United states

TPI COMPOSITES, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

 

Redeemable Preferred Share Warrants

The details of the warrant activity for the three months ended March 31, 2016 is as follows:

 

		Number of Warrants				Weighted-Average Exercise Price
Outstanding as of December 31, 2015			248			$	8,749
2016 grants			—				—
2016 exercises			—				—
2016 forfeitures			—				—
2016 cancellations			—				—
2016 expirations			—				—
Outstanding as of March 31, 2016			248			$	8,749

The warrants are reported at fair value in the accompanying financial statements based on the value of the Series B Preferred Shares that may be purchased.

Common Stock Warrants

In connection with the note purchase agreement dated December 29, 2014 for the purchase of $10.0 million of subordinated convertible promissory notes, 61,720 warrants were issued to purchase common stock with an exercise price equal to the lesser of 85% of the price per share in an initial public offering or $24.30, subject to adjustment. The warrants are immediately exercisable and expire no later than eight years from the date of issuance. The fair value of the warrants was estimated on the date of grant using the Black-Scholes option pricing model assuming a common stock price of $11.03 per share, an exercise price of $9.38 per share, expected stock price volatility of 80 percent and a risk-free interest rate estimate of 0.71 percent.

Note 9. Share-Based Compensation Plans

The Company granted stock option awards during the three months ended March 31, 2016 to certain employees under the 2015 Stock Option and Incentive Plan (the 2015 Plan). Each award includes a performance condition that requires the completion of an initial public offering (IPO) by the Company and a required vesting period of one to four years commencing upon achievement of the performance condition. The Company will begin recording share-based compensation expense for these awards (as well as those awarded during the year ended December 31, 2015) when the IPO is considered probable of achievement, which will not be deemed to occur until the consummation of the IPO, and therefore no compensation cost will be recognized until the IPO occurs. If an IPO is consummated by the Company, compensation expense will be recorded for the requisite service period from the grant date through the IPO date with the balance of the share-based compensation expensed over the remaining vesting period.

 

F-13

Table of Contents

TPI COMPOSITES, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

 

The following table summarizes the activity of the stock options and restricted stock units (RSU) under the Company’s incentive plans between January 1, 2016 and March 31, 2016:

 

						Stock Options												RSUs
		Shares Available for Grant				Shares				Weighted-Average Exercise Price				Options Exercisable				Shares				Weighted-Average Grant Date Fair Value
Balance as of December 31, 2015			3,392,141				3,261,663			$	11.90				35,703				731,880			$	10.89
Granted			(273,600	)			273,600				21.36								—				—
Exercised			—				—				—								—				—
Forfeited/cancelled			264,395				(186,635	)			10.75								(77,760	)			10.87
Balance as of March 31, 2016			3,382,936				3,348,628				12.73				25,828				654,120				10.90

The following table summarizes the outstanding and exercisable stock option awards as of March 31, 2016:

 

		Options Outstanding												Options Exercisable
Range of Exercise Prices:		Shares				Weighted-Average Remaining Contractual Life (in years)				Weighted-Average Exercise Price				Shares				Weighted-Average Exercise Price
$8.49			25,828				3.8			$	8.49				25,828			$	8.49
$10.87			2,444,400				9.2				10.87				—				—
$16.53			676,800				9.7				16.53				—				—
$23.09			201,600				10.0				23.09				—				—
$8.49 to $23.09			3,348,628				9.3				12.73				25,828				8.49