agreement between Meehan Holdings, LLC, FlexEnergy, Inc., dated May 26, 2011.
|
10.14
|
(6)
|
Master Purchase And Re-Sale Agreement No. FPG-MPRSA-001, by and between Ener-Core Power, Inc. (then known as Flex Power Generation, Inc.), and Efficient Energy Conversion Turbomachinery B.V.,
dated December 31, 2012.
|
10.14(a)
|
(6)
|
Purchase Order of Efficient Energy Conversion Turbomachinery B.V.,
dated December 31, 2012.
|
10.14(b)
|
(6)
|
Letter of Acknowledgment for Purchase Order of Efficient Energy Conversion Turbomachinery B.V.,
dated March 1, 2013.
|
10.14(c)
|
(6)
|
Letter of Credit for Purchase Order of Efficient Energy Conversion Turbomachinery B.V.,
dated March 4, 2013.
|
EXHIBIT NO. | DESCRIPTION | |
10.15
|
(6)
|
Subcontract Number S09-003 between Southern Research Institute and FlexEnergy, LLC, dated July 20, 2009.
|
10.15(a)
|
(6)
|
Work Report for Subcontract Number S09-003 between Southern Research Institute and FlexEnergy, LLC, dated September 30, 2009.
|
10.15(b)
|
(6)
|
Second Amendment to Subcontract Number S09-003 between Southern Research Institute and FlexEnergy, LLC, dated May 10, 2011.
|
10.15(c)
|
(6)
|
Third Amendment to Subcontract Number S09-003 between Southern Research Institute and FlexEnergy, LLC, dated July 3, 2012.
|
10.16
|
(6)
|
Sales and Service Agreement between Ener-Core Power, Inc. and the Regents of the University of California University of California, Irvine, dated April 19, 2013.
|
10.17
|
(7)
|
Assignment and Assumption of Lease between Ener-Core, Inc. and FlexEnergy, Inc., effective August 1, 2013.
|
10.17(a)
|
(7)
|
Lessor’s Consent to Assignment and Sublease, dated September 4, 2013.
|
10.17(b)
|
(7)
|
Letter Agreement between Ener-Core, Inc. and Meehan Holdings, LLC, dated September 4, 2013.
|
10.18
|
(13)
|
Loan, Security and Guarantee Agreement between Ener-Core, Inc. and the Export-Import Bank of the United States, dated as of November 4, 2013.
|
10.19
|
(8)
|
Warrant issued to Roth Capital Partners, LLC, dated July 8, 2013.
|
10.20
|
(8)
|
Warrant issued to Colorado Financial Services Corporation, dated July 8, 2013.
|
10.21
|
(8)
|
Warrant issued to Roth Capital Partners, LLC, dated August 27, 2013.
|
10.22
|
(8)
|
Warrant issued to Colorado Financial Services Corporation, dated August 27, 2013.
|
10.23*
|
(9)
|
Offer Letter to Kelly Anderson dated as of November 1, 2013.
|
10.23(a)*
|
(9)
|
Executive Employment Agreement of Kelly Anderson dated as of November 15, 2013.
|
10.23(b)*
|
(9)
|
Stock Option Agreement for Kelly Anderson dated as of November 15, 2013.
|
10.24
|
(10)
|
Subscription Agreement for Common Stock issued on November 18, 2013.
|
10.24(a)
|
(10)
|
Registration Rights Agreement for Common Stock issued on November 18, 2013.
|
10.25*
|
(11)
|
Offer Letter to Bennet P. Tchaikovsky dated as of November 10, 2013.
|
10.25(a)*
|
(11)
|
Stock Option Agreement for Bennet P. Tchaikovsky dated as of November 25, 2013.
|
14.1
|
(14)
|
Code of Ethics adopted on September 24, 2013
|
16.1
|
(4)
|
Letter from Weinberg & Baer LLC dated July 2, 2013.
|
21.1
|
(6)
|
Subsidiaries of the Registrant.
