UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-Q
[X]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the quarterly period ended March 31, 2015
OR
[ ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the transition period from ____ to _____
Commission
file number 000-22166
ATRM
HOLDINGS, INC.
(Exact
Name of Registrant as Specified in Its Charter)
Minnesota |
|
41-1439182 |
(State
or Other Jurisdiction of |
|
(I.R.S.
Employer |
| Incorporation
or Organization) |
|
Identification
No.) |
| 3050
Echo Lake Ave., Suite 300, |
|
|
Mahtomedi,
Minnesota |
|
55115 |
| (
Address of Principal Executive Offices) |
|
(Zip
Code) |
(651)
704-1800
(Registrant’s
Telephone Number, Including Area Code)
N/A
(Former
Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
Indicate
by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such files). Yes [X] No [ ]
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
| Large accelerated
filer [ ] |
Accelerated filer
[ ] |
Non-accelerated
filer [ ] |
Smaller reporting
company [X] |
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No
[X]
As
of May 15, 2015, 1,186,473 shares of Common Stock of the Registrant were outstanding.
ATRM
HOLDINGS, INC.
INDEX
PART
I. FINANCIAL INFORMATION
Item
1. Financial Statements
ATRM
HOLDINGS, INC.
CONDENSED
CONSOLIDATED BALANCE SHEETS
(in
thousands, except share data)
| | |
March 31, 2015 | | |
December 31, 2014 | |
| | |
(Unaudited) | | |
| |
| ASSETS | |
| | | |
| | |
| Current assets: | |
| | | |
| | |
| Cash and cash equivalents | |
$ | 728 | | |
$ | 1,996 | |
| Accounts receivable, net | |
| 4,134 | | |
| 2,804 | |
| Costs and estimated profit in excess of billings | |
| 1,386 | | |
| 1,791 | |
| Inventories | |
| 1,864 | | |
| 1,936 | |
| Fair value of contingent earn-outs, current | |
| 590 | | |
| 1,200 | |
| Other current assets | |
| 51 | | |
| 117 | |
| Total current assets | |
| 8,753 | | |
| 9,844 | |
| | |
| | | |
| | |
| Property, plant and equipment, net | |
| 4,662 | | |
| 4,740 | |
| | |
| | | |
| | |
| Fair value of contingent earn-out, noncurrent | |
| 940 | | |
| 1,100 | |
| Goodwill | |
| 1,733 | | |
| 1,733 | |
| Intangible assets, net | |
| 1,527 | | |
| 1,688 | |
| | |
| | | |
| | |
| Total assets | |
$ | 17,615 | | |
$ | 19,105 | |
| | |
| | | |
| | |
| LIABILITIES AND SHAREHOLDERS’ DEFICIT | |
| | | |
| | |
| | |
| | | |
| | |
| Current liabilities: | |
| | | |
| | |
| Note payable | |
$ | 5,500 | | |
$ | 5,500 | |
| Current portion of long-term debt | |
| 42 | | |
| 45 | |
| Trade accounts payable | |
| 4,388 | | |
| 5,129 | |
| Billings in excess of costs and estimated profit | |
| 557 | | |
| 288 | |
| Accrued compensation | |
| 263 | | |
| 84 | |
| Other accrued liabilities | |
| 1,788 | | |
| 2,492 | |
| Total current liabilities | |
| 12,538 | | |
| 13,538 | |
| | |
| | | |
| | |
| Long-term debt, less current portion | |
| 10,530 | | |
| 9,542 | |
| Deferred income taxes | |
| 7 | | |
| — | |
| | |
| | | |
| | |
| Commitments and contingencies | |
| | | |
| | |
| | |
| | | |
| | |
| Shareholders’ deficit: | |
| | | |
| | |
| Common stock, $.001 par value; 3,000,000 shares authorized; 1,186,473 shares
issued and outstanding | |
| 1 | | |
| 1 | |
| Additional paid-in capital | |
| 66,335 | | |
| 66,335 | |
| Accumulated deficit | |
| (71,796 | ) | |
| (70,311 | ) |
| Total shareholders’ deficit | |
| (5,460 | ) | |
| (3,975 | ) |
| | |
| | | |
| | |
| Total liabilities and shareholders’ deficit | |
$ | 17,615 | | |
$ | 19,105 | |
The
accompanying notes are an integral part of the condensed consolidated financial statements.
ATRM
HOLDINGS, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in
thousands, except per share data)
| | |
Three months ended
March 31, | |
| | |
2015 | | |
2014 | |
| | |
| | |
| |
| Net sales | |
$ | 6,801 | | |
$ | — | |
| Costs and expenses: | |
| | | |
| | |
| Cost of sales | |
| 6,882 | | |
| — | |
| Selling, general and administrative expenses | |
| 1,017 | | |
| 768 | |
| Total costs and expenses | |
| 7,899 | | |
| 768 | |
| | |
| | | |
| | |
| Loss from continuing operations | |
| (1,098 | ) | |
| (768 | ) |
| Other income (expense): | |
| | | |
| | |
| Change in fair value of contingent earn-out | |
| — | | |
| 75 | |
| Interest expense | |
| (387 | ) | |
| (1 | ) |
| Loss from continuing operations before income taxes | |
| (1,485 | ) | |
| (694 | ) |
| Income tax benefit | |
| — | | |
| 174 | |
| Loss from continuing operations | |
| (1,485 | ) | |
| (520 | ) |
| Income from discontinued operations, net of income taxes | |
| — | | |
| 324 | |
| Net loss | |
$ | (1,485 | ) | |
$ | (196 | ) |
| | |
| | | |
| | |
| Income (loss) per share – basic and diluted: | |
| | | |
| | |
| Continuing operations | |
$ | (1.25 | ) | |
$ | (0.48 | ) |
| Discontinued operations | |
| — | | |
| 0.30 | |
| Net loss | |
$ | (1.25 | ) | |
$ | (0.18 | ) |
| | |
| | | |
| | |
| Weighted average common shares outstanding – basic and diluted | |
| 1,186 | | |
| 1,079 | |
The
accompanying notes are an integral part of the condensed consolidated financial statements.
