☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Nevada | 20-1176000 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
11495 Valley View Road Eden Prairie, MN | 55344 | |
(Address of principal executive offices) | (Zip Code) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
None | N/A | N/A |
Large accelerated filer ☐ | Accelerated filer ☐ | |
Non-accelerated filer ☒ | Smaller reporting company ☒ | |
Emerging growth company ☐ |
Page | ||
PART I – FINANCIAL INFORMATION | ||
Item 1. | 4 | |
4 | ||
5 | ||
6 | ||
8 | ||
9 | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
PART II – OTHER INFORMATION | ||
Item 1. | ||
Item 1A. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
Item 5. | ||
Item 6. | ||
June 30, 2023 | December 31, 2022 | September 30, 2023 | December 31, 2022 | |||||||||||||
ASSETS | ||||||||||||||||
Current Assets: | ||||||||||||||||
Cash | $ | 332 | $ | 1,153 | | $ | 1,095 | $ | 1,153 | |||||||
Restricted Cash | 850 | - | ||||||||||||||
Accounts receivable, net of allowance of $1,214 and $1,037, respectively | 2,818 | 4,029 | ||||||||||||||
Accounts receivable, net of allowance of $1,247 and $1,037, respectively | 3,231 | 4,029 | ||||||||||||||
Inventory | 900 | 868 | 1,713 | 868 | ||||||||||||
Prepaid expenses and other current assets | 1,201 | 570 | 1,355 | 570 | ||||||||||||
Total Current Assets | 6,101 | 6,620 | 7,394 | 6,620 | ||||||||||||
Property, equipment and other, net | 1,050 | 856 | 1,079 | 856 | ||||||||||||
Intangible assets, net | 4,786 | 5,137 | 4,609 | 5,137 | ||||||||||||
Goodwill | 7,260 | 7,260 | 7,260 | 7,260 | ||||||||||||
Total Non-current Assets | 13,096 | 13,253 | 12,948 | 13,253 | ||||||||||||
Total Assets | $ | 19,197 | $ | 19,873 | $ | 20,342 | $ | 19,873 | ||||||||
LIABILITIES | ||||||||||||||||
Current Liabilities: | ||||||||||||||||
Senior secured debt, in default | $ | 16,123 | $ | 14,416 | $ | 17,645 | $ | 14,416 | ||||||||
Convertible promissory notes payable | 17,712 | 16,713 | 7,553 | 16,713 | ||||||||||||
Convertible promissory notes payable, related parties | 8,346 | 7,409 | 2,495 | 7,409 | ||||||||||||
Bridge notes advance | 1,476 | - | ||||||||||||||
Asset-backed secured promissory notes | 6,576 | - | ||||||||||||||
Asset-backed secured promissory notes, related parties | 3,094 | - | ||||||||||||||
Accounts payable | 4,859 | 4,400 | 4,623 | 4,400 | ||||||||||||
Accrued expenses | 6,351 | 8,512 | 6,359 | 8,512 | ||||||||||||
Factoring liabilities | 1,213 | 2,130 | 1,814 | 2,130 | ||||||||||||
Warrant liability | 14,410 | 1,416 | 28,106 | 1,416 | ||||||||||||
Accrued interest | 6,174 | 4,052 | 5,369 | 4,052 | ||||||||||||
Accrued interest, related parties | 1,438 | 788 | 729 | 788 | ||||||||||||
Current portion of contract liabilities | 67 | 60 | 68 | 60 | ||||||||||||
Other | 1,108 | 291 | 1,003 | 291 | ||||||||||||
Total Current Liabilities | 79,277 | 60,187 | 85,434 | 60,187 | ||||||||||||
Non-current Liabilities | ||||||||||||||||
Lease liabilities | 515 | 438 | 550 | 438 | ||||||||||||
Contract liabilities | 215 | 230 | 284 | 230 | ||||||||||||
Deferred tax liability | 28 | 28 | 28 | 28 | ||||||||||||
Total Non-currrent Liabilities | 758 | 696 | 862 | 696 | ||||||||||||
Total Liabilities | $ | 80,035 | $ | 60,883 | $ | 86,296 | $ | 60,883 | ||||||||
Commitments and Contingencies (Footnote 13) | ||||||||||||||||
STOCKHOLDERS’ DEFICIT | ||||||||||||||||
Preferred Stock, par value $0.001, 5,000,000 shares authorized; 6,175 shares Series A, 293 shares Series B, 90 shares Series C and 8 shares Series D no shares issued and outstanding at June 30, 2023 and December 31, 2022 | $ | - | $ | - | ||||||||||||
Common Stock, par value $0.001, 2,500,000,000 shares authorized; 561,637,651 and 548,737,651 issued and outstanding at June 30, 2023 December 31, 2022, respectively | 562 | 549 | ||||||||||||||
Preferred Stock, par value $0.001, 5,000,000 shares authorized; 6,175 shares Series A, 293 shares Series B, 90 shares Series C and 8 shares Series D no shares issued and outstanding at September 30, 2023 and December 31, 2022 | $ | - | $ | - | ||||||||||||
Common stock, par value $0.001, 2,500,000,000 shares authorized; 1,026,078,464 and 548,737,651 issued and outstanding at September 30, 2023 and December 31, 2022, respectively | 1,026 | 549 | ||||||||||||||
Additional paid-in capital | 153,264 | 152,750 | 171,377 | 152,750 | ||||||||||||
Accumulated deficit | (214,584 | ) | (194,242 | ) | (238,284 | ) | (194,242 | ) | ||||||||
Accumulated other comprehensive loss | (80 | ) | (67 | ) | (73 | ) | (67 | ) | ||||||||
Total Stockholders’ Deficit | (60,838 | ) | (41,010 | ) | (65,954 | ) | (41,010 | ) | ||||||||
Total Liabilities and Stockholders’ Deficit | $ | 19,197 | $ | 19,873 | $ | 20,342 | $ | 19,873 |
Three Months Ended June 30, | Six Months Ended June 30, | Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||||
Revenue | $ | 4,675 | $ | 3,882 | $ | 8,450 | $ | 7,077 | $ | 4,953 | $ | 4,166 | $ | 13,404 | $ | 11,242 | ||||||||||||||||
Cost of Revenues | 1,202 | 1,096 | 2,464 | 1,986 | 1,412 | 1,157 | 3,876 | 3,141 | ||||||||||||||||||||||||
Gross Margin | 3,473 | 2,786 | 5,986 | 5,091 | 3,541 | 3,009 | 9,528 | 8,101 | ||||||||||||||||||||||||
Operating Expenses: | ||||||||||||||||||||||||||||||||
General and administrative | 1,238 | 3,781 | 3,997 | 5,986 | 2,681 | 3,498 | 6,678 | 9,484 | ||||||||||||||||||||||||
Selling and marketing | 978 | 1,672 | 2,390 | 3,387 | 1,039 | 1,650 | 3,430 | 5,037 | ||||||||||||||||||||||||
Research and development | 139 | 171 | 270 | 337 | 165 | 157 | 436 | 494 | ||||||||||||||||||||||||
Depreciation and amortization | 187 | 210 | 376 | 386 | 187 | 189 | 563 | 575 | ||||||||||||||||||||||||
Total Operating Expenses | 2,542 | 5,834 | 7,033 | 10,096 | 4,072 | 5,494 | 11,107 | 15,590 | ||||||||||||||||||||||||
Operating Income/(Loss) | 931 | (3,048 | ) | (1,047 | ) | (5,005 | ) | |||||||||||||||||||||||||
Operating Loss | (531 | ) | (2,485 | ) | (1,579 | ) | (7,489 | ) | ||||||||||||||||||||||||
Other Income (Expense): | ||||||||||||||||||||||||||||||||