|
23.1
|
(14)
|
Consent of Independent Registered Public Accounting Firm – Kelly & Company.
|
31.1
|
(14)
|
Certification Pursuant to Rule 13a-14(a) and 15d-14(a) (4) of Chief Executive Officer.
|
31.2
|
(14)
|
Certification Pursuant to Rule 13a-14(a) and 15d-14(a) (4) of Chief Financial Officer.
|
32.1
|
(14)
|
Certification Pursuant to Section 1350 of Title 18 of the United States Code of Chief Executive Officer
|
32.2
|
(14)
|
Certification Pursuant to Section 1350 of Title 18 of the United States Code of Chief Financial Officer
|
101.INS ***
|
(14)
|
XBRL Instance Document.
|
101.SCH ***
|
(14)
|
XBRL Taxonomy Extension Schema Document.
|
101.CAL ***
|
(14)
|
XBRL Taxonomy Extension Calculation Linkbase Document.
|
101.DEF ***
|
(14)
|
XBRL Taxonomy Extension Definition Linkbase Document.
|
101.LAB ***
|
(14)
|
XBRL Taxonomy Extension Definition Linkbase Document.
|
101.PRE ***
|
(14)
|
XBRL Taxonomy Extension Presentation Linkbase Document.
|
*
|
Management contract or compensatory plan or arrangement.
|
**
|
Confidential treatment has been requested for a portion of this document.
|
***
|
Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.
|
(1)
|
Incorporated by reference to the Registrant’s Form S-1 filed on March 24, 2011.
|
(2)
|
Incorporated by reference to the Registrant’s Form 8-K filed on April 17, 2013.
|
(3)
|
Incorporated by reference to the Registrant’s Form 8-K filed on April 24, 2013.
|
(4)
|
Incorporated by reference to the Registrant’s Form 8-K filed on July 10, 2013.
|
(5)
|
Incorporated by reference to the Registrant’s Form 10-Q filed on August 19, 2013.
|
(6)
|
Incorporated by reference to the Registrant’s Form 8-K/A filed on August 29, 2013.
|
(7)
|
Incorporated by reference to the Registrant’s Form 8-K filed on October 2, 2013.
|
(8)
|
Incorporated by reference to the Registrant’s Form 8-K/A filed on November 6, 2013.
|
(9)
|
Incorporated by reference to the Registrant’s Form 8-K filed on November 15, 2013.
|
(10)
|
Incorporated by reference to the Registrant’s Form 8-K filed on November 22, 2013.
|
(11)
|
Incorporated by reference to the Registrant’s Form 8-K filed on November 26, 2013.
|
(12)
|
Incorporated by referenced to the Registrant’s Form 8-K/A filed on December 5, 2013.
|
(13)
|
Incorporated by referenced to the Registrant’s Form S-1/A filed on December 23, 2013.
|
(14)
|
Filed herewith.
|
ENER-CORE, INC.
