Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report
Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ~~Yes ☐~~ NoYes ☒ No 

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  No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of ‘‘large accelerated filer,’’ ‘‘accelerated filer,’’ ‘‘smaller reporting company,’’ and ‘‘emerging growth company’’ in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section ~~7(a)(2)(B)~~13(a) of the ~~Securities~~Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes  No

As of ~~May 31, 2021,~~April 30, 2022, ~~84,301,596~~99,810,544 shares of the registrant's common stock were outstanding.

This Quarterly Report on Form 10-Q contains forward-looking statements. All statements other than statements of historical or current facts contained in this Quarterly Report on Form 10-Q may be forward-looking statements. Statements regarding our future results of operations and financial position, business strategy and plans and objectives of management for future operations, including, among others, liquidity, growth and profitability strategies and factors and trends affecting our business are forward-looking statements. Forward-looking statements can be identified in some cases by the use of words such as “believe,” “can,” “could,” “potential,” “plan,” “predict,” “goals,” “seek,” “should,” “may,” “may have,” “would,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” the negative of these words, other similar expressions or by discussions of strategy, plans or intentions.

The forward-looking statements in this Quarterly Report on Form 10-Q are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. Forward-looking statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. We believe that these factors include, but are not limited to, the factors set forth under the heading “Risk Factors.” Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

You should read this Quarterly Report on Form 10-Q with the understanding that our actual future results may be materially different from what we expect. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements.

These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained in this Quarterly Report on Form 10-Q, whether as a result of any new information, future events or otherwise.

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.

~~The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.~~

1. Description of ~~Business~~business

FTC Solar, Inc. (the “Company”, “we”, “our”, or “us”) was founded in 2017 and is incorporated in the state of Delaware. We are a global provider of advanced solar tracker systems, supported by proprietary software and value-added engineering services. Our mission is to provide differentiated products, software, and services that maximize energy generation and cost savings for our customers, and to help facilitate the continued growth and adoption of solar power globally. Trackers significantly increase the amount of solar energy produced at a solar installation by moving solar panels throughout the day to maintain an optimal orientation relative to the sun. Our tracker systems are currently marketed under the Voyager brand name (“Voyager Tracker” or “Voyager”). Voyager is a next-generation two-panel in-portrait single-axis tracker solution that we believe offers industry-leading performance and ease of installation. ~~FTC Solar, Inc. (the “Company”, “we”, “our”, or “us”) was founded in 2017 and is incorporated in the state of Delaware. The Company is~~We have a team of dedicated renewable energy professionals with significant project installation experience focused on delivering cost reductions to our US and worldwide clients across the solar project development and construction cycle. ~~With significant US and worldwide project installation experience, our differentiated offerings drive value for~~Our solar solutions ~~spanning~~span a range of applications, including ground mount, tracker, canopy, and rooftop. The Company is headquartered in Austin, Texas, and has international subsidiaries in Australia, India, Singapore, and ~~Singapore.~~South Africa.

~~Initial Public Offering and Related Transaction~~

OnIn April ~~30,~~ 2021, ~~the Company~~we completed its Initial Public Offering (“IPO”) and the Company’s common stock began trading on the Nasdaq Stock Exchange on April 28, 2021, under the symbol “FTCI”. In connection with the IPO, the Company issued and soldan initial public offering (IPO) of 19,840,000 shares of ~~its~~our common stock ~~at a public offering price of $13.00~~ ~~per share.~~

The condensed consolidated financial statements as of March 31,2021 and for the period then-ended do not reflect the transaction since the IPO closed subsequent to the period end. The Company received aggregatereceiving proceeds of $241.2 million, ~~from the IPO,~~ net of ~~the~~ underwriting ~~discount~~discounts and commissions, ~~and~~but before offering costs, and began trading on the Nasdaq Global Market under the symbol “FTCI”. Prior to the completion of the IPO, the board of directors and stockholders approved an approximately 8.25-for-1 forward stock split (the “Forward Stock Split”) of the Company’s shares of common stock which became effective on April 28, 2021. Proceeds from the IPO were used for general corporate purposes, with $54.2 million used to purchase an aggregate of 4,455,384 shares of our common stock, ~~some of which resulted~~including shares resulting from the settlement of certain vested ~~RSUs~~restricted stock units (“RSUs”) and ~~the~~ exercise of certain options in connection with the IPO at the IPO price, less underwriting discounts and commissions.

Offering costs, including legal, accounting, printing and other IPO-related costs, have been capitalized in Other assets within the accompanying condensed consolidated balance sheet as of March 31, 2021, and upon completion of the IPO, these deferred offering costs will be reclassified to Additional paid-in capital and recorded against the proceeds from the offering which will be recorded in the second quarter of 2021.

~~Prior to the completion of the IPO, the Board and stockholders approved an approximately~~ ~~8.25-for-1~~ ~~forward stock split of the Company’s shares of common stock which became effective on April 28, 2021.~~

~~JOBS Act Accounting Election~~

We are an emerging growth company, as defined in the Jumpstart Our Business Startups (JOBS) Act. Under the JOBS Act, ~~emerging growth companies can~~we elected to use the allowed extended transition period to delay adopting new or revised accounting standards until such time as those standards apply to private companies. Accordingly, we will not be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies or that have opted out of using such extended transition period.

2. Summary of ~~Significant Accounting Policies~~significant accounting policies

Basis of ~~Presentation~~presentation and ~~Principles~~principles of ~~Consolidation~~consolidation

~~These~~The accompanying unaudited condensed consolidated financial statements include the results of the Company and its wholly owned subsidiaries and have been prepared in ~~conformity~~accordance with ~~U.S.~~accounting principles generally accepted ~~accounting principles~~in the United States of America (“GAAP”)~~. Intercompany accounts and transactions have been eliminated upon consolidation.~~

~~Forward Stock Split~~

~~On April 28, 2021, we effected an approximately~~ ~~8.25-for-1~~ ~~forward split (the “Forward Stock Split”) of our issued and outstanding shares of common stock, par value $0.0001~~ per share (“Common Stock”). As a result of the Forward Stock Split, one (1) share of Common Stock issued and outstanding was automatically increased to approximately 8.25 shares of issued and outstanding Common Stock, without any change in the par value per share. All information related to Common Stock, stock options, restricted stock awards and earnings per share have been retroactively adjusted to give effect to the Forward Stock Split for all periods presented.

~~Giving effect to the Forward Stock Split, the Company’s issued and outstanding stock increased from~~ ~~8,022,066~~ to ~~66,155,340~~ ~~and from~~ ~~8,164,435~~ to ~~67,329,409~~ ~~at December 31, 2020 and March 31, 2021, respectively.~~

~~Use of Estimates~~

The preparation of the Company’s financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that impact the reported amounts of assets, liabilities, expenses, and the disclosure of contingent assets and liabilities in the Company’s financial statements and accompanying notes. These estimates and assumptions are based on current facts, historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the basis.

~~Unaudited Interim Financial Information~~

~~The accompanying unaudited condensed consolidated financial statements as of March 31, 2021 and for the three months ended March 31, 2020 and 2021, have been prepared in accordance with GAAP~~ for interim financial statements and pursuant to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, all adjustments have been made that are considered necessary for a fair statement of our ~~results of operations,~~ financial position as of ~~December~~March 31, ~~2020~~2022, and ~~March~~December 31, 2021, our results of operations for the three months ended March 31, ~~2020~~2022 and 2021 and our cash flows for the three months ended March 31, ~~2020~~2022 and 2021. The condensed consolidated balance ~~sheets~~sheet as of December 31, ~~2020 have~~2021 has been derived from the Company’s audited consolidated financial ~~statements.~~statements but, does not include all disclosures required by accounting principles generally accepted in the United States of America. Operating results for the three months ended March 31, ~~2021~~2022 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2021.~~

2022. Intercompany balances and transactions have been eliminated in consolidation.

Certain information and disclosures normally included in the notes to annual financial statements prepared in accordance with GAAP have been omitted from these interim financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Therefore, these unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company’s ~~final prospectus (the “IPO Prospectus”) dated~~Annual Report on Form 10-K for the year ended December 31, 2021.

On April 28, 2021, we effected an approximately 8.25-for-1 forward split of our issued and outstanding shares of common stock, par value $0.0001 per share. As a result of the forward stock split, one (1) share of common stock issued and outstanding was automatically increased to approximately 8.25 shares of issued and outstanding common stock, without any change in the par value per share. All information related to common stock, stock options, restricted stock awards and earnings per share have been retroactively adjusted to give effect to the forward stock split for all periods presented, unless otherwise indicated.

We currently operate in one business segment, the manufacturing and servicing of Voyager Tracker.

Liquidity

We have incurred cumulative losses since inception, resulting in an accumulated deficit of $177.0 million at March 31, 2022, and have a history of cash outflows from operations. During the year ended December 31, 2021, and the three months ended March 31, 2022, we had $132.9 million and $53.1 million, respectively, of cash outflow from operations. At March 31, 2022, we had $49.4 million of cash on hand, $119.8 million of working capital and approximately $98.1 million of unused borrowing capacity under our existing revolving credit facility. The revolving credit facility includes a financial condition covenant stating we are required to have a minimum liquidity, consisting of cash on hand and unused borrowing capacity, of $125.0 million as of ~~April 29, 2021,~~each quarter end. After considering this financial condition covenant, we had approximately $22.4 million of available liquidity as of March 31, 2022, in order to retain access to our revolving credit facility. Additionally, we had 0 long-term borrowings or other material obligations requiring the use of cash as of March 31, 2022.

As of May 12, 2022, we have collected approximately $62 million of receivables since March 31, 2022, and ~~filed~~have a cash balance of approximately $71 million.

On March 25, 2022, the U.S. Department of Commerce, in response to a petition by Auxin Solar, Inc., initiated an investigation of claims related to alleged circumvention of U.S. antidumping and countervailing duties ("AD/CVD") by solar manufacturers in certain Southeast Asian countries in an effort to determine whether or not solar cells and/or modules made in those Southeast Asian nations use parts originating from China in order to circumvent the AD/CVD tariffs. This decision has resulted in some developers deferring projects later in the year due to the uncertainty of panel supply and costs, which is expected to negatively impact our anticipated revenues and our cash flows.

Our costs are affected by certain component costs including steel, motors and micro-chips, as well as transportation costs. Current market conditions that constrain supply of materials and disrupt the flow of materials from international vendors impact the cost of our products and services. These cost increases impact our operating margins. We are taking steps to expand and diversify our manufacturing partnerships and have employed alternative modes of transportation to mitigate the impact of the current headwinds in the global supply chain and logistics markets. Additionally, we have contracted with a consulting firm to support us with improvements to our processes and performance in various areas including design, sourcing, logistics, pricing, software and standard configuration. For further information regarding this consulting firm, see "Note 13. Related party transactions".

In accordance with ASC 205-40, Going Concern, we have evaluated whether there are conditions and events, considered in the aggregate, which raise substantial doubt about our ability to continue as a going concern within one year after the date the financial statements are issued. Based on our recurring losses from operations, impact of the U.S. Department of Commerce investigation of AD/CVD circumvention claims, the expectation of continued operating losses during 2022, and the need to improve profitability and cash flow to finance our future operations, we determined that there is substantial doubt about our ability to continue as a going concern within twelve months of the issuance date of the accompanying consolidated financial statements. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty and assumes we will continue as a going concern through the realization of assets and satisfaction of liabilities and commitments in the ordinary course of business.

As we continue to address these current market challenges, management has also undertaken the following actions:

•

we are in discussions with the ~~SEC pursuant~~lenders of our revolving credit facility to ~~Rule 424(b)(4)~~lower the minimum required liquidity amount, which, if successful, could result in additional liquidity;

•

we have initiated a program, as described above, with third party assistance, to improve our operating performance and increase our gross margins;

•

we are freezing non-essential hiring, reducing our travel expenses, decreasing the future use of consultants and deferring non-critical initiatives;

•

we are negotiating improved payment terms with both our customers and vendors;

•

we have initiated frequent, consistent communication with our customers, which has allowed us to resolve issues preventing timely collection of certain outstanding receivables subsequent to March 31, 2022; and

•

we are exploring options to obtain additional sources of capital.

Should we not be successful in executing the above initiatives, or in reducing our historical levels of use of cash to fund our operations, or should market conditions deteriorate significantly from what we currently expect, or regulatory and international trade policies become more stringent as a result of findings from the Department of Commerce's AD/CVD investigation, or other factors, we may need to issue additional debt or obtain new equity financing to fund our operations for the next twelve months. We may be unable to obtain any desired additional financing on terms favorable to us, or at all, depending on market and other conditions. The ability to raise additional financing depends on numerous factors that are outside of our control, including general economic and market conditions, the health of financial institutions, investors' and lenders' assessments of our prospects and the prospects of the solar industry in general.

Use of estimates

Preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported revenue and expenses during the period. Estimates are used for calculating the measure of progress of Voyager tracker projects and deriving the standalone selling prices of the individual performance obligations when determining amounts to recognize for revenue, estimating allowances for doubtful accounts and slow-moving and obsolete inventory, determining useful lives of noncurrent assets and the estimated fair value of those assets for impairment assessments, and estimating the fair value of investments, stock compensation awards, warranty liabilities and federal and state taxes and contingencies. We base our estimates on historical experience and anticipated results, trends, and various other assumptions that we believe are reasonable under the ~~Securities Act of 1933,~~circumstances, including assumptions as ~~amended (the “Securities Act”).~~to future events. Actual results could differ from those estimates.

Concentration of ~~Credit Risk~~credit risk

Financial instruments ~~which~~that potentially subject the Company to ~~concentration~~concentrations of credit risk ~~consist~~are primarily of cash and cash equivalents. The Company maintains deposits in federally insured financial institutions in excess of federally insured limits. The Company is exposed to credit risk in the event of default by the financial institutions holding our cash and cash equivalents that are recorded on our balance sheets. The Company mitigates its risk by investing in high-grade instruments and limiting the concentration in any one issuer, which limits its exposure. The Company has not experienced any losses since inception.

~~The carrying amounts of cash and cash equivalents, prepaid expenses,~~ accounts ~~payable and accrued other~~receivable.

~~liabilities are reasonable estimates of their fair value because of the short maturity of~~We regularly maintain cash balances with various financial institutions that exceed federally insured amounts, but we have experienced no losses associated with these ~~items.~~

~~Equity Method Investments~~amounts to date.

The Company ~~uses~~extends credit to customers in the ~~equity method~~normal course of ~~accounting~~business, often without requiring collateral. The Company performs credit analyses and monitors the financial health of its customers to reduce credit risk.

The Company’s accounts receivables are derived from revenue earned from customers primarily located in the U.S. and in the Asia Pacific region. No country other than the U.S. accounts for ~~equity~~10% or more of our revenue. Most of our customers are project developers, solar asset owners and engineering, procurement and construction (“EPC”) contractors that design and build solar energy projects. Often times, a small number of customers account for a significant portion of our outstanding receivables at period end and our total revenue for the year.

Cash and cash equivalents

We consider all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. We regularly maintain cash balances that exceed federally insured amounts, but we have experienced no losses associated with these amounts to date.

Accounts receivable, net

Trade receivables are recorded at invoiced amounts, net of allowances for doubtful accounts if applicable, and do not bear interest. We generally do not require collateral from our customers; however, in certain circumstances, we may require letters of credit, other collateral, additional guarantees or advance payments. The allowance for doubtful accounts is based on our assessment of the ~~investment provides the~~collectability of our customer accounts. We regularly review our accounts receivable that remain outstanding past their applicable payment terms and establish allowances or make potential write-offs by considering certain factors such as historical experience, industry data, credit quality, age of balances and current economic conditions that may affect a customers’ ability to ~~exercise significant influence, but not control, over operating~~pay.

Receivables arising from revenue recognized in excess of billings represents our unconditional right to consideration before customers are invoiced due to the level of progress obtained as of period end on our contracts to install Voyager tracker systems and ~~financial policies of the investee. The Company’s proportionate share of the net income or loss of these investees is included~~related equipment. Further information may be found below in our ~~Condensed Consolidated Statements of~~revenue recognition policy.

108

~~Comprehensive Income (Loss). Judgment regarding~~Inventories, net

Inventories are stated at the ~~level~~lower of ~~influence over each equity method investment~~cost or net realizable value, with costs computed on a first-in, first-out basis. The Company periodically reviews its inventories for excess and obsolete items and adjusts carrying costs to estimated net realizable values when they are determined to be less than cost.

Warranty

Typically, the sale of Voyager Tracker projects includes ~~considering key factors such~~parts warranties to customers as ~~the Company’s ownership interest, legal form~~part of the ~~investee, representation~~overall price of the product. We provide standard assurance type warranties for our products for periods generally ranging from five to ten years. We record a provision for estimated warranty expenses in cost of sales, net of amounts recoverable from manufacturers under their warranty obligations to us. We do not maintain general or unspecified reserves; all warranty reserves are related to specific projects. All actual or estimated material costs incurred for warranty services in subsequent periods are charged to those established reserves.

While we periodically monitor our warranty activities and claims, if actual costs incurred were to be different from our estimates, we would recognize adjustments to our warranty reserves in the period in which those differences arise or are identified.