Other (Expense)/Income: | ||||||||||||||||||||||||||||||||
Interest expense | (3,706 | ) | (2,903 | ) | (7,218 | ) | (6,040 | ) | (2,907 | ) | (3,382 | ) | (10,125 | ) | (9,421 | ) | ||||||||||||||||
Interest expense, related party | (675 | ) | (56 | ) | (1,441 | ) | (112 | ) | (938 | ) | (439 | ) | (2,379 | ) | (551 | ) | ||||||||||||||||
Change in fair value of derivative liabilities | (3,821 | ) | 7,861 | (10,618 | ) | 11,343 | (19,325 | ) | 5,252 | (29,943 | ) | 16,597 | ||||||||||||||||||||
Loss on issuance of debt | - | - | - | (3,434 | ) | - | - | - | (3,434 | ) | ||||||||||||||||||||||
Loss on extinguishment of debt | - | (211 | ) | - | (211 | ) | - | (86 | ) | - | (297 | ) | ||||||||||||||||||||
Other (expense) income | 9 | 1 | (18 | ) | 2 | 1 | 1 | (16 | ) | (1 | ) | |||||||||||||||||||||
Total Other (Expense)/Inocme | (8,193 | ) | 4,692 | (19,295 | ) | 1,548 | ||||||||||||||||||||||||||
Total Other (Expense)/Income | (23,169 | ) | 1,346 | (42,463 | ) | 2,893 | ||||||||||||||||||||||||||
Net (Loss)/Income before Income Taxes | (7,262 | ) | 1,644 | (20,342 | ) | (3,457 | ) | |||||||||||||||||||||||||
Net Loss before Income Taxes | (23,700 | ) | (1,139 | ) | (44,042 | ) | (4,596 | ) | ||||||||||||||||||||||||
Provision for Income Taxes | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Net (Loss)/Income | (7,262 | ) | 1,644 | (20,342 | ) | (3,457 | ) | |||||||||||||||||||||||||
Net Loss | (23,700 | ) | (1,139 | ) | (44,042 | ) | (4,596 | ) | ||||||||||||||||||||||||
Other Comprehensive Loss | ||||||||||||||||||||||||||||||||
Foreign currency translation adjustments | (9 | ) | - | (13 | ) | - | 7 | - | (6 | ) | 6 | |||||||||||||||||||||
Total Comprehensive (Loss)/Income | $ | (7,271 | ) | $ | 1,644 | $ | (20,355 | ) | $ | (3,457 | ) | |||||||||||||||||||||
Total Comprehensive Loss | $ | (23,693 | ) | $ | (1,139 | ) | $ | (44,048 | ) | $ | (4,590 | ) | ||||||||||||||||||||
(Loss) income per Share: | ||||||||||||||||||||||||||||||||
Basic | $ | (0.01 | ) | $ | - | $ | (0.04 | ) | $ | (0.01 | ) | |||||||||||||||||||||
Diluted | $ | (0.01 | ) | $ | - | $ | (0.04 | ) | $ | (0.01 | ) | |||||||||||||||||||||
Loss per Share: | ||||||||||||||||||||||||||||||||
Basic and diluted | $ | (0.03 | ) | $ | (0.00 | ) | $ | (0.06 | ) | $ | (0.01 | ) | ||||||||||||||||||||
Weighted average shares outstanding | ||||||||||||||||||||||||||||||||
Basic | 582,328,811 | 538,560,051 | 579,178,811 | 532,589,825 | ||||||||||||||||||||||||||||
Diluted | 582,328,811 | 871,984,091 | 579,178,811 | 532,589,825 | ||||||||||||||||||||||||||||
Basic and diluted | 892,956,020 | 561,069,625 | 683,771,214 | 542,484,779 |
Three Months Ended June 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||
Three Months Ended September 30, 2023 | Three Months Ended September 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||
Common Stock | Common Stock | |||||||||||||||||||||||||||||||||||||||||||||||
Number of | Accumulated | Number of | Accumulated | |||||||||||||||||||||||||||||||||||||||||||||
Shares | Other | Shares | Other | |||||||||||||||||||||||||||||||||||||||||||||
Issued and | Additional Paid- | Accumulated | Comprehensive | Issued and | Additional Paid- | Accumulated | Comprehensive | |||||||||||||||||||||||||||||||||||||||||
Outstanding | Par Value | in Capital | Deficit | Loss | Total | Outstanding | Par Value | in Capital | Deficit | Loss | Total | |||||||||||||||||||||||||||||||||||||
Balances as of March 31, 2023 | 555,637,651 | $ | 556 | $ | 153,046 | $ | (207,322 | ) | $ | (71 | ) | $ | (53,791 | ) | ||||||||||||||||||||||||||||||||||
Shares issued for services | 6,000,000 | 6 | 218 | - | 224 | |||||||||||||||||||||||||||||||||||||||||||
Balances as of June 30, 2023 | 561,637,651 | $ | 562 | $ | 153,264 | $ | (214,584 | ) | $ | (80 | ) | $ | (60,838 | ) | ||||||||||||||||||||||||||||||||||
Shares issued for settlement of debt | 464,440,813 | 464 | 18,113 | - | - | 18,577 | ||||||||||||||||||||||||||||||||||||||||||
Net loss | - | - | - | (7,262 | ) | - | (7,262 | ) | - | - | - | (23,700 | ) | - | (23,700 | ) | ||||||||||||||||||||||||||||||||
Foreign currency translation adjustment | - | - | - | - | (9 | ) | (9 | ) | - | - | - | - | 7 | 7 | ||||||||||||||||||||||||||||||||||
Balances as of June 30, 2023 | 561,637,651 | $ | 562 | $ | 153,264 | $ | (214,584 | ) | $ | (80 | ) | $ | (60,838 | ) | ||||||||||||||||||||||||||||||||||
Balances as of September 30, 2023 | 1,026,078,464 | $ | 1,026 | $ | 171,377 | $ | (238,284 | ) | $ | (73 | ) | $ | (65,954 | ) |
Three Months Ended June 30, 2022 | ||||||||||||||||||||||||
Common Stock | ||||||||||||||||||||||||
Number of | Accumulated | |||||||||||||||||||||||
Shares | Other | |||||||||||||||||||||||
Issued and | Additional Paid- | Accumulated | Comprehensive | |||||||||||||||||||||
Outstanding | Par Value | in Capital | Deficit | Loss | Total | |||||||||||||||||||
Balances as of March 31, 2022 | 517,195,705 | $ | 517 | $ | 150,533 | $ | (189,050 | ) | $ | (67 | ) | $ | (38,067 | ) | ||||||||||
Shares issued for services | 12,097,500 | 12 | 876 | - | - | 888 | ||||||||||||||||||
Net Income | - | - | - | 1,644 | - | 1,644 | ||||||||||||||||||
Foreign currency translation adjustment | - | - | - | - | - | - | ||||||||||||||||||
Balances as of June 30, 2022 | 529,293,205 | $ | 529 | $ | 151,409 | $ | (187,406 | ) | $ | (67 | ) | $ | (35,535 | ) |
Three Months Ended September 30, 2022 | ||||||||||||||||||||||||
Common Stock | ||||||||||||||||||||||||
Number of | Accumulated | |||||||||||||||||||||||
Shares | Other | |||||||||||||||||||||||
Issued and | Additional Paid- | Accumulated | Comprehensive | |||||||||||||||||||||
Outstanding | Par Value | in Capital | Deficit | Loss | Total | |||||||||||||||||||
Balances as of June 30, 2022 | 529,293,205 | $ | 529 | $ | 151,409 | $ | (187,406 | ) | $ | (67 | ) | $ | (35,535 | ) | ||||||||||
Shares issued for settlement of debt and warrants | 19,444,446 | 20 | 1,341 | - | - | 1,361 | ||||||||||||||||||
Net loss | - | - | - | (1,139 | ) | - | (1,139 | ) | ||||||||||||||||