ATRM
HOLDINGS, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in
thousands)
| | |
Three months ended
March 31, | |
| | |
2015 | | |
2014 | |
| Cash flows from operating activities: | |
| | | |
| | |
| Net loss | |
$ | (1,485 | ) | |
$ | (196 | ) |
| Adjustments to reconcile net loss to net cash generated by (used in) operating
activities: | |
| | | |
| | |
| Depreciation and amortization expense | |
| 241 | | |
| 9 | |
| Deferred income taxes | |
| 7 | | |
| — | |
| Share-based compensation expense | |
| — | | |
| 5 | |
| Change in fair value of contingent earn-out | |
| — | | |
| (75 | ) |
| Changes in operating assets and liabilities: | |
| | | |
| | |
| Accounts receivable | |
| (1,330 | ) | |
| (191 | ) |
| Costs and estimated profit in excess of billings | |
| 405 | | |
| — | |
| Inventories | |
| 72 | | |
| 878 | |
| Other current assets | |
| 66 | | |
| (53 | ) |
| Other assets | |
| — | | |
| 42 | |
| Trade accounts payable | |
| (741 | ) | |
| 179 | |
| Billings in excess of costs and estimated profit | |
| 269 | | |
| — | |
| Accrued compensation | |
| 179 | | |
| (32 | ) |
| Other accrued liabilities | |
| (704 | ) | |
| 69 | |
| Net cash generated by (used in) operating activities | |
| (3,021 | ) | |
| 635 | |
| | |
| | | |
| | |
| Cash flows from investing activities: | |
| | | |
| | |
| Proceeds from earn-out consideration | |
| 770 | | |
| — | |
| Purchase of property and equipment | |
| (2 | ) | |
| (1 | ) |
| Net cash generated by (used in) investing activities | |
| 768 | | |
| (1 | ) |
| | |
| | | |
| | |
| Cash flows from financing activities: | |
| | | |
| | |
| Proceeds from issuance of long-term debt | |
| 1,000 | | |
| — | |
| Principal payments on long-term debt | |
| (15 | ) | |
| (8 | ) |
| Net cash generated by (used in) financing activities | |
| 985 | | |
| (8 | ) |
| | |
| | | |
| | |
| Net increase (decrease) in cash and cash equivalents | |
| (1,268 | ) | |
| 626 | |
| | |
| | | |
| | |
| Cash and cash equivalents at beginning of period | |
| 1,996 | | |
| 1,260 | |
| | |
| | | |
| | |
| Cash and cash equivalents at end of period | |
$ | 728 | | |
$ | 1,886 | |
| | |
| | | |
| | |
| Supplemental cash flow information: | |
| | | |
| | |
| Cash paid for interest expense | |
$ | 480 | | |
$ | 1 | |
The
accompanying notes are an integral part of the condensed consolidated financial statements.
ATRM
HOLDINGS, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The
accompanying unaudited condensed consolidated financial statements include the accounts of ATRM Holdings, Inc. and its wholly
owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. References in the notes
to the condensed consolidated financial statements to “ATRM,” “the Company”, “we,” “us”
or “our”, unless the context otherwise requires, refer to ATRM Holdings, Inc. and its subsidiaries and their respective
predecessors. Our modular housing business is operated by our wholly-owned subsidiaries KBS Builders, Inc. and Maine Modular Haulers,
Inc. (collectively referred to as “KBS”).
The
condensed consolidated balance sheet at December 31, 2014 has been derived from our audited financial statements. In the opinion
of management, the unaudited interim condensed consolidated financial statements include all adjustments (consisting only of normal,
recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows for the interim
periods presented. The results of operations for the three months ended March 31, 2015 are not necessarily indicative of the operating
results to be expected for the full year or any future period.
The
accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of
the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures, normally included
in consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States
of America, have been condensed or omitted, pursuant to such rules and regulations. Therefore, these condensed consolidated financial
statements should be read in conjunction with the consolidated financial statements and accompanying footnotes included in our
Annual Report on Form 10-K for the year ended December 31, 2014.
Beginning
in fiscal year 2013, ATRM has implemented a series of strategic initiatives intended to stabilize the Company and return it to
profitability. In July 2013, we sold the assets related to our Reliability Test Products (“RTP”) line of products
to Cascade Microtech, Inc. (“Cascade”). On April 2, 2014, we acquired KBS, a business that manufactures modular housing
units for commercial and residential applications. On April 22, 2014, we entered into an agreement to transfer the assets related
to our test handler product line to BSA (as defined below) in return for a future stream of earn-out payments based on the product
line’s revenues.
We
have incurred significant operating losses and, as of March 31, 2015, we had an accumulated deficit of approximately $71.8 million.
There can be no assurance that the strategic initiatives described above will lead to sufficient revenue in the future to cover
our expenses and achieve profitability for ATRM on a consistent basis or at all. In addition, we incurred substantial debt in
connection with the acquisition of KBS. To finance the acquisition, we issued $6.5 million in promissory notes to Lone Star Value
Investors, LP (“LSVI”) and a $5.5 million promissory note (the “KBS Note”) to the seller with an original
maturity date of October 1, 2014. We reached an agreement with the holder of the KBS Note to extend its maturity date to December
1, 2014. The Company was unable to repay the note on that date and it remains unpaid as of the date of this report. The Company
is seeking to renegotiate the terms of the KBS Note and to obtain new financing to replace it. In addition, as discussed in Note
13, we received cash to fund our working capital needs during the second half of fiscal year 2014 and early 2015 from LSVI and
its affiliate Lone Star Value Co-Invest I, LP (“LSV Co-Invest I”) in exchange for unsecured promissory notes issued
to these entities. As of the date of this report, the Company’s total debt owed under promissory notes, including the KBS
Note, was approximately $16.0 million. We intend to pursue new financing to refinance all or a portion of our debt and to provide
for our general working capital needs going forward. Jeffrey E. Eberwein, the Company’s Chairman of the Board, is the manager
of Lone Star Value Investors GP, LLC (“LSVGP”), the general partner of LSVI and LSV Co-Invest I, and sole member of
Lone Star Value Management, LLC (“LSVM”), the investment manager of LSVI. ATRM may be dependent on LSVI and LSV Co-Invest
I, or other third parties, for working capital financing to fund the Company’s operations until such time as it obtains
new financing to refinance all or a portion of its debt. Although not a binding commitment, LSVM has advised ATRM of its present
intention to continue to financially support the Company as it pursues alternative financing. There can be no assurance we will
be successful in obtaining any such new financing with terms favorable to us or at all. There can be no assurance that our existing
cash reserves, together with funds generated by our operations and any future financings, will be sufficient to satisfy our debt
payment obligations.
