FTC Solar Inc

Previous wording

FTC Solar, Inc. (the “Company”, “we”, “our”, or “us”) was founded in 2017 and is incorporated in the state of Delaware. In April 2021, we completed an initial public offering ("IPO"), and our common stock began trading on the Nasdaq Global Market under the symbol “FTCI”.

Current wording

FTC Solar, Inc. (the “Company”, “we”, “our”, or “us”) was founded in 2017 and is incorporated in the state of Delaware. In April 2021, we completed an initial public offering ("IPO"), and our common stock currently trades on the Nasdaq Capital Market under the symbol “FTCI”.

Previous wording

Government Regulations. Changes in the U.S. trade environment, including the imposition of import tariffs, AD/CVD investigations and the UFLPA, which became effective in June 2022, can have an impact on the timing of developer projects. The UFLPA resulted in new rules for module importers and reviews by CBP. There is currently uncertainty in the market around achieving full compliance with UFLPA, whether related to sufficient traceability of materials or other factors. 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 and the impact of AD/CVD and UFLPA on our business by reducing our reliance on China and enhancing our U.S.-based supply chain, including through our investment in Alpha Steel, as described further in Note 3, "Equity method investment" in Part I, Item 1 of this Form 10-Q. As an example, we have reduced our reliance on suppliers in China in terms of meeting our supply chain requirements from 90% in 2019 to less than 20% as of the date of this Quarterly Report. As of March 31, 2024, we have qualified suppliers outside of China for certain of our commodities and we continue to work to have second-source capability for all Chinese-manufactured components to help reduce the extent to which our supply chain for U.S.-based projects is subject to existing tariffs and to be able to quickly address potential future regulatory and governmental policy changes. We have entered into partnerships with manufacturers based in the United States, Hong Kong, India, Mexico, Canada, Spain, Brazil, Turkey, Saudi Arabia, Thailand, Vietnam and Korea to diversify our supply chain and optimize costs. On June 6, 2022, President Biden issued an Executive Order allowing U.S. solar deployers to import solar modules and cells from Cambodia, Malaysia, Thailand and Vietnam free from certain duties for 24 months, along with other incentives designed to accelerate U.S. domestic production of clean energy technologies. However, on December 29, 2023, Auxin Solar, Inc. and Concept Clean Energy, Inc. filed suit in the U.S. Court of International Trade challenging the legal basis for the moratorium and implementing regulations. If the suit proves successful, solar module importers could owe retroactive duties on goods that have already cleared customs.

Current wording

Government Regulations. Changes in the U.S. trade environment, including the imposition of import tariffs, AD/CVD investigations and the UFLPA, which became effective in June 2022, can have an impact on the timing of developer projects. The UFLPA resulted in new rules for module importers and reviews by CBP. There is currently uncertainty in the market around achieving full compliance with UFLPA, whether related to sufficient traceability of materials or other factors. 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 and the impact of AD/CVD and UFLPA on our business by reducing our reliance on China and enhancing our U.S.-based supply chain, including through our investment in Alpha Steel, as described further in Note 3, "Equity method investment" in Part I, Item 1 of this Form 10-Q. As an example, we have reduced our reliance on suppliers in China in terms of meeting our supply chain requirements from 90% in 2019 to less than 20% as of the date of this Quarterly Report. As of June 30, 2024, we have qualified suppliers outside of China for certain of our commodities and we continue to work to have second-source capability for all Chinese-manufactured components to help reduce the extent to which our supply chain for U.S.-based projects is subject to existing tariffs and to be able to quickly address potential future regulatory and governmental policy changes. We have entered into partnerships with manufacturers based in the United States, Hong Kong, India, South Africa, Spain, Turkey, Thailand and Vietnam to diversify our supply chain and optimize costs. On June 6, 2022, President Biden issued an Executive Order allowing U.S. solar deployers to import solar modules and cells from Cambodia, Malaysia, Thailand and Vietnam free from certain duties for 24 months, along with other incentives designed to accelerate U.S. domestic production of clean energy technologies. However, on December 29, 2023, Auxin Solar, Inc. and Concept Clean Energy, Inc. filed suit in the U.S. Court of International Trade challenging the legal basis for the moratorium and implementing regulations. If the suit proves successful, solar module importers could owe retroactive duties on goods that have already cleared customs.

Previous wording

Disruptions in Transportation and Supply Chain. Our costs are affected by the costs of certain components and materials, such as steel, motors and micro-chips, as well as transportation costs. Current market conditions and international conflicts that constrain the supply of materials and disrupt the flow of materials from international vendors impact the cost of our products and services, along with overall rates of inflation in the global economy, which have been higher than pre-COVID 19 pandemic historical rates. While certain costs have moderated compared to pre-pandemic rates, domestic fuel prices continue to be elevated. These cost increases and decreases impact our operating margins.