Stock-based compensation

We recognize compensation expense for all share-based payment awards made, including stock options and restricted stock, based on the ~~board of directors, participation in policy-making decisions and material intra-entity transactions.~~

~~The Company evaluates equity method investments for impairment whenever events or changes in circumstances indicate that the carrying amount~~estimated fair value of the ~~investment might not be recoverable. Factors considered by~~award on the ~~Company when reviewing an equity method investment for impairment include~~grant date, in the ~~length~~accompanying consolidated statement of ~~time~~operations and ~~the extent to which~~comprehensive loss. We calculate the fair value of stock options using the ~~equity method investment has been less than cost,~~Black-Scholes Option-Pricing model, while the ~~investee’s financial condition and near-term prospects and~~fair value of restricted stock grants is based on the ~~intent and ability~~estimated fair value of the Company's common stock on the date of grant. Since completion of our IPO, we consider the closing price of our stock, as reported on the Nasdaq Global Market, to ~~hold~~be the ~~investment~~fair value of our stock on the grant date.

Forfeitures are accounted for ~~a period of time sufficient to allow for anticipated recovery. An impairment that is other-than temporary~~as they occur. For service-based awards, stock-based compensation is recognized inusing the straight-line attribution approach over the requisite service period. For performance-based awards, stock-based compensation is recognized based on graded vesting over the requisite service period ~~identified.~~

~~The Company accounts for distributions received from equity method investees under~~when the ~~“nature~~performance condition is probable of the distribution” approach. Under this approach, distributions received from equity method investees are classified on the basis of the nature of the activity or activities of the investee that generated the distribution as either a return on investment (classified as cash inflows from operating activities) or a return of investment (classified as cash inflows from investing activities).being achieved.

Revenue ~~Recognition~~recognition

The Company derives its revenue primarily from sale of: (1) Voyager Tracker and customized components of Voyager Tracker, (2) individual parts of Voyager Tracker for certain specific transactions, (3) shipping and handling services, (4) term-based software licenses, (5) maintenance and support services for the term-based software licenses, and (6) subscription services. Product revenue includes revenue from the sale of Voyager Tracker and customized components of Voyager Tracker, individual part sales for certain specific transactions, and sale of term-based software licenses. Term-based software licenses are deployed on the customers’ own servers and have significant standalone functionality.

Service revenue includes revenue from shipping and handling services, ~~subscription-based enterprise~~subscription fees from licensing ~~model,~~subscription services, and maintenance and support services in connection with the term-based software licenses. Our subscription-based enterprise licensing model typically has contract terms ranging from one to two years and consists of subscription fees from the licensing of subscription services. Our hosted on-demand service arrangements do not provide customers with the right to take possession of the software supporting the hosted services. Support services include ongoing security updates, upgrades, bug fixes, and maintenance.

We recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration to which we expect to be entitled to in exchange for those goods or services by following a five-step process, (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when or as the Company satisfies a performance obligation, as further described below.

Identify the contract with a customer: A contract with a customer exists when (i) the Company enters into an enforceable contract with a customer that defines each party’s rights regarding the products and services to be transferred and identifies the payment terms related to these products and services, (ii) the contract has commercial substance and, (iii) the Company determines that collection of substantially all consideration for products and services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration. In assessing the recognition of revenue, we also evaluate whether two or more contracts should be combined and accounted for as one contract and if the combined or single contract should be accounted for as multiple performance obligations which could change the amount of revenue and profit (loss) recorded in a period. Change orders may include changes in specifications or design, manner of

~~Voyager Tracker and individual parts of Voyager Tracker (including shipping and handling)~~9

~~The Company contracts~~performance, equipment, materials, scope of work, and/or the period of completion of the project. We analyze change orders to determine if they should be accounted for as a modification to an existing contract or a new stand-alone contract.

Contracts we enter into with our customers for sale of Voyager Trackers are generally under two different types of arrangements: (1) ~~Purchase Agreements~~purchase agreements and ~~Equipment Supply Contracts~~equipment supply contracts (“Purchase Agreements”) and (2) ~~Sale~~sale of individual parts of the Voyager Tracker.

Change orders from our customers are generally modifications to existing contracts and are included in the total estimated contract revenue when it is probable that the change order will result in additional value that can be reliably estimated and realized.

~~The Company’s~~Identify the performance obligations in the contract: We enter into contracts that can include various combinations of products and services, which are either capable of being distinct and accounted for as separate performance obligations or as one performance obligation since the majority of tasks and services are part of a single project or capability. However, determining whether products or services are considered distinct performance obligations that should be accounted for separately versus together may sometimes require significant judgment.

Our Purchase Agreements typically include two performance obligations- ~~(1)~~1) Voyager Tracker or customized components of Voyager Tracker, and ~~(2)~~2) shipping and handling services. The deliverables included as part of the Voyager Tracker are predominantly accounted for as one performance obligation, as these deliverables are part of a combined promise to deliver a project.

The revenue for shipping and handling services will be recognized over time based on progress in meeting shipping terms of the arrangements, as this faithfully depicts the Company’s performance in transferring control.

Sale of individual parts of Voyager Tracker for certain specific transactions includes multiple performance obligations consisting of individual parts of the Voyager Tracker. Revenue is recognized for parts sales at a point in time when the obligations under the terms of the contract with our customer are satisfied. Generally, this occurs with the transfer of control of the asset, which is in line with shipping terms.

Determine the transaction price: The transaction price is determined based on the consideration to which we will be entitled in exchange for transferring services to the customer. Such amounts are typically stated in the customer contract, and to the extent that we identify variable consideration, we will estimate the variable consideration at the onset of the arrangement as long as it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. The majority of our contracts do not contain variable consideration provisions as a continuation of the original contract. None of our contracts contain a significant financing component. Taxes collected from customers and remitted to governmental authorities are not included in revenue.

Allocate the transaction price to performance obligations in the contract: Once we have determined the transaction price, we allocate the total transaction price to each performance obligation in a manner depicting the amount of consideration to which we expect to be entitled in exchange for transferring the good(s) or service(s) to the customer. We allocate the transaction price to each performance obligation identified in the contract on a relative standalone selling price basis.

We use the expected cost-plus margin approach based on hardware, labor, and related overhead cost to estimate the standalone selling price of the Voyager Tracker, customized components of Voyager Tracker, and individual parts of Voyager Tracker for certain specific transactions. We use the adjusted market assessment approach for all other performance obligations except shipping, handling, and logistics. For shipping, handling, and logistics performance obligations, we use a residual approach to calculate the standalone selling price, because of the nature of the highly variable and broad range of prices we charge to various customers for this performance obligation in the contracts.

Recognize revenue when or as the Company satisfies a performance obligation: For each performance obligation identified, we determine at contract inception whether we satisfy the performance obligation over time or at a point in time. Voyager Tracker and customized components of Voyager Tracker performance obligations in the contract are satisfied over-time as work progresses for its custom assembled Voyager Tracker, utilizing an input measure of progress determined by cost-to-cost measures on these projects as this faithfully depicts ~~the Company’s~~our performance in transferring control.

~~The revenue for shipping and handling services is recognized over-time based on shipping terms~~ Additionally, our performance does not create an asset with an alternative use, due to the highly customized nature of the ~~arrangements, as this faithfully depicts the Company’s~~product, and we have an enforceable right to payment for performance ~~in transferring control.~~

~~The Company’s sale of~~completed to date. Our performance obligations for individual ~~parts of Voyager Tracker~~part sales for certain specific transactions ~~include multiple~~are recognized point-in-time as and when control transfers based on the Incoterms for the contract. Our performance obligations ~~consisting of individual parts of the Voyager Tracker. Revenue recognized~~ for the Company’s part sales are recorded at a point in time and recognized when obligations under the terms of the contract with our customer are satisfied. Generally, this occurs with the transfer of control of the asset, which is in line with shipping terms.

~~Term-based software license revenue~~

~~Term-based software license revenue included under product revenue is primarily derived from sale of~~ term-based software licenses ~~that~~ are ~~deployed on the customers’ own servers~~recognized point-in-time as and ~~has significant standalone functionality. The revenue is recognized~~when control transfers, either upon ~~transfer of control to the customer. The control for term-based software license is transferred at the later of~~ delivery to the customer or the software license start ~~date. Term-based software license revenue~~date, whichever is ~~immaterial as of March 31, 2020 and March 31, 2021.~~later. Our performance obligation

~~Subscription and Maintenance and support services revenue~~10

~~Subscription revenue~~for shipping and handling services is ~~derived from a subscription-based enterprise licensing model with contract terms typically ranging from~~ ~~one~~ to ~~two years~~ ~~and consists of subscription fees from~~satisfied over-time as the ~~licensing of Subscription services. Subscription~~ services ~~revenue is immaterial as of March 31, 2020 and March 31, 2021. The hosted on-demand service arrangements do not provide customers with~~are delivered over the ~~right to take possession~~term of the ~~software supporting~~contract. We recognize subscription services sales/other services on a straight-line basis over the ~~hosted services. Services~~contract period. With regard to support revenue, ~~includes maintenance and support service revenue related to term-based software licenses. Support revenue is derived from ongoing security updates, upgrades, bug fixes, and maintenance. A~~a time-elapsed method is used to measure progress because ~~the Company transfers~~we transfer control evenly over the contractual period. Accordingly, the fixed consideration related to ~~these revenues~~support revenue is generally recognized on a straight-line basis over the contract ~~term beginning on the date access is provided.~~term.

Contract assets and liabilities:

~~Cost~~The timing of ~~Revenue~~

revenue recognition, billing, and cash collection results in the recognition of accounts receivable, unbilled receivables for revenue recognized in excess of billing, and deferred revenue in the Consolidated Balance Sheets. We may receive advances or deposits from our customers before revenue is recognized, resulting in contract liabilities, which are reflected as “deferred revenue” on our Consolidated Balance Sheets.

Cost of revenue consists primarily of costs related to raw materials, freight and delivery, product warranty, and personnel costs (salaries, bonuses, benefits, and stock-based compensation). Personnel costs in cost of revenue include both direct labor costs as well as costs attributable to any individuals whose activities relate to the procurement, installment, and delivery of the finished product and services. Deferred cost of revenue results from the timing differences between the costs incurred in advance of the satisfaction of all revenue recognition criteria consistent with our revenue recognition policy.

Revision of previously issued financial statements

~~Warranty~~

~~We provide standard assurance type warranties~~In connection with preparation of our ~~Voyager Trackers~~consolidated financial statements as of and for ~~periods generally ranging from~~ ~~five~~ to ~~ten years~~. ~~We record a provision for estimated warranty expenses, net of amounts recoverable from manufacturers, to cost of sales when~~the year ended December 31, 2021, we recognize revenue. These estimates are based on our historical experience and forward-looking factors including the expected nature and frequency of product failure rates and costs to address future claims. These estimates are inherently uncertain given our relatively short history of sales and changes to our historical or projected warranty experience may result in material changes to our warranty reserveidentified an error in the ~~future. We do not maintain general or unspecified reserves; all warranty reserves are related~~classification of offering costs in the statement of cash flows for the three months ended March 31, 2021. Specifically, we incorrectly classified $1.1 million of offering costs paid as an operating cash outflow instead of a financing cash outflow in our previously issued cash flow statement for the three months ended March 31, 2021. Although we have concluded that this error is immaterial to ~~specific projects. All actual or estimated material costs incurred~~the previously issued financial statements, we have corrected this error in ~~subsequent periods are charged to those established reserves.~~

~~Remaining Performance Obligations~~

~~Remaining performance obligations relate to contracts that have original expected durations~~the accompanying condensed consolidated statements of ~~one year or less. Therefore,~~cash flows by revising the ~~transaction price allocated to performance obligations that are unsatisfied or partially satisfied as of~~operating and financing cash outflows previously reported in our cash flow statement for the ~~end of the reporting period are not required to be disclosed under ASC 606."~~

three months ended March 31, 2021.

Recent ~~Accounting Pronouncements~~

~~Recently Adopted Accounting Standards~~

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”). ASU 2019-12 removes certain exceptions related to the approach for intra period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. ASU 2019-12 also amends other aspects of the guidance to help simplify and promote consistent application of GAAP. The Companyaccounting pronouncements not yet adopted ~~ASU 2019-12 in the first quarter of 2021 and the adoption had no material impact to the Company's consolidated financial statements.~~

~~New Accounting Pronouncements Not Yet Adopted~~

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 changes the impairment model for most financial assets and requires the use of an expected loss model in place of the currently used incurred loss method. Under this model, entities will be required to estimate the lifetime expected credit loss on such instruments and record an allowance to offset the amortized cost basis of the financial asset, resulting in a net presentation of the amount expected to be collected on the financial asset. The update to the standard is effective for the Company for its fiscal year beginning after December 15, 2022, to the extent the Company remains an emerging growth company, and early adoption is ~~currently assessing the impact that~~permitted. The Company does not expect the adoption of ASU 2016-13 ~~will~~to have a material impact on its ~~condensed~~ consolidated financial statements.

~~In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848), Facilitation~~

3. Accounts receivable, net

Accounts receivable consisted of the Effects of Reference Rate Reform on Financial Reporting. This standard provides optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued. The Company is currently evaluating the impact this adoption will have on the Company’s condensed consolidated financial statements.following:

Included in total receivables above are amounts billed under retainage provisions totaling $5.1 million and $~~21.1~~ 11.6million ~~respectively from deferred revenue recorded at~~as of March 31, 2022, and December 31, ~~2019 and 2020.~~2021, respectively, which are due within the upcoming year.

4. ~~Prepaid Expenses and Other Current Assets~~Inventories, net

Inventories consisted of the following:


(in thousands)	March 31, 2022			December 31, 2021
Finished goods	$	9,008		$	8,950
Allowance for slow-moving and obsolete inventory		(90	)		(90	)
Total	$	8,918		$	8,860

5. Prepaid and other current assets

Prepaid and other current assets consisted of the following:


(in thousands)	March 31, 2022		December 31, 2021
Vendor deposits	$	10,700	$	13,098
Prepaid expenses		1,308		2,301
Prepaid taxes		290		269
Surety collateral		334		460
Other current assets		1,130		1,058
Total	$	13,762	$	17,186

6. Leases

We lease office and warehouse space in various locations, including our corporate headquarters in Austin, Texas. Additionally, we lease space for an applications laboratory and have a membership in a collaborative research facility in Colorado. All of our manufacturing is outsourced to contract manufacturing partners, and we currently do not own or lease any manufacturing facilities.

Our lease expense consisted of the following:


	Three months ended March 31,
(in thousands)	2022		2021
Operating lease cost	$	198	$	78
Short-term lease cost		115		63
Total lease cost	$	313	$	141

Reported in:
Cost of revenue	$	193	$	61
Research and development		8		6
Selling and marketing		0		1
General and administrative		112		73
Total lease cost	$	313	$	141

Future remaining operating lease payment obligations were as follows:


(in thousands)	March 31, 2022
2022	$	424
2023		520
2024		511
2025		446
2026		55
Thereafter		0
Total lease payments		1,956
Less: imputed interest		(315	)
Present value of operating lease liabilities	$	1,641

Current portion of operating lease liability	$	451
Operating lease liability, net of current portion		1,190
Present value of operating lease liabilities	$	1,641

7. Property and equipment, net

Property and equipment consisted of the following:


(in thousands)	March 31, 2022			December 31, 2021
Leasehold improvements	$	22		$	22
Field equipment		891			833
Information technology equipment		243			182
Tooling		527			543
Capitalized software		250			250
Total		1,933			1,830
Accumulated depreciation		(369	)		(248	)
Property and equipment, net	$	1,564		$	1,582

8. Accrued expenses and other current ~~assets consist of the following (in thousands~~):

December 31,
2020

March 31,
2021

Vendor deposits

$
4,205

$
6,468

Prepaid expenses

1,043

718

Deferred cost of revenue

992

921

Deferred income taxes

─

20

Surety collateral*

113

90

Other current assets

571

1,530

$
6,924

$
9,747

*Surety collateral represents amounts held in deposit to secure performance bonds, which is expected to be ultimately received back in cash when settled.

8.9. Commitments and ~~Contingencies~~

~~Litigation~~contingencies

The Company may be involved in various claims, lawsuits, investigations, and other proceedings, arising ~~from~~in the normal course of ~~its~~ business. The Company accrues a liability when management believes information available prior to the issuance of financial statements indicates it is probable a loss has been incurred as of the date of the financial ~~statement~~statements and the amount of loss can be reasonably estimated. The Company adjusts its accruals to reflect the impact of negotiation, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular case. Legal costs are expensed as incurred.

On April 21, 2021, FCX Solar, LLC (“FCX”), filed a lawsuit against us in the United States District Court for the Southern District of New York. The complaint ~~alleges~~alleged breach of contract, fraud and ~~tort~~unjust enrichment claims related to a patent license agreement and consulting relationship between FCX and us. FCX ~~seeks~~sought damages of approximately $134 million in the lawsuit. ~~Our response to the complaint will be filed on or before~~On July 2, 2021, we filed a motion to dismiss the fraud and unjust enrichment claims. On July 16, 2021, FCX filed an amended complaint asserting the same claims as the original complaint. On July 22, 2021, we advised the court that FTC would stand on its motion to dismiss, and at the request of the court, we filed a revised motion citing the amended complaint. FCX filed its response on August 19, 2021, and we filed a reply on September 7, 2021. Oral argument on our motion to dismiss was held on February 3, 2022, and the Court granted our motion on February 7, 2022, dismissing FCX's fraud and unjust enrichment claims and leaving only a claim for breach of a license agreement. On April 15, 2022, FCX filed a motion to amend its complaint to add two additional claims for breach of the license agreement and to remove the dismissed claims, including its request for damages of approximately $134 million. We intend to oppose FCX's motion to add new breach of contract claims. On May 29, 2021, FCX filed a separate lawsuit against us in the United States District Court for the Western District of Texas, alleging a claim for patent infringement related to U.S. Patent No. 10,903,782. FCX seeks an unspecified amount of damages, including past and future royalties, and injunctive relief. Our ~~response~~answer to that complaint ~~will be~~was filed on ~~or before~~ June ~~23,~~22, 2021, along with our motion to transfer the patent suit to the Southern District of New York to be consolidated with the New York litigation. FCX filed an amended complaint asserting claims for direct patent infringement, indirect infringement by active inducement, and contributory infringement on July 27, 2021, and we filed our answer to that complaint on August 10, 2021. ~~The Company believes~~On October 25, 2021, our motion to transfer the case to the Southern District of New York was granted, and the patent case was consolidated with FCX's contract case on November 19, 2021. Discovery in this consolidated matter is ongoing. We believe the claims asserted in ~~the~~both lawsuits are without merit, and we plan to vigorously defend against them. ~~The Company~~We and ~~its~~our management considered (a) the facts described above, (b) the preliminary stages of the proceedings and (c) the advice of outside legal counsel on the claims and determined that it is not probable that FCX will prevail on the merits. At this time, ~~the Company believes~~we believe that the likelihood of any material loss related to these matters is remote given the ~~preliminary stage of the claims and~~ strength of ~~the Company’s~~our defenses.

