|6 Months Ended|
Jun. 30, 2013
|Subsequent Events [Abstract]|
As discussed in Note 1, Ener-Core Power entered into an Agreement and Plan of Merger (the “Merger Agreement”) with the Company and Flex Merger Acquisition Sub, Inc., a Delaware corporation and wholly owned subsidiary of the Company (“Merger Sub”), pursuant to which the Merger Sub would merge with and into Ener-Core Power, with Ener-Core Power as the surviving entity (the “Merger”). Prior to the merger, the Company was a public reporting “shell company,” as defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended. The Merger Agreement has been approved by the boards of directors of each of the parties to the Merger Agreement. In April 2013, the pre-merger Company effected a 30-for-1 forward split of its common stock. All share amounts have been retroactively restated to reflect the effect of the stock split.
On July 1, 2013, Ener-Core Power completed the Merger with the Company. Upon completion of the merger, the operating company immediately became a public company. The Merger was accounted for as a “reverse merger” and recapitalization since the stockholders of Ener-Core Power owned a majority of the outstanding shares of the common stock immediately following the completion of the transaction, the stockholders of Ener-Core Power have significant influence and the ability to elect or appoint or to remove a majority of the members of the governing body of the combined entity, and Ener-Core Power’s senior management dominates the management of the combined entity immediately following the completion of the transaction in accordance with the provision of ASC 805, “Business Combinations.” In connection with the reverse merger, certain stockholders of the pre-merger Company returned on aggregate of 120,520,008 shares of the Company’s common stock for cancellation. This cancellation has been retroactively accounted for as of the inception of Ener-Core Power on November 12, 2011. Accordingly, Ener-Core Power was deemed to be the accounting acquirer in the transaction and, consequently, the transaction was treated as a recapitalization of Ener-Core Power. Thus, the assets and liabilities and the historical operations that are reflected in the financial statements are those of Ener-Core Power and are recorded at the historical cost basis of Ener-Core Power. The Company’s assets, liabilities and results of operations were de minimis at the time of merger.
University of California Agreement
The Company entered into a two-year agreement with the Regents of the University of California, Irvine commencing April 1, 2013 through April 1, 2015. The contract agreement is for the installation and demonstration of the FP1 equipment. The university will provide certain goods and services, including preliminary site preparation, engineering support, fuel supply, electrical interconnection, control wiring, site access, environmental compliance and approvals with the appropriate local jurisdictions. The fees associated with this agreement included initial site preparation cost of $21,000, a monthly charge of $7,780 commencing August 1, 2013 for use of the facility. In addition, there will be a fee of $4,832 per emissions test. These fees are incurred only for the eight-month period that services are provided. Site activities started in the last week of July 2013. This agreement also required the Company to increase its liability insurance up to $1,000,000 per occurrence and $2,000,000 in aggregate.
Pre-reverse Merger Equity Sales
In the quarter ending June 2013, the Company sold and issued 1,866,667 shares of its common stock to its major stockholder at $0.75 per share in consideration of approximately $728,000 in cash proceeds and repayment of approximately $672,000 of company debt and working capital obligations that the Company had incurred between the spin-off transaction in November 2012 and March 2013. Certain cash proceeds were received, and all repayments occurred, in April 2013 and additional cash proceeds were received in June 2013.
July Equity Sales
In July 2013 the Company sold and issued 4,746,863 shares of its common stock at $0.75 per share in connection with the reverse merger-related private placement for which it received proceeds of approximately $3.2 million, net of approximately $300,000 in broker-dealer commissions. In connection with this financing, 474,687 warrants were issued to investment bankers in July 2013. The warrants have an exercise price of $0.75 and expire 5 years from issuance.
August Equity Sales
In August 2013, the Company sold and issued 246,666 shares of its common stock at $0.75 per share, for which it received proceeds of approximately $170,000, net of approximately $14,800 in broker-dealer commissions. In connection with this financing, 21,733 warrants were issued to investment bankers. The warrants have an exercise price of $0.75 and expire five years from issuance.
2013 Equity Incentive Plan
On July 1, 2013, the Company’s Board of Directors adopted and approved the 2013 Equity Incentive Plan. The plan authorized the Company to grant options to purchase up to 14,000,000 shares of the Company’s authorized common stock. On July 3, 2013, grants under the plan were approved for an aggregate of 1,500,000 shares of common stock to two individuals with an exercise price per share of $0.75 and expiration date of May 5, 2018. One-third of the grant vests on November 1, 2013 and the balance vest ratably during the succeeding 30 months.
Our current headquarters is located at 9400 Toledo Way, Irvine, California 92618. The property consists of a mixed use commercial office, production, and warehouse facility of 32,649 square feet. As provided in the Contribution Agreement, we occupy a portion of the space, and have assumed one-third of all liabilities under the Standard Industrial/Commercial Single-Tenant Lease, dated May 26, 2011, between FlexEnergy and Meehan Holdings, LLC for the Property (with FlexEnergy remaining responsible for the remaining two-thirds). Notwithstanding this arrangement, the landlord does not view either us or our wholly-owned subsidiary, Ener-Core Power (which was a party to the Contribution Agreement), as formally obligated under the Lease. We are exploring various alternatives for our office and warehouse needs, including negotiating a direct lease with the landlord for a portion of our current facility or moving to a different location.
The Company evaluated all events or transactions that occurred after June 30, 2013.
The entire disclosure for significant events or transactions that occurred after the balance sheet date through the date the financial statements were issued or the date the financial statements were available to be issued. Examples include: the sale of a capital stock issue, purchase of a business, settlement of litigation, catastrophic loss, significant foreign exchange rate changes, loans to insiders or affiliates, and transactions not in the ordinary course of business.
No definition available.