Current wording

Disruptions in Transportation and Supply Chain. Our costs are affected by the costs of certain components and materials, such as steel, motors and micro-chips, as well as transportation costs. Current market conditions and international conflicts that constrain the supply of materials and disrupt the flow of materials from international vendors can impact the cost of our products and services, along with overall rates of inflation in the global economy, which have been higher than pre-COVID 19 pandemic historical rates. While certain costs have moderated compared to pre-pandemic rates, domestic fuel prices continue to be elevated. Although we don't believe inflation has had a material impact on our results as presented in this report, such cost increases and decreases could impact our future operating margins, if material.

Previous wording

We have taken steps to expand and diversify our manufacturing partnerships and have adjusted our modes of transportation to mitigate the impact of headwinds that might arise in the global supply chain and logistics markets. As an example, we modified our ocean freight from previously using charter shipments to now using containerized shipments as costs in the container market began to decrease starting in 2022. We continue to monitor the logistics markets and will continue to evaluate our use of various modes of transportation when warranted to optimize our transportation costs. Additionally, from February 2022 to September 2023, we utilized a related-party consulting firm to support us in making improvements to our processes and performance in various areas, including design, sourcing, logistics, pricing, software and our distributed generation business. For further information regarding this consulting firm, see Note 16, "Related party transactions" included in our condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report with regard to the related-party consulting firm. We also intend to maintain a sharp focus on our design-to-value initiative to continue to improve margins by reducing manufacturing and material costs of our products.

Current wording

We have taken steps to expand and diversify our manufacturing partnerships and have adjusted our modes of transportation to mitigate the impact of headwinds that might arise in the global supply chain and logistics markets. As an example, we modified our ocean freight from previously using charter shipments to now using containerized shipments as costs in the container market began to decrease starting in 2022, but more recently have begun to increase. However, we have been able to mitigate some of this increase as a result of increasing our domestic production capabilities. We continue to monitor the logistics markets and will continue to evaluate our use of various modes of transportation when warranted to optimize our transportation costs. Additionally, from February 2022 to September 2023, we utilized a related-party consulting firm to support us in making improvements to our processes and performance in various areas, including design, sourcing, logistics, pricing, software and our distributed generation business. For further information regarding this consulting firm, see Note 16, "Related party transactions" included in our condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report with regard to the related-party consulting firm. We also intend to maintain a sharp focus on our design-to-value initiative to continue to improve margins by reducing manufacturing and material costs of our products.

Previous wording

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. As an example, in August 2023, we introduced SUNOPS, a cloud-based, tracker-agnostic solar asset monitoring solution allowing asset owners and managers to evaluate the operation and performance of their solar deployments. We also intend over time 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.

Current wording

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. As an example, in August 2023, we introduced SUNOPS, a cloud-based, tracker-agnostic solar asset monitoring solution allowing asset owners and managers to evaluate the operation and performance of their solar deployments. Additionally, in May 2024, we announced the launch of our Automated Hail Stow Solution, aimed at minimizing solar panel damage caused by hail storms. This solution integrates advanced technology with meteorological data to automatically adjust the positioning of solar panels, reducing the risk of hail-related damage.

Previous wording

Impact of Climate Change. Climate change has primarily impacted our business operations by increasing demand for solar power generation and, as a result, for use of our products. While climate change has not resulted in any material negative impact to our operations to date, we recognize the risk of disruptions to our supply chain due to extreme weather events. This, among other things, has led us to expand the diversity of our supplier base and to partner with more local suppliers to reduce shipping and transportation needs. We are also increasingly partnering with larger scale steel producers rather than smaller suppliers to facilitate scaling of our operations while remaining conscious of the environmental impacts of steel manufacturing as the regulatory landscape around these high-emitting industries evolves. An example of this strategy is our investment in Alpha Steel, a U.S.-based manufacturing partnership with Taihua, a leading steel fabricator.

Current wording

While climate change has not resulted in any material negative impact to our operations to date, we recognize the risk of disruptions to our supply chain due to extreme weather events. This, among other things, has led us to expand the diversity of our supplier base and to partner with more local suppliers to reduce shipping and transportation needs. We are also increasingly partnering with larger scale steel producers rather than smaller suppliers to facilitate scaling of our operations while remaining conscious of the environmental impacts of steel manufacturing as the regulatory landscape around these high-emitting industries evolves. An example of this strategy is our investment in Alpha Steel, a U.S.-based manufacturing partnership with Taihua, a leading steel fabricator.

Previous wording

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 for (benefit from) income taxes, (ii) interest expense, net, (iii) depreciation expense, (iv) amortization of intangibles, (v) stock-based compensation, and (vi) non-routine legal fees, severance and certain other costs (credits). We also deduct the contingent gains from the disposal of our investment in an unconsolidated subsidiary 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), and (iv) the income tax expense (benefit) of those adjustments, if any. We also deduct the contingent gains from the disposal of our investment in an unconsolidated subsidiary in arriving at Adjusted Net Loss. Adjusted EPS is defined as Adjusted Net Loss on a per share basis using our weighted average diluted shares outstanding.