Balances as of September 30, 2022 | 548,737,651 | $ | 549 | $ | 152,750 | $ | (188,545 | ) | $ | (67 | ) | $ | (35,313 | ) |
Six Months Ended June 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||
Nine Months Ended September 30, 2023 | Nine Months Ended September 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||
Common Stock | Common Stock | |||||||||||||||||||||||||||||||||||||||||||||||
Number of | Accumulated | Number of | Accumulated | |||||||||||||||||||||||||||||||||||||||||||||
Shares | Other | Shares | Other | |||||||||||||||||||||||||||||||||||||||||||||
Issued and | Additional Paid- | Accumulated | Comprehensive | Issued and | Additional Paid- | Accumulated | Comprehensive | |||||||||||||||||||||||||||||||||||||||||
Outstanding | Par Value | in Capital | Deficit | Loss | Total | Outstanding | Par Value | in Capital | Deficit | Loss | Total | |||||||||||||||||||||||||||||||||||||
Balances as of December 31, 2022 | 548,737,651 | $ | 549 | $ | 152,750 | $ | (194,242 | ) | $ | (67 | ) | $ | (41,010 | ) | 548,737,651 | $ | 549 | $ | 152,750 | $ | (194,242 | ) | $ | (67 | ) | $ | (41,010 | ) | ||||||||||||||||||||
Shares issued for services | 12,900,000 | 13 | 514 | - | - | 527 | 12,900,000 | 13 | 514 | - | - | 527 | ||||||||||||||||||||||||||||||||||||
Shares issued for settlement of debt | 464,440,813 | 464 | 18,113 | - | - | 18,577 | ||||||||||||||||||||||||||||||||||||||||||
Net loss | - | - | - | (20,342 | ) | - | (20,342 | ) | - | - | - | (44,042 | ) | - | (44,042 | ) | ||||||||||||||||||||||||||||||||
Foreign currency translation adjustment | - | - | - | - | (13 | ) | (13 | ) | - | - | - | - | (6 | ) | (6 | ) | ||||||||||||||||||||||||||||||||
Balances as of June 30, 2023 | 561,637,651 | $ | 562 | $ | 153,264 | $ | (214,584 | ) | $ | (80 | ) | $ | (60,838 | ) | ||||||||||||||||||||||||||||||||||
Balances as of September 30, 2023 | 1,026,078,464 | $ | 1,026 | $ | 171,377 | $ | (238,284 | ) | $ | (73 | ) | $ | (65,954 | ) |
Six Months Ended June 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||
Nine Months Ended September 30, 2022 | Nine Months Ended September 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||
Common Stock | Common Stock | |||||||||||||||||||||||||||||||||||||||||||||||
Number of | Accumulated | Number of | Accumulated | |||||||||||||||||||||||||||||||||||||||||||||
Shares | Other | Shares | Other | |||||||||||||||||||||||||||||||||||||||||||||
Issued and | Additional Paid- | Accumulated | Comprehensive | Issued and | Additional Paid- | Accumulated | Comprehensive | |||||||||||||||||||||||||||||||||||||||||
Outstanding | Par Value | in Capital | Deficit | Loss | Total | Outstanding | Par Value | in Capital | Deficit | Loss | Total | |||||||||||||||||||||||||||||||||||||
Balances as of December 31, 2021 | 481,619,621 | $ | 482 | $ | 144,582 | $ | (183,949 | ) | $ | (73 | ) | $ | (38,958 | ) | 481,619,621 | $ | 482 | $ | 144,582 | $ | (183,949 | ) | $ | (73 | ) | $ | (38,958 | ) | ||||||||||||||||||||
Cashless warrant exercise | 14,000,000 | 14 | 2,152 | - | - | 2,166 | 14,000,000 | 14 | 2,152 | - | - | 2,166 | ||||||||||||||||||||||||||||||||||||
Warrant exercise | 909,091 | 1 | 99 | - | - | 100 | 909,091 | 1 | 99 | - | - | 100 | ||||||||||||||||||||||||||||||||||||
Shares issued in conjunction with Note Payable | 20,666,993 | 20 | 3,700 | - | - | 3,720 | 20,666,993 | 20 | 3,700 | - | - | 3,720 | ||||||||||||||||||||||||||||||||||||
Shares issued for services | 12,097,500 | 12 | 876 | - | - | 888 | ||||||||||||||||||||||||||||||||||||||||||
Shares issued for settlement of debt and warrants | 19,444,446 | 20 | 1,341 | - | - | 1,361 | ||||||||||||||||||||||||||||||||||||||||||
Shsares issued for services | 12,097,500 | 12 | 876 | - | - | 888 | ||||||||||||||||||||||||||||||||||||||||||
Net loss | - | - | - | (3,457 | ) | - | (3,457 | ) | - | - | - | (4,596 | ) | - | (4,596 | ) | ||||||||||||||||||||||||||||||||
Foreign currency translation adjustment | - | - | - | - | 6 | 6 | - | - | - | - | 6 | 6 | ||||||||||||||||||||||||||||||||||||
Balances as of June 30, 2022 | 529,293,205 | $ | 529 | $ | 151,409 | $ | (187,406 | ) | $ | (67 | ) | $ | (35,535 | ) | ||||||||||||||||||||||||||||||||||
Balances as of September 30, 2022 | 548,737,651 | $ | 549 | $ | 152,750 | $ | (188,545 | ) | $ | (67 | ) | $ | (35,313 | ) |
Six Months Ended June 30, | Nine Months Ended September 30, | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
Cash Flows - Operating Acivities: | ||||||||||||||||
Cash Flows - Operating Activities: | ||||||||||||||||
Net loss | $ | (20,342 | ) | $ | (3,457 | ) | $ | (44,042 | ) | $ | (4,596 | ) | ||||
Adjustments to reconcile net loss to net cash used by operating activities | ||||||||||||||||
Depreciation and amortization | 515 | 446 | 780 | 681 | ||||||||||||
Bad debt expense | 313 | 52 | 547 | 62 | ||||||||||||
Shares issued for services | 224 | 888 | 224 | 888 | ||||||||||||
Change in fair value of derivative liabilities | 10,618 | (11,343 | ) | 29,943 | (16,597 | ) | ||||||||||
Loss on extinguishment of debt | - | 211 | - | 297 | ||||||||||||
Loss on issuance of debt | - | 3,434 | - | 3,434 | ||||||||||||
Amortization of debt issuance costs and original issue discount | 3,955 | 1,304 | 5,656 | 2,998 | ||||||||||||
Accrued interest | 3,606 | 1,327 | 5,529 | 2,004 | ||||||||||||
Gain on sale of property and equipment, net | - | 51 | ||||||||||||||
Changes in operating assets and liabilities | ||||||||||||||||
Accounts receivable - trade | 898 | 733 | 253 | 69 | ||||||||||||
Inventory | (31 | ) | 115 | (844 | ) | 178 | ||||||||||
Prepaid expenses and other assets | (336 | ) | (27 | ) | (487 | ) | (656 | ) | ||||||||
Accounts payable | 718 | (486 | ) | 464 | (1,693 | ) | ||||||||||
Accrued expenses | (1,337 | ) | 1,710 | (1,326 | ) | (202 | ) | |||||||||
Contract liabilties | (16 | ) | (108 | ) | ||||||||||||
Contract liabilities | 50 | (94 | ) | |||||||||||||
Net Cash Used in Operating Activities | (1,215 | ) | (5,201 | ) | (3,253 | ) | (13,176 | ) | ||||||||
