4. Securities Offerings

April 2019 Class A Common Stock Offering

On April 2, 2019, Company closed an offering and sale of (a) “Primary Units,” each consisting of one share of the Company’s Class A common stock and a Series R Warrant to purchase one share of Class A common stock (the “Series R Warrant”), and (b) “Alternative Units,” each consisting of a Prepaid Series S Warrant to purchase one share of Class A common stock (the “Series S Warrants”) and a Series R Warrant to purchase one share of Class A common stock, pursuant to the Securities Purchase Agreement, dated as of April 2, 2019, by and among the Company and three institutional and accredited investors (the “Investors”) referred to herein as the “April 2019 Offering”. As a result, the Company issued 15,938,280 shares of Class A common stock, Series R Warrants to purchase 17,368,421 shares of Class A common stock, and Series S Warrants to purchase 1,430,141 shares of Class A common stock. The purchase price for a Primary Unit was $0.19 and the purchase price for an Alternative Unit was $0.18.  

The Series R Warrant is exercisable at any time after issuance and will remain exercisable for a period of five years thereafter at an exercise price of $0.20 per share, subject to adjustments for stock splits and similar events. The Series S Warrant is exercisable immediately after issuance and for a period of five years thereafter at an exercise price of $0.19 per share, of which $0.18 was paid at the closing with $0.01 per share payable upon exercise.

The Company received net proceeds of approximately $2.9 million at the closing, after deducting commissions to the placement agents and offering expenses payable by the Company associated with the offering.

In connection with the closing of the offering, the Company paid a cash fee of $231,000 to the placement agent for the offering. The Company also reimbursed $5,000 of the placement agent’s expenses and $35,000 of legal expenses of the placement agent. In addition, the Company issued a warrant to purchase 1,389,474 shares of Class A common stock to the placement agent.

The Series R Warrants have been accounted for in accordance with ASC 480. The Series R Warrants are accounted for as liabilities due to provisions allowing the Investors to request redemption in cash, upon a change of control or failure to timely deliver shares of Class A common stock upon exercise. The Company classifies these common stock warrant liabilities on the Condensed Consolidated Balance Sheet as long-term liabilities due to their maturity in 5 years. The Series R Warrants are revalued at each balance sheet date subsequent to their initial issuance. See Note 10. Fair Value Measurements for information about the techniques we use to measure the fair value of our Series R Warrants.

The Series S Warrants are derivatives and have been accounted for in accordance with ASC 815. The derivatives do not meet the criteria for equity classification and have been recorded at their fair value on the Condensed Consolidated Balance Sheets as a long-term liability due to their maturity in 5 years. Any changes in the fair value of the conversion options have been recorded as a gain or loss directly on the Condensed Consolidated Statement of Operations. See Note 10. Fair Value Measurements for information about the techniques we use to measure the fair value of our derivative instruments.

The placement agent warrants have been accounted for as non-employee compensation in accordance with ASC 718 upon adoption of ASU 2018-07 which became effective for the Company on January 1, 2019. The warrants were issued to the placement agents for their assistance with the April 2019 Offering and do not meet the requirements for liability classification. Additionally, the placement agent warrants contain a redemption feature which is not solely within the control of the Company resulting in temporary equity presentation on the Condensed Consolidated Balance Sheet as of September 30, 2019. They have been reflected at their grant date fair value and will be reassessed if it becomes probable that the placement agent warrants will be redeemable.

Rights Offering

On September 30, 2019, the Company filed an offering statement on Form 1-A with the Securities and Exchange Commission (“SEC”) under Regulation A for a subscription Rights Offering (“Rights Offering”). Under the Rights Offering, RGS will distribute to each holder of its Class A common stockholders and each holder of outstanding warrants to purchase Class A common stock, ten non-transferable subscription rights, each allowing the holder to purchase one share of Series 1 non-convertible preferred stock for $10 per share for each one share of Class A common stock owned or purchasable under such warrants as of a to-be-determined record date. Each share of the preferred stock will be entitled to a dividend representing a 12% yield on the purchase price, payable quarterly, in cash or in additional shares of Series 1 preferred stock, at the Company’s option, and have 100 votes on all matters submitted to a vote of the holders of Class A common stock. The Form 1-A offering circular covers an offering of up to $20,000,000 of Series 1 preferred stock. The Company intends to use the proceeds for commercialization of its POWERHOUSE™ solar shingle and general corporate purposes. The Company intends the Series 1 preferred stock to be qualified to trade in the over-the-counter market and to be quoted on the OTCQX marketplace operated by the OTC Markets Group.  On October 30, 2019, November 7, 2019 and November 12, 2019, the Company filed an amendments to the Form 1-A to address SEC comments and make updates.