The Company has ~~not~~0t recorded any material loss contingency in the Condensed Consolidated Balance Sheets as of March 31, 2022 and December 31, ~~2020 and March 31,~~ 2021.

~~Warranties~~

The Company provides standard warranties on its hardware products. The liability amount is based on actual historical warranty spending activity by type of product, customer, and geographic region, modified for any known differences such as the impact of reliability improvements. As of March 31, 2021, warranty reserves totaling $~~2.9~~ ~~million were recorded in accrued expenses and other current liabilities and $3.5~~ ~~million were recorded in other non-current liabilities, in the Company’s Condensed Consolidated Balance Sheets.~~

~~Changes in the Company’s product warranty reserves were as follows (in thousands~~):

March 31,
2021

Balance at beginning of period

$
6,811

Warranties issued during the period

1,554

Settlements made during the period

(1,819
)
Changes in liability for pre-existing warranties

(187
)
Balance at end of period

$
6,359

10. Stock-based compensation

Stock compensation expense for each period was as follows:


	Three months ended March 31,
(in thousands)	2022		2021
Cost of revenue	$	309	$	66
Research and development		188		14
Selling and marketing		530		9
General and administrative		3,583		360
Total stock compensation expense	$	4,610	$	449

11. Net ~~income (loss)~~loss per share

~~The table below sets forth the computation of basic and diluted income (loss) per share. All shares and per share amounts have been adjusted for an approximately~~ ~~8.25-for-1 share forward stock split which took effect on April 28, 2021 (in thousands, except per share amounts):~~

Three Months Ended March 31,

2020

2021

Basic and diluted:

Net income (loss)

$
3,420

$
(7,442
)

Basic weighted-average number of common shares outstanding

67,334,111

66,875,469

Effect of dilutive shares

9,771,308

─

Diluted weighted-average number of common shares outstanding

77,105,419

66,875,469

Basic income (loss) per share

$
0.05

$
(0.11
)
Diluted income (loss) per share

$
0.04

$
(0.11
)


	Three months ended March 31,
	2022			2021
Net loss (in thousands)	$	(27,793	)	$	(7,442	)
Weighted average shares outstanding for calculating basic and diluted loss per share		99,211,792			66,875,469
Basic and diluted loss per share	$	(0.28	)	$	(0.11	)

For purposes of computing diluted ~~net income~~loss per share, ~~weighted-average~~weighted average common shares outstanding do not include potentially dilutive securities that are ~~anti-dilutive.~~ ~~The following potentially dilutive securities were excluded (in thousands):~~ anti-dilutive, as shown below.

Three Months Ended
March 31,

2020

2021

Shares of common stock issuable under stock option plans outstanding

526

8,197

Shares of common stock issuable upon vesting of restricted stock awards

825

15,463

Potential common shares excluded from diluted net loss per share

1,351

23,660


	As of March 31,
	2022		2021
Anti-dilutive securities excluded from calculating dilutive loss per share:
Shares of common stock issuable under stock option plans outstanding		8,452,319		8,197,000
Shares of common stock issuable upon vesting of restricted stock units		4,995,792		15,463,000
Potential common shares excluded from diluted net loss per share calculation		13,448,111		23,660,000

~~11.~~12. Income ~~Taxes~~taxes

For the three months ended March 31, ~~2020~~2022 and 2021, ~~the Company~~we recorded income tax expense of $0.08 million and an income tax benefit of $~~0.16~~ ~~million and $~~0.02 million, ~~respectively. The income tax benefit recorded for~~respectively, both ~~the three months ended March 31, 2020 and 2021, was~~of which were lower than the statutory ~~tax~~ rate of 21%, primarily due to a valuation allowance established against the ~~U.S~~U.S. deferred tax assets.~~On March 27, 2020, the CARES Act among other things, permits NOL carryovers and carrybacks to offset 100% of taxable income for taxable years beginning before 2021. In addition, the CARES Act allows NOLs incurred in 2018, 2019~~

and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income tax. The Company recorded a discrete income tax benefit during the first quarter of 2020 related to an NOL carryback refund of approximately $~~0.2~~ ~~million.~~

~~As of~~At March 31, ~~2021, the Company~~2022, we had total unrecognized tax benefits of approximately $~~0.09~~0.7 million. ~~All~~Approximately $0.2 million of our gross unrecognized tax benefits, if recognized, would affect our effective tax rate. We recognize accrued interest and penalties related to unrecognized tax benefits as a component of income tax expense. As of March 31, ~~2021, the Company~~2022, we had 0t accrued ~~any~~ interest or penalties related to unrecognized tax benefits.

~~12. Segment Information~~13. Related party transactions

In February 2022, we engaged Fernweh Engaged Operator Company LLC (“FEOC”) to support us with improvements to our processes and performance in various areas including design, sourcing, logistics, pricing, software and standard configuration. The ~~Company has~~ 1~~segment: manufacturing~~consideration for such engagement is a combination of (i) quarterly cash payments through mid-2023, (ii) stock options that are time-based vested through the second quarter of 2023, and ~~servicing~~(iii) options with vesting tied to achievement of ~~Voyager Tracker. The Company's Chief Executive Officer (the chief operating decision maker) views and evaluates operations, manages resource allocations, and measures~~certain performance metrics based on our stock price. The foregoing transaction constitutes a related person transaction under our policies and procedures as South Lake One LLC, an entity affiliated with Isidoro Quiroga Cortés, a member of our board of directors, and a holder of more than 5% of our outstanding capital stock, is an investor in Fernweh Group LLC (“Fernweh Group”), the ~~results~~parent entity of ~~the Company’s reportable operating segment under its management reporting system. The application of this structure permits us to align our strategic business initiatives~~FEOC. Also, Aequanimitas Limited Partnership and ~~corporate goals~~Discrimen LLC are investors in ~~a manner that best focuses our businesses~~Fernweh Group, and ~~support operations for success.~~

~~The following table summarizes the Company’s total revenue by geographic area based~~Isidoro Quiroga Cortés is affiliated with those entities. Isidoro Quiroga Cortés is also on the ~~billing address~~board of Fernweh Group. For the ~~customers (~~three months ended March 31, 2022, we incurred $~~in thousands~~1.1): million of general and administrative expense associated with our engagement of FEOC. We made

Three Months Ended March 31,

2020

2021

United States

$
32,315

$
65,644

Other

61

63

Total net revenue

$
32,376

$
65,707

~~Other than the United States, no other individual country exceeded~~ 10~~% or more of total revenue~~cash payments during the three months ended March 31, ~~2021.~~

~~13. Related Parties~~

~~On July 21, 2020, the Company’s Board of Directors approved a share repurchase of~~ ~~9,896,666~~ ~~shares of common stock for an aggregate price of $~~0 ~~from a founder of the Company.~~

~~On January 8, 2021, the Company’s Board of Directors approved a share repurchase of~~ ~~148,440~~ ~~shares of common stock for an aggregate price of $~~0 ~~from a founder of the Company.~~

~~There were no other material related-party transactions during the three months ended March 31, 2021.~~

~~14. Subsequent Events~~

~~Revolving Credit Facility~~

~~On April 30, 2021, the Company entered into a $100~~ million senior secured revolving credit facility, by and among the Company, as borrower, the several financial institutions from time to time parties thereto, and Barclays Bank PLC, as an issuing lender, the swingline lender and as administrative agent (the “Credit Agreement”). The Credit Agreement has an initial ~~three-year~~ ~~term and it will be used for working capital and for other general corporate purposes. The Company has not made any draws on the revolving credit facility.~~

~~The Credit Agreement includes the following terms: (i) aggregate commitments of up to $100~~ ~~million, with letter of credit and swingline sub-limits; (ii) customary base rate and LIBOR-based interest rates, with initial margins of~~ ~~2.25% and~~ ~~3.25% per annum, respectively; (iii) initial commitment fees of~~ ~~0.50% per annum; (iv) initial letter of credit fees of~~ ~~3.25~~% per annum; and (v) other customary terms for a corporate revolving credit facility. The facility will be secured by a first priority lien on substantially all of the Company’s assets, subject to certain exclusions, and customary guarantees.

The Credit Agreement includes certain financial condition covenants that the Company is required to satisfy. These covenants include minimum adjusted EBITDA, liquidity, net leverage ratio and interest coverage ratio as defined in the Revolving Credit Facility.2022.

1915

ITEM 2. ~~MANAGEMENT’S~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes included in Item 1 of this Form 10-Q and ~~other~~along with information included in our ~~prospectus which includes our audited financial statements~~Annual Report on Form 10-K for the year ended December 31, ~~2019 and 2020 and this Quarterly Report on Form 10-Q.~~2021. In addition to historical financial information, the following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results ~~and timing of selected events~~ could differ materially from such forward-looking statements. Factors that could cause or contribute to those differences include, but are not limited to, those identified below and those discussed in ~~the sections titled “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements”~~Part I, Item 1A. "Risk Factors" included in our ~~prospectus.~~Annual Report on Form 10-K for the year ended December 31, 2021. Additionally, our historical results are not necessarily indicative of the results that may be expected in any future period.

This discussion and analysis of our financial condition and results of operations contain the presentation of Adjusted EBITDA, Adjusted Net Loss and Adjusted ~~Net Income,~~EPS, which are not presented in accordance with GAAP. Adjusted EBITDA, Adjusted Net Loss and Adjusted ~~Net Income~~EPS are being presented because they provide the Company and readers of this Form 10-Q with additional insight into our operational performance relative to earlier periods and relative to our competitors. We do not intend Adjusted EBITDA, Adjusted Net Loss and Adjusted ~~Net Income~~EPS to be substitutes for any GAAP financial information. Readers of this Form 10-Q should use Adjusted EBITDA Adjusted Net Loss and Adjusted ~~Net Income~~EPS only in conjunction with Net ~~Income,~~Loss and Net Loss per Share, the most comparable GAAP financial ~~measure.~~measures. Reconciliations of Adjusted EBITDA, Adjusted Net Loss and Adjusted ~~Net Income~~EPS to Net ~~Income,~~Loss and Net Loss per Share, the most comparable GAAP ~~measure,~~measures, is provided in ~~Non-GAAP~~"Non-GAAP Financial ~~Matters.~~Measures".

Overview

FTC Solar, Inc. (the “Company”, “we”, “our”, or “us”) was founded in 2017 and is incorporated in the state of Delaware. We are a global provider of advanced solar tracker ~~systems. Our trackers are~~systems, supported by proprietary software ~~designed to increase energy production yield from our tracker systems. We also support our customers in project design~~ and ~~development by providing~~ value-added engineering ~~services that assist customers in optimizing our products and reducing total project costs.~~services. Our mission is to provide differentiated products, software, and services that maximize energy generation and cost savings for our ~~customers. We believe achieving our mission will~~customers, and to help facilitate the continued growth and adoption of solar power globally. Trackers significantly increase the amount of solar energy produced at a solar installation by moving solar panels throughout the day to maintain an optimal orientation relative to the sun. Our ~~systems offer efficiency gains relative to other~~ tracker systems ~~due to our tracker’s enhanced design, which includes~~are currently marketed under the Voyager brand name (“Voyager Tracker” or “Voyager”). Voyager is a next-generation two-panel in-portrait ~~format~~single-axis tracker solution that we believe offers industry-leading performance and independent rows, and its optimization for use with bifacial panels. Additionally, these efficiency gains can be enhanced by our proprietary software solutions. Our customers include leading project developers, solar asset owners and EPC contractors that design and build solar energy projects. Ourease of installation. We have a team of ~~experienced~~dedicated renewable energy professionals iswith significant project installation experience focused on delivering ~~compelling value~~cost reductions to ~~customers~~our US and worldwide clients across the ~~full~~ solar ~~energy~~ project ~~lifecycle,~~development and construction cycle. Our solar solutions span a range of applications, including ground mount, tracker, canopy, and rooftop. The Company is headquartered in Austin, Texas, and has international subsidiaries in Australia, India, Singapore, and South Africa.

In April 2021, we completed an initial public offering (IPO) of 19,840,000 shares of our common stock receiving proceeds of $241.2 million, net of underwriting discounts and commissions, but before offering costs, and began trading on the Nasdaq Global Market under the symbol “FTCI”. Prior to the completion of the IPO, the board of directors and stockholders approved an approximately 8.25-for-1 forward stock split (the “Forward Stock Split”) of the Company’s shares of common stock which became effective on April 28, 2021. Proceeds from the IPO were used for general corporate purposes, with $54.2 million used to purchase an aggregate of 4,455,384 shares of our common stock, including shares resulting from the settlement of certain vested restricted stock units (“RSUs”) and exercise of certain options in connection with the IPO at the ~~development, construction~~IPO price, less underwriting discounts and ~~operations phases.~~commissions.

Our corporate headquarters and testing lab is located in Austin, Texas, and we have a training and technology development site in Aurora, Colorado. To assist with our global expansion effort, we have grown our sales and support network abroad, with employees located in Australia, India, the Middle East, China, Europe, South Africa, and South-East Asia as of March 31, 2021. As of March 31, 2021, we had 207 full-time employees.

We currently offer tracking and software solutions targeting the utility-scale solar energy markets to current and potential customers in the United States, Asia, the Middle East, North Africa, Europe, South America and Australia. In 2020 and as of March 31, 2021, we derived the majority of our revenue from EPC contractors in the United States. We expect this revenue profile to shift over time as project developers and solar asset owners make more direct purchases of solar installations and as we continue to expand our global footprint in Latin America, Europe and certain other markets. We derived 86% of all of our revenue from tracker system sales for the three months ended March 31, 2021. During this same period, substantially all of our revenues were derived from sales to our customers in the United States. We have maintained focus on our growth strategy throughout the quarter ended March 31, 2021. We also secured the first order of our SunPath performance enhancing software product which we introduced at the end of 2020. Our SunPath product boosts project energy production yield. Our solution is differentiated from other products in the marketplace by eliminating row-to-row shading, optimizing capture of diffuse light and increasing the system yield. We estimate this enables customers to achieve up to a 6% increase in energy yield at a solar installation. We also launched a large format module tracker system in January of 2021. We currently have customer projects utilizing this large format tracker system. With the industry seeing increasing interest in large format

2016

~~modules,~~
We are an emerging growth company, as defined in the Jumpstart Our Business Startups (JOBS) Act. Under the JOBS Act, we ~~are providing tracker systems that are compatible with a wide variety of module sizes and configurations, while maintaining~~elected to use the ~~format and installation speed in portrait orientation. FTC is committed~~allowed extended transition period to ~~providing innovative solutions designed~~delay adopting new or revised accounting standards until such time as those standards apply to ~~benefit our customers and deliver value.~~private companies.

Key Factors Affecting Our Performance

Government Regulations. Changes in the U.S. trade environment, including the imposition of import tariffs, AD/CVD investigations and WROs directed at forced labor in China, can have an impact on the timing of developer projects. This impact on project activity by developers can negatively affect the amount and timing of our revenue, results of operations and cash flows. Escalating trade tensions, particularly between the United States and China, have led to increased tariffs and trade restrictions, including tariffs applicable to certain raw materials and components for our products. We have taken measures with the intention of mitigating the effect of tariffs, AD/CVD and WROs on our business by reducing our reliance on China. In 2019, 90% of our supply chain was sourced from China. As of March 31, 2022, we have qualified suppliers outside of China for all our commodities and reduced the extent to which our supply chain for U.S.-based projects is subject to existing tariffs. We have entered into partnerships with manufacturers in the United States, Mexico, Canada, Spain, Brazil, Turkey, Saudi Arabia, India, Thailand, Vietnam and Korea to diversify our supply chain and optimize costs.

Disruptions in Transportation and Supply Chain. Our costs are affected by the underlying costs of raw materials including steel, component costs including motors and micro-chips and transportations costs. Current market conditions and international conflicts that constrain supply of materials and disrupt the flow of materials from international vendors impacts the cost of our products and services. We have also seen increases in domestic fuel prices and transportation costs. These cost increases impact our margins. We are taking steps to expand and diversify our manufacturing partnerships and we are implementing alternative modes of transportation to mitigate the impacts of these current headwinds in the global supply chain and logistics market. We also have a sharp focus on our design to value initiative to improve margin by reducing manufacturing and material costs of our products.

