QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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(Address of principal executive offices)
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(Zip Code)
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which
registered
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None
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N/A
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N/A |
Large accelerated filer ☐
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Accelerated filer ☐
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Smaller reporting company
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Emerging growth company
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Page
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PART I – FINANCIAL INFORMATION
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Item 1.
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4
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4
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5
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6
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7
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8
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Item 2.
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15
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Item 3.
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18
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Item 4.
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18
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PART II – OTHER INFORMATION
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Item 1.
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20
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Item 1A.
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20
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Item 2.
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20
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Item 3.
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20
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Item 4.
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Item 5.
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20
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Item 6.
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21
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23
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March 31, 2023
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December 31, 2022
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|||||||
ASSETS
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||||||||
Current Assets:
|
||||||||
Cash
|
$
|
|
$
|
|
||||
Accounts receivable, net of allowance of $
|
|
|
||||||
Inventory
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|
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||||||
Prepaid expenses and other current assets
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||||||
Total Current Assets
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||||||
Property, Equipment and Other, net
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||||||
Intangible Assets, net
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||||||
Goodwill
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||||||
Total Non-current Assets |
||||||||
Total Assets
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$
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$
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||||
LIABILITIES
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||||||||
Current Liabilities:
|
||||||||
Senior secured debt, in default
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$
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$
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|
||||
Convertible promissory notes payable
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||||||||
Convertible promissory notes payable, related parties
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||||||||
Accounts payable
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||||||
Accrued expenses
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||||||
Due under factoring ageement
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||||||||
Warrant liability
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||||||
Accrued interest
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||||||
Accrued interest, related parties
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||||||
Current portion of contract liabilities
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||||||
Other
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||||||
Total Current Liabilities
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||||||
Non-current Liabilities
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||||||||
Lease liabilities
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||||||
Contract liabilities
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||||||
Deferred tax liability
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||||||
Total Non-currrent Liabilities
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|
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||||||
Total Liabilities
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$ |
|
$ |
|
||||
Commitments and Contingencies (Footnote 11)
|
||||||||
STOCKHOLDERS’ DEFICIT
|
||||||||
Preferred Stock, par value $
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$ |
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$ |
|
||||
Common Stock, par value $
|
|
|
||||||
Additional Paid-in Capital
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|
|
||||||
Accumulated Deficit
|
(
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)
|
(
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)
|
||||
Accumulated Other Comprehensive Loss
|
(
|
)
|
(
|
)
|
||||
Total Stockholders’ Deficit
|
(
|
)
|
(
|
)
|
||||
Total Liabilities and Stockholders’ Deficit
|
$
|
|
$
|
|
Three Months Ended March 31,
|
||||||||
2023
|
2022
|
|||||||
Revenue
|
$
|
|
$
|
|
||||
Cost of Revenues
|
|
|
||||||
Gross Margin
|
|
|
||||||
Operating Expenses:
|
||||||||
General and administrative
|
|
|
||||||
Selling and marketing
|
|
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||||||