Current wording

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 for (benefit from) income taxes, (ii) interest expense, net, (iii) depreciation expense, (iv) amortization of intangibles, (v) stock-based compensation, and (vi) non-routine legal fees, severance and certain other costs (credits). We also deduct the contingent gains arising from earnout payments and project escrow releases relating to the disposal of our investment in an unconsolidated subsidiary 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), and (iv) the income tax expense (benefit) of those adjustments, if any. We also deduct the contingent gains arising from earnout payments and project escrow releases relating to the disposal of our investment in an unconsolidated subsidiary in arriving at Adjusted Net Loss. Adjusted EPS is defined as Adjusted Net Loss on a per share basis using our weighted average diluted shares outstanding.

Previous wording

The vast majority of our revenue in the periods presented was attributable to sales in the United States and Australia. Our revenue growth is dependent on continued growth in the number of solar tracker projects and engineering services we win in competitive bidding processes and growth 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, expand our global footprint to new emerging markets, grow our sources of production 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.

Current wording

The vast majority of our revenue in the periods presented was attributable to sales by our locations in the United States and Australia. Our revenue growth is dependent on continued growth in the number of solar tracker projects and engineering services we win in competitive bidding processes and growth 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, expand our global footprint to new emerging markets, grow our sources of production 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.

Previous wording

The decrease in product revenue for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023, was primarily due to a decrease of 72% in the amount of megawatts produced as activity was adversely impacted by customer project delays and a decline in order levels during the latter part of 2023 as compared to the same period in 2022. However, we also had an increase of 20% in ASP for the three months ended March 31, 2024, as a result of better pricing as compared to the three months ended March 31, 2023, which partially offset some of the impact of the decline in activity.

Current wording

The decrease in product revenue for the three months ended June 30, 2024, as compared to the three months ended June 30, 2023, was primarily due to a decrease of 62% in the amount of MW produced as activity was adversely impacted by customer project delays during the latter part of 2023, and continuing into 2024, as compared to the same periods in 2022 and 2023. However, we also had an increase of 10% in ASP for the three months ended June 30, 2024, as a result of better pricing as compared to the three months ended June 30, 2023, which partially offset some of the impact of the decline in activity.

Previous wording

Our gross margin percentage of revenue for the three months ended March 31, 2024 was a negative 16.7%, as compared to a positive 5.0% for the three months ended March 31, 2023.

Current wording

Our gross margin percentage of revenue for the three months ended June 30, 2024 was a negative 20.5%, as compared to a positive 6.8% for the three months ended June 30, 2023.

Previous wording

Interest expense totaled approximately $0.3 million during each of the three months ended March 31, 2024 and 2023, and primarily consisted of letter of credit and commitment fees on the Credit Facility, along with associated debt issue cost amortization. Interest income earned on our cash equivalents was approximately $0.2 million during each of the three months ended March 31, 2024 and 2023.

Current wording

Interest expense totaled approximately $0.1 million and $0.3 million during the three months ended June 30, 2024 and 2023, respectively, and primarily consisted of letter of credit and commitment fees on the Credit Facility, along with associated debt issue cost amortization. Interest income earned on our cash equivalents was approximately $0.1 million and $0.3 million during the three months ended June 30, 2024 and 2023, respectively.

Previous wording

The decrease in service revenue for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023, primarily resulted from (i) a decrease of 75% in the amount of MW delivered as a result of timing of project deliveries, (ii) lower engineering consulting and software revenues, and (iii) a decrease of 20% in ASP as compared to the three months ended March 31, 2023.

Current wording

The decrease in service revenue for the six months ended June 30, 2024, as compared to the six months ended June 30, 2023, primarily resulted from (i) a decrease of 76% in the amount of MW delivered as a result of timing of project deliveries, as well as lower production levels, (ii) lower engineering consulting and software revenues, and (iii) a decrease of 6% in ASP as compared to the six months ended June 30, 2023.

Previous wording

The decrease in cost of revenue for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023, was primarily driven by (i) a decrease of 72% in MW produced, (ii) a decrease of 75% in shipping and logistics activity and, (iii) by a reduction of 40% in the cost per MW produced as largely a result of lower direct costs due to our design to value efforts and lower (a) remediation costs, (b) obsolete and slow-moving inventory provisions and, (c) stock-based compensation expense during the current period.

Current wording

The decrease in cost of revenue for the six months ended June 30, 2024, as compared to the six months ended June 30, 2023, was primarily driven by (i) a decrease of 68% in MW produced, (ii) a decrease of 76% in shipping and logistics activity, and (iii) by lower (a) remediation costs, (b) obsolete and slow-moving inventory provisions, and (c) stock-based compensation expense during the current period.

Previous wording

We had negative gross margin for the three months ended March 31, 2024 as production volumes were not sufficient to cover certain relatively fixed overhead costs and our service revenue was not sufficient to fully cover our related shipping, transportation and warehousing costs.