Megawatts ("MW") Shipped and Average Selling Price ("ASP"). The primary operating metric we use to evaluate our sales performance and to track market acceptance of our products is the change in quantity of megawatts (MW) shipped from period to period. MW are measured for each individual project and are calculated based on the expected output of that project once installed and fully operational. We also utilize metrics related to price and cost of goods sold per watt, including the change in ASP from period to period and cost per watt. ASP is calculated by dividing total revenue by total watts and cost per watt is calculated by dividing total costs of goods sold by total watts. These metrics enable us to evaluate trends in pricing, manufacturing cost and profitability. Events such as the COVID-19 pandemic and international conflicts can impact the U.S. economy, global supply chains, and our business. These impacts can cause significant shipping delays and cost increases, as well as offsetting ASP increases, and also raise the price of inputs like steel and logistics, affecting our cost per watt.

Investment in Technology and Personnel. We invest in both the people and technology behind our products. We intend to continue making significant investments in the technology for our products and expansion of our patent portfolio to attract and retain customers, expand the capabilities and scope of our products, and enhance user experience. We also intend to make significant investments to attract and retain employees in key positions, including sales leads, engineers, software developers, quality assurance personnel, supply chain personnel, product management, and operations personnel, to help us drive additional efficiencies across our marketplace and, in the case of sales leads, to continue to enhance and diversify our sales capabilities, including international expansion.

~~Megawatts Shipped and Average Selling Price.~~ The primary operating metric we use to evaluate our sales performance and to track market acceptance of our products is the change in megawatts (MW) shipped from period to period. MW are measured for each individual project and are calculated based on the expected output of that project once installed and fully operational. We also utilize metrics related to price and cost of goods sold per MW, including the change in average selling price (“ASP”) from period to period and cost per watt. ASP is calculated by dividing total revenue by total MW and cost per watt is calculated by dividing total costs of goods sold by total MW. These metrics enable us to evaluate trends in pricing, manufacturing cost and profitability.

~~Government Regulations.~~ Changes in the U.S. trade environment, including the imposition of import tariffs, continue to affect the amount and timing of our revenue, results of operations and cash flows. Escalating trade tensions, particularly between the United States and China, have led to increased tariffs and trade restrictions, including tariffs applicable to certain raw materials and components for our products. We have taken measures with the intention of mitigating the effect of tariffs on our business by reducing our reliance on China. In 2019, 90% of our supply chain was sourced from China. As of March 31, 2021, we have qualified suppliers outside of China for all our commodities and reduced the extent to which our supply chain for U.S.-based projects is subject to existing tariffs. We have entered into partnerships with manufacturers in the United States, Mexico, Canada, Spain, Brazil, Turkey, Saudi Arabia, India, China, Vietnam and Korea to diversify our supply chain and optimize costs.

Impact of the COVID-19 ~~Pandemic~~Pandemic.

In March of 2020, the World Health Organization declared that the worldwide spread and severity of a new coronavirus, referred to as COVID-19, was severe enough to be characterized as a pandemic. In response to the continued spread of COVID-19, governmental authorities in the United States and around the world have imposed various restrictions designed to slow the pace of the pandemic, including restrictions on travel and other restrictions that prohibit employees from going to work, including in cities where we have offices, employees, and customers, causing severe disruptions in the worldwide economy. The broader implications of the COVID-19 pandemic on our business, financial condition and results of operations remain uncertain and will depend on certain developments, including the duration and severity of the COVID-19 pandemic, the impact of virus variants, the rate of vaccinations, the COVID-19 pandemic’s impact on our customers and suppliers and the range of governmental and community reactions to the pandemic. While our day-to-day operations have been affected, the impact has been less pronounced as most of our staff has worked remotely and continued to develop our product offerings, source materials and install our products. However, we have experienced significant supply chain disruptions that have caused delays in product deliveries due to diminished vessel capacity and port detainment of vessels as a consequence of the COVID-19 pandemic (including as a result of multiple COVID-19 variants), which have contributed to an increase in lead times for delivery of our tracker systems. ~~The reduced capacity for logistics is causing increases in logistics costs. We also~~For instance, we experienced a COVID-related supplier production slowdown in India at the

end of March ~~2021.~~2021, which continued throughout 2021 due to the emergence of the Omicron variant. The reduced capacity for logistics is also causing increases in logistics costs. Additionally, ground operations at project sites have been impacted by health-related restrictions, shelter-in-place orders and worker absenteeism, which has resulted in delays in project ~~completion in 2020,~~completions, and these restrictions have also hindered our ability to provide on-site support to our customers and conduct inspections of our contract manufacturers. The disruptions in the global supply chain have resulted in extended lead times for some of our component parts. Management will continue to monitor the impact of the global situation on our financial condition, cash flows, operations, contract manufacturers, industry, workforce and customer relationships.

Non-GAAP Financial Measures

Adjusted EBITDA, adjusted net loss and adjusted earnings per share ("EPS")

We utilize Adjusted EBITDA, Adjusted Net Loss, and Adjusted EPS as supplemental measures of our performance. We define Adjusted EBITDA as net loss plus (i) provision (benefit) for income taxes, (ii) interest expense, net, (iii) depreciation expense, (iv) amortization of intangibles, (v) stock-based compensation, (vi) non-routine legal fees, severance and certain other costs (credits) and (vii) the loss (income) from our unconsolidated subsidiary. We also deduct the gains from the disposal of our investment in unconsolidated subsidiary and from extinguishment of our debt from net loss in arriving at Adjusted EBITDA. We define Adjusted Net Loss as net loss plus (i) amortization of debt issue costs and intangibles, (ii) stock-based compensation, (iii) non-routine legal fees, severance and certain other costs (credits), (iv) the loss (income) from our unconsolidated subsidiary and (v) income tax expense (benefit) of adjustments. We also deduct the gains or add back the losses from the disposal of our investment in unconsolidated subsidiary and from extinguishment of our debt from net loss in arriving at Adjusted Net Loss. Adjusted EPS is defined as Adjusted Net Loss on a per share basis using the weighted average diluted shares outstanding.

Adjusted EBITDA, Adjusted Net Loss, and Adjusted EPS are intended as supplemental measures of performance that are neither required by, nor presented in accordance with, U.S. generally accepted accounting principles (“GAAP”). We present Adjusted EBITDA, Adjusted Net Loss and Adjusted EPS, because we believe they assist investors and analysts in comparing our performance across reporting periods on an ongoing basis by excluding items that we do not believe are indicative of our core operating performance. In addition, we use Adjusted EBITDA, Adjusted Net Loss and Adjusted EPS to evaluate the effectiveness of our business strategies.

Among other limitations, Adjusted EBITDA, Adjusted Net Loss, and Adjusted EPS do not reflect (i) our cash expenditures, or future requirements, for capital expenditures or contractual commitments, and (ii) the impact of certain cash charges resulting from matters we consider not to be indicative of our ongoing operations. Further, the adjustments noted in Adjusted EBITDA do not reflect the impact of any income tax expense or benefit. Additionally, other companies in our industry may calculate Adjusted EBITDA, Adjusted Net Loss, and Adjusted EPS differently than we do, which limits its usefulness as a comparative measure.

Because of these limitations, Adjusted EBITDA, Adjusted Net Loss, and Adjusted EPS should not be considered in isolation or as substitutes for performance measures calculated in accordance with GAAP, and you should not rely on any single financial measure to evaluate our business. These non-GAAP financial measures, when presented, are reconciled to the most closely applicable GAAP measure as disclosed below:


	Three months ended March 31,
	2022						2021
(in thousands, except shares and per share data)	Adjusted EBITDA			Adjusted Net Loss			Adjusted EBITDA			Adjusted Net Loss
Net loss per GAAP	$	(27,793	)	$	(27,793	)	$	(7,442	)	$	(7,442	)
Reconciling items -
Provision (benefit) for income taxes		76			—			(19	)		—
Interest expense, net		295			—			14			—
Amortization of debt issue costs in interest expense		—			173			—			—
Depreciation expense		121			—			9			—
Stock-based compensation		4,610			4,610			449			449
(Gain) from disposal of investment in unconsolidated subsidiary(d)		(337	)		(337	)		—			—
(Gain) loss on extinguishment of debt		—			—			(790	)		(790	)
Non-routine legal fees(a)		1,078			1,078			15			15
Severance(b)		615			615			—			—
Other costs(c)		1,370			1,370			882			882
(Income) loss from unconsolidated subsidiary(d)		—			—			218			218
Income tax expense (benefit) attributable to adjustments		—			—			—			(8	)
Adjusted Non-GAAP amounts	$	(19,965	)	$	(20,284	)	$	(6,664	)	$	(6,676	)

GAAP net loss per share:
Basic	N/A			$	(0.28	)	N/A			$	(0.11	)
Diluted	N/A			$	(0.28	)	N/A			$	(0.11	)

Adjusted Non-GAAP net loss per share (Adjusted EPS):
Basic	N/A			$	(0.20	)	N/A			$	(0.10	)
Diluted	N/A			$	(0.20	)	N/A			$	(0.10	)

Weighted-average common shares outstanding:
Basic	N/A				99,211,792		N/A				66,875,469
Diluted	N/A				99,211,792		N/A				66,875,469

(a) Non-routine legal fees represent legal fees incurred for matters that were not ordinary or routine to the operations of the business.

(b) Severance costs were incurred related to agreements with certain executives due to restructuring changes.

(c) Other costs in 2022 include certain costs attributable to accelerated vesting of stock-based compensation awards resulting from our IPO and shareholder follow on registration costs pursuant to our IPO. Other costs in 2021 include consulting fees in connection with operations and finance.

(d) Our management excludes the gain from current year collections of contingent contractual amounts arising from the sale in 2021 of our unconsolidated subsidiary when evaluating our operating performance, as well as the income (loss) from operations of our unconsolidated subsidiary prior to the sale.

Key Components of Our Results of Operations

The following discussion describes certain line items in our condensed consolidated statements of operations.

Revenue

We generate our revenue in two streams – Product revenue and Service revenue. Product revenue is derived from the sale of Voyager Trackers, customized components of Voyager Trackers, individual part sales for certain specific transactions and sale of term-based software licenses. Revenue from the sale of Voyager Trackers and customized components of Voyager Trackers is recognized over time, as work progresses, utilizing an input measure of progress determined by cost incurred to date relative to total expected cost on these projects to correlate with our performance in transferring control over Voyager Trackers and its components. Revenue from the sale of a Voyager Tracker’s individual parts is recognized point-in-time as and when control transfers based on the terms of the contract. Revenue from sale of term-based software licenses is recognized upon transfer of control to the customer. Service revenue includes revenue from shipping and handling services, subscription-based enterprise licensing model and maintenance and support services in connection with the term-based software licenses. Revenue for shipping and handling services is

recognized over time based on progress in meeting shipping terms of the arrangements. Subscription revenue, which is derived from a subscription-based enterprise licensing model, and support revenue, which is derived from ongoing security updates and maintenance, are generally recognized on a straight-line basis over the term of the contract.

Our customers include project developers, solar asset owners and EPC contractors that design and build solar energy projects. For each individual solar project, we enter into a contract with our customers covering the price, specifications, delivery dates and warranty for the products being purchased, among other things. Our contractual delivery period for Voyager Trackers and related parts can vary ~~between eight weeks~~depending on size of the project and ~~16 weeks.~~availability of vessels and other means of delivery. Contracts can range in value from tens of thousands to tens of millions of dollars.

Our revenue is affected by changes in the volume and ASP of our solar tracking systems purchased by our customers and volume of sales of software products and engineering services, among other things. The ASP of our solar tracker systems and quarterly volume of sales is driven by the supply of, and demand for, our products, changes in product mix, geographic mix of our customers, strength of competitors’ product offerings and availability of government incentives to the end-users of our products. Additionally, our revenue may be impacted by seasonality and variability related to ITC step-downs and construction activity as well as ~~inclement weather conditions.~~the cold weather.

The vast majority of our revenue in the periods presented was attributable to sales in the United States and Australia, with a smaller portion derived from sales in South Africa, Europe and Southeast Asia. Our revenue growth is dependent on continued growth in the number of solar tracker projects ~~software sales~~ and engineering services we win in competitive bidding ~~processes. Our~~processes and growth ~~targets are impacted by~~in our software sales each year, as well as our ability to increase our market share in each of the geographies in which we currently compete, ~~and to~~ expand our global footprint to new emerging ~~markets. To support this planned growth, we must~~markets, grow our production capabilities to meet demand and continue to develop and introduce new and innovative products that address the changing technology and performance requirements of our customers, among other things.

Cost of revenue and gross profit (loss)

We subcontract with third-party manufacturers to manufacture and deliver our products directly to our customers. Our product costs are affected by the underlying cost of raw materials procured by these contract manufacturers, including steel and aluminum; component costs, including electric motors and gearboxes; technological innovation in manufacturing processes; and our ability to achieve economies of scale resulting in lower component costs. We do not currently hedge against changes in the price of raw materials, but we continue to explore opportunities to mitigate the risks of foreign currency and commodity fluctuations through the use of hedges and foreign exchange lines of credit. Some of these costs, primarily personnel, are not directly affected by sales volume.

We have increased our headcount since our April 2021 IPO as we scaled up our business. Our gross profit may vary period-to-period due to changes in our headcount, ASP, product costs, product mix, customer mix, geographical mix, shipping methods, warranty costs and seasonality. Pursuant to the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act"), we received employee retention credits during 2021, which reduced the impact of increased personnel costs on our operating results during the prior year comparative period.

Operating expenses

Operating expenses consist of research and development expenses, selling and marketing expenses and general and administrative expenses. Personnel-related costs are the most significant component of our operating expenses and include salaries, benefits, bonuses, commissions and stock-based compensation expenses.

Our increased headcount has contributed to increased operating costs both in absolute dollars and as a percentage of revenue. While we have recently frozen non-essential hiring in response to current regulatory issues that are negatively impacting solar project activity levels, we expect to resume hiring new employees in the future as needed to support our future expected growth and in response to expected turnover. In addition, our operating costs have been impacted by (i) our level of research activities to originate, develop and enhance our products, (ii) our sales and marketing efforts as we expand our development activities in other parts of the world, and (iii) increased legal and professional fees, compliance costs, insurance, facility costs and other costs associated with our expected growth and in being a public company.

~~Cost~~20

Results of Operations - Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2021


	Three months ended March 31,
	2022						2021
(in thousands, except percentages)	Amounts			Percentage of revenue			Amounts			Percentage of revenue
Revenue:
Product	$	30,968			62.5	%	$	56,462			85.9	%
Service		18,585			37.5	%		9,245			14.1	%
Total revenue		49,553			100.0	%		65,707			100.0	%
Cost of revenue:
Product		34,963			70.6	%		54,996			83.7	%
Service		23,877			48.2	%		10,592			16.1	%
Total cost of revenue		58,840			118.7	%		65,588			99.8	%
Gross profit (loss)		(9,287	)		(18.7	%)		119			0.2	%
Operating expenses
Research and development		2,701			5.5	%		1,954			3.0	%
Selling and marketing		1,972			4.0	%		1,100			1.7	%
General and administrative		13,818			27.9	%		5,084			7.7	%
Total operating expenses		18,491			37.3	%		8,138			12.4	%
Loss from operations		(27,778	)		(56.1	%)		(8,019	)		(12.2	%)
Interest expense, net		(295	)		(0.6	%)		(14	)		0.0	%
Gain from disposal of investment in unconsolidated subsidiary		337			0.7	%		—			0.0	%
Gain on extinguishment of debt		—			0.0	%		790			1.2	%
Other expense		19			0.0	%		—			0.0	%
Loss from unconsolidated subsidiary		—			0.0	%		(218	)		(0.3	%)
Loss before income taxes		(27,717	)		(55.9	%)		(7,461	)		(11.4	%)
(Provision) benefit for income taxes		(76	)		(0.2	%)		19			0.0	%
Net loss	$	(27,793	)		(56.1	%)	$	(7,442	)		(11.3	%)

Revenue ~~and Gross Profit~~


	Three months ended March 31,
(in thousands)	2022		2021		$ Change			% Change
Product	$	30,968	$	56,462	$	(25,494	)		(45.2	)%
Service		18,585		9,245		9,340			101.0	%
Total revenue	$	49,553	$	65,707	$	(16,154	)		(24.6	)%

Product revenue

The decrease in product revenue for the three months ended March 31, 2022, as compared to the three months ended March 31, 2021, was primarily due to (i) a customer concession reserve, (ii) a 34% decrease in MW produced and (iii) a decrease of approximately 11% in ASP.

The current period decrease in MW produced was due to accelerated production and product delivery in the fourth quarter of 2021, which had the effect of reducing our project production in the current year quarter. Continued tight logistics, supply chain availability, and increased uncertainty among project owners and developers regarding the ability to obtain modules for use in their projects, which also utilize our trackers, all contributed to the production decline during the three months ended March 31, 2022. We believe the regulatory concerns regarding module availability, among other things, has slowed new and existing project activity during the three months ended March 31, 2022 by pushing some activity out to later periods in 2022 and beyond.

Service revenue

The increase in service revenue for the three months ended March 31, 2022, as compared to the three months ended March 31, 2021, was primarily due to an increase in MW delivered during the quarter related to logistics as well as an increase in ASP related to shipping and logistics revenue on Voyager Tracker sales, partially offset by a customer concession reserve recognized during the three months ended March 31, 2022.

