Weichai Transactions

3 Months Ended

Mar. 31, 2019

Weichai Warrant

In September 2018, the Weichai Warrant was amended under the terms of a second amended and restated warrant (“Amended and Restated Warrant”) to defer its exercise date to a 90-day period commencing April 1, 2019, to adjust the exercise price to a price per share of the Company’s Common Stock equal to the lesser of (i) 50% of the Volume-Weighted Average Price (“VWAP”) during the 20 consecutive trading day period preceding October 1, 2018 and (ii) 50% of the VWAP during the 20 consecutive trading day period preceding the date of exercise, subject to an adjustment that could reduce the exercise price by up to $15.0 million. In the event that the adjustment exceeded the exercise price, the excess would be due to the warrant holder.

The Weichai Warrant is a freestanding derivative financial instrument that is not indexed solely to the Company’s Common Stock due to the Weichai Warrant’s exercise terms. Therefore, the Weichai Warrant is presented at fair value in the Company’s Consolidated Balance Sheets in Warrant liability for $30.7 million and $35.1 million at March 31, 2019 and December 31, 2018, respectively. Changes in value of the Weichai Warrant resulted in a gain of $4.4 million and a loss of $2.5 million reported in (Gain) loss from change in value of warrants in the Company’s Consolidated Statements of Operations for the three months ended March 31, 2019 and 2018, respectively. See Note 8. Fair Value of Financial Instruments for additional details and assumptions used in valuing the Weichai Warrant, as well as adjustments for the three months ended March 31, 2019 and 2018.

On April 23, 2019, Weichai exercised the Weichai Warrant resulting in the Company issuing 4,049,759 shares of the Company’s Common Stock and Weichai becoming the owner of 51.5% of the outstanding shares of the Company’s Common Stock, as of such date. The exercise proceeds for the warrants of $1.6 million were based on 50% of the VWAP during the 20 consecutive trading day period preceding April 23, 2019 and the $15.0 million reduction in the exercise price described above. For the year ended December 31, 2019, the Company recorded net expense of $1.4 million for changes in the value of the Weichai Warrant inclusive of the impact of the exercise.

Related Party Transactions

The Company purchased $0.8 million of inventory from Weichai during the three months ended March 31, 2019. Purchases of inventory from Weichai were not material during the three months ended March 31, 2018. Company sales to Weichai during the three months ended March 31, 2019 and March 31, 2018 were insignificant.

Stockholders’ Equity

Common and Treasury Stock

The changes in shares of Common and Treasury Stock are as follows:



(in thousands)	Common Shares Issued	Treasury Stock Shares		Common Shares Outstanding
Balance as of January 1, 2019	19,067	429		18,638
Net shares issued for Stock awards	—	(120	)	120
Balance as of March 31, 2019	19,067	309		18,758