Research and development
|
|
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||||||
Depreciation and amortization
|
||||||||
Total Operating Expenses
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|
|
||||||
Operating Loss
|
(
|
)
|
(
|
)
|
||||
Other Income (Expense):
|
||||||||
Interest expense
|
(
|
)
|
(
|
)
|
||||
Interest expense, related party
|
(
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)
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(
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)
|
||||
Change in fair value of derivative liabilities
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(
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)
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|
|||||
Loss on issuance of debt
|
( |
) | ||||||
Other expense |
( |
) | ||||||
Gain / (loss) on foreign currency exchange
|
|
(
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)
|
|||||
Total Other Expense
|
(
|
)
|
(
|
)
|
||||
Net Loss before Income Taxes
|
(
|
)
|
(
|
)
|
||||
Provision for Income Taxes
|
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|
||||||
Net Loss
|
(
|
)
|
(
|
)
|
||||
Other Comprehensive Loss
|
||||||||
Foreign currency translation adjustments
|
( |
) | ||||||
Total Comprehensive Loss
|
$
|
(
|
)
|
$
|
(
|
)
|
||
Loss per Share:
|
||||||||
Basic and Diluted
|
$
|
(
|
)
|
$
|
(
|
)
|
||
Weighted average shares outstanding, basic and diluted
|
|
|
Three Months Ended March 31, 2023 |
||||||||||||||||||||||||||||||||
Preferred Stock
|
Common Stock
|
|||||||||||||||||||||||||||||||
Number of
|
Number of
|
Accumulated
|
||||||||||||||||||||||||||||||
Shares | Shares | Other | ||||||||||||||||||||||||||||||
Issued and
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Issued and
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Additional Paid-
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Accumulated
|
Comprehensive
|
||||||||||||||||||||||||||||
Outstanding
|
Par Value
|
Outstanding |
Par Value
|
in Capital
|
Deficit
|
Loss | Total | |||||||||||||||||||||||||
Balances as of December 31, 2022
|
|
$
|
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
|||||||||||||||
Shares issued for services |
||||||||||||||||||||||||||||||||
Net loss
|
-
|
|
-
|
|
|
(
|
)
|
|
(
|
)
|
||||||||||||||||||||||
Foreign currency translation adjustment
|
- | - | ( |
) | ( |
) | ||||||||||||||||||||||||||
Balances as of March 31, 2023
|
|
$
|
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
Three Months Ended March 31, 2022 | ||||||||||||||||||||||||||||||||
Preferred Stock |
Common Stock | |||||||||||||||||||||||||||||||
Number of
|
Number of
|
Accumulated
|
||||||||||||||||||||||||||||||
Shares |
Shares | Other |
||||||||||||||||||||||||||||||
Issued and
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Issued and
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Additional Paid-
|
Accumulated
|
Comprehensive |
||||||||||||||||||||||||||||
Outstanding
|
Par Value |
Outstanding | Par Value |
in Capital
|
Deficit |
Loss | Total | |||||||||||||||||||||||||
Balances as of December 31, 2021
|
|
$
|
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
|||||||||||||||
Cashless warrant exercise
|
||||||||||||||||||||||||||||||||
Warrant exercise
|
||||||||||||||||||||||||||||||||
Shares issued in conjunction with Note Payable
|
||||||||||||||||||||||||||||||||
Net loss
|
-
|
|
-
|
|
|
(
|
)
|
|
(
|
)
|
||||||||||||||||||||||
Foreign currency translation adjustment
|
- | - | ||||||||||||||||||||||||||||||
Balances as of March 31, 2022
|
|
$
|
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
Three Months Ended March 31,
|
||||||||
2023
|
2022
|
|||||||
Cash Flows - Operating Acivities:
|
||||||||
Net loss
|
$
|
(
|
)
|
$
|
(
|
)
|
||
Adjustments to reconcile net loss to net cash used by operating activities
|
||||||||
Depreciation and Amortization
|
|
|
||||||
Bad debt expense
|
|
|
||||||
Change in fair value of derivative liabilities
|
(
|
)
|
||||||
Loss on issuance of debt
|
||||||||
Amortization of debt issuance costs and original issue discount
|
|
|
||||||
Accrued interest
|
|
|
||||||
Changes in operating assets and liabilities
|
||||||||
Accounts receivable - trade
|
|
|
||||||
Inventory
|
(
|
)
|
|
|||||
Prepaid expenses and other assets
|
|
|
||||||
Accounts payable
|
|
(
|
)
|
|||||
Accrued expenses
|
|
|
||||||
Contract liabilties
|
(
|
)
|
(
|
)
|
||||
Net Cash Used in Operating Activities
|
(
|
)
|
(
|
)
|
||||
Cash Flows - Investing Activities
|
||||||||
Proceeds from sale of property and equipment
|
|
|
||||||
Purchase of property and equipment
|
( |
) | ||||||
Net Cash Flows Provided by (Used in) Investing Activities
|
(
|
)
|
|
|||||
Cash Flows - Financing Activities
|
||||||||
Proceeds from senior promissory notes
|
||||||||
Payments
to factoring agent, net
|
( |
) | ( |
) | ||||
Proceeds from warrant exercises
|
|
|
||||||
Payments of principal on finance leases
|
(
|
)
|
(
|
)
|
||||
Net Cash Flows Provided by Financing Activities
|
(
|
)
|
|
|||||
Effect of Exchange Rates on Cash
|
(
|
)
|
(
|
)
|
||||
Net Change in Cash During Period
|
(
|
)
|
(
|
)
|
||||
Cash at Beginning of Period
|
|
|
||||||
Cash at End of Period
|
$
|
|
$
|
|
||||
Supplemental Information:
|
||||||||
Cash paid for interest
|
$
|
|
$
|
|
||||
Non-cash Investing and Financing Activities:
|
||||||||
Reclassification of warrant liability due to cashless warrant exercise
|
$
|
|
$
|
|
||||
Warrants issued in conjunction with senior secured promissory note payable
|
||||||||
Common shares issued in conjunction with senior secured promissory note payable
|
||||||||
Common shares issued for advisory shares
|
1.
|
Nature of the Business and Basis of Presentation
|
2. |
Going Concern
|
3. |
Summary of Significant Accounting Policies
|
4.
|
Loss per Share
|
Three Months Ended
|
||||||||
(in Thousands) |
March 31, 2023
|
March 31, 2022
|
||||||
Weighted average shares outstanding
|
||||||||
Common shares
|
|
|
||||||
Common shares issuable assuming exercise of nominally priced warrants
|
|
|
||||||
Weighted average shares outstanding
|
|
|
Three Months Ended | ||||||||
(in Thousands) |
March 31, 2023
|
March 31, 2022
|
||||||
Common stock options
|
|
|
||||||
Common stock purchase warrants
|
|
|
||||||
Convertible notes payable
|
|
|
||||||
|
|
5. |
Accrued Expenses
|
(in Thousands)
|
March 31, 2023
|
December 31, 2022
|
||||||
Registration penalties
|
$
|
|
$
|
|
||||
License fees
|
|
|