|
|||
(Registrant)
|
|||
By:
|
/s/
Alain J. Castro
|
||
Alain J. Castro
|
|||
Chief Executive Officer
|
|||
(Principal Executive Officer)
|
|||
By:
|
/s/
Kelly Anderson
|
||
Kelly Anderson
|
|||
Chief Financial Officer
|
|||
(Principal Financial and Accounting Officer)
|
Signature
|
Title
|
Date
|
||
/s/
Alain J. Castro
|
Chief Executive Officer and Director
|
April 15, 2014
|
||
Alain J. Castro
|
||||
/s/ Boris A. Maslov
|
President, Chief Operating Officer, and Chief Technology Officer
|
April 15, 2014
|
||
Boris A. Maslov
|
||||
/s/
Kelly Anderson
|
Treasurer, Secretary and Chief Financial Officer
|
April 15, 2014
|
||
Kelly Anderson
|
||||
/s/
Michael J. Hammons
|
Director
|
April 15, 2014
|
||
Michael J. Hammons
|
||||
/s/
Christopher J. Brown
|
Director
|
April 15, 2014
|
||
Christopher J. Brown
|
||||
/s/
Stephen L. Johnson
|
Director
|
April 15, 2014
|
||
Stephen L. Johnson
|
||||
/s/ Bennet P. Tchaikovsky
|
Director
|
April 15, 2014
|
||
Bennet P. Tchaikovsky
|
F-2
|
|
F-3
|
|
F-4
|
|
F-5
|
|
F-6
|
|
F-8
|
December 31,
|
||||||||
2013
|
2012
|
|||||||
Assets
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$ | 1,201,000 | $ | 93,000 | ||||
Accounts receivable
|
16,000 | — | ||||||
Restricted cash
|
50,000 | — | ||||||
Costs in excess of billings on uncompleted
contracts
|
801,000 | — | ||||||
Inventory
|
29,000 | — | ||||||
Prepaid expenses and other current assets
|
46,000 | 9,000 | ||||||
Total current assets
|
2,143,000 | 102,000 | ||||||
Property and equipment, net
|
764,000 | 878,000 | ||||||
Intangibles, net
|
41,000 | 48,000 | ||||||
Deposits
|
28,000 | — | ||||||
Total assets
|
$ | 2,976,000 | $ | 1,028,000 | ||||
Liabilities and Stockholders’ Equity
|
||||||||
Current liabilities:
|
||||||||
Accounts payable
|
419,000 | 33,000 | ||||||
Accrued expenses
|
266,000 | 386,000 | ||||||
Unearned revenue
|
701,000 | — | ||||||
Provision for contract loss
|
100,000 | — | ||||||
Capital leases payable
|
8,000 | — | ||||||
Total current liabilities
|
1,494,000 | 419,000 | ||||||
Long term liabilities:
|
||||||||
Other
|
6,000 | — | ||||||
Capital lease payable
|
29,000 | — | ||||||
Total liabilities
|
1,529,000 | 419,000 | ||||||
Commitments and contingencies (Note 14)
|
||||||||
Stockholders’ equity:
|
||||||||
Preferred stock, $0.0001 par value.
Authorized 50,000,000 shares;
no shares issued and outstanding at
December 31, 2013 and December 31, 2012
|
— | — | ||||||
Common stock, $0.0001 par value.
Authorized 200,000,000 shares;
72,554,000 and 60,883,000 shares issued and outstanding at December 31, 2013 and December 31, 2012, respectively
|
7,000 | 6,000 | ||||||
Additional paid in capital
|
8,945,000 | 978,000 | ||||||
Accumulated deficit
|
(7,505,000 | ) | (375,000 | ) | ||||
Total stockholders’ equity
|
1,447,000 | 609,000 | ||||||
Total liabilities and stockholders’ equity
|
$ | 2,976,000 | $ | 1,028,000 |
Successor
|
Predecessor
(carve-out)
|
|||||||||||
Year Ended
December 31,
2013
|
November 12 -
December 31,
2012
|
January 1 -
November 11,
2012
|
||||||||||
(Restated)
|
||||||||||||
Revenues:
|
||||||||||||
Revenues from unrelated parties
|
$ | 7,000 | $ | 991,000 | $ | — | ||||||
Revenues from related parties
|
9,000 | — | — | |||||||||
Total revenues
|
16,000 | 991,000 | — | |||||||||
Cost of Goods Sold
|
||||||||||||
Cost of goods sold to unrelated parties
|
106,000 | 991,000 | — | |||||||||
Cost of goods sold to related parties
|
6,000 | — | — | |||||||||
Total costs of goods sold