Cash Flows - Investing Activities | ||||||||||||||||
Proceeds from sale of property and equipment | - | 948 | 13 | 1,022 | ||||||||||||
Purchase of property and equipment | (169 | ) | - | (169 | ) | - | ||||||||||
Net Cash Flows (Used in)/Provided by Investing Activities | (169 | ) | 948 | (156 | ) | 1,022 | ||||||||||
Cash Flows - Financing Activities | ||||||||||||||||
Proceeds from senior promissory notes | - | 2,940 | - | 2,940 | ||||||||||||
Proceeds from convertible promissory notes payable | 1,202 | - | 1,202 | 12,366 | ||||||||||||
Proceeds from bridge notes advance | 1,476 | 2,130 | ||||||||||||||
Proceeds from bridge notes payable | 2,994 | 640 | ||||||||||||||
Payments to factoring agent, net | (1,167 | ) | 55 | (710 | ) | (227 | ) | |||||||||
Proceeds from warrant exercises | - | 100 | - | 100 | ||||||||||||
Payments of principal on finance leases | (85 | ) | (121 | ) | (130 | ) | (174 | ) | ||||||||
Payments of principal on convertible promissory notes and SBA loans | - | (2,981 | ) | |||||||||||||
Net Cash Flows Provided by Financing Activities | 1,426 | 5,104 | 3,356 | 12,664 | ||||||||||||
Effect of Exchange Rates on Cash | (13 | ) | 14 | (5 | ) | (17 | ) | |||||||||
Net Change in Cash and Restricted Cash During Period | 29 | 865 | ||||||||||||||
Net Change in Cash During Period | (58 | ) | 493 | |||||||||||||
Cash and Restricted Cash at Beginning of Period | 1,153 | 619 | ||||||||||||||
Cash and Restricted Cash at End of Period | $ | 1,182 | $ | 1,484 | ||||||||||||
Cash at Beginning of Period | 1,153 | 619 | ||||||||||||||
Cash at End of Period | $ | 1,095 | $ | 1,112 | ||||||||||||
Supplemental Information: | ||||||||||||||||
Cash paid for interest | $ | 908 | $ | 2,045 | $ | 984 | $ | 3,345 | ||||||||
Non-cash Investing and Financing Activities: | ||||||||||||||||
Warrants issued in conjunction with senior secured promissory note payable and convertible promissory notes payable | $ | 570 | $ | 2,654 | $ | 570 | $ | 4,117 | ||||||||
Conversion of convertible notes payable to common stock | 18,577 | - | ||||||||||||||
Common shares issued for advisory shares | 302 | - | 302 | - | ||||||||||||
Embedded conversion feature on convertible promissory notes payable | 157 | - | ||||||||||||||
Embedded conversion feature on convertible promissory notes payable and bridge notes payable | (520 | ) | 2,309 | |||||||||||||
Reclassification of warrant liability due to cashless warrant exercise | - | 2,167 | - | 2,166 | ||||||||||||
Working capital balances refinanced into convertible notes payable | - | 2,273 | ||||||||||||||
Settlement of debt and warrants with stock | - | 1,361 | ||||||||||||||
Common shares issued in conjunction with senior secured promissory note payable | - | 3,720 | - | 3,720 |
1. | Nature of the Business and Basis of Presentation |
2. | Going Concern |
3. | Summary of Significant Accounting Policies |
4. | Merger Agreement |
• | Merger Sub will merge with and into the Company, with the Company being the surviving company following the merger. |
• | Each issued and outstanding share of the Company’s common stock, will automatically be converted into Class A common stock of SEPA, par value $0.0001 per share (the “Class A Common Stock”), at the Conversion Ratio (as defined in the Merger Agreement); and |
• | Outstanding convertible securities of the Company will be assumed by SEPA and will be converted into the right to receive Class A Common Stock of SEPA. |
Three Months Ended | Six Months Ended | Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||
(in Thousands) | June 30, 2023 | June 30, 2022 | June 30, 2023 | June 30, 2022 | September 30, 2023 | September 30, 2022 | September 30, 2023 | September 30, 2022 | ||||||||||||||||||||||||
Weighted average shares outstanding | ||||||||||||||||||||||||||||||||
Common shares | 560,638 | 518,074 | 557,488 | 508,399 | 871,265 | 540,584 | 662,080 | 519,127 | ||||||||||||||||||||||||
Common shares issuable assuming exercise of nominally priced warrants | 21,691 | 20,486 | 21,691 | 24,191 | 21,691 | 20,486 | 21,691 | 23,358 | ||||||||||||||||||||||||
Weighted average shares outstanding | 582,329 | 538,560 | 579,179 | 532,590 | 892,956 | 561,070 | 683,771 | 542,485 |
Six Months Ended | Nine Months Ended | |||||||||||||||
(in Thousands) | June 30, 2023 | June 30, 2022 | September 30, 2023 | September 30, 2022 | ||||||||||||
Common stock options | 19,136 | 22,046 | 19,136 | 21,246 | ||||||||||||
Common stock purchase warrants | 1,247,911 | 189,157 | 1,106,819 | 984,799 | ||||||||||||
Convertible notes payable | 677,050 | 122,271 | 224,509 | 483,588 | ||||||||||||
1,944,097 | 333,474 | 1,350,464 | 1,489,633 |
6. | Accrued Expenses |
(in Thousands) | June 30, 2023 | December 31, 2022 | September 30, 2023 | December 31, 2022 | ||||||||||||
Registration penalties | $ | 1,583 | $ | 1,583 | $ | 1,583 | $ | 1,583 | ||||||||
License fees | 892 | 892 | 892 | 892 | ||||||||||||
Director and professional fees | 877 | 586 | 1,177 | 586 | ||||||||||||
Employee compensation | 2,665 | 4,585 | 2,665 | 4,585 | ||||||||||||
Other | 334 | 866 | 42 | 866 | ||||||||||||
$ | 6,351 | $ | 8,512 | $ | 6,359 | $ | 8,512 |
7. | Senior Secured Debt, In Default |
June 30, 2023 | December 31, 2022 | September 30, 2023 | December 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(in thousands) | Principal | Debt Discount | Carrying Value | Accrued Interest | Principal | Debt Discount | Carrying Value | Accrued Interest | Principal | Debt Discount | Carrying Value | Accrued Interest | Principal | Debt Discount | Carrying Value | Accrued Interest | ||||||||||||||||||||||||||||||||||||||||||||||||
Senior secured debt | $ | 20,346 | $ | (4,223 | ) | $ | 16,123 | $ | 2,676 | $ | 19,211 | $ | (4,795 | ) | $ | 14,416 | $ | 1,890 | $ | 21,399 | $ | (3,754 | ) | $ | 17,645 | $ | 2,636 | $ | 19,211 | $ | (4,795 | ) | $ | 14,416 | $ | 1,890 |
8. | Convertible Promissory Notes Payable |
As of June 30, 2023 | As of September 30, 2023 | |||||||||||||||||||||||||||||||||||||||