||||||
Director and professional fees |
|
|
||||||
Employee compensation |
||||||||
Other
|
|
|
||||||
|
$
|
|
$
|
|
6. |
Senior Secured Debt, In Default
|
March 31, 2023
|
December 31, 2022
|
|||||||||||||||||||||||
(in thousands)
|
Principal
|
Debt Discount
|
Carrying Value
|
Principal
|
Debt Discount
|
Carrying Value
|
||||||||||||||||||
Senior secured debt
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
7. |
Convertible Promissory Notes Payable
|
|
As of March 31, 2023
|
|||||||||||||||||||
(In thousands, except conversion price)
|
Conversion
Price
|
Principal
|
Remaining
Debt Discount
|
Remaining
Embedded
Conversion
Option
|
Carrying Value
|
|||||||||||||||
Acquisition convertible promissory note, in default
|
$
|
|
|
|
|
|
||||||||||||||
Convertible promissory notes payable, related parties, in default
|
$
|
|
|
|
|
|
||||||||||||||
2022 convertible notes payable
|
$
|
|
|
(
|
)
|
|
|
|||||||||||||
2022 convertible notes payable, related parties
|
$
|
|
|
(
|
)
|
|
|
|||||||||||||
Total Convertible Promissory Notes Payable
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
|
|
As of December 31, 2022
|
|||||||||||||||||||
(In thousands, except conversion price)
|
Conversion
Price
|
Principal
|
Remaining
Debt
Discount
|
Remaining
Embedded
Conversion
Option
|
Carrying
Value
|
|||||||||||||||
Acquisition convertible promissory note, in default
|
$
|
|
|
|
|
|
||||||||||||||
Convertible promissory note, related party, in default
|
$
|
|
|
|
|
|
||||||||||||||
2022 convertible notes payable
|
$
|
|
|
(
|
)
|
|
|
|||||||||||||
2022 convertible notes payable, related parties
|
$
|
|
|
(
|
)
|
|
|
|||||||||||||
Total Convertible Promissory Notes
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
|
8. |
Fair Value Measurements
|
Fair value measured at March 31,
2023
|
||||||||||||||||
Quoted prices in
|
Significant other
|
Significant
|
||||||||||||||
Fair value at
|
active markets
|
observable inputs
|
unobservable inputs
|
|||||||||||||
(in thousands) |
March 31, 2023
|
(Level 1)
|
(Level 2)
|
(Level 3)
|
||||||||||||
Warrant liability
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Embedded conversion option
|
|
|
|
|
||||||||||||
Total fair value
|
$ |
|
$ |
|
$ |
|
$ |
|
Fair value measured at December 31, 2022
|
||||||||||||||||
Quoted prices in | Significant other | Significant | ||||||||||||||
Fair value at | active markets | observable inputs |
unobservable inputs
|
|||||||||||||
(in thousands) |
December 31, 2022
|
(Level 1)
|
(Level 2)
|
(Level 3)
|
||||||||||||
Warrant liability
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Embedded conversion option
|
|
|
|
|
||||||||||||
Total fair value
|
$
|
|
$
|
|
$
|
|
$
|
|
March 31, | December 31, |
|||||||
2023 |
2022
|
|||||||
Weighted average remaining life in years
|
|
|
||||||
Weighted average volatility
|
|
%
|
|
%
|
||||
Value of underlying shares
|
$ | $ | ||||||
Weighted average risk free interest rate
|
|
%
|
|
%
|
||||
Expected dividend yield
|
|
%
|
|
%
|
Warrants
|
Fair Value
|
Fair Value
|
||||||||||
(in thousands, except per share data)
|
Outstanding
|
per Share
|
(in thousands)
|
|||||||||
Balance at December 31, 2022
|
|
$
|
|
$
|
|
|||||||
Loss on remeasurement of warrant liability
|
|
|
||||||||||
Balance at March 31, 2023
|
|
$
|
|
$
|
|
March 31, 2023
|
December 31, 2022
|
|||||||
|
||||||||
Conversion Price(1)
|
$
|
|
$
|
|
||||
Value of underlying shares
|
$
|
|
$
|
|
||||
Interest Rate (annual) (2)
|
|
%
|
|
%
|
||||
Volatility (annual) (3)
|
|
%
|
|
%
|
||||
Time to Maturity (Years)
|
|
|
(1) |
|
(2) |
|
(3) |
|
(in thousands)
|
Conversion
Liability
|
|||
Balance December 31, 2022
|
$
|
|
||
Change in fair value
|
(
|
)
|
||
Balance March 31, 2023
|
$
|
|
9. |
Revenue
|
Three Months Ended March 31, 2023
|
Three Months Ended March 31, 2022
|
|||||||||||||||||||||||
United States
|
International
|
Total
|
United States
|
International
|
Total
|
|||||||||||||||||||
Accessory and parts revenue
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||||||||
System revenue
|
|
|
|
|
|
|
||||||||||||||||||
License fees and other
|
|
|
|
|
|
|
||||||||||||||||||
Product Revenue
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||
Rental Income
|
|
|
|
|
|
|
||||||||||||||||||
Total Revenue
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
10. |
Concentration of Credit Risk and Limited Suppliers
|
Three Months Ended
|
||||||||
March 31, 2023
|
March 31, 2022
|
|||||||
Purchases:
|
||||||||
Vendor A
|
|
%
|
|
%
|
11. |
Commitments and Contingencies
|
12. |
Subsequent Events
|
Item 2. |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
For the Three Months Ended
|
||||||||||||||||
March 31,
|
Change
|
|||||||||||||||
2023
|
2022
|
$
|
%
|
|||||||||||||
Revenues:
|
||||||||||||||||
Total Revenue
|
$
|
3,775
|
$
|
3,195
|
$
|
580
|
18
|
%
|
||||||||
Cost of Revenues
|
1,262
|
889
|
373
|
42
|
%
|
|||||||||||
Gross Margin
|
2,513
|
2,306
|
207
|
9
|
%
|
|||||||||||
Operating Expenses:
|
||||||||||||||||
General and administrative
|
2,759
|
2,205
|
554
|
25
|
%
|
|||||||||||
Selling and marketing
|
1,412
|
1,715
|
(303
|
)
|
-18
|
%
|
||||||||||
Research and development
|
131
|
166
|
(35
|
)
|
-21
|
%
|
||||||||||
Depreciation and amortization
|
189
|
176
|
13
|
7
|
%
|
|||||||||||
Operating Loss
|
(1,978
|
)
|
(1,956
|
)
|
(22
|
)
|
1
|
%
|
||||||||
Other Income (Expense), net
|
(11,102
|
)
|
(3,145
|
)
|
(7,957
|
)
|
253
|
%
|
||||||||
Net Loss
|
$
|
(13,080
|
)
|
$
|
(5,101
|
)
|
(7,979
|
)
|
156
|
%
|
For the three months ended March 31,
|
Change
|
|||||||||||||||
2023
|
2022
|
$ |
|
%
|
||||||||||||
Interest expense
|
$
|
(4,278
|
)
|
$
|
(3,192
|
)
|
$
|
(1,086
|
)
|
34
|
%
|
|||||
Change in fair value of derivatives
|
(6,797
|
)
|
3,482
|
(10,279
|
)
|
-295
|
%
|
|||||||||
Loss on issuance of debt
|
-
|
(3,434
|
)
|
3,434
|
nm
|
|||||||||||
Other expense
|
(27
|
)
|
-
|
(27
|
)
|
nm
|
||||||||||
Loss on foreign currency exchange
|
-
|
(1
|
)
|
1
|
nm
|
|||||||||||
Other expense, net
|
$
|
(11,102
|
)
|
$
|
(3,145
|
)
|
$
|
(7,957
|
)
|
253
|
%
|
For the three months ended March 31,
|
||||||||
(in Thousands)
|
2023
|
2022
|
||||||
Cash flows used by operating activities
|
$
|
(371
|
)
|
$
|
(3,132
|
)
|
||
Cash flows (used by) provided by investing activities
|
$
|
(18
|
)
|
$
|
360
|
|||
Cash flows (used by) provided by financing activities
|
$
|
(654
|
)
|
$
|
2,470
|
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 AND USE OF PROCEEDS.
