Weichai Transactions

6 Months Ended

Jun. 30, 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.

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.

The Weichai Warrant was a freestanding derivative financial instrument that was not indexed solely to the Company’s Common Stock due to the Weichai Warrant’s exercise terms. Therefore, the Weichai Warrant was presented at fair value in the Company’s Consolidated Balance Sheet in Warrant liability for $35.1 million at December 31, 2018. Changes in value and the impact of the exercise of the Weichai Warrant resulted in a net loss of $5.8 million and $1.4 million reported in Loss from change in value and exercise of warrants in the Company’s Consolidated Statements of Operations for the three and six months ended June 30, 2019, respectively. Changes in value of the Weichai Warrant resulted in a net loss of $6.5 million and $9.0 million for the three and six months ended June 30, 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 six months ended June 30, 2019 and 2018.

Related Party Transactions

The Company purchased $0.1 million and $0.9 million of inventory from Weichai during the three and six months ended June 30, 2019, respectively. Purchases of inventory from Weichai were not material during the three and six months ended June 30, 2018. Company sales to Weichai during the three and six months ended June 30, 2019 and 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	—	(137	)	137
Shares issued to Weichai ^*	4,050	—		4,050
Balance as of June 30, 2019	23,117	292		22,825


*	See Note 3. Weichai Transactions for additional information.

Weichai Warrant