Cost of revenue and gross profit (loss)

Cost of revenue consists primarily of Voyager Trackers’ raw material costs, including purchased components, as well as costs related to freight and delivery, product warranty, supply chain personnel and consultants, insurance and customer support. Personnel costs include both direct labor costs as well as costs attributable to any individuals whose activities relate to the procurement, installation and delivery of the finished product and provision of ~~services.~~

~~We subcontract to third party contract manufacturers to manufacture~~services and ~~deliver our products directly to our customers. Our product costs~~ are ~~affected by the underlying cost~~net of raw materials procured by these contract manufacturers, including steel and aluminum; component costs, including electric motors and gearboxes; technological innovation in manufacturing processes; and our ability to achieve economies of scale resulting in lower component costs. We do not currently apply financial hedges against changes in the price of raw materials, but we continue to explore opportunities to mitigate the risks of foreign currency and commodity fluctuations through the use of hedges and foreign exchange lines of credit. The industry is currently experiencing rising steel and logistics costs. We do not have any multi-year contracts with unhedged steel exposure. We fix our steel input prices as close to signing a customer purchase order as possible. We also recently expanded our global supply chain which has improved our ability to secure necessary supplies and further diversifies us on key components and positions us with additional flexibility moving forward. Subsequent to the quarter ended March 31, 2021, we entered into contracts to provide more certainty for a substantial portion of the steel commodities required for our anticipated production in the second half of the year.

federal employee retention credits received.

Gross profit may vary from ~~quarter-to-quarter~~period-to-period and is primarily affected by our ASP, product costs, ~~product mix,~~timing of tracker production and delivery, customer mix, geographical mix, shipping method, ~~and~~logistics costs, warranty costs and seasonality.


	Three months ended March 31,
(in thousands)	2022			2021			$ Change			% Change
Product	$	34,963		$	54,996		$	(20,033	)		(36.4	)%
Service		23,877			10,592			13,285			125.4	%
Total cost of revenue	$	58,840		$	65,588		$	(6,748	)		(10.3	)%
Gross profit (loss)	$	(9,287	)	$	119		$	(9,406	)		(7,904.2	)%
Gross profit (loss) percentage of revenue		(18.7	%)		0.2	%

~~Operating Expenses~~

~~Operating expenses consist~~The decrease in cost of ~~research~~revenue for the three months ended March 31, 2022, as compared to the three months ended March 31, 2021, was primarily driven by a decrease of 34% in MW produced, lower warranty costs and ~~development expenses, selling~~lower expenditures for certain retrofits, remediations and ~~marketing expenses~~product reconfigurations compared to the same period last year. This was partially offset by increases in shipping and ~~general~~logistics costs during much of 2021 and ~~administrative expenses. Personnel-related~~into 2022, as compared to rates available during the first three months of 2021 and increases in personnel-related costs ~~are the most significant component of~~due to higher headcount levels subsequent to our IPO as we scaled up our operating ~~expenses~~structure. Cost per MW produced increased 37% due mainly to increases in shipping and ~~include salaries, benefits, bonuses, commissions~~logistics costs, steel prices and ~~stock-based compensation expenses.~~

personnel-related costs.

Our full-time employee headcount in research and development, selling and marketing and general and administrative capacities has grown as we invested in new employees to support our growth and operations as a publicly traded company.

~~The timing of these additional hires could materially affect our operating expenses in any particular period, both in absolute dollars and as a~~gross profit (loss) percentage of ~~revenue. We expect to continue to invest substantial resources to support our growth and anticipate that each of the following categories of operating expenses will increase in absolute dollar amounts~~revenue for the ~~foreseeable future.~~three months ended March 31, 2022 was a negative 18.7%, as compared to a positive 0.2% for the three months ended March 31, 2021. The decrease was due primarily to (i) a customer concession reserve of $5.0 million recognized during the three months ended March 31, 2022, (ii) increased shipping and logistics costs that were not passed on to our customers that impact our service margins and (iii) increased headcount levels in relation to lower production which impacted our product margins.

Research and ~~Development Expenses~~

development

Research and development expenses consist primarily of salaries (net of federal employee retention credits received during 2021), employee benefits, stock-based compensation expenses and travel expenses related to our engineers performing research and development activities to originate, develop and enhance our products. Additional expenses include consulting charges, component purchases, legal fees for registering patents and other costs for performing research and development on our software products.


	Three months ended March 31,
(in thousands)	2022		2021		$ Change		% Change
Research and development	$	2,701	$	1,954	$	747		38.2	%

The increase in research and development expenses was primarily attributable to (i) $0.5 million of higher payroll-related costs and (ii) $0.2 million of higher stock-based compensation expense mainly due to headcount increases allowing for expansion of our research and development activities designed to enhance our products and the absence of federal employee retention credits received subsequent to 2021. Research and development expenses as a percentage of revenue were 5.5% for the three months ended March 31, 2022, compared to 3.0% for the three months ended March 31, 2021.

Selling and ~~Marketing Expenses~~

marketing

Selling and marketing expenses consist primarily of salaries (net of federal employee retention credits received during 2021), employee benefits, stock-based compensation expenses and travel expenses related to our ~~selling~~sales and marketing and business development personnel. Additionally, selling and marketing expenses include costs associated with professional fees and support charges for software subscriptions and licenses, trade shows and conventions.


	Three months ended March 31,
(in thousands)	2022		2021		$ Change		% Change
Selling and marketing	$	1,972	$	1,100	$	872		79.3	%

~~We expect an~~The increase in ~~the number of selling and marketing personnel in connection with the expansion of our global selling and marketing footprint as we enter new markets. The majority of our~~ selling and marketing expenses was primarily attributable to (i) $0.5 million of higher stock-based compensation expense, and (ii) $0.2 million of higher payroll-related costs related to higher headcount levels as we scaled up our operating structure following our IPO and the absence of federal employee retention credits received subsequent to 2021. In addition, we also spent an additional $0.2 million for trade shows and advertising as compared to the same period last year. Selling and marketing costs as a percentage of revenue were 4.0% for the ~~period~~three months ended March 31, ~~2020 were related~~2022, compared to ~~sales to customers in~~1.7% for the ~~United States and business development in other parts of the world. As of~~three months ended March 31, 2021, we have a sales presence in the United States, Australia, India, the Middle East, China, Europe, South Africa, and South-East Asia. We intend to continue to expand our sales presence and marketing efforts to additional countries.

2021.

General and ~~Administrative Expenses~~

administrative

General and administrative expenses consist primarily of salaries (net of federal employee retention credits received during 2021), employee benefits, stock-based compensation expenses, and travel expenses related to our executives, finance team, and ~~the~~ administrative employees. It also consists of legal, consulting, and professional fees, rent and lease expenses pertaining to our headquarters and international offices, business insurance costs and other costs. We will incur additional audit, tax, accounting, legal and other costs related to compliance with applicable securities and other regulations, as well as additional insurance, investor relations and other costs associated with being a public company.


	Three months ended March 31,
(in thousands)	2022		2021		$ Change		% Change
General and administrative	$	13,818	$	5,084	$	8,734		171.8	%

~~Non-Operating Expenses and Other Items~~

~~Interest Expense~~

Interest expense consists of interest payments related to a revolving line of credit with Western Alliance Bank, which was scheduled to mature on June 10, 2021 (See “Debt Obligations” below) but was paid off during the quarter ended March 31, 2021.

~~Gain on extinguishment of debt~~

~~Gain on extinguishment of debt is the result of a forgiveness of a loan effective January 20, 2021 (See “Debt Obligations” below) under the SBA’s Paycheck Protection Program (PPP).~~

~~Income Taxes~~

~~Benefit from income taxes consists primarily of income taxes related to foreign and state jurisdictions in which we conduct business.~~

~~Income (Loss) from Unconsolidated Subsidiary~~

~~Income (loss) from unconsolidated subsidiary is comprised of income/expense allocation from our equity method investment.~~

~~Results of Operations~~

The following tables summarizes our results of operations as well as other financial data management considers meaningful for the three months ended March 31, 2021 and 2020. This information should be read in conjunction with our condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q. The results of historical periods are not necessarily indicative of the results of operations for any future period.

Three Months Ended

March 31,

2020

2021

(dollars in thousands)

Revenue:

Product revenue

$
30,469

$
56,462

Service revenue

1,907

9,245

Total revenue

32,376

65,707

Cost of revenue (a):

Product cost of revenue

23,747

54,996

Service cost of revenue

1,649

10,592

Total cost of revenue

25,396

65,588

Gross profit

6,980

119

Operating expenses

Research and development (a)

1,094

1,954

Selling and marketing (a)

515

1,100

General and administrative (a)

2,475

5,084

Total operating expenses

4,084

8,138

Income (loss) from operations

2,896

(8,019
)
Interest expense

(112
)

(14
)
Gain on extinguishment of debt

—

790

Income (loss) before income taxes

2,784

(7,243
)
Benefit from income taxes

158

19

Income (loss) from unconsolidated
subsidiary

478

(218
)
Net income (loss)

$
3,420

$
(7,442
)
Other comprehensive income (loss):

Foreign currency translation adjustments

8

(1
)
Comprehensive income (loss)

$
3,428

$
(7,443
)

~~(a)~~

~~Includes stock-based compensation expense as follows:~~

Three Months Ended
March 31,

2020

2021

Cost of revenue

$
82

$
66

Research and development

16

15

Selling and marketing

9

9

General and administrative

351

359

Total stock-based compensation expense

$
458

$
449

~~Comparison of the Three Months ended March 31, 2020 and 2021~~

~~Product Revenue~~

Product revenue for the three months ended March 31, 2021 was $56.5 million an increase of $26.0 million, or 85.3%, as compared to $30.5 million for the three months ended March 31, 2020, primarily driven by a 104% increase in MW shipped and a slight decrease in ASP. During the quarter ended March 31, 2021, 70% of the MW shipped were to new customers that we did not have in the quarter ended March 31, 2020 and 30% represented new projects with customers we worked with in the quarter ended March 31, 2020. The revenue was generated by customer projects located in the United States.

~~Service Revenue~~

Service revenue for the three months ended March 31, 2021 was $9.2 million, an increase of $7.3 million, or 384.2%, as compared to $1.9 million for the three months ended March 31, 2020, primarily driven by an increase in shipping and logistics revenue on Voyager Tracker sales due to a 104% increase in MW shipped to our U.S. customers and a small increase in ASP. In the period ended March 31, 2020, 65% of the MW shipped were related to individual part sales as customers sought to take advantage of safe harbor rules. Revenue recognized for these part sales, including shipping and handling revenue, are recorded at a point in time and included in product sales during the period delivered.

~~Cost of Revenue and Gross Profit~~

Cost of revenue for the three months ended March 31, 2021 was $65.6 million, an increase of $40.2 million, or 158.3%, as compared to $25.4 million for the three months ended March 31, 2020, primarily driven by the aforementioned increase in MW shipped. Cost per MW increased quarter over quarter due to increases in steel prices and logistics cost. Our approach when we receive a contract from our customers, is to place the related supply purchase orders for tracker components as soon as possible thus locking our costs for commodities like steel. We increased our head count in operations to support our rapid growth which is reflected in significantly higher overhead costs. Cost of revenue for the three months ended March 31, 2021 was also impacted by approximately $2.5 million in expenditures related to certain retrofits, remediations and product reconfigurations for certain of our solar tracker systems that had been previously installed, or were in the process of being installed, at customer sites. We undertook these activities after identifying these opportunities for such systems for our customers.

Gross margin was negatively impacted by increased logistics costs that we were not able to pass on to our customers, higher overhead costs and the expenses associated with remediation and retrofits. Our gross profit for the three months ended March 31, 2021 decreased by $6.9 million, or 98%, as compared to the three months ended March 31, 2020 due to the above stated reasons. The gross profit for the three months ended March 31, 2020 benefitted from a higher mix of safe harbor projects which carried a higher margin as customers were seeking to take advantage of the expected step down in investment tax credit.

~~Research and Development Expenses~~

Research and development expenses for the three months ended March 31, 2021 were $2.0 million, an increase of $0.9 million, or 78%, as compared to $1.1 million for the three months ended March 31, 2020. The increase in expenses was primarily attributable to an increase of $.3 million in personnel-related expenses, due to a net increase in headcount for the research and development of our products and an increase of $0.5 million in facilities and equipment related expenses. Research and development expenses as a percentage of revenue were 3% for the three months ended March 31, 2020 and 2021.

~~Selling and Marketing Expenses~~

Selling and marketing expenses for the three months ended March 31, 2021 were $1.1 million, an increase of $0.6 million, or 114%, as compared to $0.5 million for the three months ended March 31, 2020. The increase in selling and marketing expenses was primarily attributable to an increase in personnel-related expenses, due to a net increase in headcount to support our international expansion plans. Selling and marketing expenses as a percentage of revenue for the three months ended March 31, 2020 and 2021 was approximately 2%.

~~General and Administrative Expenses~~

General and administrative expenses for the three months ended March 31, 2021 were $5.1 million, an increase of $2.6 million, or 105%, as compared to $2.5 million for the three months ended March 31, 2020. The increase in general and administrative expenses was primarily attributable to (i) $3.2 million of higher stock-based compensation expense, (ii) $2.9 million of higher payroll-related costs due to increased headcount, (iii) $1.0 million of higher legal and other professional services costs and (iv) an increase of ~~$0.8~~$1.3 million in ~~personnel-related~~other operating expenses, ~~including stock-based compensation expense due~~primarily related to ~~a net increase in headcount, an increase of $1.1 million in professional fees for consulting, legal and accounting services, an increase of $0.3 million in business~~higher insurance costs ~~and an increase~~as a result of ~~$0.1 million pertaining to rent, lease and other office expenses in line with an increase in headcount.~~being a new public company. General and administrative expenses as a percentage of revenue ~~was approximately 8%~~were 27.9% for the three months ended March 31, ~~2020 and 2021.~~

~~Interest Expense~~

~~Interest expense consists of interest expense in connection with our revolving line of credit with Western Alliance Bank, was scheduled~~2022, compared to ~~mature on June 10, 2021 (See “Debt Obligations” below) but was paid off during the quarter ended March 31, 2021.~~

~~Income (loss) from Unconsolidated Subsidiary~~

~~(Loss) from unconsolidated subsidiary~~7.7% for the three months ended March 31, ~~2021 was $0.2 million, a decrease of $0.7 million, or 145%, as compared to a $0.5 million income for~~2021.

Interest expense, net


	Three months ended March 31,
(in thousands)	2022		2021		$ Change		% Change
Interest expense, net	$	295	$	14	$	281		2,007.1	%

Interest expense during the three months ended March 31, ~~2020. This decrease resulted~~2022, primarily related to commitment fees on our revolving credit facility with Barclays Bank that we entered into in April 2021, along with associated debt issue cost amortization.

Gain from ~~recording $218 thousand~~disposal of ~~loss from~~investment in unconsolidated subsidiary


	Three months ended March 31,
(in thousands)	2022		2021		$ Change		% Change
Gain from disposal of investment in unconsolidated subsidiary	$	337	$	—	$	337	N/A

We sold our ~~investment~~interest in our unconsolidated subsidiary, Dimension Energy LLC ~~(“Dimension”~~("Dimension") ~~for the three months ended March 31, 2021, as compared to income from such investment for the three months ended March 31, 2020.~~, on June 24, 2021. Dimension is a community solar developer based in Atlanta, Georgia that provides renewable energy solutions for local communities in the United States. ~~This decrease was primarily due~~The sales agreement with Dimension includes an earnout provision which provides the potential to receive additional contingent consideration of up to approximately $14.0 million through December 2024, based on Dimension achieving certain performance milestones. The sales agreement also includes a projects escrow release which is an additional contingent consideration to receive $7 million based on Dimension’s completion of certain construction projects in progress at the time of the sale. We made an accounting policy election to account for the contingent gains from the earnout provision and projects escrow release only when those amounts become realizable in the periods subsequent to the ~~fact~~disposal date.

During the three months ended March 31, 2022, we received $0.3 million from escrow for subsequent completion of certain construction projects that were in progress at the time of the sale.

Gain on extinguishment of debt


	Three months ended March 31,
(in thousands)	2022		2021		$ Change			% Change
Gain on extinguishment of debt	$	—	$	790	$	(790	)		(100.0	%)

In January 2021, our Paycheck Protection Program loan that was received in April 2020 pursuant to the CARES Act, was forgiven, resulting in a gain on extinguishment of debt. The terms of the CARES Act provided for loan forgiveness if the proceeds were used to retain and pay employees and for other qualifying expenditures.

Loss from unconsolidated subsidiary


	Three months ended March 31,
(in thousands)	2022		2021		$ Change			% Change
Loss from unconsolidated subsidiary	$	—	$	218	$	(218	)		100.0	%

As discussed above, we sold our interest in our unconsolidated subsidiary, Dimension, ~~recognized a~~on June 24, 2021. Our share of the loss from this unconsolidated subsidiary for the three months ended March 31, 2021 ~~as projects did not reach performance obligation milestones to recognize revenue.~~

was $0.2 million.

Liquidity and Capital Resources

Liquidity

Since our inception, we have financed our operations primarily through sales of shares of common stock, including our IPO in April 2021, issuance of debt and payments from our customers. Our ability to generate positive cash flow from operations is dependent on contract payment terms, timely collections from our customers and the strength of our gross margins.

We ~~believe that operating~~have incurred cumulative losses since inception, resulting in an accumulated deficit of $177.0 million at March 31, 2022, and have a history of cash ~~flows~~outflows from operations. During the year ended December 31, 2021, and the three months ended March 31, 2022, we had $132.9 million and $53.1 million, respectively, of cash ~~generated by~~outflow from operations. At March 31, 2022, we had $49.4 million of cash on hand, $119.8 million of working capital and approximately $98.1 million of unused borrowing capacity under our ~~IPO will be sufficient to meet our near term future cash needs. Please see our subsequent event footnote for information on a~~existing revolving credit facility. The revolving credit facility ~~agreement~~includes a financial condition covenant stating we ~~entered into~~are required to have a minimum liquidity, consisting of cash on hand and unused borrowing capacity, of $125.0 million as of each quarter end. After considering this financial condition covenant, we had approximately $22.4 million of available liquidity as of March 31, 2022, in ~~April~~order to retain access to our revolving credit facility. Additionally, we had no long-term borrowings or other material obligations requiring the use of cash as of March 31, 2022.