Our
inability to generate funds or obtain financing sufficient to satisfy our debt payment obligations may result in such obligations
being accelerated by our lenders, which would likely have a material adverse effect on our business, financial condition and results
of operations. Given these uncertainties, there can be no assurance that our existing cash reserves will be sufficient to avoid
liquidity issues and/or fund operations beyond one year from March 31, 2015.
On
April 2, 2014, the Company entered into an agreement with KBS Building Systems, Inc. and certain of its affiliates and their owner,
pursuant to which we purchased substantially all of KBS Building Systems’ assets related to its business of manufacturing,
selling, and distributing modular housing units for residential and commercial use. Consideration for the acquisition included
$5.0 million in cash paid at closing, the KBS Note in the principal amount of $5.5 million and the assumption of certain other
liabilities. In addition, we assumed certain debt of approximately $1.4 million which we paid at closing. The acquired assets
included approximately $0.4 million in cash, resulting in a net purchase price of approximately $10.1 million.
KBS
results are included in our condensed consolidated statement of operations since April 2, 2014, the date of acquisition. The following
unaudited pro forma financial information presents the combined results of ATRM and KBS Buildings Systems for the three months
ended March 31, 2014 as if the acquisition had occurred on January 1, 2014 (in thousands):
| Pro forma net sales | |
$ | 9,844 | |
| Pro forma loss from continuing operations | |
| (2,008 | ) |
| Pro forma net loss | |
| (1,684 | ) |
| Pro forma loss per share – basic and diluted | |
$ | (1.56 | ) |
The
above unaudited pro forma financial information is not necessarily indicative of what our consolidated results of operations actually
would have been or what results may be expected in the future.
We
incurred expenses for professional fees associated with the KBS acquisition of approximately $100,000 in the three months ended
March 31, 2014. These costs are included in the caption “Selling, general and administrative expenses” in our condensed
consolidated statement of operations.
| 4. |
SALE OF PRODUCT
LINE - DISCONTINUED OPERATIONS |
On
April 22, 2014, we entered into an Agreement (the “BSA Agreement”) with Boston Semi Equipment LLC (“BSE”)
and Boston Semi Automation LLC (“BSA”), a wholly owned subsidiary of BSE, pursuant to which we transferred our assets
and certain liabilities related to our business of designing, manufacturing, marketing and servicing equipment used in the handling
of integrated circuits (“test handler product line”) to BSA.
The
BSA Agreement provides that BSA will pay to ATRM a royalty on all revenue related to the test handler product line through December
31, 2018. The royalty percentage was 14.25% for the three month period ended March 31, 2015 and decreases 0.75% each quarter thereafter.
Royalties earned are subject to certain qualifications and adjustments. The first royalty payment covering the period April 22,
2014 through December 31, 2014 amounted to approximately $0.8 million and was received in January 2015. Subsequent payments are
due 60 days after the end of each calendar quarter.
Following
the sale of our RTP product line to Cascade in 2013 and the transfer of our test handler product line to BSA in April 2014, ATRM
has no manufacturing operations remaining in North St. Paul, Minnesota. The lease for our North St. Paul facility, which consists
of approximately 45,000 square feet, expires on August 31, 2015. Approximately one-half of the space in this facility is subleased
to Cascade and BSA through the end of our lease. We also entered into administrative services agreements with Cascade and BSA
that provide for copier and computer network services among other things. The remaining half of the facility is unutilized.
As
a result of the divestitures of our businesses in Minnesota, we determined that ATRM would not receive economic benefit from its
facility, copier and IT equipment leases at its North St. Paul location over their remaining terms, and liabilities related to
these contracts should be recorded at net settlement value at April 22, 2014 (the “cease-use date”). We recorded a
charge of $264,000 related to these contracts in the quarter ended June 30, 2014. The accrued facility expense is included in
“Other accrued liabilities” in our condensed consolidated balance sheet. See Note 11.
On
May 1, 2015, we entered into an agreement with the landlord of the leased facility in North St. Paul to accelerate the expiration
of the lease from August 31, 2015 to May 1, 2015. We also entered into agreements with Cascade and BSA to terminate their subleases
effective May 1, 2015. The early terminations of these agreements were executed at the request of the owner of the facility at
no cost to ATRM. Effective May 1, 2015, we relocated our corporate office from the North St. Paul facility to a suburb of St.
Paul, MN where we lease office space on a month to month basis.
Condensed
operating results for the test handler product line are presented as discontinued operations in our consolidated statements of
operations for the three months ended March 31, 2014 and are summarized below (in thousands):
| Net sales | |
$ | 2,158 | |
| Costs and expenses: | |
| | |
| Cost of sales | |
| 1,250 | |
| Operating
expenses | |
| 410 | |
| Total
costs and expenses | |
| 1,660 | |
| Income before income taxes | |
| 498 | |
| Income
tax expense | |
| (174 | ) |
| Income from discontinued
operations | |
$ | 324 | |
The
Company had no discontinued operations for the three months ended March 31, 2015.