|
112,000 | 991,000 | ||||||||||
Gross Profit (Loss)
|
(96,000 | ) | — | — | ||||||||
Operating expenses:
|
||||||||||||
Selling, general, and administrative
|
4,802,000 | 237,000 | 2,887,000 | |||||||||
Research and development
|
2,257,000 | 138,000 | 2,301,000 | |||||||||
Impairment loss of long-lived assets
|
— | — | 329,000 | |||||||||
Total operating expenses
|
7,059,000 | 375,000 | 5,517,000 | |||||||||
Operating loss
|
(7,155,000 | ) | (375,000 | ) | (5,517,000 | ) | ||||||
Other income (expenses):
|
||||||||||||
Other income, net
|
36,000 | — | — | |||||||||
Interest expense – related party
|
(10,000 | ) | — | (1,031,000 | ) | |||||||
Total other income (expenses), net
|
26,000 | — | (1,031,000 | ) | ||||||||
Loss before provision for income taxes
|
(7,129,000 | ) | (375,000 | ) | (6,548,000 | ) | ||||||
Provision for income taxes
|
1,000 | — | — | |||||||||
Net loss
|
$ | (7,130,000 | ) | $ | (375,000 | ) | $ | (6,548,000 | ) | |||
Loss per share – basic and diluted
|
$ | (0.11 | ) | $ | (0.01 | ) | $ | — | ||||
Weighted average common shares – basic and diluted
|
67,803,000 | 60,883,000 | — |
Additional
|
Total
|
|||||||||||||||||||||||||||
Common stock
|
Preferred Stock
|
paid-in
|
Accumulated
|
Stockholders’
|
||||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
capital
|
Deficit
|
Equity (Deficit)
|
||||||||||||||||||||||
Balances at January 1, 2012
|
— | $ | — | — | $ | — | $ | — | $ | — | $ | 73,000 | ||||||||||||||||
Cash contributions from Parent
|
— | — | — | — | — | — | 6,238,000 | |||||||||||||||||||||
Stock-based compensation expense
|
— | — | — | — | — | — | 380,000 | |||||||||||||||||||||
Net loss – Predecessor
|
— | — | — | — | — | — | (6,548,000 | ) | ||||||||||||||||||||
Balances at November 11, 2012
|
— | $ | — | — | $ | — | $ | — | $ | — | $ | 143,000 | ||||||||||||||||
Recapitalization resulting from July 1, 2013 reverse-merger, net of cancellation of 120,520,000 shares
|
24,980,000 | 2,000 | — | — | (2,000 | ) | — | — | ||||||||||||||||||||
Contribution of net assets to Ener-Core Power, Inc.
|
35,903,000 | 4,000 | — | — | 981,000 | — | 841,000 | |||||||||||||||||||||
Net loss – Successor
|
— | — | — | — | — | (375,000 | ) | (375,000 | ) | |||||||||||||||||||
Balances at December 31, 2012
|
60,883,000 | $ | 6,000 | — | $ | — | $ | 978,000 | $ | (375,000 | ) | $ | 609,000 | |||||||||||||||
Issuance of common stock for conversion of related party debt
|
1,028,000 | — | — | — | 771,000 | — | 771,000 | |||||||||||||||||||||
Issuance of common stock for cash, net of offering
Costs of $533,000
|
7,499,000 | 1,000 | — | — | 5,465,000 | — | 5,466,000 | |||||||||||||||||||||
Stock-based compensation expense
|
— | — | — | — | 1,729,000 | — | 1,729,000 | |||||||||||||||||||||
Exercise of stock options
|
3,221,000 | — | — | — | 2,000 | — | 2,000 | |||||||||||||||||||||
Repurchase of non-vested shares
|
(77,000 | ) | — | — | — | — | — | — | ||||||||||||||||||||
Net loss
|
— | — | — | — | — | (7,130,000 | ) | (7,130,000 | ) | |||||||||||||||||||
Balances at December 31, 2013
|
72,554,000 | $ | 7,000 | — | $ | — | $ | 8,945,000 | $ | (7,505,000 | ) | $ | 1,447,000 |
Successor
|
Predecessor
(carve-out)
|
|||||||||||
Year Ended
December 31,
2013
|
November 12 -
December 31,
2012
|
January 1 -
November 11,
2012
|
||||||||||
Cash flows used in operating activities:
|
||||||||||||
Net loss
|
$ | (7,130,000 | ) | $ | (375,000 | ) | $ | (6,548,000 | ) | |||