|
Item 3. |
DEFAULTS UPON SENIOR SECURITIES.
|
Item 4. |
MINE SAFETY DISCLOSURES.
|
Item 5. |
OTHER INFORMATION.
|
Item 6. |
EXHIBITS
|
Exhibit No.
|
Description
|
|
|
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).
|
|
Rule 13a-14(a)/15d-14(a) Certification of the Chief Executive Officer.
|
|
|
|
Rule 13a-14(a)/15d-14(a) Certification of the Chief Financial Officer.
|
|
|
|
Section 1350 Certification of the Principal Executive Officer.
|
|
|
|
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: May 11, 2023
|
By: /s/ Kevin A. Richardson, II
|
|
|
|
Kevin A. Richardson, II
|
|
|
Chief Executive Officer
|
(Duly Authorized Officer and Principal Executive Officer)
|
||
Dated: May 11, 2023
|
By: /s/ Toni Rinow
|
|
|
|
Toni Rinow
|
|
|
Chief Financial Officer
|
(Principal Financial and Accounting Officer)
|
1. |
I have reviewed this quarterly report on Form 10-Q of SANUWAVE Health, Inc.;
|
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 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 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 11, 2023
|
/s/ Kevin A. Richardson II
|
Kevin A. Richardson II
|
Chief Executive Officer
|
(Principal Executive Officer)
|
1. |
I have reviewed this quarterly report on Form 10-Q of SANUWAVE Health, Inc.;
|
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 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 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 11, 2023
|
/s/ Toni Rinow
|
Toni Rinow
|
Chief Financial Officer
|
(Principal Financial Officer and Principal Accounting Officer)
|
1. |
The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
|
2. |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.
|
Date: May 11, 2023
|
/s/ Kevin A. Richardson II
|
Kevin A. Richardson II
|
Chief Executive Officer
|
(Principal Executive Officer)
|
1. |
The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
|
2. |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.
|
Date: May 11, 2023
|
/s/ Toni Rinow
|
Toni Rinow
|
Chief Financial Officer
|
(Principal Financial Officer and Principal Accounting Officer)
|
Nature of the Business and Basis of Presentation |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2023 | |||
Nature of the Business and Basis of Presentation [Abstract] | |||
Nature of the Business and Basis of Presentation |
SANUWAVE Health, Inc. and Subsidiaries (“SANUWAVE” or the “Company”) is focused on the commercialization of its patented noninvasive and
biological response activating medical systems for the repair and regeneration of skin, musculoskeletal tissue, and vascular structures.
Basis of Presentation – The accompanying unaudited condensed consolidated financial
statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8-03 of
Regulation S-X. Accordingly, these condensed consolidated financial statements do not include all the information and disclosures required by U.S. GAAP for comprehensive financial statements.
The financial information as of March 31, 2023, and for the three months ended March 31, 2023, and 2022 is unaudited; however, in the opinion of
management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2023, are not necessarily indicative of the results that
may be expected for any other interim period or for the year ending December 31, 2023.
The condensed consolidated balance sheet on December 31, 2022, has been derived from the audited consolidated financial statements at that date but
does not include all the information and disclosures required by U.S. GAAP for comprehensive financial statements. These financial statements should be read in conjunction with the Company’s December 31, 2022, Annual Report on Form 10-K filed
with the SEC on March 31, 2023 (the “2022 Annual Report”).
Reclassifications - Certain accounts in the prior period condensed consolidated financial statements have been reclassified to conform to the
presentation of the current period condensed consolidated financial statements. These reclassifications had no effect on the previously reported operating results.
|
Going Concern |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2023 | |||
Going Concern [Abstract] | |||
Going Concern |
The recurring losses from operations, the events of default on the Company’s notes payable, and dependency upon future issuances of equity or other
financing to fund ongoing operations have raised substantial doubt as to our ability to continue as a going concern for a period of at least twelve months from the filing of this Form 10-Q. The Company expects to devote substantial resources for the commercialization of UltraMIST and PACE systems which will require additional capital resources to
remain a going concern.
Management’s plans are to obtain additional capital in 2023 through the conversion of outstanding warrants, issuance of common or preferred stock, securities
convertible into common stock, or secured or unsecured debt. These possibilities, to the extent available, may be on terms that result in significant dilution to the Company’s existing stockholders. In addition, there can be no assurances that
the Company’s plans to obtain additional capital will be successful on the terms or timeline it expects, or at all. If these efforts are unsuccessful, the Company may be required to significantly curtail or discontinue operations or, if
available, obtain funds through financing transactions with unfavorable terms.