Current wording

We had negative gross margin for the six months ended June 30, 2024 as (i) production volumes were not sufficient to cover certain relatively fixed overhead costs, and (ii) our service revenue was not sufficient to fully cover our warehousing and certain other costs.

Previous wording

We had positive gross margin for the three months ended March 31, 2023 due to (i) improved product average selling prices in the period, (ii) lower direct and indirect product costs resulting from our design to value efforts and (iii) positive margins on our shipping and logistics services.

Current wording

We had positive gross margin for the six months ended June 30, 2023 due to (i) better product ASP, (ii) improvements in our direct costs due to our design-to-value efforts and the impact of our cost control initiatives on indirect costs, (iii) higher production activity and (iv) positive margins on our shipping and logistics services.

Previous wording

The decrease in research and development expenses for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023, was primarily attributable to (i) lower stock-based compensation costs of $0.2 million, largely due to (a) award forfeitures resulting from a reduction in force in August 2023 and (b) the absence of stock award grants during the three months ended March 31, 2024 for incentive compensation, as compared to the issuance of such awards for incentive compensation earned during the three months ended March 31, 2023, (ii) lower spending on lab and other research activities of $0.2 million and, (iii) lower payroll costs of $0.1 million. Research and development expenses as a percentage of revenue were 11.4% for the three months ended March 31, 2024, as compared to 4.7% for the three months ended March 31, 2023. The increase in the percentage research and development costs to revenue for the three months ended March 31, 2024, is largely a function of the lower level of revenue.

Current wording

The decrease in research and development expenses for the six months ended June 30, 2024, as compared to the six months ended June 30, 2023, was primarily attributable to (i) lower stock-based compensation costs of $0.2 million, largely due to (a) award forfeitures resulting from a reduction in force in August 2023, as well as (b) the absence of stock award grants during the six months ended June 30, 2024 for incentive compensation, as compared to the issuance of such awards for incentive compensation earned during the six months ended June 30, 2023, (ii) lower spending on lab and other research activities of $0.2 million, (iii) lower payroll costs of $0.2 million due to lower average headcount, and (iv) lower software licensing and subscription costs of approximately $0.2 million. Research and development expenses as a percentage of revenue were 12.4% for six months ended June 30, 2024, as compared to 5.2% for the six months ended June 30, 2023. The increase in the percentage research and development costs to revenue for the six months ended June 30, 2024, is largely a function of the lower level of revenue.

Previous wording

The increase in selling and marketing expenses for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023, was primarily attributable to higher provisions for credit losses of $0.7 million related mainly to a charge associated with a specific customer account during the three months ended March 31, 2024 . Selling and marketing costs as a percentage of revenue were 19.0% for the three months ended March 31, 2024, compared to 4.2% for the three months ended March 31, 2023.

Current wording

The increase in selling and marketing expenses for the six months ended June 30, 2024, as compared to the six months ended June 30, 2023, was primarily attributable to (i) higher payroll expense of $0.7 million due to higher average headcount, (ii) higher provisions for credit losses of $0.4 million related mainly to a charge associated with a specific customer account during the six months ended June 30, 2024, and (iii) higher marketing, travel and professional service costs. These increased costs were partially offset by lower stock-based compensation costs of $0.5 million. Selling and marketing costs as a percentage of revenue were 18.4% for the six months ended June 30, 2024, compared to 4.9% for the six months ended June 30, 2023.

Previous wording

The decrease in general and administrative expenses for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023, was primarily attributable to $2.1 million of lower stock-based compensation expense related primarily to (i) forfeiture of awards in connection with the September 2023 termination of the Service Agreement with a related party as described further in Note 16, "Related party transactions" in Part I, Item 1 above, (ii) forfeiture of awards in connection with our reduction in force in August 2023 and executive terminations during the fourth quarter of 2023 and (iii) the absence of stock-based incentive compensation awards during the three months ended March 31, 2024, as compared to the three months ended March 31, 2023. In addition, the terminations described above contributed to lower payroll expense of $0.9 million during the three months ended March 31, 2024 and we were able to lower our insurance costs by $0.8 million and our legal costs by $0.2 million as compared to the three months ended March 31, 2023. General and administrative expenses as a percentage of revenue were 52.2% for the three months ended March 31, 2024, compared to 26.4% for the three months ended March 31, 2023, largely due to the lower level of revenue.

Current wording

The decrease in general and administrative expenses for the six months ended June 30, 2024, as compared to the six months ended June 30, 2023, was primarily attributable to $3.6 million of lower stock-based compensation expense related primarily to (i) forfeiture of awards in connection with the September 2023 termination of the Service Agreement with a related party as described further in Note 16, "Related party transactions" in Part I, Item 1 above, (ii) forfeiture of awards in connection with our reduction in force in August 2023 and executive terminations during the fourth quarter of 2023, and (iii) the absence of stock-based incentive compensation awards during the six months ended June 30, 2024, as compared to the six months ended June 30, 2023. In addition, the terminations described above contributed to lower payroll expense of $1.3 million during the six months ended June 30, 2024 and we were able to lower our insurance costs by $1.3 million and our legal costs by $0.6 million as compared to the six months ended June 30, 2023. General and administrative expenses as a percentage of revenue were 52.4% for the six months ended June 30, 2024, compared to 26.8% for the six months ended June 30, 2023, largely due to the lower level of revenue.