Adjustments to reconcile net loss to net cash used in operating activities:
|
||||||||||||
Depreciation and amortization
|
213,000 | 35,000 | 100,000 | |||||||||
Stock-based compensation
|
1,729,000 | — | 380,000 | |||||||||
Provision for contract loss
|
100,000 | — | — | |||||||||
Impairment of property and equipment
|
— | — | 329,000 | |||||||||
Changes in assets and liabilities:
|
||||||||||||
Accounts and other receivables
|
(16,000 | ) | — | — | ||||||||
Inventory
|
(29,000 | ) | — | — | ||||||||
Costs in excess of billings on uncompleted contracts
|
(801,000 | ) | — | (776,000 | ) | |||||||
Prepaid expenses and other current assets
|
(37,000 | ) | (9,000 | ) | (12,000 | |||||||
Deposit
|
(28,000 | ) | — | — | ||||||||
Restricted cash
|
(50,000 | ) | — | |||||||||
Accounts payable
|
613,000 | 33,000 | 197,000 | |||||||||
Accrued expenses
|
(121,000 | ) | (91,000 | ) | (16,000) | |||||||
Deferred revenue
|
701,000 | — | — | |||||||||
Related party payables
|
— | — | 132,000 | |||||||||
Other liabilities
|
6,000 | — | — | |||||||||
Net cash used in operating activities
|
(4,850,000 | ) | (407,000 | ) | (6,214,000 | ) | ||||||
Cash flows used in investing activities:
|
||||||||||||
Purchase of property and equipment
|
(54,000 | ) | — | (24,000 | ) | |||||||
Net cash used in investing activities
|
(54,000 | ) | — | (24,000 | ) | |||||||
Cash flows from financing activities:
|
||||||||||||
Proceeds from related party notes payable and advance
|
994,000 | — | — | |||||||||
Proceeds from line of credit
|
400,000 | — | — | |||||||||
Cash contributed from Parent in Contribution Agreement for
issuance of stock to investor
|
— | 500,000 | — | |||||||||
Proceeds from exercise of stock options
|
2,000 | — | — | |||||||||
Proceeds from issuance of common stock, net
|
5,466,000 | — | — | |||||||||
Repayment of line of credit
|
(400,000 | ) | — | — | ||||||||
Repayment of related party notes payable
|
(450,000 | ) | — | — | ||||||||
Cash contributions from Parent
|
— | — | 6,238,000 | |||||||||
Net cash provided by financing activities
|
6,012,000 | 500,000 | 6,238,000 | |||||||||
Net increase in cash and cash equivalents
|
1,108,000 | 93,000 | — | |||||||||
Cash and cash equivalents at beginning of period
|
93,000 | — | — | |||||||||
Cash and cash equivalents at end of period
|
$ | 1,201,000 | $ | 93,000 | — |
Successor
|
Predecessor
(carve-out)
|
|||||||||||
Year Ended
December 31,
2013
|
November 12 -
December 31,
2012
|
January 1 -
November 11,
2012
|
||||||||||
Supplemental disclosure of cash flow information:
|
||||||||||||
Cash paid during the period for:
|
||||||||||||
Income taxes
|
$
|
1,000
|
$
|
—
|
$
|
—
|
||||||
Interest
|
$
|
13,000
|
$
|
—
|
$
|
—
|
||||||
Supplemental disclosure of non-cash activities:
|
||||||||||||
Conversion of advances from related party into common stock
|
$
|
411,000
|
$
|
—
|
$
|
—
|
||||||
Conversion of related party notes payable into common stock
|
$
|
360,000
|
$
|
—
|
$
|
—
|
||||||
Capital leases for purchase of equipment
|
$
|
38,000
|
$
|
—
|
$
|
—
|
||||||
Non-cash contribution from Parent at spin-off date:
|
||||||||||||
Prepaid expenses
|
$
|
—
|
$
|
25,000
|
$
|
—
|
||||||
Accounts payable
|
$
|
—
|
$
|
414,000
|
$
|
—
|
||||||
Accrued expenses
|
$
|
—
|
$
|
180,000
|
$
|
—
|
||||||
Related party accrued interest
|
$
|
—
|
$
|
132,000
|
$
|
—
|
·
|
Level 1: Valuations based on unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. Currently, we do not have any items classified as Level 1.