| 5. |
FAIR VALUE
MEASUREMENTS |
Financial
assets reported at fair value on a recurring basis included the following at March 31, 2015 (in thousands):
| | |
Level 1 | | |
Level 2 | | |
Level 3 | |
| Contingent earn-out receivable related to the transfer of test handler product line: | |
| | | |
| | | |
| | |
| Current portion | |
$ | — | | |
$ | — | | |
$ | 590 | |
| Noncurrent portion | |
| — | | |
| — | | |
| 940 | |
| Total | |
$ | — | | |
$ | — | | |
$ | 1,530 | |
The
following table summarizes the Level 3 activity for our earn-out receivable related to the transfer of our test handler product
line (in thousands):
| | |
Level
3 | |
| | |
| |
| Balance
at December 31, 2014 | |
$ | 2,300 | |
| Subtract
- settlement | |
| (770 | ) |
| Balance
at March 31, 2015 | |
$ | 1,530 | |
Quantitative
information about Level 3 fair value measurements on a recurring basis at March 31, 2015 is summarized in the table below:
| Fair
Value Asset |
|
Valuation
Technique |
|
Unobservable
Input |
|
Amount
|
| Earn-out receivable
related to transfer of test handler product line |
|
Discounted
cash flow |
|
Revenue
growth rate |
|
0% |
| |
|
|
|
Performance
weighted average |
|
60%
to 125% |
| |
|
|
|
Discount
rate |
|
10% |
| 6. |
ACCOUNTS RECEIVABLE,
NET |
Accounts
receivable consists of the following (in thousands):
| | |
March 31, 2015 | | |
December 31, 2014 | |
| | |
(Unaudited) | | |
| |
| | |
| | |
| |
| Contract billings | |
$ | 3,325 | | |
$ | 2,235 | |
| Retainage | |
| 1,589 | | |
| 1,369 | |
| Subtotal | |
| 4,914 | | |
| 3,604 | |
| Less - allowance for doubtful accounts | |
| (780 | ) | |
| (800 | ) |
| Accounts receivable, net | |
$ | 4,134 | | |
$ | 2,804 | |
Retainage
balances are expected to be collected within the next twelve months.
Inventories
are comprised of the following (in thousands):
| | |
March
31, 2015 | | |
December
31, 2014 | |
| | |
(Unaudited) | | |
| |
| | |
| | |
| |
| Raw
materials | |
$ | 1,657 | | |
$ | 1,729 | |
| Finished
goods | |
| 207 | | |
| 207 | |
| Total
inventories | |
$ | 1,864 | | |
$ | 1,936 | |
| 8. |
GOODWILL AND
INTANGIBLE ASSETS, NET |
Intangible
assets are comprised of the following at March 31, 2015 (in thousands):
| | |
Gross Carrying
Amount | | |
Accumulated
Amortization | | |
Net Carrying
Value | |
| Indefinite-lived intangible assets: | |
| | | |
| | | |
| | |
| Goodwill | |
$ | 1,733 | | |
$ | — | | |
$ | 1,733 | |
| Trademarks | |
| 290 | | |
| — | | |
| 290 | |
| Total | |
| 2,023 | | |
| — | | |
| 2,023 | |
| | |
| | | |
| | | |
| | |
| Finite-lived intangible assets: | |
| | | |
| | | |
| | |
| Customer relationships | |
| 1,420 | | |
| (203 | ) | |
| 1,217 | |
| Purchased backlog | |
| 990 | | |
| (970 | ) | |
| 20 | |
| Total | |
| 2,410 | | |
| (1,173 | ) | |
| 1,237 | |
| | |
| | | |
| | | |
| | |
| Total intangible assets | |
$ | 4,433 | | |
$ | (1,173 | ) | |
$ | 3,260 | |
Amortization
expense amounted to approximately $200,000 for the three months ended March 31, 2015. Estimated amortization of purchased intangible
assets over the next five years is as follows (in thousands):
| 2015 (nine months) | | |
$ | 172 | |
| 2016 | | |
| 203 | |
| 2017 | | |
| 203 | |
| 2018 | | |
| 203 | |
| 2019 | | |
| 203 | |
| Thereafter | | |
| 253 | |
| Total | | |
$ | 1,237 | |
| 9. |
UNCOMPLETED CONSTRUCTION CONTRACTS |
The
status of uncompleted construction contracts is as follows (in thousands):
| | |
March
31, 2015 | | |
December
31, 2014 | |
| | |
(Unaudited) | | |
| |
| Costs
incurred on uncompleted contracts | |
$ | 26,091 | | |
$ | 21,282 | |
| Inventory
purchased for specific contracts | |
| 1,424 | | |
| 445 | |
| Estimated
profit | |
| 2,279 | | |
| 2,717 | |
| Subtotal | |
| 29,794 | | |
| 24,444 | |
| Less
billings to date | |
| (28,965 | ) | |
| (22,941 | ) |
| Total | |
$ | 829 | | |
$ | 1,503 | |
| | |
| | | |
| | |
| Included
in the following balance sheet captions: | |
| | | |
| | |
| Costs
and estimated profit in excess of billings | |
$ | 1,386 | | |
$ | 1,791 | |
| Billings
in excess of costs and estimated profit | |
| (557 | ) | |
| (288 | ) |
| Total | |
$ | 829 | | |
$ | 1,503 | |
The
Company had approximately $7.5 million of work under contract remaining to be recognized at March 31, 2015.
| 10. |
ACCOUNTS PAYABLE RETAINAGE |
Accounts
payable includes retainage amounts due to subcontractors of $0.5 million at each of March 31, 2015 and December 31, 2014. Retainage
balances are expected to be settled within the next twelve months.
| 11. |
OTHER ACCRUED
LIABILITIES |
Other
accrued liabilities are comprised of the following (in thousands):
| | |
March 31, 2015 | | |
December 31, 2014 | |
| | |
(Unaudited) | | |
| |
| Accrued facility expenses (see Note 4) | |
$ | 113 | | |
$ | 138 | |
| Accrued interest expense | |
| 577 | | |
| 671 | |
| Accrued sales taxes | |
| 821 | | |
| 873 | |
| Accrued health insurance costs | |
| 166 | | |
| 305 | |
| Accrued sales rebates | |
| 29 | | |
| 363 | |
| Accrued warranty | |
| 65 | | |
| 78 | |
| Other | |
| 17 | | |
| 64 | |
| Total other current accrued liabilities | |
$ | 1,788 | | |
$ | 2,492 | |
Changes
in accrued warranty for the three months ended March 31, 2015 are summarized below (in thousands):
| Accrual balance, beginning of period | |
$ | 78 | |
| Accruals for warranties | |
| 7 | |
| Settlements
made | |
| (20 | ) |
| Accrual balance, end of period | |
$ | 65 | |
As
described in Notes 2 and 3, as partial consideration for the KBS acquisition, we issued to the seller an unsecured promissory
note in the principal amount of $5.5 million. We were unable to repay the note on its maturity date, December 1, 2014, and it
remains unpaid as of the date of this report. Under the terms of the note, the holder has a right to charge interest at 10.0%
per annum for any period during which we are in default. The Company is seeking to renegotiate the terms of note and to obtain
new financing to replace it. There can be no assurance we will be able to do so under terms that are favorable to us or at all.