(In thousands, except conversion price) | Conversion Price | Principal | Remaining Debt Discount | Remaining Embedded Conversion Option | Carrying Value | Conversion Price | Principal | Remaining Debt Discount | Remaining Embedded Conversion Option | Carrying Value | ||||||||||||||||||||||||||||||
Acquisition convertible promissory note, in default | $ | 0.10 | 4,000 | - | - | 4,000 | $ | 0.10 | 4,000 | - | - | 4,000 | ||||||||||||||||||||||||||||
Convertible promissory notes payable, related parties, in default | $ | 0.10 | 1,373 | - | - | 1,373 | $ | 0.10 | 1,373 | - | - | 1,373 | ||||||||||||||||||||||||||||
2022 convertible notes payable | $ | 0.04 | 14,193 | (991 | ) | 510 | 13,712 | $ | 0.04 | 3,940 | (388 | ) | 1 | 3,553 | ||||||||||||||||||||||||||
2022 convertible notes payable, related parties | $ | 0.04 | 7,210 | (420 | ) | 183 | 6,973 | $ | 0.04 | 1,270 | (148 | ) | - | 1,122 | ||||||||||||||||||||||||||
Total Convertible Promissory Notes Payable | $ | 26,776 | $ | (1,411 | ) | $ | 693 | $ | 26,058 | $ | 10,583 | $ | (536 | ) | $ | 1 | $ | 10,048 |
As of December 31, 2022 | As of December 31, 2022 | |||||||||||||||||||||||||||||||||||||||
(In thousands, except conversion price) | Conversion Price | Principal | Remaining Debt Discount | Remaining Embedded Conversion Option | Carrying Value | Conversion Price | Principal | Remaining Debt Discount | Remaining Embedded Conversion Option | Carrying Value | ||||||||||||||||||||||||||||||
Acquisition convertible promissory note, in default | $ | 0.10 | 4,000 | - | - | 4,000 | $ | 0.10 | 4,000 | - | - | 4,000 | ||||||||||||||||||||||||||||
Convertible promissory note, related party, in default | $ | 0.10 | 1,373 | - | - | 1,373 | $ | 0.10 | 1,373 | - | - | 1,373 | ||||||||||||||||||||||||||||
2022 convertible notes payable | $ | 0.04 | 13,660 | (2,532 | ) | 1,585 | 12,713 | $ | 0.04 | 13,660 | (2,532 | ) | 1,585 | 12,713 | ||||||||||||||||||||||||||
2022 convertible notes payable, related parties | $ | 0.04 | 6,515 | (1,234 | ) | 755 | 6,036 | $ | 0.04 | 6,515 | (1,234 | ) | 755 | 6,036 | ||||||||||||||||||||||||||
Total Convertible Promissory Notes | $ | 25,548 | $ | (3,766 | ) | $ | 2,340 | $ | 24,122 | |||||||||||||||||||||||||||||||
Total Convertible Promissory Notes Payable | $ | 25,548 | $ | (3,766 | ) | $ | 2,340 | $ | 24,122 |
9. |
September 30, 2023 | ||||||||||||||||
(In thousands) | Principal | Debt Discount | Embedded Derivative | Carrying Value | ||||||||||||
ABS promissory notes | | 3,122 | | (379 | ) | | 3,833 | | 6,576 | |||||||
ABS promissory notes, related parties | 1,462 | (179 | ) | 1,811 | 3,094 | |||||||||||
Total ABS Promissory Notes | | 4,584 | | (558 | ) | | 5,644 | | 9,670 |
10. | Fair Value Measurements |
Fair value measured at June 30, 2023 | Fair value measured at September 30, 2023 | |||||||||||||||||||||||||||||||
Fair value at | Quoted prices in active markets | Significant other observable inputs | Significant unobservable inputs | Fair value at | Quoted prices in active markets | Significant other observable inputs | Significant unobservable inputs | |||||||||||||||||||||||||
(in thousands) | June 30, 2023 | (Level 1) | (Level 2) | (Level 3) | September 30, 2023 | (Level 1) | (Level 2) | (Level 3) | ||||||||||||||||||||||||
Warrant liability | $ | 14,410 | $ | - | $ | - | $ | 14,410 | $ | 28,106 | $ | - | $ | - | $ | 28,106 | ||||||||||||||||
Embedded conversion option | 693 | - | - | 693 | ||||||||||||||||||||||||||||
Embedded conversion derivatives | 5,645 | - | - | 5,645 | ||||||||||||||||||||||||||||
Total fair value | $ | 15,103 | $ | - | $ | - | $ | 15,103 | $ | 33,751 | $ | - | $ | - | $ | 33,751 |
Fair value measured at December 31, 2022 | Fair value measured at December 31, 2022 | |||||||||||||||||||||||||||||||
Fair value at | Quoted prices in active markets | Significant other observable inputs | Significant unobservable inputs | Fair value at | Quoted prices in active markets | Significant other observable inputs | Significant unobservable inputs | |||||||||||||||||||||||||
(in thousands) | December 31, 2022 | (Level 1) | (Level 2) | (Level 3) | December 31, 2022 | (Level 1) | (Level 2) | (Level 3) | ||||||||||||||||||||||||
Warrant liability | $ | 1,416 | $ | - | $ | - | $ | 1,416 | $ | 1,416 | $ | - | $ | - | $ | 1,416 | ||||||||||||||||
Embedded conversion option | 2,340 | - | - | 2,340 | ||||||||||||||||||||||||||||
Embedded conversion derivatives | 2,340 | - | - | 2,340 | ||||||||||||||||||||||||||||
Total fair value | $ | 3,756 | $ | - | $ | - | $ | 3,756 | $ | 3,756 | $ | - | $ | - | $ | 3,756 |
June 30, | Initial Valuation | December 31, | Initial Valuation | December 31, | ||||||||||||||||
2023 | May 2023 | 2022 | May 2023 | 2022 | ||||||||||||||||
Weighted average remaining life in years | 4.22 | 5.00 | 4.68 | 5.00 | 4.68 | |||||||||||||||
Weighted average volatility | 103 | % | 84 | % | 92 | % | 84 | % | 92 | % | ||||||||||
Value of underlying shares | $ | 0.022 | $ | 0.019 | $ | 0.005 | $ | 0.019 | $ | 0.005 | ||||||||||
Weighted average risk free interest rate | 4.0 | % | 3.5 | % | 4.0 | % | 3.5 | % | 4.0 | % | ||||||||||
Expected dividend yield | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % |
Warrants | Fair Value | Fair Value | Warrants | Fair Value | Fair Value | |||||||||||||||||||
(in thousands, except per share data) | Outstanding | per Share | (in thousands) | Outstanding | per Share | (in thousands) | ||||||||||||||||||
Balance at December 31, 2022 | 1,066,857 | $ | 0.06 | $ | 1,416 | 1,066,857 | $ | 0.06 | $ | 1,416 | ||||||||||||||
Issuance | 61,389 | 0.01 | 570 | 61,389 | 0.01 | 570 | ||||||||||||||||||
Loss on remeasurement of warrant liability | - | 12,424 | - | 26,120 | ||||||||||||||||||||
Balance at June 30, 2023 | 1,128,246 | $ | 0.01 | $ | 14,410 | |||||||||||||||||||
Balance at September 30, 2023 | 1,128,246 | $ | 0.02 | $ | 28,106 |
June 30, 2023 | Initial valuation May 2023 | December 31, 2022 | Initial Valuation | |||||||||||||||||
May 2023 | December 31, 2022 | |||||||||||||||||||
Conversion Price(1) | $ | 0.04 | $ | 0.04 | $ | 0.04 | $ | 0.04 | $ | 0.04 | ||||||||||