|
·
|
Level 2: Valuations based on observable inputs (other than Level 1 prices), such as quoted prices for similar assets at the measurement date quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability. Funds maintained in our money market account are classified as Level 2.
|
·
|
Level 3: Valuations based on inputs that require inputs that are both significant to the fair value measurement and unobservable and involve management judgment (i.e., supported by little or no market activity). Currently, we do not have any items classified as Level 3.
|
Successor
|
Predecessor
(carve-out)
|
|||||||||||
Year ended
December 31,
2013
|
November 12 - December 31,
2012
|
January 1 -
November 11,
2012
|
||||||||||
Net loss
|
$
|
(7,130,000
|
)
|
$
|
(375,000
|
)
|
$
|
(6,548,000
|
)
|
|||
Weighted average number of common shares outstanding:
|
||||||||||||
Basic and diluted
|
67,803,000
|
60,883,000
|
—
|
|||||||||
Net loss attributable to common stockholders per share:
|
||||||||||||
Basic and diluted
|
$
|
(0.11
|
)
|
$
|
(0.01
|
)
|
$
|
—
|
December 31,
|
||||||||
2013
|
2012
|
|||||||
Raw materials
|
$ | 29,000 | $ | — | ||||
Work-in-process
|
— | — | ||||||
Finished goods
|
— | — | ||||||
Less: inventory reserve
|
— | — | ||||||
Total inventory
|
$ | 29,000 | $ | — |
December 31,
|
||||||||
2013
|
2012
|
|||||||
Payroll advance
|
$ | — | $ | 2,000 | ||||
Prepaid rent
|
26,000 | — | ||||||
Prepaid insurance
|
11,000 | 2,000 | ||||||
Prepaid professional fees
|
— | 5,000 | ||||||
Prepaid licenses
|
6,000 | — | ||||||
Prepaid fees
|
3,000 | — | ||||||
Total
|
$ | 46,000 | $ | 9,000 |
December 31,
|
||||||||
2013
|
2012
|
|||||||
Machinery and equipment
|
$ | 849,000 | $ | 816,000 | ||||
Office furniture and fixtures
|
198,000 | 174,000 | ||||||
Computer equipment and software
|
97,000 | 62,000 | ||||||
Total cost
|
1,144,000 | 1,052,000 | ||||||
Less accumulated depreciation
|
(380,000 | ) | (174,000 | ) | ||||
Net
|
$ | 764,000 | $ | 878,000 |
December 31,
|
||||||||
2013
|
2012
|
|||||||
Machinery and equipment
|
$ | 27,000 | $ | — | ||||
Computer equipment and software
|
17,000 | — | ||||||
Total assets under capital lease
|
44,000 | — | ||||||
Less accumulated depreciation
|
(1,000 | ) | — | |||||
Net assets under capital lease
|
$ | 43,000 | $ | — |
Successor
|
Predecessor
(carve-out)
|
|
||||||||||
December 31,
2013
|
December 31,
2012
|
November 11,
2012
|
||||||||||
Research and development
|
$
|
76,000
|
$
|
—
|
$
|
—
|
||||||
General and administrative
|
130,000
|
34,000
|
94,000
|
|||||||||
$ |
206,000
|
$ |
34,000
|
$ |
94,000
|
December 31,
|
||||||||
2013
|
2012
|
|||||||
Patents
|
$
|
80,000
|
$
|
80,000
|
||||
Less accumulated amortization
|
(39,000
|
)
|
(32,000
|
)
|
||||
Net
|
$
|
41,000
|
$
|
48,000
|
December 31,
|
||||||||
2013
|
2012
|
|||||||
Accrued professional fees
|
$ | 81,000 | $ | 25,000 | ||||
Accrued payroll
|
26,000 | 64,000 | ||||||
Accrued vacation
|
76,000 | — | ||||||
Accrued severance
|
— | 42,000 | ||||||
Accrued expense reports
|
29,000 | — | ||||||
Accrued consulting
|
— | 50,000 | ||||||
Accrued taxes
|
7,000 | — | ||||||
Accrued other
|
12,000 | 1,000 | ||||||
Accrued liabilities owed by Parent - reimbursable under Contribution Agreement
|
35,000 | 204,000 | ||||||
Total accrued expenses
|
$ | 266,000 | $ | 386,000 |
December 31,
|
||||||||
2013
|
2012
|
|||||||
Capital lease payable to De Lage Landon secured by forklift, 10.0% interest, due on October 1, 2018, monthly payment of $451.50
|
$
|
20,000
|
$
|
—
|
||||
Capital lease payable to Dell Computers secured by computer equipment, 15.09% interest, due on December 15, 2016, monthly payment of $592.13.
