ECOTALITY, INC. - 10-Q filing on 2012-05-21

Notes Payable	3 Months Ended
Mar. 31, 2012
Debt Disclosure [Abstract]
Debt Disclosure [Text Block]	Note 8 – Notes Payable On January 16, 2007, the Company purchased an office building for an aggregate price of $576.0 thousand. Half of the aggregate price of $288.0 thousand was paid in cash and the remaining balance of $288.0 thousand was structured as an interest-only loan. The loan carried an interest rate of 6.75% calculated annually, with monthly interest-only payments due beginning on February 16, 2007. The Company paid $100.0 thousand in connection with the refinance of the property on January 20, 2012. The remaining balance of $187 thousand is structured as an interest-only loan, bears an interest rate of 7.0% calculated annually, with monthly payments in the amount of $1.1 thousand due on or before January 16, 2014, with the possibility of an extension to January 16, 2016. The loan is secured by a deed of trust on the office building. On July 15, 2011, the Company signed a Certificate of Acceptance under a Master Lease Agreement with Cisco Capital for equipment cost at $1.8 million, which was determined to be a capital lease. This 18-month capital lease of equipment obligated the Company to $2.1 million of lease payments starting August 1, 2011. The equipment covered by this lease was to be utilized by the Company in furthering the deployment of home energy management systems. On January 20, 2012 the Company and Cisco Capital together with Cisco Systems entered into a Settlement Agreement and Release following notification to the Company by Cisco Systems of their decision not to continue to provide certain services related to the equipment subject to the lease. The settlement agreement had the effect of terminating the lease, with the Company retaining a small portion of the equipment called for in the original lease, and returning the remainder. Interest payments previously accrued and unpaid under the lease agreement were liquidated through a final settlement calling for a payment from the Company to Cisco Capital of $10 thousand and a payment from Cisco Capital to the Company of $63 thousand. As a result of the Settlement Agreement and Release, in the March 31, 2012 financial statements we recorded a $147 thousand reversal of previously accrued interest expense. At March 31, 2012, the total liability balance relating to the capital lease obligation was $0. March 13, 2012 Financing Agreements: Convertible Note Purchase Agreement The Company and ABBTV entered into a Convertible Note Purchase Agreement (the “Convertible Note Purchase Agreement”), pursuant to which the Company agreed to issue and sell, and the Investor agreed to purchase, $5 .0 million in aggregate principal amount of a 5.05% Unsecured Convertible Note due 2015 (the Note”). The Convertible Note Purchase Agreement contains customary representations, warranties and agreements by the Company. In addition, the Company has agreed to indemnify the Investor against certain liabilities, including liabilities under the Securities Act, or to contribute to payments the Investor may be required to make in respect of those liabilities. 5.05% Unsecured Convertible Note Due 2015 The Note matures on March 13, 2015 and bears interest at a rate of 5.05% per annum, payable quarterly in arrears in cash on the final day of each fiscal quarter beginning on March 31, 2012. The Note is the unsecured obligation of the Company and is senior to the Company’s preferred stock and common stock and other unsecured debt. The Note is convertible into shares of the Company’s common stock at any time, in whole or in part, at the option of the holder at a per share conversion price equal to $1.27, subject to adjustment for stock splits, stock dividends, combinations and other corporate transactions. Events of default under the Note include, among others, payment defaults, cross-defaults, the Company’s common stock is suspended from trading for a period of time or no longer listed on an eligible trading market, and certain bankruptcy-type events involving the Company or certain subsidiaries. Upon an event of default, the holder may elect to require the Company to redeem all or any portion of the outstanding principal amount of the Note for a price equal to the greater of (i) the amount to be redeemed (as calculated through the redemption date) and (ii) the product of (A) the conversion rate with respect to such amount in effect at such time as the holders deliver a redemption notice and (B) the greatest closing sale price of the Company’s common stock on any trading day during the period starting on the date immediately preceding the event of default and ending on the trading day immediately prior to the date the Company is required to pay the redemption amount. In addition, upon an event of default the interest rate on the Note will increase by a per annum rate of 2.0% during the first 90-day period immediately following the event of default and will increase an additional 2.0% per annum during each subsequent 90-day period until the event of default has been cured, but in no event will such increase exceed a per annum rate of 6.0%. The Company may redeem all the outstanding principal amount of the Note if the Company enters into a binding agreement for a change of control of the Company or if the closing sale price of the Company’s common stock exceeds 300% of the conversion price for thirty (30) consecutive calendar days. If the Company elects to redeem the Note, the redemption price will be equal to 115% of the greater of (i) the amount to be redeemed (as calculated through the redemption date) and (ii) the product of (A) the conversion rate with respect to such amount in effect at such time as the holders deliver a redemption notice and (B) the greatest closing sale price of the Company’s common stock on any trading day during the period starting on the date the Company elects to redeem the note and ending on the trading day immediately prior to the date the Company is required to pay the redemption amount. Registration Rights Agreement In connection with the potential conversion of the Note, the Company and ABBTV entered into a Registration Rights Agreement (the Registration Rights Agreement”) pursuant to which the Company agreed to file a registration statement providing for the resale of the securities issuable upon a conversion of the Note. The registration statement was filed May 11, 2012. The registration statement must be declared effective by the Securities and Exchange Commission (the “SEC”) no later than 90 days after the issuance date of the Note (or, in the event of a “full review” by the SEC, no later than 120 days after such issuance date). The Company will be required to pay liquidated damages to the Investor as set forth in the Registration Rights Agreement if it fails to meet these deadlines. Amendment to Warrant In connection with the Convertible Note Purchase Agreement, the Company and ABBTV entered into an Amendment to Warrant (“Warrant Amendment”), amending that certain warrant to purchase up to 1,041,667 shares of common stock of the Company (the “Warrant”), which the Company issued to the ABBTV on January 13, 2011. The Warrant Amendment reduces the exercise price applicable to the Warrant from $4.91 per share to $2.50 per share. As a result of these agreements, the Company recorded a long term note of $5 million, which is presented in the March 31, 2012 balance sheet net the discount represented by the value of the related amendment to warrant. The discount was determined based on the difference in the value of the original warrant immediately prior to the amendment, and the value of the warrant immediately following the amendment. The reprice calculation resulted in a discount of $122 thousand. At March 31, 2012, the total long term liability balance relating to the convertible note was $5 million, less a discount of $0.1 million.