Long-term
debt consists of the following (in thousands):
| | |
March 31, 2015 | | |
December 31, 2014 | |
| | |
(Unaudited) | | |
| |
| | |
| | |
| |
| Promissory note payable to LSVI, unsecured, interest of 10% per annum payable semi-annually
in July and January, with any unpaid principal and interest due on April 1, 2019 | |
$ | 5,000 | | |
$ | 5,000 | |
| | |
| | | |
| | |
| Promissory notes payable to LSV Co-Invest I, unsecured, interest of 10% per annum payable semi-annually
in July and January, with any unpaid principal and interest due on April 1, 2019 | |
| 4,500 | | |
| 4,500 | |
| | |
| | | |
| | |
| Promissory note payable to LSVI, unsecured, interest of 10% per annum payable semi-annually in
July and January, with any unpaid principal and interest due on April 1, 2019 (1) | |
| 1,000 | | |
| — | |
| | |
| | | |
| | |
| Notes payable, secured by equipment, interest rates from 5.0% to 9.5%,
with varying maturity dates through September 2018 | |
| 72 | | |
| 87 | |
| | |
| | | |
| | |
| Total long-term debt | |
| 10,572 | | |
| 9,587 | |
| Current portion | |
| (42 | ) | |
| (45 | ) |
| Noncurrent portion | |
$ | 10,530 | | |
$ | 9,542 | |
| |
(1) | On
February 25, 2015, in order to provide additional working capital to ATRM, we entered
into a Securities Purchase Agreement with LSVI pursuant to which it purchased for $1.0
million in cash, an unsecured promissory note made by ATRM in the principal amount of
$1.0 million. The note bears interest at 10.0% per annum, with interest payable semiannually
in January and July and any unpaid principal and interest is due on April 1, 2019. |
As of March 31,
2015, LSVI owned 167,885 shares of our common stock, or approximately 14.1% of our outstanding shares. Jeffrey E. Eberwein, ATRM’s
Chairman of the Board, is the manager of LSVGP, the general partner of LSVI and LSV Co-Invest I, and sole member of LSVM, the
investment manager of LSVI.
ATRM’s
entry into the securities purchase agreement with LSVI was approved by a Special Committee of our Board of Directors consisting
solely of independent directors.
| 14. |
STOCK INCENTIVE
PLAN AND SHARE-BASED COMPENSATION |
A
stock incentive plan approved by our shareholders and adopted in May 2003 (the “2003 Plan”) terminated in February
2013. A new incentive plan (the “2014 Plan”) was approved by our board of directors on October 9, 2014 and became
effective on December 4, 2014 upon approval by shareholders. The 2014 Plan is administered by the Compensation Committee of our
board of directors. The purpose of the 2014 Plan is to provide employees, consultants and board members the opportunity to acquire
an equity interest in the Company through the issuance of various stock-based awards such as stock options and restricted stock.
100,000 shares of the Company’s common stock are authorized to be issued pursuant to the 2014 Plan. As of March 31, 2015,
no awards had been granted under the 2014 Plan.
The
following table summarizes stock option activity under the 2003 Plan for the three months ended March 31, 2015:
| | | |
Number
of Shares | | |
Weighted
Average
Exercise Price | | |
Weighted
Average
Remaining
Contract Term | | |
Aggregate
Intrinsic Value
(in thousands) | |
| Outstanding, January 1, 2015 | | |
| 38,500 | | |
$ | 12.27 | | |
| | | |
| | |
| No
activity during the three months ended March 31, 2015 | | |
| — | | |
| — | | |
| | | |
| | |
| Outstanding, March
31, 2015 | | |
| 38,500 | | |
$ | 12.27 | | |
| 2.0
years | | |
$ | 0 | |
| | | |
| | | |
| | | |
| | | |
| | |
| Exercisable, March
31, 2015 | | |
| 38,500 | | |
$ | 12.27 | | |
| 2.0
years | | |
$ | 0 | |
All
stock options outstanding at March 31, 2015 are nonqualified options which expire
at varying dates through November 2017. The aggregate intrinsic values in the table above are zero because the option exercise
prices for all outstanding options exceeded ATRM’s closing stock price on March 31,
2015.
ATRM
uses the fair value method to measure and recognize share-based compensation. We determine the fair value of share-based awards
on the grant date using the Black-Scholes option valuation model and recognize the compensation expense on a straight-line basis
over the vesting period of the applicable awards.
Share-based
compensation expense amounted to approximately $5,000 for the three months ended March 31, 2014 and is included in the caption
“Income from discontinued operations, net of income taxes” in our condensed consolidated statements of operations
We
record the benefit we will derive in future accounting periods from tax losses and credits and deductible temporary differences
as “deferred tax assets”. We record a valuation allowance to reduce the carrying value of our net deferred tax assets
if, based on all available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.
Since 2009, we have maintained a valuation allowance to fully reserve our deferred tax assets. We recorded a full valuation allowance
in 2009 because we determined there was not sufficient positive evidence regarding our potential for future profits to outweigh
the negative evidence of our three year cumulative loss position at that time. We expect to continue to maintain a full valuation
allowance until we determine that we can sustain a level of profitability that demonstrates our ability to realize these assets.
To the extent we determine that the realization of some or all of these benefits is more likely than not based upon expected future
taxable income, a portion or all of the valuation allowance will be reversed. Such a reversal would be recorded as an income tax
benefit and, for some portion related to deductions for stock option exercises, an increase in shareholders’ equity. At
March 31, 2015, we have recorded a deferred tax liability of $7,000 for the taxable differences
related to our indefinite lived intangible assets when calculating our valuation allowance due to the unpredictability of the
reversal of these differences. We are presenting a $174,000 income tax benefit on the statement of operations for the three month
period ended March 31, 2014. The presented benefit is an offset to the tax provision effect we are presenting within discontinued
operations for the same time period.
ATRM
HOLDINGS, INC.
Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The
following discussion and analysis should be read in conjunction with our unaudited condensed consolidated financial statements,
and the notes thereto, and other financial information appearing elsewhere in this Quarterly Report on Form 10-Q and the audited
consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December
31, 2014. All figures in the following discussion are presented on a consolidated basis. All dollar amounts and percentages presented
herein have been rounded to approximate values.
Forward-Looking
Statements
The
following management’s discussion and analysis includes “forward-looking statements”, as such term is used within
the meaning of the Private Securities Litigation Reform Act of 1995. These “forward-looking statements” are not based
on historical fact and involve assessments of certain risks, developments, and uncertainties in our business looking to the future.
Such forward-looking statements can be identified by the use of terminology such as “may”, “will”, “should”,
“expect”, “anticipate”, “estimate”, “intend”, “continue”, or “believe”,
or the negatives or other variations of these terms or comparable terminology. Forward-looking statements may include projections,
forecasts, or estimates of future performance and developments. Forward-looking statements contained in this Quarterly Report
on Form 10-Q are based upon assumptions and assessments that we believe to be reasonable as of the date of this Quarterly Report
on Form 10-Q. Whether those assumptions and assessments will be realized will be determined by future factors, developments, and
events, which are difficult to predict and may be beyond our control. Actual results, factors, developments, and events may differ
materially from those we assumed and assessed. Risks, uncertainties, contingencies, and developments, including those discussed
in this Management’s Discussion and Analysis of Financial Condition and Results of Operations and those identified in “Risk
Factors” in Item 1A in our Annual Report on Form 10-K for the fiscal year ended December 31, 2014, could cause our future
operating results to differ materially from those set forth in any forward-looking statement. There can be no assurance that any
such forward-looking statement, projection, forecast or estimate contained can be realized or that actual returns, results, or
business prospects will not differ materially from those set forth in any forward-looking statement.
Given
these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. We disclaim any obligation
to update any such factors or to publicly announce the results of any revisions to any of the forward-looking statements contained
herein to reflect future results, events or developments.
Results
of Operations
Net
Sales. Net sales from continuing operations were approximately $6.8 million for the three months ended March 31, 2015. The
first quarter is typically a relatively low sales period due to weather-related decreases in demand. In addition, the timing of
our actual sales and revenue recognition can be affected by weather-related delays in transportation of modules and site preparation,
including delays in building foundations for commercial projects or single family homes. These factors were especially prevalent
during the three months ended March 31, 2015 due to the unusually inclement weather in the New England region. Net sales of the
test handler product line which we divested in 2014 are included in results from discontinued operations.
Cost
of Sales. Cost of sales amounted to approximately $6.9 million for the three months ended March 31, 2015. These costs reflected
the inefficiencies resulting from lower sales due to the weather-related issues described above, including the costs associated
with closing our smaller Waterford factory for four weeks during the period. Cost of sales for the test handler product line which
we divested in 2014 is included in results from discontinued operations.
Selling,
General and Administrative. Selling, general and administrative (“SG&A”) expenses for the three months ended
March 31, 2015 were approximately $1.0 million compared with approximately $0.8 million for the comparable period in 2014, an
increase of approximately $0.2 million. Expenses attributed to the KBS operations that we acquired in April 2014 amounted to approximately
$0.8 million, including approximately $0.2 million of amortization expense related to the acquired intangible assets. Excluding
the KBS-related expenses, SG&A expenses decreased approximately $0.5 million, which reflected decreases of approximately $0.3
million in legal expenses, $0.1 million in compensation and $0.1 million in severance costs. Legal expenses were higher in 2014
primarily due to costs incurred in connection with the acquisition of KBS and the divestiture of our test handler product line.
Change
in Fair Value of Contingent Earn-Out. Change in fair value of contingent earn-out of approximately $0.1 million for the three
months ended March 31, 2014 represented an increase in the fair value of the earn-out receivable related to the sale of our RTP
line of products based on a reassessment of its fair value at March 31, 2014.
Interest
Expense. Interest expense amounted to approximately $0.4 million for the three months ended March 31, 2015 and consisted of
interest related to the debt we incurred to finance the KBS acquisition in April 2014 and additional borrowings described in Note
13 to our unaudited condensed consolidated financial statements. Interest income for all periods presented and interest expense
for the three months ended March 31, 2014 were not significant.
Income
Taxes. Since 2009, we have maintained a valuation allowance to fully reserve our deferred tax assets. We expect to continue
to maintain a full valuation allowance until we determine that we can sustain a level of profitability that demonstrates our ability
to realize these assets. To the extent we determine that the realization of some or all of these benefits is more likely than
not based upon expected future taxable income, a portion or all of the valuation allowance will be reversed. Such a reversal would
be recorded as an income tax benefit and, for some portion related to deductions for stock option exercises, an increase in shareholders’
equity. We recorded no income tax expense or benefit for the three months ended March 31, 2015. The income tax expense attributed
to discontinued operations for the three months ended March 31, 2014, calculated using a 35% marginal tax rate, is offset by a
corresponding income tax benefit for continuing operations.
Discontinued
Operations. Results related to our divested test handler operations have been reclassified and presented as discontinued operations
for the three months ended March 31, 2014. Condensed results of discontinued operations are summarized in Note 4 to our unaudited
condensed consolidated financial statements.
Financial
Condition, Liquidity and Capital Resources
Cash
and cash equivalents decreased by approximately $1.3 million in the three months ended March 31, 2015.
Cash
flows used in operating activities. In the three months ended March 31, 2015, cash flows used in operating activities was
approximately $3.0 million, consisting primarily of our net loss of approximately $1.5 million and approximately $1.8 million
in working capital changes, partially offset by approximately $0.2 million non-cash depreciation and amortization expense. Working
capital changes using cash included an increase of approximately $1.3 million in accounts receivable and decreases of approximately
$0.7 million in accounts payable and $0.7 million in other accrued liabilities, partially offset by an increase of approximately
$0.4 million in costs and estimated profit in excess of billings and decreases of approximately $0.3 million in billings in excess
of costs and estimated profit and $0.2 million in accrued compensation. The increases in accounts receivable and billings in excess
of costs and estimated profit and the decrease in costs and estimated profit in excess of billings primarily reflected a relatively
higher average percentage of completion of KBS commercial projects in progress at March 31, 2015 compared with that at December
31, 2014. The decrease in accounts payable resulted primarily from the timing of payments. The decrease in other accrued liabilities
reflected the settlement of approximately $0.3 million in accrued sales rebates and a decrease of approximately $0.2 million in
accrued health insurance expenses. Cash flows from operating activities for the three months ended March 31, 2014 are not relevant
as we divested our test handler product line, the only operating business we owned during that period, in April 2014.