Value of underlying shares | $ | 0.022 | $ | 0.019 | $ | 0.005 | $ | 0.019 | $ | 0.005 | ||||||||||
Interest Rate (annual) (2) | 5.28 | % | 4.70 | % | 4.64 | % | 4.70 | % | 4.64 | % | ||||||||||
Volatility (annual) (3) | 141.3 | % | 114.1 | % | 503.0 | % | 114.1 | % | 503.0 | % | ||||||||||
Time to Maturity (Years) | 0.39 | 1.00 | 0.60 | 1.00 | 0.60 |
(1) | Based on the terms provided in the convertible promissory note agreements to convert to common stock of the Company |
(2) | Interest rate for U.S. Treasury Bonds, as of |
(3) | Based on a discounted historical daily volatility of the Company as of |
(in thousands) | Conversion Liability | Conversion Liability | ||||||
Balance December 31, 2022 | $ | 2,340 | $ | 2,340 | ||||
Initial value of new issuance | 157 | (519 | ) | |||||
Change in fair value | (1,804 | ) | 3,824 | |||||
Balance June 30, 2023 | $ | 693 | ||||||
Balance September 30, 2023 | $ | 5,645 |
11. | Revenue |
Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Three Months Ended September 30, 2023 | Three Months Ended September 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||
United States | International | Total | United States | International | Total | United States | International | Total | United States | International | Total | |||||||||||||||||||||||||||||||||||||
Consumables and parts revenue | $ | 2,913 | $ | 18 | $ | 2,931 | $ | 2,629 | $ | 34 | $ | 2,663 | $ | 3,133 | $ | 25 | $ | 3,158 | $ | 2,978 | $ | 34 | $ | 3,012 | ||||||||||||||||||||||||
System revenue | 1,323 | 79 | 1,402 | 862 | - | 862 | 1,607 | 18 | 1,625 | 902 | - | 902 | ||||||||||||||||||||||||||||||||||||
License fees and other | 75 | 5 | 80 | 8 | 5 | 13 | 38 | - | 38 | - | 5 | 5 | ||||||||||||||||||||||||||||||||||||
Product Revenue | $ | 4,311 | $ | 102 | $ | 4,413 | $ | 3,499 | $ | 39 | $ | 3,538 | $ | 4,778 | $ | 43 | $ | 4,821 | $ | 3,880 | $ | 39 | $ | 3,919 | ||||||||||||||||||||||||
Rental Income | 262 | - | 262 | 344 | - | 344 | 132 | - | 132 | 247 | - | 247 | ||||||||||||||||||||||||||||||||||||
Total Revenue | $ | 4,573 | $ | 102 | $ | 4,675 | $ | 3,843 | $ | 39 | $ | 3,882 | $ | 4,910 | $ | 43 | $ | 4,953 | $ | 4,127 | $ | 39 | $ | 4,166 |
Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | |||||||||||||||||||||||
United States | International | Total | United States | International | Total | |||||||||||||||||||
Consumables and parts revenue | $ | 5,487 | $ | 50 | $ | 5,537 | $ | 4,824 | $ | 30 | $ | 4,854 | ||||||||||||
System revenue | 2,157 | 115 | 2,272 | 1,491 | 16 | 1,507 | ||||||||||||||||||
License fees and other | 81 | 15 | 96 | 14 | 14 | 28 | ||||||||||||||||||
Product Revenue | $ | 7,725 | $ | 180 | $ | 7,905 | $ | 6,329 | $ | 60 | $ | 6,389 | ||||||||||||
Rental Income | 545 | - | 545 | 688 | - | 688 | ||||||||||||||||||
Total Revenue | $ | 8,270 | $ | 180 | $ | 8,450 | $ | 7,017 | $ | 60 | $ | 7,077 |
Nine Months Ended September 30, 2023 | Nine Months Ended September 30, 2022 | |||||||||||||||||||||||
United States | International | Total | United States | International | Total | |||||||||||||||||||
Consumables and parts revenue | $ | 8,620 | $ | 76 | $ | 8,696 | $ | 7,836 | $ | 30 | $ | 7,866 | ||||||||||||
System revenue | 3,763 | 132 | 3,895 | 2,392 | 16 | 2,408 | ||||||||||||||||||
License fees and other | 121 | 15 | 136 | 19 | 14 | 33 | ||||||||||||||||||
Product Revenue | $ | 12,504 | $ | 223 | $ | 12,727 | $ | 10,247 | $ | 60 | $ | 10,307 | ||||||||||||
Rental Income | 677 | - | 677 | 935 | - | 935 | ||||||||||||||||||
Total Revenue | $ | 13,181 | $ | 223 | $ | 13,404 | $ | 11,182 | $ | 60 | $ | 11,242 |
12. | Concentration of Credit Risk and Limited Suppliers |
Accounts receivable: | September 30, 2023 | December 31, 2022 | ||||||
Customer A | 10 | % | - |
Three Months Ended | Six Months Ended | Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||
June 30, 2023 | June 30, 2022 | June 30, 2023 | June 30, 2022 | September 30, 2023 | September 30, 2022 | September 30, 2023 | September 30, 2022 | |||||||||||||||||||||||||
Purchases: | ||||||||||||||||||||||||||||||||
Vendor A | 13 | % | 17 | % | 17 | % | 18 | % | 22 | % | 18 | % | 19 | % | 18 | % | ||||||||||||||||
Vendor B | 16 | % | n/a | 11 | % | n/a | 23 | % | n/a | 16 | % | n/a | ||||||||||||||||||||
Vendor C | 20 | % | n/a | 10 | % | n/a |
13. | Commitments and Contingencies |
• | holders of 80% or more of the Company’s convertible notes with a maturity date occurring after the date of the Closing (the “Closing Date”), measured by number of shares of our common stock into which such convertible notes may be converted, agreeing to convert their convertible notes into shares of common stock immediately prior to the Effective Time. |
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
(in thousands) | 2023 | 2022 | 2023 | 2022 | ||||||||||||
Net (Loss)/Income | $ | (7,262 | ) | $ | 1,644 | $ | (20,342 | ) | $ | (3,457 | ) | |||||
Non-GAAP Adjustments: | ||||||||||||||||
Interest expense | 4,381 | 2,959 | 8,659 | 6,152 | ||||||||||||
Depreciation and amortization | 257 | 255 | 515 | 446 | ||||||||||||
EBITDA | (2,624 | ) | 4,858 | (11,168 | ) | 3,141 | ||||||||||
Non-GAAP Adjustments for Adjusted EBITDA: | ||||||||||||||||
Change in fair value of derivative liabilities | 3,821 | (7,861 | ) | 10,618 | (11,343 | ) | ||||||||||
Other non-cash or one-time charges: | ||||||||||||||||
Release of historical accrued expenses | (1,250 | ) | - | (1,250 | ) | - | ||||||||||
Shares for Services | 224 | 888 | 224 | 888 | ||||||||||||
Loss on issuance of debt | - | - | - | 3,434 | ||||||||||||
Loss on extinguishment of debt | - | 211 | - | 211 | ||||||||||||
Adjusted EBITDA | $ | 171 | $ | (1,904 | ) | $ | (1,576 | ) | $ | (3,669 | ) |
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
(in thousands) | 2023 | 2022 | 2023 | 2022 | ||||||||||||
Net (Loss)/Income | $ | (23,700 | ) | $ | (1,139 | ) | $ | (44,042 | ) | $ | (4,596 | ) | ||||
Non-GAAP Adjustments: | ||||||||||||||||
Interest expense | 3,845 | 3,821 | 12,504 | 9,972 | ||||||||||||