Previous wording

We sold our interest in our unconsolidated subsidiary, Dimension Energy LLC ("Dimension"), 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. The sales agreement with Dimension included 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 disposal date. During the three months ended March 31, 2024 and 2023, we received earnout and escrow release payments of $4.1 million and $0.9 million, respectively, that were recognized in accordance with our policy election. Since the sale of our interest in Dimension, we have received a total of $7.4 million in contingent earnout and escrow release payments through March 31, 2024.

Current wording

We sold our interest in our unconsolidated subsidiary, Dimension Energy LLC ("Dimension"), 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. The sales agreement with Dimension included 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 arising from earnout payments and project escrow releases only when those amounts become realizable in the periods subsequent to the disposal date. During the six months ended June 30, 2024 and 2023, we received earnout and escrow release payments of $4.1 million and $0.9 million, respectively, that were recognized in accordance with our policy election. Since the sale of our interest in Dimension, we have received a total of $7.4 million in contingent earnout and escrow release payments through June 30, 2024.

Previous wording

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.

Current wording

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 our level of production, contract payment terms, timely collections from our customers and the strength of our gross margins.

Previous wording

We have incurred cumulative losses since inception and have a history of cash outflows from operations. As of March 31, 2024, we had $14.0 million of cash on hand, $45.7 million of working capital and approximately $64.9 million of remaining capacity available for future sales of our common stock under our ATM program as defined and described further in Note 4 in the notes to condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report. There can be no assurance that we will be able to sell any additional shares of our common stock under the ATM program and no assurance regarding the price at which we will be able to sell such shares, and any sales of our common stock under the ATM program may be at prices that result in additional dilution to our existing stockholders. On December 22, 2023, we received notification from The Nasdaq Stock Market LLC (“Nasdaq”) that we were not in compliance with the requirement to maintain a minimum closing bid price of $1.00 per share, as set forth in Nasdaq Listing Rule 5450(a)(1), because the closing bid price of the Company’s common stock was below $1.00 per share for 30 consecutive business days. The notification does not impact the listing of our common stock on the Nasdaq Global Market at this time.

Current wording

We have incurred cumulative losses since inception and have a history of cash outflows from operations. As of June 30, 2024, we had $10.8 million of cash on hand, $33.0 million of working capital and approximately $64.9 million of remaining capacity available for future sales of our common stock under our ATM program as defined and described further in Note 4, "ATM program" in the notes to condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report. There can be no assurance that we will be able to sell any additional shares of our common stock under the ATM program and no assurance regarding the price at which we will be able to sell such shares, and any sales of our common stock under the ATM program may be at prices that result in additional dilution to our existing stockholders.

Previous wording

In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we have a period of 180 calendar days from the date of notification, or until June 19, 2024, to regain compliance with the minimum bid price requirement. During this period, our common stock will continue to trade on the Nasdaq Global Market. If at any time before June 19, 2024 the bid price of our common stock closes at or above $1.00 per share for a minimum of ten consecutive business days, Nasdaq will provide written notification that we have achieved compliance with this minimum bid price requirement.

Current wording

On December 22, 2023, we received notification from The Nasdaq Stock Market LLC (“Nasdaq”) that we were not in compliance with the requirement to maintain a minimum closing bid price of $1.00 per share, as set forth in Nasdaq Listing Rule 5450(a)(1), because the closing bid price of the Company’s common stock was below $1.00 per share for 30 consecutive business days. In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we were initially given a period of 180 calendar days from the date of notification, or until June 19, 2024, to regain compliance with the minimum bid price requirement, which was not achieved. Effective May 31, 2024, trading in our common stock transferred from the Nasdaq Global Market to the Nasdaq Capital Market. On June 21, 2024, we received notification from Nasdaq that we were approved for an additional 180-day period, or until December 17, 2024, to cure the bid price deficiency in accordance with Nasdaq Listing Rule 5810(c)(3)(A). We are currently evaluating all of our options to achieve compliance with Nasdaq requirements for continued listing, which may include effecting a reverse stock split, if necessary, at least 10 days prior to December 17, 2024. At this time, our common stock continues to trade on the Nasdaq Capital Market under the symbol "FTCI". If at any time before December 17, 2024 the bid price of our common stock closes at or above $1.00 per share for a minimum of ten consecutive business days, Nasdaq will provide written notification that we have achieved compliance with this minimum bid price requirement. If we fail to regain compliance with the minimum bid price requirement during this second 180-day period, then Nasdaq will notify us that our common stock is subject to delisting.