The accompanying condensed consolidated financial statements have been prepared in conformity with U.S. GAAP, which contemplate continuation of
the Company as a going concern and the realization of assets and satisfaction of liabilities in the normal course of business. The carrying amounts of assets and liabilities presented in the condensed consolidated financial statements do not
necessarily purport to represent realizable or settlement values. The condensed consolidated financial statements do not include any adjustment that might result from the outcome of this uncertainty. The Company’s condensed consolidated financial
statements do not include any adjustments relating to the recoverability of assets and classification of assets and liabilities that might be necessary should the Company be unable to continue as a going concern.
|
Summary of Significant Accounting Policies |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2023 | |||
Summary of Significant Accounting Policies [Abstract] | |||
Summary of Significant Accounting Policies |
Significant accounting policies followed by the Company are summarized below and should be read in conjunction with those described in Note 4 of
the consolidated financial statements in our 2022 Annual Report.
Estimates – These condensed consolidated financial statements have been prepared in
accordance with U.S. GAAP. Because a precise determination of assets and liabilities, and correspondingly revenues and expenses, depend on future events, the preparation of condensed consolidated financial statements for any period necessarily
involves the use of estimates and assumptions. Actual amounts may differ from these estimates. These condensed consolidated financial statements have, in management’s opinion, been properly prepared within reasonable limits of materiality and
within the framework of the accounting policies summarized herein.
Significant estimates include the recording of allowances for doubtful accounts, the net realizable value of inventory, useful lives of
long-lived assets, fair value of goodwill and other intangible assets, the determination of the valuation allowances for deferred taxes, estimated fair value of stock-based compensation, and the estimated fair value of financial instruments,
including warrants and embedded conversion options.
Revenue Recognition - The core principle of ASC Topic 606 “Revenue from Contracts with Customers” (“ASC 606”) requires that an entity recognize
revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The Company allocates the transaction
price to all contractual performance obligations included in the contract. If a contract has more than one performance obligation, we allocate the transaction price to each performance obligation based on standalone selling price, which
depicts the amount of consideration we expect to be entitled in exchange for satisfying each performance obligation. The Company recognizes revenue primarily from the following types of contracts:
System Sales, Accessory and Part Sales - System sales, accessory and part sales include devices and applicators (new and refurbished).
Performance obligations are satisfied at the point in time when the customer obtains control of the goods, which is generally at the point in time that the product is shipped.
Licensing Fees - Licensing transactions include distribution licenses and intellectual property licenses. Licensing revenue is recognized as the Company satisfies
its performance obligations, which may vary with the terms of the licensing agreement.
Other Revenue - Other revenue primarily includes warranties, repairs, and billed freight. The Company allocates the device sales price to the product and the
embedded warranty by reference to the stand-alone extended warranty price. Warranty revenue is recognized over the time that the Company satisfies its performance obligations, which is generally the warranty term. Repairs (parts and labor)
and billed freight revenue are recognized at the point in time that the service is performed, or the product is shipped, respectively.
Recent Accounting Pronouncements – In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit
Losses on Financial Instruments, which was subsequently revised by ASU 2018-19. The ASU introduces a new model for assessing impairment of most financial assets. Entities are required to use a forward-looking expected loss model, which
replaces the current incurred loss model, resulting in earlier recognition of allowance for losses. The Company adopted this ASU in January 2023, and there was no material impact on the consolidated financial statements.
|
Loss per Share |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Loss per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Loss per Share |
The net loss per share is calculated by dividing the net loss attributable to common stockholders by the weighted average number of shares
outstanding for the three months ended March 31, 2023, and 2022. In accordance with Accounting Standards codification (“ASC”) Topic 260-10-45-13, Earnings Per Share, the weighted average of number of
shares outstanding includes outstanding common stock and shares issuable for nominal consideration. Accordingly, warrants issued with a $0.01 per share
exercise price, are included in weighted average shares outstanding as follows:
Diluted net loss per share is computed by dividing the net loss attributable to common stockholders by the weighted average number of shares
of common stock and diluted common stock equivalents outstanding. To the extent that securities are “anti-dilutive,” they are excluded from the calculation of diluted net loss per share. As a result of the net loss for the three months ended
March 31, 2023, and 2022, all potentially dilutive shares were anti-dilutive and therefore excluded from the computation of diluted net loss per share. Anti-dilutive equity securities consisted of the following for the three months ended March 31, 2023, and 2022,
respectively:
|
Accrued Expenses |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accrued Expenses [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accrued Expenses |
Accrued expenses consist of the following:
|
Senior Secured Debt, In Default |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Senior Secured Debt, In Default [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Senior Secured Debt, In Default |
The following table summarizes outstanding senior secured debt, in default:
Senior secured promissory note payable, in default (“Senior
Secured Note”) – In
August 2020, the Company entered into a Note and Warrant Purchase and Security Agreement (the “NWPSA”). In accordance with the NWPSA, the Company issued a $15 million Senior Secured Promissory Note Payable (the “Senior Secured Note”) and a warrant exercisable into shares of the Company’s common stock in exchange for cash to support
operations, repay outstanding debt and close on the acquisition of the UltraMIST assets from Celularity Inc. (Celularity) among other transactions.