Cash
flows generated by (used in) investing activities. In the three months ended March 31, 2015, cash flows generated by investing
activities was approximately $0.8 million, consisting primarily of a $0.8 million royalty payment received from BSA related to
the transfer of our test handler product line to BSA in fiscal year 2014. In the three months ended March 31, 2014, cash flows
from investing activities were not significant.
Cash
flows provided by financing activities. In the three months ended March 31, 2015, cash flows generated by financing activities
was approximately $1.0 million, which consisted primarily of the $1.0 million received from the sale of a $1.0 million promissory
note to LSVI as described in Note 13 to our unaudited condensed consolidated financial statements. Cash flows used in financing
activities in the three months ended March 31, 2014 were not significant.
Historically,
we have supported our capital expenditure and working capital needs with cash generated from operations, debt financings and our
existing cash and cash equivalents. We have incurred significant losses in recent years. Since July of 2013, we implemented several
strategic initiatives intended to stabilize the Company and return us to profitability, including the sales of our RTP product
line in July 2013 and our test handler product line in April 2014. Also in April 2014, we acquired KBS, a business that manufactures
modular housing units for commercial and residential applications, because we believe there is significant growth opportunity
within the industry and it provides ATRM with the potential to return to profitability. We are working to implement strategies
to improve profitability at KBS, including management changes and the implementation of improved processes, operating and financial
reporting and controls. However, there can be no assurance that the acquisition of KBS will lead to sufficient revenue in the
future to cover our expenses and allow us to achieve profitability, on a consistent basis or at all.
As
of March 31, 2015, our cash and cash equivalents amounted to approximately $0.7 million. As of March 31, 2015 and the date of
this report, our interest-bearing debt totaled approximately $16.1 million, including the KBS Note of $5.5 million, $6.0 million
owed to LSVI and $4.5 million owed to LSV Co-Invest I. We are seeking to renegotiate the terms of the KBS Note and we intend to
pursue new financing to replace the KBS Note and all or a portion of the debt owing to LSVI and LSV Co-Invest I and to provide
for our general working capital needs. There can be no assurance we will be successful in obtaining any such new financing with
terms favorable to us or at all. Until such time as we obtain such new financing, we may be dependent on LSVI and LSV Co-Invest
I, or other third parties, to provide for our general working capital needs. Although not a binding commitment, LSVM has advised
us of its present intention to continue to financially support the Company as it pursues new financing.
There
can be no assurance that our cash and cash equivalents, together with funds generated by our operations and any future financings,
will be sufficient to satisfy our debt payment obligations, including but not limited to our obligation to pay all principal and
interest under the KBS Note. In addition, in order to execute our long-term growth strategy, which may include additional acquisitions,
we may need to raise additional funds through public or private equity offerings, debt financings, or other means.
Item
3. Quantitative and Qualitative Disclosures About Market Risk
Not
applicable
Item
4. Controls and Procedures
Evaluation
of Disclosure Controls and Procedures
As
of the end of the period covered by this report, our chief executive officer and our chief financial officer conducted an evaluation
of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on their evaluation of
our disclosure controls and procedures, our chief executive officer and chief financial officer concluded that our disclosure
controls and procedures were not effective as of March 31, 2015, to ensure that information required to be disclosed by the Company
in the reports that we file or submit under the Exchange Act is (a) recorded, processed, summarized and reported within the time
periods specified in the SEC’s rules and forms and (b) accumulated and communicated to management, including our chief executive
officer and chief financial officer, as appropriate to allow for timely decisions regarding required disclosure.
Description
of Material Weakness in Internal Control Over Financial Reporting
As
discussed in Management’s Discussion and Analysis of Financial Condition and Results of Operations above and Notes 3 and
4 to our accompanying condensed consolidated financial statements, in April 2014 we acquired the assets and assumed certain liabilities
related to the operations of KBS and transferred our test handler product line to BSA. As a result, the KBS business currently
represents our primary business activity. Prior to the acquisition, the KBS operations were a privately-owned business with very
limited administrative and accounting resources, outdated accounting software and generally weak accounting processes and internal
control procedures. Due to the lack of adequate processes, procedures and controls at KBS, management concluded that we have material
weaknesses in our internal control over financial reporting, and that our disclosure controls and procedures and our internal
control over financial reporting were not effective as of March 31, 2015. Specifically, material weaknesses were found in our
financial reporting process with respect to (1) poor control over accounts payable cut-offs and (2) inadequate segregation of
duties in certain accounting processes, including the cash receipts and disbursements processes and management of user access
rights in our accounting system, partly as a result of our limited size and accounting staff.
Remediation
of Material Weakness
We
are working to remediate these material weaknesses. Since the April 2014 acquisition of KBS, we hired an additional accounting
professional in July 2014 with relevant experience to assist in the effort to implement improvements at KBS. We have implemented
improvements in processes, procedures and controls, including in the areas of contract accounting, proper transaction cutoffs,
inventory controls, financial reporting and management oversight. We will continue to work to improve such processes, procedures
and controls, and will disclose in future periods the progress we have made in our efforts to remediate these material weaknesses.
Changes
in Internal Control Over Financial Reporting
As a result of the KBS acquisition
that closed in the second quarter of 2014 and the control deficiencies at KBS discussed above, we determined that we have material
weaknesses in our internal control over financial reporting. We are working to remediate these material weaknesses as discussed
above.
PART
II. OTHER INFORMATION
Item1.
Legal Proceedings
As
reported in our Annual Report on Form 10-K for the year ended December 31, 2014, we are subject to litigation captioned UTHE Technology
Corporation vs. Aetrium Incorporated et al. in the United States District Court for the Northern District of California. On September
13, 2013 the court entered final judgment dismissing all remaining claims UTHE Technology Corporation (“UTHE”) asserted
against us in the litigation. On September 23, 2013, UTHE appealed the district court judgment to the United States Court of Appeal
for the Ninth Circuit. The appeal is currently pending.