|
17,000
|
—
|
||||||
Total capital leases
|
37,000
|
—
|
||||||
Less: current portion
|
(8,000
|
) | — | |||||
Long-term portion of capital leases
|
$
|
29,000
|
$
|
—
|
Year Ending
December 31
|
Amount
|
||||
2014
|
$ | 13,000 | |||
2015
|
13,000 | ||||
2016
|
12,000 | ||||
2017
|
5,000 | ||||
2018
|
4,000 | ||||
Net minimum lease payments
|
47,000 | ||||
Less: Amount representing interest
|
(10,000 | ) | |||
Present value of net minimum lease payments
|
37,000 | ||||
Less: Current maturities of capital lease obligations
|
(8,000 | ) | |||
Long-term capital lease obligations
|
$ | 29,000 |
December 31,
2013
|
December 31,
2012
|
|||||||
Expected volatility
|
73.50 | % | 77.00 | % | ||||
Dividend yield
|
0.00 | % | 0.00 | % | ||||
Risk-free interest rate
|
1.26 | % | 0.33 | % | ||||
Expected life (in years)
|
6.64 | 5.00 |
Weighted-
|
||||||||||||||||
Weighted-
|
Average
|
|||||||||||||||
Average
|
Remaining
|
Aggregate
|
||||||||||||||
Exercise
|
Contractual
|
Intrinsic
|
||||||||||||||
Options
|
Shares
|
Price
|
Life
|
Value
|
||||||||||||
Balance at January 1, 2012
|
—
|
$ |
—
|
N/A
|
||||||||||||
Options granted
|
3,220,735
|
0.001
|
5.00
|
|||||||||||||
Balance, December 31, 2012
|
3,220,735
|
0.001
|
5.00
|
|||||||||||||
Exercise of unvested options into restricted stock
|
(3,220,735
|
)
|
0.001
|
—
|
||||||||||||
Granted during 2013
|
8,910,000
|
1.289
|
6.55
|
|||||||||||||
Balance, December 31, 2013
|
8,910,000
|
$
|
1.289
|
6.30
|
$
|
2,240,000
|
||||||||||
Exercisable on December 31, 2013
|
533,334
|
$
|
1.00
|
4.35
|
$
|
288,000
|
Options Outstanding
|
Options Exercisable
|
||||||||||||||
Weighted-
|
|||||||||||||||
Average
|
Weighted-
|
Weighted-
|
|||||||||||||
Remaining
|
Average
|
Average
|
|||||||||||||
Exercise
|
Number of
|
Contractual
|
Exercise
|
Number of
|
Exercise
|
||||||||||
Prices
|
Shares
|
Life
|
Price
|
Shares
|
Price
|
||||||||||
(In years)
|
|||||||||||||||
$ | 0.51 - $1.00 |
1,500,000
|
4.35
|
$
|
1.00
|
533,334
|
$
|
1.00
|
|||||||
$ | 1.01 - $1.50 |
5,860,000
|
6.65
|
$
|
1.30
|
—
|
$
|
—
|
|||||||
$ | 1.51 - $2.00 |
1,550,000
|
6.88
|
$
|
1.52
|
—
|
$
|
—
|
|||||||
8,910,000
|
6.30
|
$
|
1.29
|
533,334
|
$
|
1.00
|
Weighted-
|
||||||||
Average
|
||||||||
Grant
|
||||||||
Shares
|
Price
|
|||||||
Balance, December 31, 2012
|
—
|
—
|
||||||
Exercise of options
|
3,220,735
|
$
|
0.001
|
|||||
Repurchase of unvested restricted shares
|
(76,608
|
)
|
$
|
0.001
|
||||
Vested
|
(1,467,259