Depreciation and amortization | 266 | 235 | 780 | 681 | ||||||||||||
EBITDA | (19,589 | ) | 2,917 | (30,758 | ) | 6,057 | ||||||||||
Non-GAAP Adjustments for Adjusted EBITDA: | ||||||||||||||||
Change in fair value of derivative liabilities | 19,325 | (5,252 | ) | 29,943 | (16,597 | ) | ||||||||||
Other non-cash or one-time charges: | ||||||||||||||||
Release of historical accrued employee compensation expenses | - | - | (1,250 | ) | - | |||||||||||
Shares for Services | - | - | 224 | 888 | ||||||||||||
Loss on issuance of debt | - | - | - | 3,434 | ||||||||||||
Loss on extinguishment of debt | - | 86 | - | 297 | ||||||||||||
Adjusted EBITDA | $ | (264 | ) | $ | (2,249 | ) | $ | (1,841 | ) | $ | (5,921 | ) |
For the Three Months Ended | For the Six Months Ended | For the Three Months Ended | For the Nine Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
June 30, | Change | June 30, | Change | September 30, | Change | September 30, | Change | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2023 | 2022 | $ | % | 2023 | 2022 | $ | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(in Thousands) | 2023 | 2022 | $ | % | 2023 | 2022 | $ | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenues: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total Revenue | $ | 4,675 | $ | 3,882 | $ | 793 | 20 | % | $ | 8,450 | $ | 7,077 | $ | 1,373 | 19 | % | $ | 4,953 | $ | 4,166 | $ | 787 | 19 | % | $ | 13,404 | $ | 11,242 | $ | 2,162 | 19 | % | ||||||||||||||||||||||||||||||||
Cost of Revenues | 1,202 | 1,096 | 106 | 10 | % | 2,464 | 1,986 | 478 | 24 | % | 1,412 | 1,157 | 255 | 22 | % | 3,876 | 3,141 | 735 | 23 | % | ||||||||||||||||||||||||||||||||||||||||||||
Gross Margin | 3,473 | 2,786 | 687 | 25 | % | 5,986 | 5,091 | 895 | 18 | % | 3,541 | 3,009 | 532 | 18 | % | 9,528 | 8,101 | 1,427 | 18 | % | ||||||||||||||||||||||||||||||||||||||||||||
Gross Margin Percentage | 71 | % | 72 | % | -1 | % | 71 | % | 72 | % | -1 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Operating Expenses: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
General and administrative | 1,238 | 3,781 | (2,543 | ) | -67 | % | 3,997 | 5,986 | (1,989 | ) | -33 | % | 2,681 | 3,498 | (817 | ) | -23 | % | 6,678 | 9,484 | (2,806 | ) | -30 | % | ||||||||||||||||||||||||||||||||||||||||
Selling and marketing | 978 | 1,672 | (694 | ) | -42 | % | 2,390 | 3,387 | (997 | ) | -29 | % | 1,039 | 1,650 | (611 | ) | -37 | % | 3,430 | 5,037 | (1,607 | ) | -32 | % | ||||||||||||||||||||||||||||||||||||||||
Research and development | 139 | 171 | (32 | ) | -19 | % | 270 | 337 | (67 | ) | -20 | % | 165 | 157 | 8 | 5 | % | 436 | 494 | (58 | ) | -12 | % | |||||||||||||||||||||||||||||||||||||||||
Operating Income (loss) | 187 | 210 | (23 | ) | -11 | % | 376 | 386 | (10 | ) | -3 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Depreciation and amortization | 187 | 189 | (2 | ) | -1 | % | 563 | 575 | (12 | ) | -2 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Operating Loss | 931 | (3,048 | ) | 3,979 | -131 | % | (1,047 | ) | (5,005 | ) | 3,958 | -79 | % | (531 | ) | (2,485 | ) | 1,954 | -79 | % | (1,579 | ) | (7,489 | ) | 5,910 | -79 | % | |||||||||||||||||||||||||||||||||||||
Other Income (Expense), net | (8,193 | ) | 4,692 | (12,885 | ) | -275 | % | (19,295 | ) | 1,548 | (20,843 | ) | -1346 | % | (23,169 | ) | 1,346 | (24,515 | ) | nm | (42,463 | ) | 2,893 | (45,356 | ) | nm | ||||||||||||||||||||||||||||||||||||||
Net (Loss) Income | $ | (7,262 | ) | $ | 1,644 | (8,906 | ) | -542 | % | $ | (20,342 | ) | $ | (3,457 | ) | (16,885 | ) | 488 | % | |||||||||||||||||||||||||||||||||||||||||||||
Net Loss | $ | (23,700 | ) | $ | (1,139 | ) | (22,561 | ) | nm | $ | (44,042 | ) | $ | (4,596 | ) | (39,446 | ) | nm |
For the three months ended June 30, | Change | For the six months ended June 30, | Change | |||||||||||||||||||||||||||||
2023 | 2022 | $ | % | 2023 | 2022 | $ | % | |||||||||||||||||||||||||
Interest expense | $ | (4,381 | ) | $ | (2,959 | ) | $ | (1,422 | ) | 48 | % | $ | (8,659 | ) | $ | (6,152 | ) | $ | (2,507 | ) | 41 | % | ||||||||||
Change in fair value of derivatives | (3,821 | ) | 7,861 | (11,682 | ) | -149 | % | (10,618 | ) | 11,343 | (21,961 | ) | -194 | % | ||||||||||||||||||
Loss on issuance of debt | - | - | - | nm | - | (3,434 | ) | 3,434 | nm | |||||||||||||||||||||||
Loss on extinguishment of debt | - | (211 | ) | 211 | nm | - | (211 | ) | 211 | nm | ||||||||||||||||||||||
Other expense | 9 | 1 | 8 | nm | (18 | ) | 2 | (20 | ) | nm | ||||||||||||||||||||||
Other (expense)/income, net | $ | (8,193 | ) | $ | 4,692 | $ | (12,885 | ) | -275 | % | $ | (19,295 | ) | $ | 1,548 | $ | (20,843 | ) | -1346 | % |
For the three months ended September 30, | Change | For the nine months ended September 30, | Change | |||||||||||||||||||||||||||||
2023 | 2022 | $ | % | 2023 | 2022 | $ | % | |||||||||||||||||||||||||
Interest expense | $ | (3,845 | ) | $ | (3,821 | ) | $ | (24 | ) | 1 | % | $ | (12,504 | ) | $ | (9,972 | ) | $ | (2,532 | ) | 25 | % | ||||||||||
Change in fair value of derivatives | (19,325 | ) | 5,252 | (24,577 | ) | -468 | % | (29,943 | ) | 16,597 | (46,540 | ) | -280 | % | ||||||||||||||||||
Loss on issuance of debt | - | - | - | nm | - | (3,434 | ) | 3,434 | nm | |||||||||||||||||||||||
Loss on extinguishment of debt | - | (86 | ) | 86 | nm | - | (297 | ) | 297 | nm | ||||||||||||||||||||||
Other expense | 1 | 1 | - | nm | (16 | ) | (1 | ) | (15 | ) | nm | |||||||||||||||||||||
Other (expense)/income, net | $ | (23,169 | ) | $ | 1,346 | $ | (24,515 | ) | -1821 | % | $ | (42,463 | ) | $ | 2,893 | $ | (45,356 | ) | -1568 | % |
For the six months ended June 30, | ||||||||
(in Thousands) | 2023 | 2022 | ||||||
Cash flows used by operating activities | $ | (1,215 | ) | $ | (5,201 | ) | ||
Cash flows (used by) provided by investing activities | $ | (169 | ) | $ | 948 | |||
Cash flows provided by financing activities | $ | 1,426 | $ | 5,104 |
For the nine months ended September 30, | ||||||||
(in Thousands) | 2023 | 2022 | ||||||
Cash flows used by operating activities | $ | (3,253 | ) | $ | (13,176 | ) | ||