Notes Payable

3 Months Ended

Mar. 31, 2012

Note 8 – Notes Payable

On January 16, 2007, the Company purchased an office building for an aggregate price of $576.0 thousand. Half of the aggregate price of $288.0 thousand was paid in cash and the remaining balance of $288.0 thousand was structured as an interest-only loan. The loan carried an interest rate of 6.75% calculated annually, with monthly interest-only payments due beginning on February 16, 2007. The Company paid $100.0 thousand in connection with the refinance of the property on January 20, 2012. The remaining balance of $187 thousand is structured as an interest-only loan, bears an interest rate of 7.0% calculated annually, with monthly payments in the amount of $1.1 thousand due on or before January 16, 2014, with the possibility of an extension to January 16, 2016. The loan is secured by a deed of trust on the office building.

On July 15, 2011, the Company signed a Certificate of Acceptance under a Master Lease Agreement with Cisco Capital for equipment cost at $1.8 million, which was determined to be a capital lease. This 18-month capital lease of equipment obligated the Company to $2.1 million of lease payments starting August 1, 2011. The equipment covered by this lease was to be utilized by the Company in furthering the deployment of home energy management systems. On January 20, 2012 the Company and Cisco Capital together with Cisco Systems entered into a Settlement Agreement and Release following notification to the Company by Cisco Systems of their decision not to continue to provide certain services related to the equipment subject to the lease. The settlement agreement had the effect of terminating the lease, with the Company retaining a small portion of the equipment called for in the original lease, and returning the remainder. Interest payments previously accrued and unpaid under the lease agreement were liquidated through a final settlement calling for a payment from the Company to Cisco Capital of $10 thousand and a payment from Cisco Capital to the Company of $63 thousand. As a result of the Settlement Agreement and Release, in the March 31, 2012 financial statements we recorded a $147 thousand reversal of previously accrued interest expense. At March 31, 2012, the total liability balance relating to the capital lease obligation was $0.