Item1A.
Risk Factors
Not
applicable.
Item
2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item
3. Defaults on Senior Securities
None.
Item
4. Mine Safety Disclosures
None.
Item
5. Other Information
None.
Item
6. Exhibits
| |
31.1
|
Certification
of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| |
|
|
| |
31.2 |
Certification
of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| |
|
|
| |
32.1 |
Certification
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
| |
|
|
| |
101.INS * |
XBRL
Instance Document |
| |
|
|
| |
101.SCH * |
XBRL
Taxonomy Extension Schema |
| |
|
|
| |
101.CAL * |
XBRL
Taxonomy Extension Calculation Linkbase |
| |
|
|
| |
101.DEF * |
XBRL
Taxonomy Extension Definition Linkbase |
| |
|
|
| |
101.LAB * |
XBRL
Taxonomy Extension Label Linkbase |
| |
|
|
| |
101.PRE * |
XBRL
Taxonomy Extension Presentation Linkbase |
*
Pursuant to Rule 406T of Regulation S-T, the XBRL related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall
not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise
subject to the liability of that section, and shall not be deemed part of a registration statement, prospectus or other document
filed under Sections 11 or 12 of the Securities Act of 1933, as amended, or otherwise subject to the liability of those sections,
except as shall be expressly set forth by specific reference in such filings.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
| |
ATRM
HOLDINGS, INC. |
| |
(Registrant) |
| |
|
|
| Date: May 20,
2015 |
By: |
/s/
Daniel M. Koch |
| |
|
Daniel M. Koch |
| |
|
President and
Chief Executive Officer |
| |
|
(Principal Executive
Officer) |
| |
|
|
| Date: May 20,
2015 |
By: |
/s/
Paul H. Askegaard |
| |
|
Paul H. Askegaard |
| |
|
Chief Financial
Officer |
| |
|
(Principal Financial
and Accounting Officer) |
EXHIBIT
INDEX
| 4.1 |
Promissory
Note, dated February 25, 2015. (incorporated by reference to Exhibit 4.1 to our Current Report on Form 8-K filed February
27, 2015). |
| |
|
| 10.1 |
Securities
Purchase Agreement, dated February 25, 2015, by and between ATRM Holdings, Inc. and Lone Star Value Investors, LP. (incorporated
by reference to Exhibit 10.1 to our Current Report on Form 8-K filed February 27, 2015). |
| |
|
| 31.1 |
Certification
of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| |
|
| 31.2 |
Certification
of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| |
|
| 32.1 |
Certification
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
| |
|
| 101.INS * |
XBRL
Instance Document |
| |
|
| 101.SCH * |
XBRL
Taxonomy Extension Schema |
| |
|
| 101.CAL * |
XBRL
Taxonomy Extension Calculation Linkbase |
| |
|
| 101.DEF * |
XBRL
Taxonomy Extension Definition Linkbase |
| |
|
| 101.LAB * |
XBRL
Taxonomy Extension Label Linkbase |
| |
|
| 101.PRE * |
XBRL
Taxonomy Extension Presentation Linkbase |
*
Pursuant to Rule 406T of Regulation S-T, the XBRL related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall
not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise
subject to the liability of that section, and shall not be deemed part of a registration statement, prospectus or other document
filed under Sections 11 or 12 of the Securities Act of 1933, as amended, or otherwise subject to the liability of those sections,
except as shall be expressly set forth by specific reference in such filings.
Exhibit
31.1
Certification
of the Principal Executive Officer
Pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
I, Daniel
M. Koch, certify that:
| |
1. |
I
have reviewed this Quarterly Report on Form 10-Q of ATRM Holdings, Inc. for the quarterly period ended March 31, 2015; |
| |
|
|
| |
2. |
Based
on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect
to the period covered by this report; |
| |
|
|
| |
3. |
Based
on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report; |
| |
|
|
| |
4. |
The
registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) Designed
such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being prepared;
(b) Designed
such internal control over financial reporting, or caused such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated
the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such
evaluation; and
(d) Disclosed
in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s
most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
| |
5. |
The
registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors
(or persons performing the equivalent functions): |
(a) All
significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information;
and
(b) Any
fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal control over financial reporting.
| Date:
May 20, 2015 |
/s/
Daniel M. Koch |
| |
Daniel
M. Koch |
| |
President
and Chief Executive Officer |
| |
(Principal
Executive Officer) |
Exhibit
31.2
Certification
of the Principal Financial Officer
Pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
I, Paul
H. Askegaard, certify that:
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1. |
I
have reviewed this Quarterly Report on Form 10-Q of ATRM Holdings, Inc. for the quarterly period ended March 31, 2015; |
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2. |
Based
on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect
to the period covered by this report; |
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3. |
Based
on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report; |
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4. |
The
registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting
(as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) Designed
such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being prepared;
(b) Designed
such internal control over financial reporting, or caused such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated
the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such
evaluation; and
(d) Disclosed
in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s
most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5. |
The
registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors
(or persons performing the equivalent functions): |
(a) All
significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information;
and
(b) Any
fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal control over financial reporting.
| Date:
May 20, 2015 |
/s/
Paul H. Askegaard |
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Paul
H. Askegaard |
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Chief
Financial Officer |
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(Principal
Financial and Accounting Officer) |
Exhibit
32.1
CERTIFICATION
PURSUANT TO
SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002
In connection
with the Quarterly Report of ATRM Holdings, Inc. (the “Company”) on Form 10-Q for the quarterly period ended March
31, 2015, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Daniel M. Koch,
as Chief Executive Officer of the Company, and Paul H. Askegaard, as Chief Financial Officer of the Company, each hereby certifies,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:
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(1) |
the
Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
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(2) |
the
information contained in the Report fairly presents, in all material respects, the financial condition and results of operations
of the Company. |
| Date: May 20, 2015 |
/s/ Daniel M. Koch |
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Daniel M. Koch |
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President and Chief Executive Officer |
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(Principal Executive Officer) |
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|
| Date: May 20, 2015 |
/s/ Paul H. Askegaard |
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Paul H. Askegaard |
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Chief Financial Officer |
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(Principal Financial and Accounting Officer) |