Cash flows (used by) provided by investing activities | $ | (156 | ) | $ | 1,022 | |||
Cash flows provided by financing activities | $ | 3,356 | $ | 12,664 |
Item 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Item 4. | CONTROLS AND PROCEDURES |
1. | Expertise and resources to analyze and properly apply U.S. GAAP to complex and non-routine transactions such as complex financial instruments and derivatives and complex sales distributing agreements with select vendors. |
2. | A lack of internal resources to analyze and properly apply U.S. GAAP to accounting for financial instruments included in service agreements with select vendors. |
3. | The Company has failed to design and implement controls around all accounting and IT processes and procedures and, as such, we believe that all its accounting and IT processes and procedures need to be re-designed and tested for operating effectiveness. |
Item 1. | LEGAL PROCEEDINGS. |
Item 1A. | RISK FACTORS. |
Item 2. | UNREGISTERED SALES OF EQUITY SECURITIES, |
Item 3. | DEFAULTS UPON SENIOR SECURITIES. |
Item 4. | MINE SAFETY DISCLOSURES. |
Item 5. | OTHER INFORMATION. |
Item 6. | EXHIBITS |
Exhibit No. | Description |
Agreement and Plan of Merger, dated as of August 23, 2023, by and among SEP Acquisition Corp., SEP Acquisition Holdings Inc., and SANUWAVE Health, Inc. (Incorporated by reference to Exhibit 2.1 to the Form 8-K filed with the SEC on August 23, 2023). | |
Articles of Incorporation (Incorporated by reference to Exhibit 3.1 to the Form 10-SB filed with the SEC on December 18, 2007). | |
Certificate of Amendment to the Articles of Incorporation (Incorporated by reference to Appendix A to the Definitive Schedule 14C filed with the SEC on October 16, 2009). | |
Certificate of Amendment to the Articles of Incorporation (Incorporated by reference to Exhibit A to the Definitive Schedule 14C filed with the SEC on April 16, 2012). | |
Bylaws (Incorporated by reference to Exhibit 3.02 to the Form 10-SB filed with the SEC on December 18, 2007). | |
Certificate of Designation of Preferences, Rights and Limitations of Series A Convertible Preferred Stock of the Company dated March 14, 2014 (Incorporated by reference to Exhibit 3.1 to the Form 8-K filed with the SEC on March 18, 2014). | |
Certificate of Amendment to the Articles of Incorporation, dated September 8, 2015 (Incorporated by reference to Exhibit 3.6 to the Form 10-K filed with the SEC on March 30, 2016). | |
Preferred Stock of the Company dated January 12, 2016 (Incorporated by reference to Exhibit 3.1 to the Form 8-K filed with the SEC on January 19, 2016). | |
Preferred Stock of the Company dated January 31, 2020 (Incorporated by reference to Exhibit 3.1 to the Form 8-K filed with the SEC on February 6, 2020). | |
Certificate of Designation of Preferences, Rights and Limitations of Series C Convertible Preferred Stock of the Company dated January 31, 2020 (Incorporated by reference to Exhibit 3.1 to the Form 8-K filed with the SEC on February 6, 2020). | |
Certificate of Designation of Series D Convertible Preferred Stock (Incorporated by reference to Exhibit 3.1 to the Form 8-K filed with the SEC on May 20, 2020). | |
Certificate of Amendment of the Articles of Incorporation (Incorporated by reference to Exhibit 3.1 to the Form 8-K filed with the SEC on January 5, 2021). | |
Certificate of Amendment of the Articles of Incorporation, dated January 31, 2023 (Incorporated by reference to Exhibit 3.12 to the Form S-1/A filed with the SEC on January 31, 2023). | |
Form of Asset-Backed Secured Promissory Note issued to certain purchasers, dated July 21, 2023 (Incorporated by reference to Exhibit 4.1 to the Form 8-K filed with the SEC on July 26, 2023). | |
Security Agreement, dated July 21, 2023, by and among the Company and certain lenders (Incorporated by reference to Exhibit 10.1 to the Form 8-K filed with the SEC on July 26, 2023). |
Subordination Agreement, dated July 21, 2023, by and among the Company, NH Expansion Credit Fund Holdings LP and certain creditors (Incorporated by reference to Exhibit 10.2 to the Form 8-K filed with the SEC on July 26, 2023). | |
Side Letter, dated July 21, 2023, by and among the Company and certain purchasers (Incorporated by reference to Exhibit 10.3 to the Form 8-K filed with the SEC on July 26, 2023). | |
Non-Compete and Confidentiality Agreement, dated July 31, 2023, by and between the Company and Andrew Walko (Incorporated by reference to Exhibit 10.2 to the Form 8-K filed with the SEC on July 31, 2023). | |
Form of Voting Agreement, dated as of August 23, 2023, by and among SEP Acquisition Corp., SANUWAVE Health, Inc., and the stockholder of SANUWAVE Health, Inc. party thereto (Incorporated by reference to Exhibit 10.1 to the Form 8-K filed with the SEC on August 23, 2023). | |
Sponsor Voting Agreement, dated as of August 23, 2023, by and among Mercury Sponsor Group I LLC, SEP Acquisition Corp., and SANUWAVE Health, Inc. (Incorporated by reference to Exhibit 10.2 to the Form 8-K filed with the SEC on August 23, 2023). | |
Form of Lock-Up Agreement, dated as of August 23, 2023, by and between SEP Acquisition Corp. and the stockholder of SANUWAVE Health, Inc. party thereto (Incorporated by reference to Exhibit 10.3 to the Form 8-K filed with the SEC on August 23, 2023). | |
Section 1350 Certification of the | |
Section 1350 Certification of the Chief Financial Officer. | |
101.INS* | XBRL Instance. |
101.SCH* | XBRL Taxonomy Extension Schema. |
101.CAL* | XBRL Taxonomy Extension Calculation. |
101.DEF* | XBRL Taxonomy Extension Definition. |
101.LAB* | XBRL Taxonomy Extension Labels. |
101.PRE* | XBRL Taxonomy Extension Presentation. |
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
SANUWAVE HEALTH, INC. | |||
Dated: | By: | /s/ Morgan Frank |
Morgan Frank | |||
Chief Executive Officer (Duly Authorized Officer and Principal Executive Officer) |
Dated: | By: | /s/ Toni Rinow |
Toni Rinow | |||
Chief Financial Officer (Principal Financial and Accounting Officer) |