Pineapple Energy (PEGY) - 2021 Q1 - Quarterly Report

Part I. Financial Information Presents unaudited financial statements and management's discussion for Q1 2021 Financial Statements (Unaudited) Presents unaudited condensed consolidated financial statements for Q1 2021 and 2020, including detailed notes Condensed Consolidated Balance Sheets Total assets decreased to $53.1 million from $55.6 million, with stockholders' equity also declining Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Total Current Assets | $33,663 | $35,758 | | Total Assets | $53,108 | $55,556 | | Total Current Liabilities | $6,717 | $7,438 | | Total Liabilities | $7,386 | $8,062 | | Total Stockholders' Equity | $45,722 | $47,495 | Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) Net loss from continuing operations increased to $2.16 million in Q1 2021, driven by higher operating expenses Q1 Income Statement Summary (in thousands) | Metric | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Sales | $10,159 | $9,163 | | Gross Profit | $4,217 | $3,737 | | Operating Loss from Continuing Operations | $(2,147) | $(1,224) | | Net Loss from Continuing Operations | $(2,161) | $(809) | | Net (Loss) Income | $(2,161) | $1,505 | | Diluted Net (Loss) Income per Share | $(0.23) | $0.16 | - Acquisition-related costs of $1.14 million were incurred in Q1 2021, with no such costs in Q1 2020, significantly contributing to the higher operating loss[17] Condensed Consolidated Statements of Changes in Stockholders' Equity Stockholders' equity decreased to $45.7 million, primarily due to the $2.16 million net loss - The primary driver for the decrease in stockholders' equity in Q1 2021 was the net loss of $2,160,851[19] Condensed Consolidated Statements of Cash Flows Net cash increased by $1.65 million, with operating activities providing $200,000 and investing activities providing $2.1 million Q1 Cash Flow Summary (in thousands) | Cash Flow Activity | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $200 | $241 | | Net Cash from Investing Activities | $2,092 | $6,504 | | Net Cash from Financing Activities | $(655) | $(274) | | Net Increase in Cash | $1,655 | $6,434 | - A significant use of cash in financing activities was the $550,000 payment of contingent consideration related to the IVDesk acquisition[22][129] Notes to Condensed Consolidated Financial Statements Notes detail business segments, acquisitions, discontinued operations, and significant subsequent events - The company operates in two segments: (1) Electronics & Software (Transition Networks, Net2Edge) and (2) Services and Support (JDL, Ecessa)[24] - On March 11, 2020, the company sold its Suttle business lines for $8.0 million, which are now reported as discontinued operations[39] - The company completed the acquisition of Ecessa Corporation on May 14, 2020, and the operating assets of IVDesk Minnesota, Inc. on November 3, 2020, both of which are part of the Services & Support segment[54][58] - Subsequent to the quarter end, on April 28, 2021, the company agreed to sell its Electronics & Software segment (Transition Networks and Net2Edge businesses) to Lantronix, Inc. for up to $32 million[82] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial performance, corporate developments, segment results, and liquidity for Q1 2021 - On March 1, 2021, CSI entered into a merger agreement with Pineapple Energy LLC, where Pineapple will become a wholly-owned subsidiary of CSI[84] - On April 28, 2021, CSI agreed to sell its Transition Networks and Net2Edge businesses (E&S Segment) to Lantronix, Inc. for a purchase price of up to $32 million, including a $7 million earnout[90] Q1 2021 Financial Summary | Metric | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Consolidated Sales | $10.2 million | $9.2 million | | Operating Loss from Continuing Operations | $2.1 million | $1.2 million | | Net Loss from Continuing Operations | $2.2 million | $0.8 million | | Diluted EPS from Continuing Operations | ($0.23) | ($0.09) | Results of Operations: Q1 2021 vs Q1 2020 Consolidated sales rose 10.9% to $10.2 million, while operating loss widened to $2.1 million Electronics & Software Segment Sales (in thousands) | Category | Q1 2021 | Q1 2020 | Change | | :--- | :--- | :--- | :--- | | By Region | | | | | North America | $7,201 | $7,448 | -3% | | International | $1,164 | $1,088 | +7% | | Total | $8,365 | $8,536 | -2% | | By Product | | | | | Intelligent edge solutions | $3,713 | $3,354 | +11% | | Traditional products | $4,652 | $5,182 | -10% | - The Electronics & Software segment's sales decrease was attributed to supply chain constraints and delayed project spending due to the COVID-19 pandemic[113] Services & Support Segment Sales (in thousands) | Category | Q1 2021 | Q1 2020 | Change | | :--- | :--- | :--- | :--- | | Total Sales | $1,938 | $827 | +134% | | Project & product revenue | $385 | $141 | +173% | | Services & support revenue | $1,553 | $686 | +126% | - The significant revenue growth in the Services & Support segment was due to the acquisitions of Ecessa (May 2020) and IVDesk (November 2020) Ecessa contributed $653,000 and IVDesk contributed $597,000 in revenue during Q1 2021[119] Liquidity and Capital Resources The company maintained strong liquidity with $21.0 million in cash and investments and an undrawn $5.0 million line of credit Liquidity Position (as of March 31, 2021) | Item | Amount (in thousands) | | :--- | :--- | | Cash, cash equivalents, restricted cash, and liquid investments | $21,001 | | Working Capital | $26,946 | - The company has a $5.0 million line of credit facility with Wells Fargo, expiring August 28, 2021 There were no outstanding borrowings as of March 31, 2021[130][132] - Cash flow from operations was $200,000 in Q1 2021 Cash used in financing was $655,000, primarily for a $550,000 contingent consideration payment for the IVDesk acquisition[127][129] Quantitative and Qualitative Disclosures about Market Risk Minimal market risk exposure due to no derivatives, primarily USD transactions, and no outstanding variable-rate borrowings - The company does not use freestanding derivatives and the vast majority of its transactions are denominated in U.S. dollars, limiting exposure to foreign currency and derivative market risks[139][140] - The company's bank line of credit has a variable interest rate (LIBOR plus 1.25%), but there were no outstanding borrowings at March 31, 2021[140] Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes to internal control over financial reporting - Management concluded that the Company's disclosure controls and procedures were effective as of March 31, 2021[144] - No material changes were made to the company's internal control over financial reporting during the first quarter of 2021[145] Part II. Other Information Covers legal proceedings, risk factors, equity security sales, and exhibits Legal Proceedings The company reports no material legal proceedings - Not Applicable[148] Risk Factors Not applicable for this quarterly report, with no material changes from prior Form 10-K disclosures - Not Applicable[148] Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 20,607 shares in Q1 2021, with $341,242 remaining for future repurchases Issuer Purchases of Equity Securities (Q1 2021) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | January 2021 | — | $— | | February 2021 | — | $— | | March 2021 | 20,607 | $5.99 | | Total | 20,607 | $5.99 | - As of March 31, 2021, $341,242 remained available under the company's stock repurchase program[149] Exhibits Lists exhibits filed with Form 10-Q, including CEO/CFO certifications and the Q1 2021 earnings press release - Exhibits filed include CEO and CFO certifications (31.1, 31.2, 32) and the Q1 2021 earnings press release (99.1)[152]