As of May 12, 2022, we have collected approximately $62 million of receivables since March 31, 2022, and have a cash balance of approximately $71 million.

As we continue to address these current market challenges, management has also undertaken the following actions:

•

we are in discussions with the lenders of our revolving credit facility to lower the minimum required liquidity amount, which, if successful, could result in additional liquidity;

•

we have initiated a program, as described above, with third party assistance, to improve our operating performance and increase our gross margins;

•

we are freezing non-essential hiring, reducing our travel expenses, decreasing the future use of consultants and deferring non-critical initiatives;

•

we are negotiating improved payment terms with both our customers and vendors;

•

we are exploring options to obtain additional sources of capital.

Statements of cash flows

In connection with preparation of our consolidated financial statements as of and for the year ended December 31, 2021, we identified an error in the classification of offering costs in the statement of cash flows for the three months ended March 31, 2021. Specifically, we incorrectly classified $1.1 million of offering costs paid as an operating cash outflow instead of a financing cash outflow in our previously issued cash flow statement for the three months ended March 31, 2021. Although we have concluded that this error is immaterial to the previously issued financial statements, we have corrected this error in the accompanying condensed consolidated statements of cash flows

~~We intend to maintain appropriate debt levels based upon~~25

by revising the operating and financing cash outflows previously reported in our cash flow ~~expectations, our overall cost of capital and expected cash requirements~~statement for our operations, such as systems and project development activities in certain international regions. Any incremental debt financings could result in increased debt service expenses and/or restrictive covenants, which could limit our ability to pursue our strategic plans.

the three months ended March 31, 2021.

The following table shows our cash flows from operating activities, investing activities and financing activities for the stated ~~periods:~~periods (revised as described above):


	Three months ended March 31,
(in thousands)	2022			2021
Net cash used in operating activities	$	(53,106	)	$	(25,904	)
Net cash used in investing activities		(186	)		(85	)
Net cash provided by (used in) financing activities		428			(2,045	)
Effect of exchange rate changes on cash, cash equivalents and restricted cash		62			1
Net decrease in cash, cash equivalents and restricted cash	$	(52,802	)	$	(28,033	)

Operating activities

During the three months ended March 31, 2022, we used approximately $22.7 million of cash to fund (i) losses on certain of our projects, largely related to increased material and logistics costs due to supply chain disruptions during the past year that were not fully recoverable, (ii) higher personnel and facility-related costs associated with headcount increases, and (iii) increased professional service fees, largely as a result of being a new public company. Economic conditions during 2021 and the first three months of 2022 caused our industry to experience rapid commodity price increases and significant increases in transportation costs during the last twelve months which negatively impacted our margins in the near term and thus, our cash flow from operations.

We are taking steps to diversify our supply chain and implement design changes to lower the material requirements for our trackers in order to mitigate these economic headwinds. We believe this impact to be temporary as we work through our cost improvement roadmap.

A total of approximately $30.4 million was also used during the three months ended March 31, 2022, to fund increases in working capital and other items, largely related to (i) a slowdown in collections from customers during the period and (ii) current period project activity.

During the three months ended March 31, 2021, we used approximately $5.6 million to fund operating expenses as we continued to expand our presence to additional countries. A total of $20.3 million was also used during the three months ended March 31, 2021, to fund increases in working capital, largely related to an increase in revenue recognized in excess of customer billings resulting from project activity levels during the period.

Investing activities

During the three months ended March 31, 2022, we paid approximately $0.5 million, primarily for new lab equipment to be used for product testing, as well as new computer and IT equipment, acquired during the latter part of 2021. Additionally, we received $0.3 million from escrow in connection with our June 2021 sale of Dimension in connection with the subsequent completion of certain construction projects that were in progress at the time of the sale.

During the three months ended March 31, 2021, our capital spending on new equipment was approximately $0.1 million.

Financing activities

During the three months ended March 31, 2022, we received $0.5 million of proceeds from employee exercises of stock options.

During the three months ended March 31, 2021, we paid off the $1.0 million of outstanding borrowings under our Western Alliance Bank revolving line of credit facility and incurred approximately $1.1 million in costs associated with our IPO during the second quarter of 2021.

Revolving line of credit

On April 30, 2021, we entered into a senior secured revolving credit facility with various lenders, including Barclays Bank PLC, as an issuing lender, the swingline lender and as administrative agent (the “Credit Agreement”). The Credit Agreement has an initial

Three Months Ended

March 31,

2020

2021

(in thousands)

Net cash used in operating activities

$
(6,300
)

$
(26,988
)
Net cash used in investing activities

─

(85
)
Net cash provided by (used in) financing activities

30,000

(961
)
Effect of exchange rate changes on cash and restricted cash

8

1

Increase (decrease) in cash and restricted cash

$
23,708

$
(28,033
)

three-year term and will be used for working capital and for other general corporate purposes. The Credit Agreement includes the following terms: (i) aggregate commitments of up to $100 million, with letter of credit and swingline sub-limits; (ii) a base rate of LIBOR, plus 3.25% per annum, (iii) initial commitment fees of 0.50% per annum; (iv) initial letter of credit fees of 3.25% per annum; and (v) other customary terms for a corporate revolving credit facility. Should LIBOR rates become unavailable during the term of the Credit Agreement, the rate per annum on loans will be based on the secured overnight financing rate (SOFR) published by the Federal Reserve Bank of New York, or a successor SOFR administrator.

~~Operating Activities~~We have not made any draws on the revolving credit facility as of March 31, 2022. However, at March 31, 2022, we did have a $1.9 million in letter of credit outstanding that reduced our available borrowing capacity to approximately $98.1 million.

~~For~~The facility is secured by a first priority lien on substantially all of our assets, subject to certain exclusions, and customary guarantees. The Credit Agreement, as amended, includes the ~~three~~following financial condition covenants that we are required to satisfy: (i) maintain a minimum liquidity limit of $50 million for each quarter; (ii) maintain a 3.75 times leverage ratio; and (iii) maintain a 1.5 times interest coverage ratio. The leverage and interest coverage ratios will be triggered when we achieve $50 million in adjusted EBITDA over a trailing twelve months, or upon our election if we have achieved positive adjusted EBITDA over a trailing twelve months. Once the leverage and interest coverage ratios are triggered the minimum liquidity limit will not have a minimum limit. Minimum liquidity includes unrestricted cash plus the undrawn balance of the revolving credit facility. The minimum liquidity covenant was the only financial condition covenant we had to satisfy as of the period ended March 31, 2020, net cash used in operating activities was $6 million, primarily due to a net income of $3.4 million and an increase of $9.0 million in prepaid and other current assets, $11.6 million in deferred revenue, $4.3 million in accrued expenses and a decrease of $3.4 million in receivables and $4.1 million in inventories.

For the three months ended March 31, 2021, net cash used in operating activities was $27 million, primarily due to a net loss of $7.4 million which is reflective of our current investment in growing our operations and expanding our presence to additional countries. This reflects an increase of $20.2 million in receivables, $2.6 million in inventory, $2.9 million in prepaids, $3.6 million in other current assets, $12.9 million in accounts payable, $10.4 million in accrued expenses and a decrease of $14.8 million in deferred revenue.

~~Investing Activities~~

~~For the three months ended March 31, 2021, net cash used in investing activities was $0.1 million, which was attributable to the purchase of property and equipment.~~

~~Financing Activities~~

~~For the three months ended March 31, 2020, net cash provided by financing activities was $30 million which was from the sale of stock.~~

~~For the three months ended March 31, 2021, net cash used in financing activities was $1.0 million which was attributable to paying off the Western Alliance Bank revolving line of credit facility.~~

~~Debt Obligations~~

~~Revolving Line of Credit~~

On June 17, 2019, we entered into a revolving line of credit agreement with the Western Alliance Bank for a total aggregate principal amount of $1.0 million, which was scheduled to mature on June 10, 2021.2022. As of March 31, ~~2021, the outstanding balance for the revolving line of credit was paid~~2022, we were in full ~~and the revolving credit line was closed.~~

~~Paycheck Protection Program~~

On April 30, 2020, we received a PPP loan pursuant to the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) in the amount of $0.8 million. The PPP loan has a two-year term maturing on April 30, 2022 and bears a fixed interest rate of 1%. Under the terms of the CARES Act the loan is eligible for forgiveness, in part or whole, if the proceeds are used to retain and pay employees and for other qualifying expenditures. The PPP loan and the related accrued interest were fully forgiven on January 20, 2021.

~~Non-GAAP Financial Measures~~

~~Adjusted EBITDA, Adjusted Non-GAAP Net Income (Loss) and Adjusted Non-GAAP Net Income (Loss) Per Share (“ Adjusted EPS”)~~

We present Adjusted EBITDA, Adjusted Non-GAAP Net Income (Loss) and Adjusted EPS as supplemental measures of our performance. We define Adjusted EBITDA as net loss plus (i) income tax benefit, (ii) interest expense, (iii) depreciation expense, (iv) amortization of intangibles, (v) stock-based compensation (vi) gain on extinguishment of debt, (vii) other costs (viii) (income) loss from unconsolidated subsidiary. We define Adjusted Net Income (Loss) as net income (loss) plus (i) amortization of intangibles, (ii) stock-based compensation, (iii) gain on extinguishment of debt, (iv) other costs, (v) (income) loss from unconsolidated subsidiary and (vi) income tax benefit of adjustments. Adjusted EPS is defined as Adjusted Non-GAAP Net Income (Loss) Per Share basis using the weighted average basic and diluted shares outstanding.

Adjusted EBITDA, Adjusted Non-GAAP Net Income (Loss) and Adjusted EPS are intended as supplemental measures of performance that are neither required by, nor presented in accordance with, U.S. generally accepted accounting principles (“GAAP”). We present Adjusted EBITDA, Adjusted Non-GAAP Net Income (Loss) and Adjusted EPS because we believe they assist investors and analysts in comparing our performance across reporting periods on an ongoing basis by excluding items that we do not believe are indicative of our core operating performance. In addition, we use Adjusted EBITDA, Adjusted Non-GAAP Net Income (Loss) and Adjusted EPS to evaluate the effectiveness of our business strategies.

Among other limitations, Adjusted EBITDA, Adjusted Non-GAAP Net Income (Loss) and Adjusted EPS do not reflect (i) our cash expenditures, or future requirements, for capital expenditures or contractual commitments, and (ii) the impact of certain cash charges resulting from matters we consider not to be indicative of our ongoing operations. Further, the adjustments noted in Adjusted EBITDA do not reflect the impact of any income tax expense or benefit. Additionally, other companies in our industry may calculate Adjusted EBITDA, Adjusted Non-GAAP Net Income (Loss) and Adjusted EPS differently than we do, which limits its usefulness as a comparative measure.

Because of these limitations, Adjusted EBITDA, Adjusted Non-GAAP Net Income (Loss) and Adjusted EPS should not be considered in isolation or as substitutes for performance measures calculated in accordance with GAAP and you should not rely on any single financial measure to evaluate our business. These Non-GAAP financial measures, when presented, are reconciled to the most closely applicable GAAP measure as disclosed below.

~~The following table reconciles Net Income (Loss) to Adjusted EBITDA for the three months ended March 31, 2020 and 2021, respectively:~~

Three Months Ended

March 31,

2020

2021

(in thousands)

Net income (loss)

$
3,420

$
(7,442
)
Income tax (benefit)

(158
)

(19
)
Interest expense, net(a)

112

14

Depreciation expense

3

9

Amortization of intangibles(b)

33

─

Stock-based compensation(c)

458

449

(Gain) on extinguishment of debt(d)

─

(790
)
Other costs (e)

─

897

(Income) loss from unconsolidated subsidiary(f)

(478
)

218

Adjusted EBITDA

$
3,390

$
(6,664
)

~~(a) Represents interest expense, annual amortization of debt issuance cost and loss on debt extinguishment in connection~~compliance with our ~~Secured Promissory Notes, and a revolving line of credit with Western Alliance Bank.~~financial condition covenant.

~~(b) Represents amortization expense related to developed technology.~~

~~(c) Represents stock-based compensation expense.~~

~~(d) Represents a gain on extinguishment of debt resulting from forgiveness of a loan under the SBA’s Paycheck Protection Program. See “Note -7 Debt and Other Borrowings”~~

~~(e) Represents consulting fees in connection with operations and finance.~~

~~(f) Represents results of an entity that we do not consolidate, as our management excludes these results when evaluating our operating performance.~~

The following table reconciles Net Income (Loss) to Adjusted Non-GAAP Net Income (Loss) and Adjusted EPS for the three months ended March 31, 2020 and 2021, respectively. All shares and per share amounts have been adjusted for a approximately 8.25-for-1 share forward stock split which took effect on April 28, 2021:

Three Months Ended

March 31,

2020

2021

(in thousands, except per share data)
Net income (loss)

$
3,420

$
(7,442
)

Amortization of intangibles

33

─

Stock-based compensation

458

449

(Gain) on extinguishment of debt

─

(790
)

Other costs

─

897

(Income) loss from unconsolidated subsidiary

(478
)

218

Income tax expense of adjustments(a)

(3
)

(8
)

Adjusted Non-GAAP net income (loss)

$
3,430

$
(6,676
)

Adjusted Non-GAAP net income (loss) per share (Adjusted EPS)

Basic

$
0.05

$
(0.10
)

Diluted

$
0.04

$
(0.10
)

Weighted-average Non-GAAP common shares outstanding:

Basic

67,334,111

66,875,469

Diluted

77,105,419

66,875,469

~~(a)Represents incremental tax expense of adjustments made to reconcile Net Income (Loss) to Adjusted Non-GAAP Net Income (Loss) driven from (Income) loss from unconsolidated subsidiary.~~

~~Off-Balance Sheet Arrangements~~

The Company does not have any off-balance sheet financing arrangements or liabilities, guarantee contracts, retained or contingent interests in transferred assets or any obligation arising out of a material variable interest in an unconsolidated entity.

~~Recently Issued Accounting Pronouncements~~

~~See Note 2 to our condensed consolidated financial statements included elsewhere in this report.~~

Critical Accounting Policies and Significant Management Estimates

~~The preparation of~~We prepare our interim unaudited condensed consolidated financial statements in accordance with ~~GAAP~~GAAP. The preparation of condensed consolidated financial statements also requires us to make estimates ~~judgments~~ and assumptions that affect the reported amounts ~~and classifications~~ of assets and liabilities, ~~revenues and expenses and~~ the ~~related disclosures~~disclosure of contingent assets and liabilities ~~in our interim unaudited condensed consolidated~~at the date of the financial statements, and ~~accompanying notes. The SEC has defined a company's critical~~the reported revenue and expenses during the period. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ significantly from the estimates made by our management. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the ~~ones~~more significant areas involving management’s judgments and estimates. Critical accounting policies and estimates are those that ~~are~~we consider the most important to the portrayal of ~~the company's~~our financial condition and results of operations ~~and which~~because they require ~~the company to make its~~our most difficult, ~~and~~ subjective or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain. ~~Based~~

We believe that the accounting policies described below involve a significant degree of judgment and complexity. Accordingly, we believe these are the most critical to aid in fully understanding and evaluating our condensed consolidated financial condition and results of operations.

Revenue recognition

Policy description

performance, equipment, materials, scope of work, and/or the period of completion of the project. We analyze change orders to determine if they should be accounted for as a modification to an existing contract or a new stand-alone contract.

Contracts we enter into with our customers for sale of Voyager Trackers are generally under two different types of arrangements: (1) purchase agreements and equipment supply contracts (“Purchase Agreements”) and (2) sale of individual parts of the Voyager Tracker.

Identify the performance obligations in the contract: We enter into contracts that can include various combinations of products and services, which are either capable of being distinct and accounted for as separate performance obligations or as one performance obligation since the majority of tasks and services are part of a single project or capability. However, determining whether products or services are considered distinct performance obligations that should be accounted for separately versus together may sometimes require significant judgment.

Our Purchase Agreements typically include two performance obligations- 1) Voyager Tracker or customized components of Voyager Tracker, and 2) shipping and handling services. The deliverables included as part of the Voyager Tracker are predominantly accounted for as one performance obligation, as these deliverables are part of a combined promise to deliver a project.

The revenue for shipping and handling services will be recognized over time based on shipping terms of the arrangements, as this ~~definition,~~faithfully depicts the Company’s performance in transferring control.

Allocate the transaction price to performance obligations in the contract: Once we have determined the transaction price, we allocate the total transaction price to each performance obligation in a manner depicting the amount of consideration to which we expect to be entitled in exchange for transferring the good(s) or service(s) to the customer. We allocate the transaction price to each performance obligation identified in the ~~following critical accounting policies~~contract on a relative standalone selling price basis.

We use the expected cost-plus margin approach based on hardware, labor, and ~~estimates:~~related overhead cost to estimate the standalone selling price of the Voyager Tracker, customized components of Voyager Tracker, and individual parts of Voyager Tracker for certain specific transactions. We use the adjusted market assessment approach for all other performance obligations except shipping, handling, and logistics. For shipping, handling, and logistics performance obligations, we use a residual approach to calculate the standalone selling price, because of the nature of the highly variable and broad range of prices we charge to various customers for this performance obligation in the contracts.