March 13, 2012 Financing Agreements:

Convertible Note Purchase Agreement

The Company and ABBTV entered into a Convertible Note Purchase Agreement (the “Convertible Note Purchase Agreement”), pursuant to which the Company agreed to issue and sell, and the Investor agreed to purchase, $5 .0 million in aggregate principal amount of a 5.05% Unsecured Convertible Note due 2015 (the Note”). The Convertible Note Purchase Agreement contains customary representations, warranties and agreements by the Company. In addition, the Company has agreed to indemnify the Investor against certain liabilities, including liabilities under the Securities Act, or to contribute to payments the Investor may be required to make in respect of those liabilities.

5.05% Unsecured Convertible Note Due 2015

The Note matures on March 13, 2015 and bears interest at a rate of 5.05% per annum, payable quarterly in arrears in cash on the final day of each fiscal quarter beginning on March 31, 2012. The Note is the unsecured obligation of the Company and is senior to the Company’s preferred stock and common stock and other unsecured debt. The Note is convertible into shares of the Company’s common stock at any time, in whole or in part, at the option of the holder at a per share conversion price equal to $1.27, subject to adjustment for stock splits, stock dividends, combinations and other corporate transactions.

Events of default under the Note include, among others, payment defaults, cross-defaults, the Company’s common stock is suspended from trading for a period of time or no longer listed on an eligible trading market, and certain bankruptcy-type events involving the Company or certain subsidiaries. Upon an event of default, the holder may elect to require the Company to redeem all or any portion of the outstanding principal amount of the Note for a price equal to the greater of (i) the amount to be redeemed (as calculated through the redemption date) and (ii) the product of (A) the conversion rate with respect to such amount in effect at such time as the holders deliver a redemption notice and (B) the greatest closing sale price of the Company’s common stock on any trading day during the period starting on the date immediately preceding the event of default and ending on the trading day immediately prior to the date the Company is required to pay the redemption amount. In addition, upon an event of default the interest rate on the Note will increase by a per annum rate of 2.0% during the first 90-day period immediately following the event of default and will increase an additional 2.0% per annum during each subsequent 90-day period until the event of default has been cured, but in no event will such increase exceed a per annum rate of 6.0%.

The Company may redeem all the outstanding principal amount of the Note if the Company enters into a binding agreement for a change of control of the Company or if the closing sale price of the Company’s common stock exceeds 300% of the conversion price for thirty (30) consecutive calendar days. If the Company elects to redeem the Note, the redemption price will be equal to 115% of the greater of (i) the amount to be redeemed (as calculated through the redemption date) and (ii) the product of (A) the conversion rate with respect to such amount in effect at such time as the holders deliver a redemption notice and (B) the greatest closing sale price of the Company’s common stock on any trading day during the period starting on the date the Company elects to redeem the note and ending on the trading day immediately prior to the date the Company is required to pay the redemption amount.

Registration Rights Agreement

In connection with the potential conversion of the Note, the Company and ABBTV entered into a Registration Rights Agreement (the Registration Rights Agreement”) pursuant to which the Company agreed to file a registration statement providing for the resale of the securities issuable upon a conversion of the Note. The registration statement was filed May 11, 2012. The registration statement must be declared effective by the Securities and Exchange Commission (the “SEC”) no later than 90 days after the issuance date of the Note (or, in the event of a “full review” by the SEC, no later than 120 days after such issuance date). The Company will be required to pay liquidated damages to the Investor as set forth in the Registration Rights Agreement if it fails to meet these deadlines.

Amendment to Warrant

In connection with the Convertible Note Purchase Agreement, the Company and ABBTV entered into an Amendment to Warrant (“Warrant Amendment”), amending that certain warrant to purchase up to 1,041,667 shares of common stock of the Company (the “Warrant”), which the Company issued to the ABBTV on January 13, 2011. The Warrant Amendment reduces the exercise price applicable to the Warrant from $4.91 per share to $2.50 per share.

As a result of these agreements, the Company recorded a long term note of $5 million, which is presented in the March 31, 2012 balance sheet net the discount represented by the value of the related amendment to warrant. The discount was determined based on the difference in the value of the original warrant immediately prior to the amendment, and the value of the warrant immediately following the amendment. The reprice calculation resulted in a discount of $122 thousand. At March 31, 2012, the total long term liability balance relating to the convertible note was $5 million, less a discount of $0.1 million.