Previous wording

Also, as of March 31, 2024, we had a material contractual obligation that could require us to make additional capital contributions of up to $1.6 million to Alpha Steel, as described further in Note 3, "Equity method investment" in the notes to condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report.

Current wording

At June 30, 2024, we had a contractual obligation that could require us to make additional capital contributions of up to $0.8 million to Alpha Steel, as well as make a minimum level of purchases from Alpha Steel, as described further in Note 3, "Equity method investment" in the notes to condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report. In the event we were to fail to meet our minimum required purchase commitments during a specified period, including the current period from January 1, 2024 to June 30, 2025, we may be required to make a cash payment for the net profit attributable to any unfilled requirements, calculated as specified in the agreement, in an amount not to exceed $4.0 million in the aggregate.

Previous wording

We have taken steps to expand and diversify our manufacturing partnerships and have adjusted our modes of transportation to mitigate the impact of headwinds that might arise in the global supply chain and logistics markets. As an example, we modified our ocean freight from previously using charter shipments to now using containerized shipments as costs in the container market began to decrease starting in 2022. We continue to monitor the logistics markets and will continue to evaluate our use of various modes of transportation when warranted to optimize our transportation costs. Additionally, from February 2022 to September 2023, we utilized a related-party consulting firm to support us in making improvements to our processes and performance in various areas, including design, sourcing, logistics, pricing, software and our distributed generation business. For further information regarding this consulting firm, see Note 16, "Related party transactions" in the notes to condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report.

Current wording

We have taken steps to expand and diversify our manufacturing partnerships and have adjusted our modes of transportation to mitigate the impact of headwinds that might arise in the global supply chain and logistics markets. As an example, we modified our ocean freight from previously using charter shipments to now using containerized shipments as costs in the container market began to decrease starting in 2022, but more recently have begun to increase. However, we have been able to mitigate some of this increase as a result of increasing our domestic production capabilities. We continue to monitor the logistics markets and will continue to evaluate our use of various modes of transportation when warranted to optimize our transportation costs. Additionally, from February 2022 to September 2023, we utilized a related-party consulting firm to support us in making improvements to our processes and performance in various areas, including design, sourcing, logistics, pricing, software and our distributed generation business. For further information regarding this consulting firm, see Note 16, "Related party transactions" in the notes to condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report. These steps, and others, have allowed us to improve our business processes and lower our product cost structure, thus improving our direct product margins in recent periods. As an example, we generated positive gross profit during each quarter in 2023. Additionally, we have made substantial progress in lowering our operating costs, showing significant improvement since becoming a public company, as well as in comparison to the prior year periods included in this Quarterly Report. These combined factors have allowed us to significantly lower the estimated quarterly revenue level that we believe is required to break even. However, our low revenue levels for the three and six months ended June 30, 2024, have prevented us from continuing to show positive quarterly gross profit in 2024, similar to 2023, as revenues have not been sufficient to fully cover our indirect costs.

Previous wording

Similar to previous periods, we continue to evaluate our opportunities in 2024 to address existing market challenges, our cost structure and our historical use of cash. Further, in 2023, we introduced a new mounting solution to support the installation and use of U.S.-manufactured thin-film modules, Pioneer, our 1P solar tracker solution became certified, and we introduced SUNOPS, a cloud-based, tracker agnostic solar asset monitoring solution allowing asset owners and managers to evaluate the operation and performance of their solar deployments. Additionally, we have seen improvements in the logistics markets and easing of supply chain constraints since 2022. These factors contributed to us having positive gross profit during each quarter in 2023, a first since our IPO in April 2021.

Current wording

Similar to previous periods, we continue to evaluate additional opportunities in 2024 to address existing market challenges, our cost structure and our historical use of cash. In 2023, (i) we introduced a new mounting solution to support the installation and use of U.S.-manufactured thin-film modules, (ii) Pioneer, our 1P solar tracker solution, became certified, and (iii) we introduced SUNOPS, a cloud-based, tracker agnostic solar asset monitoring solution allowing asset owners and managers to evaluate the operation and performance of their solar deployments. We have continued to enhance our customer offerings in 2024, including the launch of our Automated Hail Stow Solution which is aimed at minimizing solar panel damage caused by hail storms. As described elsewhere in this Quarterly Report, we also have recently added experienced and accomplished leadership talent to head our North America and International sales organizations and have named a new President and Chief Executive Officer with significant experience in the solar industry who will join us on August 19, 2024.

Previous wording

Management believes that our existing cash on hand, including cash received in April 2024 as a result of our agreement with a major customer as discussed further in Note 18, "Subsequent events" in the notes to condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report, as well as the continuing impact of certain of the actions described above and our expectations of (i) improved market conditions, (ii) the expected timing of customer project activity, including activity related to certain large project awards received in 2023, and (iii) positive results in recent periods from our efforts to increase our direct product margins, will allow us to grow profitably and generate positive cash flow from operations during the next twelve months in amounts that will be sufficient, along with our other available resources such as our existing working capital and, if conditions become more conducive, the remaining capacity available for future sales of our common stock under our ATM program, to fund our operations for at least one year from the date of issuance of the condensed consolidated financial statements.