|
)
|
$
|
0.001
|
||||
Balance, December 31, 2013
|
1,676,868
|
$
|
0.001
|
Warrants
Outstanding
|
||||||||
Number of
Warrants
|
Weighted-
Average
Exercise Price
per Share
|
|||||||
Balance outstanding at January 1, 2013
|
— | $ | — | |||||
Warrants issued
|
631,087 | 0.80 | ||||||
Warrants exercised
|
— | — | ||||||
Balance outstanding at December 31, 2013
|
631,087 | $ | 0.80 | |||||
Warrants exercisable at December 31, 2013
|
631,087 | $ | 0.80 |
Successor
|
Predecessor
|
|||||||||||
Year Ended
December 31,
2013
|
November 12 -
December 31,
2012
|
January 1, -
November
11,
2012
|
||||||||||
Current income tax expense:
|
||||||||||||
Federal
|
$ | — | $ | — | $ | — | ||||||
State
|
1,000 | — | — | |||||||||
Total
|
1,000 | — | — | |||||||||
Deferred income tax expense:
|
||||||||||||
Federal
|
— | — | — | |||||||||
State
|
— | — | — | |||||||||
Total
|
— | — | — | |||||||||
Provision for income taxes
|
$ | 1,000 | $ | — | $ | — |
December 31,
2013
|
December 31,
2012
|
|||||||
Deferred tax assets:
|
||||||||
Net operating loss carry-forward
|
$ | 4,033,000 | 160,000 | |||||
Valuation allowance
|
(4,033,000 | ) | (160,000 | ) | ||||
Net deferred tax assets
|
$ | — | $ | — |
2014
|
$ | 333,000 | ||
2015
|
319,000 | |||
2016
|
329,000 | |||
2017
|
3,000 | |||
2018
|
2,000 | |||
$ | 986,000 |
Assets:
|
||||
$ | 991,000 | |||
Prepaid expenses
|
$ | 25,000 | ||
Property and equipment, net
|
$ | 912,000 | ||
Intangibles, net
|
$ | 49,000 | ||
Total Assets
|
$ | 1,976,000 | ||
Liabilities:
|
||||
Accounts payable and accrued expenses
|
$ | 710,000 | ||
Related party accrued interest
|
$ | 132,000 | ||
Unearned revenue
|
$ | 991,000 | ||
Total liabilities
|
$ | 1,833,000 | ||
Divisional equity
|
$ | 143,000 | ||
Total liabilities and equity
|
$ | 1,976,000 |
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
(a)
|
All significant deficiencies and material weakness in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: April 15, 2014
|
|
/s/
Alain J. Castro
|
|
Alain J. Castro
Chief Executive Officer
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
(a)
|
All significant deficiencies and material weakness in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: April 15, 2014
|
|
/s/
Kelly Anderson
|
|
Kelly Anderson
|
|
Chief Financial Officer
|
/s/
Alain J. Castro
|
|
Alain J. Castro
|
|
Chief Executive Officer
|
|
April 15, 2014
|
/s/
Kelly Anderson
|
|
Kelly Anderson
|
|
Chief Financial Officer
|
|
April 15, 2014
|