In February 2022,
the Company entered into a Second Amendment to Note and Warrant Purchase and Security Agreement (the “Second NWPSA”) for $3.0
million, for a total of $18.0 million outstanding. Along with the issuance of the note, the Company also issued warrants to purchase
16.2 million shares of common stock with an exercise price of $0.18 and 20.6 million shares of common stock. Since the combined fair
value of the warrants and common stock issued as part of the Second NWPSA exceeded the face value of the note, the additional amount beyond the face value was recorded as a loss on issuance totaling $3.4 million.
Interest is charged
at the greater of the prime rate or 3% plus 9% and paid quarterly. The cash interest rate for March 31,2023, was 17%. The principal increases at a rate of 3%
of the outstanding principal balance (PIK interest) on each quarterly interest payment date. The original maturity date of the Senior Secured Note is September 20, 2025, and it can be prepaid.
As of March 31,
2023, the Company is in default of the minimum liquidity provisions in the Senior Secured Note and, as a result, it is classified in current liabilities in the accompanying consolidated balance sheets. The Company is accruing interest at the
default interest rate of an incremental 5%.
The debt issuance
costs, and debt discount related to the Senior Secured Note were capitalized as a reduction in the principal amount and are being amortized to interest expense over the life of the Senior Secured Note. The amortization of the debt issuance
costs and debt discount, included in interest expense, for the three months ended March 31, 2023, and 2022, totaled $0.4 million and
$0.5 million, respectively. Accrued interest related to the Senior Secured Note was $2.1 million and $1.9 million on March 31, 2023, and December
31, 2022, respectively. Interest expense on the Senior Secured Note totaled $1.6 million and $0.8 million for the three months ended March 31, 2023, and 2022, respectively.
|
Convertible Promissory Notes Payable |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Convertible Promissory Notes Payable [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Convertible Promissory Notes Payable |
The following two tables summarize outstanding notes payable as of March 31,
2023, and December 31, 2022:
2022 Convertible Notes Payable and 2022 Convertible Notes
Payable, Related Parties - In August 2022 and November 2022, the Company entered into
Securities Purchase Agreements (the “Purchase Agreements”), for the sale in a private placement of (i) Future Advance Convertible Promissory Notes (the “Notes”) in an aggregate principal amount of $16.2 million in August and $4.0 million in November, (ii)
Common Stock Purchase Warrants to purchase an additional 504.4 million shares of common stock with an exercise price of $0.067 per share and (iii) Common Stock Purchase Warrants to purchase an additional 504.4 million shares of common stock with an exercise price of $0.04 per
share. The Company paid issuance costs totaling approximately $1.4 million. Interest expense for the three months ended March 31,
2023, totaled $2.3 million, $0.8
million in contractual interest expense and $1.5 million in amortization of debt discount and issuance costs.
Pursuant to the Notes, the Company promised to pay in cash
and/or in shares of common stock, at a conversion price of $0.04 (the “Conversion Price”), the principal amount and interest at a
rate of 15% per annum on any outstanding principal. The Conversion Price of the Notes is subject to adjustment, including if the
Company issues or sells shares of common stock for a price per share less than the Conversion Price of the Notes or if the Company lists its shares of common stock on The Nasdaq Capital Market and the average volume weighted average price of
such common stock for the preceding such listing is less than $0.04 per share; provided, however, that the Conversion Price shall never be less than $0.01. The Notes contain customary events of default and covenants, including limitations on incurrences of indebtedness and liens. In addition, pursuant to the Notes, the Company
agreed to reduce its outstanding shares via a reverse stock split to provide the number of authorized and unissued shares of common stock sufficient to permit the conversion of these Notes on or before December 31, 2022. However, the Company
obtained a waiver of this requirement through December 31, 2023, from all holders of the Notes and amended its Articles of Incorporation to increase its number of authorized shares of common stock from 800,000,000 to 2,500,000,000.
|
Fair Value Measurements |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements |
In accordance with ASC 820 (Fair Value Measurements and Disclosures), the Company uses various inputs to measure the outstanding warrants
and certain embedded conversion features associated with a convertible debt on a recurring basis to determine the fair value of the liabilities.
The following tables classify the Company’s liabilities measured at fair value on a recurring basis into the fair value hierarchy:
There were no
transfers among Levels 1, 2 or 3 during the three months ended March 31, 2023, and 2022. Both observable and unobservable inputs were used to determine the fair value of positions that the Company has classified within the Level 3 category. Unrealized gains and losses
associated with liabilities within the Level 3 category include changes in fair value that were attributable to both observable (e.g. changes in market interest rates) and unobservable (e.g., changes in unobservable long-dated volatilities)
inputs.
Warrant Liability
Significant inputs related to the Company’s liability classified warrants are listed
below.
A summary of the warrant liability activity for the three months
ended March 31, 2023, is as follows:
Embedded
Conversion Option Liability
Certain
convertible notes include a conversion option that meets the definition of a derivative liability and, accordingly, is required to be bifurcated. The fair value for the conversion option liability was determined using the Black Scholes method.
The
fair value of conversion option liability assumptions for the periods ended below:
A summary of the conversion option liability
activity is as follows:
|
Revenue |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue |
The
disaggregation of revenue is based on type and geographical region. The following table presents revenue from contracts with customers:
|
Concentration of Credit Risk and Limited Suppliers |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||
Concentration of Credit Risk and Limited Suppliers [Abstract] | |||||||||||||||||||||||||||||||||||||||
Concentration of Credit Risk and Limited Suppliers |
The
Company currently purchases most of its product component materials from single suppliers and the loss of any of these suppliers could result in a disruption in our production. The percentage of purchases from major vendors of the Company that
exceeded ten percent of total purchases for the three months ended March 31, 2023, and 2022 were as follows:
|
Commitments and Contingencies |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2023 | |||
Commitments and Contingencies [Abstract] | |||
Commitments and Contingencies |
In the ordinary course of business, the Company from time to time becomes
involved in various legal proceedings involving a variety of matters. The Company does not believe there are any pending legal proceedings that will have a material adverse effect on the Company’s business, consolidated financial position,
results of operations, or cash flows. However, the outcome of such legal matters is inherently unpredictable and subject to significant uncertainties. The Company’s expenses legal fees in the period in which they are incurred.