Current wording

Management believes that our existing cash on hand, as well as the continuing impact of certain of the actions described within this memo and our expectations of (i) the expected timing of future customer project activity, including activity related to certain large project awards previously received, and (ii) the positive results in recent periods from our efforts to increase our direct product margins and lower our cost structure, will allow us to grow profitably and generate positive cash flow from operations during the next twelve months in amounts that will be sufficient, along with our other available resources such as our existing working capital and, the remaining capacity available for future sales of our common stock under our ATM program, to fund our operations for at least one year from the date of issuance of our condensed consolidated financial statements.

Previous wording

While there are already many underlying drivers of growth in the solar industry, the expected positive impact on demand for our products, or the timing of construction activity by existing customers and solar project developers, could take longer than expected to occur. In addition, domestic and international market conditions could deteriorate significantly from what we currently expect, and regulatory and international trade policies could become more stringent as a result of (i) findings from an ongoing Solar Circumvention Investigation in response to a petition by Auxin Solar, Inc. of claims related to alleged circumvention of AD/CVD by solar manufacturers in certain Southeast Asian countries, (ii) enforcement of the UFLPA passed by the U.S. Congress and signed into law by President Biden on December 23, 2021, by CBP, and (iii) other factors, which may result in a need for us to issue additional debt or obtain new equity financing to adequately fund our existing operations beyond the next twelve months. We continue to actively explore options to obtain additional sources of capital through the issuance of new debt, asset financing or other potential measures for our longer-term needs. However, we may be unable to obtain any desired additional financing on terms favorable to us, or at all, depending on market and other conditions, which could result in curtailment of our current operations and our ability to further invest in our products and new technology. The ability to raise additional financing depends on numerous factors, some of which that are outside of our control, including macroeconomic factors such as the impact of inflation, the level of interest rates, supply chain or other effects from the ongoing conflicts in the Ukraine and the Middle East, general market conditions, the health of financial institutions (including recent bankruptcies and financial difficulties involving certain regional banks and related impacts that have occurred and continue to occur in the banking industry), investors' and lenders' assessments of our prospects and the prospects of the solar industry in general and the ability of our common stock to continue to trade in active markets.

Current wording

While there are already many underlying drivers of growth in the solar industry, the expected positive impact on demand for our products from these drivers of growth could take longer than expected to occur because the timing of construction activity by existing customers and solar project developers can be uncertain. As an example, we have experienced in recent periods customer delays caused by interconnection issues, equipment shortages and the timing and ability of obtaining financing at acceptable levels. In addition, domestic and international market conditions, including differences between margins on international and U.S. projects, could deteriorate significantly from what we currently expect, and regulatory and international trade policies could become more stringent as a result of (i) findings from an ongoing Solar Circumvention Investigation in response to a petition by Auxin Solar, Inc. of claims related to alleged circumvention of AD/CVD by solar manufacturers in certain Southeast Asian countries, (ii) enforcement of the UFLPA passed by the U.S. Congress and signed into law by President Biden on December 23, 2021, by CBP, and (iii) other factors, which may result in a need for us to issue additional debt or obtain new equity financing to adequately fund our existing operations beyond the next twelve months. We continue to actively explore options to obtain additional sources of capital through the issuance of new debt, asset financing or other potential measures for our longer-term needs. However, we may be unable to obtain any desired additional financing on terms favorable to us, or at all, depending on market and other conditions, which could result in curtailment of our current operations and our ability to further invest in our products and new technology. The ability to raise additional financing depends on numerous factors, some of which are outside of our control, including macroeconomic factors such as the impact of inflation, the level of interest rates, supply chain or other effects from the ongoing conflicts in the Ukraine and the Middle East, general market conditions, the health of financial institutions (including recent bankruptcies and financial difficulties involving certain regional banks and related impacts that have occurred and continue to occur in the banking industry), investors' and lenders' assessments of our prospects and the prospects of the solar industry in general and the ability of our common stock to continue to trade in active markets.

Previous wording

During the three months ended March 31, 2024, we used approximately $8.1 million of cash to fund a portion of our current period expenditures for personnel and facilities, legal and professional fees, insurance, research and development and various other operating activities. This compares to approximately $4.1 million of cash used during the three months ended March 31, 2023, also to fund a portion of our prior period expenditures for various operating activities as described above.

Current wording

During the six months ended June 30, 2024, we used approximately $17.1 million of cash to fund a portion of our current period expenditures for personnel and facilities, legal and professional fees, insurance, research and development and various other operating activities. This compares to approximately $9.2 million of cash used during the six months ended June 30, 2023, also to fund a portion of our prior period expenditures for various operating activities as described above.