Recognize revenue when or as the Company satisfies a performance obligation:

~~Revenue recognition;~~

 For each performance obligation identified, we determine at contract inception whether we satisfy the performance obligation over time or at a point in time. Voyager Tracker and customized components of Voyager Tracker performance obligations in the contract are satisfied over-time as work progresses for its custom assembled Voyager Tracker, utilizing an input measure of progress determined by cost-to-cost measures on these projects as this faithfully depicts our performance in transferring control. Additionally, our performance does not create an asset with an alternative use, due to the highly customized nature of the product, and we have an enforceable right to payment for performance completed to date. Our performance obligations for individual part sales for certain specific transactions are recognized point-in-time as and when control transfers based on the Incoterms for the contract. Our performance obligations for term-based software licenses are recognized point-in-time as and when control transfers, either upon delivery to the customer or the software license start date, whichever is later. Our performance obligation

~~Equity~~

for shipping and handling services is satisfied over-time as the services are delivered over the term of the contract. We recognize subscription services sales/other services on a straight-line basis over the contract period. With regard to support revenue, a time-elapsed method ~~investments~~

is used to measure progress because we transfer control evenly over the contractual period. Accordingly, the fixed consideration related to support revenue is generally recognized on a straight-line basis over the contract term.

Contract accounting:

~~Warranties;~~

 The timing of revenue recognition, billing, and cash collection results in the recognition of accounts receivable, unbilled receivables for revenue recognized in excess of billing, and deferred revenue in the Condensed Consolidated Balance Sheets. We may receive advances or deposits from our customers before revenue is recognized, resulting in contract liabilities, which are reflected as “deferred revenue” on our Condensed Consolidated Balance Sheets.

~~Stock-based compensation;~~

Judgments and assumptions

~~Deferred revenues~~

The timing and amounts of revenue and cost of revenue recognition, as well as recording of related receivables and deferred revenue, is highly dependent on our identification of performance obligations in each contract and our estimates by contract of total project cost and our progress toward project completion as of each period end. Certain estimates are subject to factors outside of our control that may impact our suppliers and the global supply chain. As an example, we began to experience increases in steel prices and shipping and logistics costs, as well as delays in delivery of our products to customers during 2021, which negatively impacted our results of operations as we were not able to recover all of the additional costs under certain of our fixed fee contracts. We base our estimates on the best information available at each period end, but future events and their effects cannot be determined with certainty, and actual results could differ materially from our assumptions and estimates.

~~Leases;~~

Accounts receivable, net

~~Contingent consideration;~~

Policy description

Trade receivables are recorded at invoiced amounts, net of allowances for doubtful accounts if applicable, and

do not bear interest. We generally do not require collateral from our customers; however, in certain circumstances, we may require letters of credit, other collateral, additional guarantees or advance payments. The allowance for doubtful accounts is based on our assessment of the collectability of our customer accounts.

We plan to adopt ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments effective January 1, 2023. For the three months ended March 31, 2022 and 2021 we have utilized the incurred loss model in estimating our allowance for doubtful accounts.

~~Income taxes.~~

Judgments and assumptions

We regularly review our accounts receivable that remain outstanding past their applicable payment terms and establish allowances or make potential write-offs by considering certain factors such as historical experience, industry data, credit quality, age of balances and current economic conditions that may affect a customers’ ability to pay.

Adjustments to the allowance may either impact the amount of revenue previously recognized or bad debt expense depending on the facts and circumstances leading to the adjustment. Adjustments to amounts originally estimated to be collectible that are considered to be potential price concessions as a result of a dispute regarding performance or other matters affecting customer relationships will result in a reduction in revenue whereas adjustments due to changes in customer credit risk or their expected ability to pay will be recognized in bad debt expense.

Warranty

Policy description

Typically, the sale of Voyager Tracker projects includes parts warranties to customers as part of the overall price of the product. We provide standard assurance type warranties for our products for periods generally ranging from five to ten years. We record a provision for estimated warranty expenses in cost of sales, net of amounts recoverable from manufacturers under their warranty obligations to us. We do not maintain general or unspecified reserves; all warranty reserves are related to specific projects. All actual or estimated material costs incurred for warranty services in subsequent periods are charged to those established reserves.

~~We have other key accounting policies which involve the use of estimates, judgments~~Judgments and assumptions that are significant to understanding our results. See Note 2 - Summary of Significant Accounting Policies to the interim unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q. Of those policies, we believe that the accounting policies enumerated above involve the greatest degree of complexity and exercise of judgment by our management.

During the three months ended March 31, 2021, there were no significant changes in our critical accounting policies or estimates which were included in the condensed consolidated financial statements and the accompanying notes for the fiscal year ended December 31, 2020, which are included in our financial statements for the fiscal year ended December 31, 2020, which are included in the Company’s final prospectus (the “IPO Prospectus”) for its initial public offering (“IPO”) dated as of April 29, 2021 and filed with the Securities and Exchange Commission (the “SEC”) pursuant to Rule 424(b)(4) under the Securities Act of 1933, as amended (the “Securities Act”).

We ~~evaluate~~base our estimated warranty obligations on our historical experience and forward-looking factors including the nature and frequency of product failure rates and costs to address future claims. These estimates are inherently uncertain given our relatively short history of sales and changes to our historical or projected warranty experience may result in material changes to our warranty reserve in the future. Additionally, we make estimates of what costs we believe will be recoverable from the manufacturer of our products that we use to offset our obligations to our customers.

While we periodically monitor our warranty activities and claims, if actual costs incurred were to be different from our estimates, ~~judgments~~we would recognize adjustments to our warranty reserves in the period in which those differences arise or are identified. Such adjustments could be material to our results of operations in the period the adjustments are made.

Stock-based compensation

Policy description

We recognize compensation expense for all share-based payment awards made, including stock options and restricted stock, based on the estimated fair value of the award on the grant date, in the accompanying consolidated statement of operations and comprehensive loss. We calculate the fair value of stock options using the Black-Scholes Option-Pricing model while the fair value of restricted stock grants is based on the estimated fair value of the Company's common stock on the date of grant. Forfeitures are accounted for as they occur. For service-based awards, stock-based compensation is recognized using the straight-line attribution approach over the requisite service period. For performance-based awards, stock-based compensation is recognized based on graded vesting over the requisite service period when the performance condition is probable of being achieved.

Judgments and assumptions

The Black-Scholes model relies on various assumptions, in addition to the exercise price of the option and the value of our common stock on ~~an ongoing basis,~~the date of grant. These assumptions include:

Expected Term: The expected term represents the period that the Company’s stock-based awards are expected to be outstanding and ~~while we believe~~is calculated as the average of the option vesting and contractual terms, based on the simplified method. The simplified method deems the term to be the average of the time-to-vesting and the contractual life of the options.

Expected Volatility: Since the Company did not have a trading history of its common stock prior to our IPO and since such trading history subsequent to our IPO is limited, the expected volatility is derived from the average historical stock volatilities of several public companies within the Company’s industry that it considers to be comparable to its business over a period equivalent to the expected term of the stock option grants.

Risk-Free-Interest-Rate: The Company bases the risk-free interest rate on the implied yield available on US Treasury zero-coupon issues with a remaining term equivalent to the expected term.

Expected Dividend: The Company has not issued any dividends in its history and does not expect to issue dividends over the life of the options and, therefore, has estimated the dividend yield to be zero.

Changes to any of these assumptions, but particularly our estimates ~~judgments~~of expected term and ~~assumptions~~volatility, could change the fair value of our options and impact the amount of stock-based compensation expense we report each period.

JOBS Act accounting election

We are ~~reasonable, they are based upon information available at~~an emerging growth company, as defined in the ~~time. Actual results may differ significantly from these estimates under different assumptions, judgments~~JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or ~~conditions~~revised accounting standards until such time as those standards apply to private companies. We elected to use the allowed extended transition period for adopting new or revised accounting standards.

ITEM 3. ~~Quantitative and Qualitative Disclosures about Market Risk~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risk in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily a result of customer concentrations and fluctuations in steel, aluminum and logistics/transportation prices. We do not hold or issue financial instruments for trading purposes.

Commodity Price Risk

We subcontract to various contract manufacturers, who manufacture and deliver products directly to our customers. We, therefore, do not procure raw materials and commodities directly. We are subject to indirect risk from fluctuating market prices of certain commodity raw materials, including steel and aluminum, that are used in our products, through our contract manufacturers, as increases in these commodity prices would increase our cost of procuring subcontracting services. Prices of these raw materials may be affected by supply restrictions or other market factors from time to time. Significant price increases for these raw materials could reduce our operating margins if we are unable to recover such increases in costs from our customers, and could harm our business, financial condition and results of operations.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of ~~Disclosure Controls and Procedures~~

~~Our~~ disclosure controls and procedures are designed to ensure that the information relating to our Company, including our consolidated subsidiary, required to be disclosed in our SEC reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and is accumulated and communicated to our

Our management, ~~including our chief executive officer and chief financial officer, as appropriate to allow for timely decisions regarding required disclosure. We conducted an evaluation, under the supervision and~~ with the participation of ~~management, including~~ our ~~chief~~principal executive officer and ~~chief~~principal financial officer, ofevaluated the effectiveness ~~of the design and operation~~ of our disclosure controls and ~~procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934,~~procedures. Solely as ~~amended) as~~a result of the ~~end of the period covered by this quarterly report on Form 10-Q. Based on this evaluation,~~material weaknesses described below, our ~~chief~~principal executive officer and ~~chief~~principal financial officer concluded that, as of ~~the evaluation date,~~March 31, 2022, our disclosure controls and procedures were not ~~effective due to~~effective.

We have performed additional analyses, reconciliations, and other post-closing procedures and have concluded that, notwithstanding the material weaknesses in our internal control over financial reporting, ~~as described below.~~the consolidated financial statements fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with GAAP.

Limitations on effectiveness of disclosure controls and procedures

~~Previously Reported Material Weaknesses~~In designing and evaluating our disclosure controls and procedures, our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. Disclosure controls and procedures include, without limitation, controls and procedures designed to provide reasonable assurance that the information required to be disclosed by a company in ~~Internal Control over Financial Reporting~~the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Description of material weaknesses

AWe determined that we had material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis. During the course of preparing for our IPO and as reported in the IPO

~~Prospectus, we identified a material weakness~~weaknesses in our internal ~~control~~controls over financial reporting as of December 31, 2021. Specifically, we ~~did not~~identified certain control deficiencies in the design and ~~maintain effective~~operation of our internal controls over financial reporting that constituted the following material weaknesses:

•

We did not have a sufficient complement of experienced personnel with the requisite technical knowledge of public company accounting and reporting and for non-routine, unusual or complex transactions. This material weakness contributed to the following material weaknesses.

•

We did not design and maintain adequate controls over the period-end close and financial reporting process including establishment of accounting policies and procedures, certain account reconciliations, cut-off, segregation of duties, journal entries and financial statement preparation. This material weakness contributed to material adjustments in ~~the 2019~~prior consolidated financial statements principally, but not limited to, the following areas: earnings per share calculations, definite-lived intangibles, warranty obligation, cut-off of revenue transactions and related cost of sales.

This material weakness also

contributed to misstatements in our stock-based compensation and weighted-average common shares outstanding, which led to the revision of our interim consolidated financial statements as of June 30, 2021 and for the three- and six-months period then ended.

•

We did not design and maintain effective information technology general controls ~~(ITGC)~~ over the IT systems used for preparation of the financial statements. Specifically, we did not design and maintain (i) program change management controls to ensure that information technology program and data changes affecting financial IT applications and underlying accounting records ~~are~~were identified, tested, authorized and implemented appropriately; (ii) user access controls to ensure appropriate segregation of duties and that adequately restrict user and privileged access to financial applications, programs and data to appropriate Company personnel; and (iii) testing and approval controls for program development to ensure that new software development is aligned with business and IT requirements.

Although there were no material adjustments to ~~the~~prior period consolidated financial statements as a result of IT deficiencies, these IT deficiencies, when aggregated, could impact the effectiveness of IT-dependent controls (such as automated controls that address the risk of material misstatement to one or more assertions, along with the IT controls and underlying data that support the effectiveness of system-generated data and reports) that could result in misstatements potentially impacting all financial statement accounts and disclosures that would not be prevented or detected. Accordingly, we have determined that these IT deficiencies in the aggregate constitute a material ~~weakness~~

weakness.

Additionally, the above material weaknesses could result in a misstatement of ~~the aforementioned~~our account balances or disclosures that would result in a material misstatement of the annual or interim financial statements that would not be prevented or detected. ~~As a result of~~

Remediation plan for the material weaknesses in

To address our material weaknesses, we have implemented and continue to implement a remediation plan. We have added key personnel with requisite technical knowledge of public company accounting including a Director of SEC Reporting and Technical Accounting, a Director of Tax Accounting and Reporting and a Corporate Controller. We also hired an experienced Director of Internal Audit that reports directly to the audit committee of our board of directors. We hired a Chief Information Officer & Chief Data Officer and a Director of Information Technology to strengthen our information technology infrastructure. During 2021, we implemented Blackline's account reconciliation tool, and ensured segregation of duties for journal entries and account reconciliations. We have been formalizing documentation of accounting and IT policies and internal controls. In addition, a disclosure committee charter was established, and several training sessions related to internal controls and disclosure controls were provided. While we believe these efforts will improve our internal control over financial reporting, ~~identified above, management concluded that~~ the ~~Company’s internal control over financial reporting was not effective as of March 31, 2021 based on the criteria set forth in “Internal Control—Integrated Framework” issued by COSO.~~

~~Status of Remediation Plan~~

~~Our remediation efforts for these material weaknesses have included the following:~~

~~• We have hired additional accounting personnel from the finance~~implementation and ~~accounting profession with experience in publicly traded companies;~~

~~• We utilized third-party consultants and specialists to supplement our internal resources;~~

~~• We have drafted and implemented new accounting policies and procedures;~~

~~• We plan to implement processes and procedures to monitor and evaluate the effectiveness~~validation of our ~~ITGC controls on an~~remediation is ongoing ~~basis~~ and ~~are committed to taking further action and implementing additional enhancements or improvements, as we find necessary.~~

~~We plan to continue to assess our internal controls and procedures and implement processes and procedures~~may not be sufficient to remediate these weaknesses or to avoid the identification of material ~~weaknesses.~~

weaknesses in the future, which could impair our ability to accurately and timely report our financial position, results of operations or cash flows, including our filing of quarterly or annual reports with the SEC.

Changes in ~~Internal Control~~

internal control

There have been no changes in our internal control over financial reporting that occurred during the period covered by this report, other than our (i) hiring a new Corporate Controller with public-company accounting experience and a new Chief Information Officer & Chief Data Officer, (ii) implementing a new stock-based compensation reporting system and (iii) establishing controls over tracking and reporting of our stock-based compensation awards that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, we are subject to routine legal proceedings in the normal course of operating our business.

Currently there are no claims or proceedings against us that we believe will have a material adverse effect on our business, financial condition, results of operations or cash flows.

On April 21, 2021, FCX Solar, LLC (“FCX”), filed a lawsuit against us in the United States District Court for the Southern District of New York. The complaint ~~alleges~~alleged breach of contract, fraud and ~~tort~~unjust enrichment claims related to a patent license agreement and consulting relationship between FCX and us. FCX ~~seeks~~sought damages of approximately $134 million in the lawsuit. ~~Our response to the complaint will be filed on or before~~On July 2, 2021, we filed a motion to dismiss the fraud and unjust enrichment claims. On July 16, 2021, FCX filed an amended complaint asserting the same claims as the original complaint. On July 22, 2021, we advised the court that FTC would stand on its motion to dismiss, and at the request of the court, we filed a revised motion citing the amended complaint. FCX filed its response on August 19, 2021, and we filed a reply on September 7, 2021. Oral argument on our motion to dismiss was held on February 3, 2022, and the Court granted our motion on February 7, 2022, dismissing FCX's fraud and unjust enrichment claims and leaving only a claim for breach of a license agreement. On April 15, 2022, FCX filed a motion to amend its complaint to add two additional claims for breach of the license agreement and to remove the dismissed claims, including its request for damages of approximately $134 million. We intend to oppose FCX's motion to add new breach of contract claims. On May 29, 2021, FCX filed a separate lawsuit against us in the United States District Court for the Western District of Texas, alleging a claim for patent infringement related to U.S. Patent No. 10,903,782. FCX seeks an unspecified amount of damages, including past and future royalties, and injunctive relief. Our ~~response~~answer to that complaint ~~will be~~was filed on ~~or before~~ June ~~23,~~22, 2021, along with our motion to transfer the patent suit to the Southern District of New York to be consolidated with the New York litigation. FCX filed an amended complaint asserting claims for direct patent infringement, indirect infringement by active inducement, and contributory infringement on July 27, 2021, and we filed our answer to that complaint on August 10, 2021. On October 25, 2021, our motion to transfer the case to the Southern District of New York was granted, and the patent case was consolidated with FCX's contract case on November 19, 2021. Discovery in this consolidated matter is ongoing. We believe the claims asserted in ~~the~~both lawsuits are without merit, and we plan to vigorously defend against them. ~~However,~~We and our management considered (a) the ~~outcome~~facts described above, (b) the preliminary stages of the proceedings and (c) the advice of outside legal counsel on the claims and determined that it is not probable that FCX will prevail on the merits. At this time, we believe that the likelihood of any ~~legal proceedings~~material loss related to these matters is ~~inherently uncertain, and any judgment, ruling, fine, penalty, or injunctive relief entered against us or any adverse settlement could negatively affect~~remote given the strength of our ~~business, results of operations, and financial condition.~~defenses.