Acquisition dispute - In May 2021, the Company received notification alleging that it is not in compliance with the license agreement with Celularity entered into in
connection with the acquisition of the UltraMIST assets. The Company has responded and asserted that the Company is not in breach and that the supplier has breached various agreements. It is too early to determine the outcome of this
matter. Any potential impact on the Company cannot be fully determined at this time and there is no guarantee that the dispute will be resolved in a manner beneficial to the Company.
|
Subsequent Events |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2023 | |||
Subsequent Events [Abstract] | |||
Subsequent Events |
On May 9, 2023, the Company issued (i) Notes in an aggregate principal amount of approximately $1.2 million, (ii) First Warrants to purchase approximately 30.7 million
shares of common stock with an exercise price of $0.067 per share and (iii) Second Warrants to purchase approximately 30.7 million shares of common stock with an exercise price of $0.04 per share, in each case pursuant to the Purchase Agreement. The closing of the private placement occurred on May 9, 2023, and we received total proceeds of $1.2 million.
|
Summary of Significant Accounting Policies (Policies) |
3 Months Ended |
---|---|
Mar. 31, 2023 | |
Summary of Significant Accounting Policies [Abstract] | |
Estimates |
Estimates – These condensed consolidated financial statements have been prepared in
accordance with U.S. GAAP. Because a precise determination of assets and liabilities, and correspondingly revenues and expenses, depend on future events, the preparation of condensed consolidated financial statements for any period necessarily
involves the use of estimates and assumptions. Actual amounts may differ from these estimates. These condensed consolidated financial statements have, in management’s opinion, been properly prepared within reasonable limits of materiality and
within the framework of the accounting policies summarized herein.
Significant estimates include the recording of allowances for doubtful accounts, the net realizable value of inventory, useful lives of
long-lived assets, fair value of goodwill and other intangible assets, the determination of the valuation allowances for deferred taxes, estimated fair value of stock-based compensation, and the estimated fair value of financial instruments,
including warrants and embedded conversion options.
|
Revenue Recognition |
Revenue Recognition - The core principle of ASC Topic 606 “Revenue from Contracts with Customers” (“ASC 606”) requires that an entity recognize
revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The Company allocates the transaction
price to all contractual performance obligations included in the contract. If a contract has more than one performance obligation, we allocate the transaction price to each performance obligation based on standalone selling price, which
depicts the amount of consideration we expect to be entitled in exchange for satisfying each performance obligation. The Company recognizes revenue primarily from the following types of contracts:
System Sales, Accessory and Part Sales - System sales, accessory and part sales include devices and applicators (new and refurbished).
Performance obligations are satisfied at the point in time when the customer obtains control of the goods, which is generally at the point in time that the product is shipped.
Licensing Fees - Licensing transactions include distribution licenses and intellectual property licenses. Licensing revenue is recognized as the Company satisfies
its performance obligations, which may vary with the terms of the licensing agreement.
Other Revenue - Other revenue primarily includes warranties, repairs, and billed freight. The Company allocates the device sales price to the product and the
embedded warranty by reference to the stand-alone extended warranty price. Warranty revenue is recognized over the time that the Company satisfies its performance obligations, which is generally the warranty term. Repairs (parts and labor)
and billed freight revenue are recognized at the point in time that the service is performed, or the product is shipped, respectively.
|
Recent Accounting Pronouncements |
Recent Accounting Pronouncements – In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit
Losses on Financial Instruments, which was subsequently revised by ASU 2018-19. The ASU introduces a new model for assessing impairment of most financial assets. Entities are required to use a forward-looking expected loss model, which
replaces the current incurred loss model, resulting in earlier recognition of allowance for losses. The Company adopted this ASU in January 2023, and there was no material impact on the consolidated financial statements.
|
Loss per Share (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Loss per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Weighted Average Shares Outstanding | Accordingly, warrants issued with a $0.01 per share
exercise price, are included in weighted average shares outstanding as follows:
|
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Anti-dilutive Equity Securities | Anti-dilutive equity securities consisted of the following for the three months ended March 31, 2023, and 2022,
respectively:
|
Accrued Expenses (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accrued Expenses [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accrued Expenses |
Accrued expenses consist of the following:
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Senior Secured Debt, in Default (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Senior Secured Debt, In Default [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Outstanding Secured Debt |
The following table summarizes outstanding senior secured debt, in default:
|
Convertible Promissory Notes Payable (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Convertible Promissory Notes Payable [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Outstanding Notes Payable |
The following two tables summarize outstanding notes payable as of March 31,
2023, and December 31, 2022:
|
Fair Value Measurements (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Liabilities Measured at Fair Value on Recurring Basis |
The following tables classify the Company’s liabilities measured at fair value on a recurring basis into the fair value hierarchy:
|
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Fair Value of Warrant Liabilities Using Black-Scholes Model |
Significant inputs related to the Company’s liability classified warrants are listed
below.