Previous wording

Approximately $3.8 million of cash was also used for working capital and other increases during the three months ended March 31, 2024, primarily as a result of production activity and the timing of customer receipts and vendor payments. During the three months ended March 31, 2023, we used approximately $4.3 million of cash for working capital and other increases as a result of production activity and the timing of vendor payments.

Current wording

Approximately $1.5 million of cash was generated from working capital and other decreases during the six months ended June 30, 2024, primarily as a result of production activity and the timing of customer receipts, including the settlement reached with a major customer as described further in Note 5, "Accounts receivable, net" in the notes to condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report, and payments to our vendors. During the six months ended June 30, 2023, we used approximately $21.6 million of cash for working capital and other increases as a result of production activity and the timing of customer receipts, net of vendor payments.

Previous wording

During the three months ended March 31, 2024, we made an additional equity investment of $1.0 million in Alpha Steel, a manufacturing partnership with Taihua, in which we hold a 45% interest. Pursuant to our agreement with Alpha Steel, we could be required to make up to $1.6 million in future additional capital contributions as Alpha Steel continues to expand production. We also spent nearly $0.4 million, mainly for tooling and new computer and IT equipment during the three months ended March 31, 2024. In addition, we received $4.1 million of contingent earnout payments in connection with the June 2021 sale of our equity interest in Dimension.

Current wording

During the six months ended June 30, 2024, we made additional equity investments of $1.8 million in Alpha Steel, a manufacturing partnership with Taihua, in which we hold a 45% interest. Pursuant to our agreement with Alpha Steel, we could be required to make up to $0.8 million in future additional capital contributions as Alpha Steel continues to expand production. We also spent nearly $1.1 million, mainly for tooling and new computer and IT equipment, as well as leasehold improvements, during the six months ended June 30, 2024. In addition, we received $4.1 million of contingent earnout payments in connection with the June 2021 sale of our equity interest in Dimension.

Previous wording

During the three months ended March 31, 2023, we made an initial equity investment of $0.9 million in Alpha Steel and received $0.9 million in contingent payments from escrow in connection with the sale of our equity interest in Dimension as described above.

Current wording

During the six months ended June 30, 2023, we made an initial equity investment of $0.9 million in Alpha Steel and received $0.9 million in contingent payments from escrow in connection with the sale of our equity interest in Dimension as described above.

Previous wording

During the three months ended March 31, 2023, we began selling newly issued shares of our common stock in various daily transactions under our ATM program, receiving cash proceeds of nearly $5.5 million. We also received $0.1 million of proceeds from employee exercises of stock options.

Current wording

During the six months ended June 30, 2023, we began selling newly issued shares of our common stock in various daily transactions under our ATM program, receiving cash proceeds of $20.6 million. We also received $0.1 million of proceeds from employee exercises of stock options.

Previous wording

On April 30, 2021, we entered into our Credit Facility with various lenders, including Barclays Bank PLC, as issuing lender, the swingline lender and as administrative agent providing aggregate commitments of up to $100.0 million. We had not made any draws on our Credit Facility as of March 31, 2024. However, as of March 31, 2024, we had $1.9 million in letters of credit outstanding that reduced our unused borrowing capacity to approximately $98.1 million.

Current wording

Our Credit Facility, entered into in 2021 with various lenders, including Barclays Bank PLC, as issuing lender, the swingline lender and as administrative agent, expired unused on April 30, 2024. The Credit Facility has not currently been replaced.

Previous wording

Adjustments to the allowance are largely dependent on historical experience involving amounts previously collected from our customers in recent years or based on specific changes in a customer's ability to pay. As an example, we recognized a $0.6 million credit loss provision in our selling and marketing expenses during the three months ended March 31, 2024, related to indications received of a specific customer's inability to fully pay amounts owed. Historical experience, when used in making such adjustments, may not reflect current actual experience.

Current wording

Adjustments to the allowance are largely dependent on historical experience involving amounts previously collected from our customers in recent years or based on specific changes in a customer's ability to pay. As an example, we recognized a $0.6 million credit loss provision in our selling and marketing expenses during the six months ended June 30, 2024, primarily related to a specific customer's inability to fully pay amounts owed. Historical experience, when used in making such adjustments, may not reflect current actual experience.

Previous wording

In estimating the fair value of the consolidated company, we used our market capitalization based on our closing stock price on the Nasdaq Global Market at March 31, 2024. Our daily closing stock price is affected by numerous factors, some of which may not directly involve the operations of the company, and, historically, has demonstrated high volatility.

Current wording

In estimating the fair value of the consolidated company, we used our market capitalization based on our closing stock price on the Nasdaq Capital Market at June 30, 2024. Our daily closing stock price is affected by numerous factors, some of which may not directly involve the operations of the company and, historically, has demonstrated high volatility.

Previous wording

We did not identify any impairments of our long-lived assets, intangible assets or goodwill during the three months ended March 31, 2024 and 2023.

Current wording

We did not identify any impairments of our long-lived assets, intangible assets or goodwill during the six months ended June 30, 2024 and 2023.