ITEM 1A. RISK FACTORS

~~This~~We are subject to a number of risks that if realized could adversely affect our business, strategies, prospects, financial condition, results of operations and cash flows. Some of the more significant risks and uncertainties we face include those summarized below. The summary below is not exhaustive and is qualified by reference to the full set of risk factors set forth in Item 1A. "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2021 ("Annual Report"). Please carefully consider all of the information in this Quarterly Report on Form 10-Q ~~should be read~~and our Annual Report, including the full set of risks set forth in ~~conjunction~~Item 1A. "Risk Factors" of our Annual Report, and in our other filings with the ~~risk factors included~~SEC before making an investment decision regarding us.

•

Risks related to our business and our industry – We are a new public company with a history of losses that provides products and services to the solar industry, which is rapidly changing and dependent on being competitive with the price of electricity generated from other sources. We face competition from other companies that may be larger than us and have more financial resources than we have which could impact our ability to compete for new business.

•

Risks related to the COVID-19 pandemic – We face risks of significant supply chain disruptions that can cause delays in product deliveries and result in financial penalties and in our ~~Prospectus. There have been no material changes~~ability to serve our customers at their project sites and to meet their training needs due to the lack of availability of qualified personnel and the impact of governmental health-related restrictions and shelter-in-place orders.

•

Risks related to intellectual property – We face the risk ~~factors disclosed under the heading “Risk Factors” in~~of not being able to adequately protect or defend our ~~Prospectus which is included~~intellectual property and property rights in the ~~Company’s final prospectus (the “IPO Prospectus”) for its initial public offering (“IPO”) dated as~~various countries in which we do business.

•

Risks related to manufacturing and supply chain – We face risks in meeting the needs of ~~April 29, 2021~~our customers due to our reliance on contract manufacturers, including on their ability to obtain raw materials in a cost effective and ~~filed with the Securities~~timely manner and ~~Exchange Commission (the “SEC”) pursuant~~ to ~~Rule 424(b)(4) under the Securities Act~~provide timely deliveries of ~~1933, as amended (the “Securities Act”).~~

finished products to us and our customers.

•

Risks related to government regulation and legal compliance – We face risks to the demand for our products from our customers due to changes in or expiration of governmental incentives and existing tax credits and other benefits. Additionally, changes in the trade environment and tax treaties between the United States and other countries, such as China, as well as import tariffs could adversely affect our business.

•

Risks related to information technology and data privacy – We face reputational and monetary risks from cybersecurity deficiencies and the unauthorized disclosure of personal or sensitive data relating to our employees, customers, vendors and others.

•

Risks related to ownership of our common stock – The holders of our common stock face a risk of loss in their investment in us due to fluctuations in our stock price as a result of changing market conditions, international trade tensions, our future financial performance, our corporate legal structure and the substantial ownership in our stock by our directors, executive officers and principal stockholders.

Additionally, as described further in Note 2 in Part 1, Item 1 under the section "Liquidity" and in Part 1, Item 2 of this Quarterly Report on Form 10-Q under the section "Liquidity and Capital Resources", we have a history of cash outflows to fund operations. At March 31, 2022, we have $22.4 million of available liquidity, after taking into consideration a minimum liquidity covenant in our senior secured revolving credit facility.

ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Unregistered Sales of Equity Securities

None.

Use of ~~proceeds~~Proceeds from Initial Public Offering of Common ~~Stock~~Stoc

On April 30, 2021, ~~we closed~~ the Company completed an IPO ~~in which we issued and sold~~(Commission file number 333-254797) of 19,840,000 shares of ~~our~~its common stock ~~at a public~~receiving proceeds of $241.2 million, net of underwriting discounts and commissions, but before offering ~~price of $13.00 per share.~~

~~The offer and sale of all~~costs. Prior to the completion of the IPO, the board of directors and stockholders approved an approximately 8.25-for-1 forward stock split of the Company’s shares of ~~our~~ common stock ~~in the IPO was registered under the Securities Act pursuant to our Registration Statements on Form S-1, as amended (File No. 333-254797),~~ which became effective on April ~~27,~~28, 2021. Barclays, BofA Securities, Credit Suisse and UBS Investment Bank acted as joint book-running managers and representatives of the underwriters for the IPO. HSBC, Cowen, Simmons Energy | A Division of Piper Sandler, Raymond James and Roth Capital Partners acted as co-managers for the IPO.

~~We received aggregate proceeds of $241.2 million~~Proceeds from the IPO ~~net of approximately $16.8 million in underwriting discount and commissions and before offering costs.~~

Wewere used ~~$54.2 million of the net proceeds of the IPO~~ to purchase an aggregate of 4,455,384 shares of our common stock ~~some~~at a cost of ~~which will result~~$54.2 million, including shares resulting from the settlement of certain vested ~~RSUs~~restricted stock units and ~~the~~ exercise of certain options in connection with ~~this~~ the IPO ~~offering, from the Stock Repurchase Parties~~ at the ~~initial public offering~~IPO price, ~~net of underwriters' fees~~less underwriting discounts and commissions.

~~We intend~~ The remaining proceeds have been used and continue to ~~use the remaining $187.0 million~~be used for ~~offering costs,~~ general corporate purposes, including working capital, capital expenditures and operating expenses. We may also use a portion of such proceeds to acquire or invest in businesses, products, services or technologies, however, we do not have binding agreements or commitments for any material acquisitions or investments at this time.

There has been no material change in our planned use of the net proceeds from the IPO as described in our final prospectus filed with the ~~IPO prospectus.~~SEC pursuant to Rule 424(b).

ITEM 3.DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4.MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5.OTHER INFORMATION

None.

ITEM 6.EXHIBITS

The following exhibits are filed as part of this report:



Exhibit Number		Description
3.1	**	Amended and Restated Certificate of Incorporation of FTC Solar, Inc.(filed as Exhibit 3.1 to the Registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on May 3, 2021 and incorporated herein by reference).
3.2	**	Amended and Restated Bylaws of FTC Solar, Inc.(filed as Exhibit 3.2 to the Registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on May 3, 2021 and incorporated herein by reference).
3.3	**	Certificate of Correction of Amended and Restated Certificate of Incorporation ~~(As Corrected~~(Filed as Exhibit 3.3 to the Registrant's Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on June 8, ~~2021)~~2021 and incorporated herein by reference)
4.1	**	Specimen Common Stock Certificate (filed as Exhibit 4.1 to the Registrant's Registration Statement on Form S-1 filed with the Securities and Exchange Commission on April 29, 2021 and incorporated herein by reference)
10.2	**	Amendment No. 1 to Registration Rights Agreement, dated February 17, 2022, by and among FTC Solar, Inc. and certain holders of its capital stock (filed as Exhibit 10.2 to the Registrant's Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 21, 2022 and incorporated herein by reference)
10.4	*	Amendment No. 1 to Senior Secured Revolving Credit Facility, by and among FTC Solar, Inc., as borrower, HSBC Bank USA, N.A. and Barclays Bank PLC, as an issuing lender and as administrative agent.
10.5	*	Employment Agreement by and between FTC Solar, Inc. and Robert Phelps Morris.
31.1	*	Certification of ~~Chief~~Principal Executive Officer Pursuant to SEC Rule 13a−14(a)/15d−~~14,~~14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	*	Certification of ~~Chief~~Principal Financial Officer Pursuant to SEC Rule 13a−14(a)/15d−14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	*	Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	*	Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	*	Inline XBRL Instance Document
101.SCH	*	Inline XBRL Taxonomy Extension Schema Document
101.CAL	*	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	*	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	*	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE	*	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104	*	Cover Page Interactive Data File ~~( formatted~~(formatted as Inline XBRL and contained in exhibit 101)

*Filed herewith

**Incorporated herein by reference

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



	FTC SOLAR, INC.


Date: ~~June 8, 2021~~May 16, 2022	/s/ ~~Anthony P. Etnyre~~Sean Hunkler
	~~Anthony P. Etnyre,~~Sean Hunkler, Chief Executive Officer



Date: ~~June 8, 2021~~May 16, 2022	/s/ ~~Patrick M. Cook~~Phelps Morris
	~~Patrick M. Cook,~~Phelps Morris, Chief Financial Officer


Delaware		81-4816270
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)
9020 N Capital of Texas Hwy, Suite I-260, Austin, Texas 78759		78759
(Address of Principal Executive Offices)		(Zip Code)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.0001 par value	FTCI	The Nasdaq Stock Market LLC


		Pages(s)
	Forward looking statements	1
Item 1.	Financial Statements (Unaudited)	2
	Condensed Consolidated Balance Sheets	52
	Condensed Consolidated Statements of Comprehensive ~~Income (Loss)~~Loss	63
	Condensed Consolidated Statements of Stockholders’ Equity	74
	Condensed Consolidated Statements of Cash Flows	85
	Notes to Condensed Consolidated Financial Statements	~~9–19~~6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2016

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3031

Item 4.	Controls and Procedures	3031


PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	33
Item 1A.	Risk Factors	33
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34
Item 3.	Defaults Upon Senior Securities	34
Item 4.	Mine Safety Disclosures	34
Item 5.	Other Information	34
Item 6.	Exhibits	35
SIGNATURES		36


(in thousands, except shares and per share data)	March 31, 2022			December 31, 2021
ASSETS
Current assets
Cash and cash equivalents	$	49,383		$	102,185
Accounts receivable, net		132,230			107,548
Inventories		8,918			8,860
Prepaid and other current assets		13,762			17,186
Total current assets		204,293			235,779
Operating lease right-of-use assets		1,622			1,733
Property and equipment, net		1,564			1,582
Other assets		3,929			3,926
Total assets	$	211,408		$	243,020
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable	$	46,102		$	39,264
Accrued expenses		30,648			47,860
Income taxes payable		87			47
Deferred revenue		3,100			1,421
Other current liabilities		4,523			4,656
Total current liabilities		84,460			93,248
Operating lease liability, net of current portion		1,190			1,340
Other non-current liabilities		5,590			5,566
Total liabilities		91,240			100,154
Commitments and contingencies (Note 9)
Stockholders’ equity
Preferred stock par value of $0.0001 per share, 10,000,000 shares authorized; NaN issued as of March 31, 2022 and December 31, 2021		0			0
Common stock par value of $0.0001 per share, 850,000,000 shares authorized; 99,724,843 and 92,619,641 shares issued and outstanding as of March 31, 2022 and December 30, 2021		10			9
Treasury stock, at cost; 10,762,566 shares as of March 31, 2022 and December 31, 2021		0			0
Additional paid-in capital		297,119			292,082
Accumulated other comprehensive income (loss)		64			7
Accumulated deficit		(177,025	)		(149,232	)
Total stockholders’ equity		120,168			142,866
Total liabilities and stockholders’ equity	$	211,408		$	243,020


	December 31, 2020			March 31, 2021

ASSETS
Current assets
Cash	$	32,359		$	5,340
Restricted cash		1,014			0
Accounts receivable, net		23,734			43,906
Inventories		1,686			4,273
Prepaid and other current assets		6,924			9,747
Total current assets		65,717			63,266
Investments in unconsolidated subsidiary		1,857			1,639
Other assets		3,819			7,546
Total assets	$	71,393		$	72,451
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable	$	17,127		$	30,107
Line of credit		1,000			0
Accrued expenses and other liabilities		18,495			29,750
Accrued interest – related party		207			0
Deferred revenue		22,980			8,184
Total current liabilities		59,809			68,041
Long-term debt and other borrowings		784			0
Other non-current liabilities		3,349			3,914
Total liabilities		63,942			71,955
Commitments and contingencies (Note 8)
Stockholders’ equity
Common stock par value of $0.0001 per share, 98,960,064 shares authorized; 66,155,340 and 67,329,409 shares issued and outstanding as of December 31, 2020 and March 31, 2021		1			1
Treasury stock, at cost; 9,896,666 and 10,045,106 shares as of December 31, 2020 and March 31, 2021		0			—
Additional paid-in capital		50,096			50,584
Accumulated other comprehensive loss		(3	)		(4	)
Accumulated deficit		(42,643	)		(50,085	)
Total stockholders’ equity		7,451			496
Total liabilities and stockholders’ equity	$	71,393		$	72,451


☒		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the quarterly period ended March 31, ~~2021~~2022
		OR
☐		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


Large accelerated filer		Accelerated filer		Non-accelerated filer		Smaller reporting company	

Emerging growth company		


	Preferred stock				Common stock				Treasury stock
(in thousands, except shares)	Shares		Amount		Shares		Amount		Shares		Amount		Additional paid-In capital			Accumulated other comprehensive income (loss)		Accumulated deficit			Total stockholders' equity (deficit)
Balance as of December 31, 2021		0	$	0		92,619,641	$	9		10,762,566	$	—	$	292,082		$	7	$	(149,232	)	$	142,866
Shares issued during the period for vested restricted stock awards		—		—		5,311,326		1		—		—		(1	)		—		—			—
Issuance of common stock upon exercise of stock options		—		—		1,793,876		—		—		—		428			—		—			428
Stock-based compensation		—		—		—		—		—		—		4,610			—		—			4,610
Net loss		—		—		—		—		—		—		—			—		(27,793	)		(27,793	)
Other comprehensive loss		—		—		—		—		—		—		—			57		—			57
Balance as of March 31, 2022		0	$	0		99,724,843	$	10		10,762,566	$	—	$	297,119		$	64	$	(177,025	)	$	120,168


	Three Months Ended March 31,
	2020			2021
Revenue:
Product	$	30,469		$	56,462
Service		1,907			9,245
Total revenue		32,376			65,707
Cost of revenue:
Product		23,747			54,996
Service		1,649			10,592
Total cost of revenue		25,396			65,588
Gross profit		6,980			119
Operating expenses
Research and development		1,094			1,954
Selling and marketing		515			1,100
General and administrative		2,475			5,084
		4,084			8,138
Income (loss) from operations		2,896			(8,019	)
Interest expense		(112	)		(14	)
Gain on extinguishment of debt		0			790
Income (loss) before income taxes		2,784			(7,243	)
Benefit from income taxes		158			19
Income (loss) from unconsolidated subsidiary		478			(218	)
Net income (loss)	$	3,420		$	(7,442	)
Other comprehensive income (loss):
Foreign currency translation adjustments		8			(1	)
Comprehensive income (loss)	$	3,428		$	(7,443	)
Net income (loss) per share:
Basic	$	0.05		$	(0.11	)
Diluted	$	0.04		$	(0.11	)
Weighted-average common shares outstanding:
Basic		67,334,111			66,875,469
Diluted		77,105,419			66,875,469


	Common Stock				Treasury Stock				Additional Paid-In		Accumulated Other Comprehensive		Accumulated			Total Stockholders'
	Shares		Amount		Shares		Amount		Capital		Income (Loss)		Deficit			Equity
Balance as of December 31, 2019		63,633,981	$	1		—	$	—	$	18,273	$	—	$	(26,719	)	$	(8,445	)
Restricted stock awards vested during the period		1,419,379		—		—		—		—		—		—			—
Issuance of common stock		9,162,976		—		—		—		30,000		—		—			30,000
Stock-based compensation		—		—		—		—		458		—		—			458
Net income (loss)		—		—		—		—		—		—		3,420			3,420
Other comprehensive income (loss)		—		—		—		—		—		8		—			8
Balance as of March 31, 2020		74,216,336	$	1		—	$	—	$	48,731	$	8	$	(23,299	)	$	25,441


	December 31, 2020		March 31, 2021
Accrued cost of revenue	$	7,812	$	21,827
Accrued expenses		2,856		2,900
Warranty reserves		3,985		2,891
Accrued compensation		2,869		1,336
Accrued interest expense		28	─
Other		945		796
Total	$	18,495	$	29,750


	December 31, 2020			March 31, 2021
Dimension Energy LLC
Carrying value	$	1,857		$	1,639
Ownership percentage		23.6	%		23.3	%


	March 31, 2021
Balance at beginning of period	$	6,811
Warranties issued during the period		1,554
Settlements made during the period		(1,819	)
Changes in liability for pre-existing warranties		(187	)
Balance at end of period	$	6,359


	Three Months Ended March 31,
	2020		2021
Shares of common stock issuable under stock option plans outstanding		526		8,197
Shares of common stock issuable upon vesting of restricted stock awards		825		15,463
Potential common shares excluded from diluted net loss per share		1,351		23,660


	Three Months Ended
	March 31,
	2020			2021
	(dollars in thousands)
Revenue:
Product revenue	$	30,469		$	56,462
Service revenue		1,907			9,245
Total revenue		32,376			65,707
Cost of revenue (a):
Product cost of revenue		23,747			54,996
Service cost of revenue		1,649			10,592
Total cost of revenue		25,396			65,588
Gross profit		6,980			119
Operating expenses
Research and development (a)		1,094			1,954
Selling and marketing (a)		515			1,100
General and administrative (a)		2,475			5,084
Total operating expenses		4,084			8,138
Income (loss) from operations		2,896			(8,019	)
Interest expense		(112	)		(14	)
Gain on extinguishment of debt		—			790
Income (loss) before income taxes		2,784			(7,243	)
Benefit from income taxes		158			19
Income (loss) from unconsolidated subsidiary		478			(218	)
Net income (loss)	$	3,420		$	(7,442	)
Other comprehensive income (loss):
Foreign currency translation adjustments		8			(1	)
Comprehensive income (loss)	$	3,428		$	(7,443	)