A summary of the warrant liability activity for the three months
ended March 31, 2023, is as follows:
|
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Fair Value of Conversion Option Liabilities Using Black-Scholes Model |
The
fair value of conversion option liability assumptions for the periods ended below:
|
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Summary of Conversion Option Liability Activity |
A summary of the conversion option liability
activity is as follows:
|
Revenue (Tables) |
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Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disaggregation of Revenue |
The
disaggregation of revenue is based on type and geographical region. The following table presents revenue from contracts with customers:
|
Concentration of Credit Risk and Limited Suppliers (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||
Concentration of Credit Risk and Limited Suppliers [Abstract] | |||||||||||||||||||||||||||||||||||||
Concentration of Credit Risk and Limited Suppliers |
The
Company currently purchases most of its product component materials from single suppliers and the loss of any of these suppliers could result in a disruption in our production. The percentage of purchases from major vendors of the Company that
exceeded ten percent of total purchases for the three months ended March 31, 2023, and 2022 were as follows:
|
Loss per Share, Weighted Average Shares Outstanding (Details) - $ / shares |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
Loss per Share [Abstract] | ||
Warrant exercise price (in dollars per share) | $ 0.01 | |
Weighted Average Shares Outstanding [Abstract] | ||
Weighted average shares outstanding (in shares) | 575,028,811 | 525,414,534 |
Common Shares [Member] | ||
Weighted Average Shares Outstanding [Abstract] | ||
Weighted average shares outstanding (in shares) | 553,338,000 | 498,723,000 |
Common Shares Issuable Assuming Exercise of Nominally Priced Warrants [Member] | ||
Weighted Average Shares Outstanding [Abstract] | ||
Weighted average shares outstanding (in shares) | 21,691,000 | 26,691,000 |
Loss per Share, Anti Dilutive Equity Securities (Details) - shares shares in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
Anti-dilutive Securities [Abstract] | ||
Anti-dilutive equity securities (in shares) | 1,830,385 | 309,366 |
Common Stock Options [Member] | ||
Anti-dilutive Securities [Abstract] | ||
Anti-dilutive equity securities (in shares) | 19,286 | 31,759 |
Common Stock Purchase Warrants [Member] | ||
Anti-dilutive Securities [Abstract] | ||
Anti-dilutive equity securities (in shares) | 1,186,522 | 183,435 |
Convertible Notes Payable [Member] | ||
Anti-dilutive Securities [Abstract] | ||
Anti-dilutive equity securities (in shares) | 624,577 | 94,172 |
Accrued Expenses (Details) - USD ($) $ in Thousands |
Mar. 31, 2023 |
Dec. 31, 2022 |
---|---|---|
Accrued Expense [Abstract] | ||
Registration penalties | $ 1,583 | $ 1,583 |
License fees | 893 | 892 |
Director and professional fees | 797 | 586 |
Employee compensation | 4,223 | 4,585 |
Other | 1,054 | 866 |
Total accrued expenses | $ 8,550 | $ 8,512 |
Senior Secured Debt, in Default, Outstanding Secured Debt (Details) - USD ($) $ in Thousands |
Mar. 31, 2023 |
Dec. 31, 2022 |
Aug. 31, 2020 |
---|---|---|---|
Senior Secured Debt [Abstract] | |||
Principal amount | $ 25,548 | $ 25,548 | |
Debt discount | (2,270) | (3,766) | |
Carrying value | 14,996 | 14,416 | |
Senior Secured Debt [Member] | |||
Senior Secured Debt [Abstract] | |||
Principal amount | 19,355 | 19,211 | $ 15,000 |
Debt discount | (4,359) | (4,795) | |
Carrying value | $ 14,996 | $ 14,416 |
Fair Value Measurements, Embedded Conversion Option Liability (Details) - Level 3 [Member] - Embedded Conversion Option [Member] $ / shares in Units, $ in Thousands |
3 Months Ended | 12 Months Ended | ||||||
---|---|---|---|---|---|---|---|---|
Mar. 31, 2023
USD ($)
$ / shares
|
Dec. 31, 2022
USD ($)
$ / shares
|
|||||||
Fair Value, Embedded Conversion Option Liability [Abstract] | ||||||||
Beginning balance | $ 2,340 | |||||||
Change in fair value | (1,051) | |||||||
Ending balance | $ 1,289 | $ 2,340 | ||||||
Measurement Input, Conversion Price [Member] | ||||||||
Embedded Conversion Option Liability [Abstract] | ||||||||
Conversion Price (in dollars per share) | $ / shares | [1] | $ 0.04 | $ 0.04 | |||||
Measurement Input, Value of Underlying Shares [Member] | ||||||||
Embedded Conversion Option Liability [Abstract] | ||||||||
Measurement input | $ / shares | 0.017 | 0.005 | ||||||
Measurement Input, Interest Rate (annual) [Member] | ||||||||
Embedded Conversion Option Liability [Abstract] | ||||||||
Measurement input | [2] | 0.0477 | 0.0464 | |||||
Measurement Input, Volatility (annual) [Member] | ||||||||
Embedded Conversion Option Liability [Abstract] | ||||||||
Measurement input | [3] | 1.623 | 5.03 | |||||
Measurement Input, Time to Maturity (Years) [Member] | ||||||||
Embedded Conversion Option Liability [Abstract] | ||||||||
Time to Maturity (Years) | 4 months 6 days | 7 months 6 days | ||||||
|
Concentration of Credit Risk and Limited Suppliers (Details) |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
Purchases [Member] | Supplier Concentration Risk [Member] | Vendor A [Member] | ||
Concentration of Credit Risk and Limited Suppliers [Abstract] | ||
Concentration risk, percentage | 20.00% | 19.00% |
Subsequent Events (Details) - USD ($) $ / shares in Units, $ in Thousands, shares in Millions |
May 09, 2023 |
Mar. 31, 2023 |
Dec. 31, 2022 |
---|---|---|---|
Subsequent Event [Abstract] | |||
Aggregate principal amount | $ 25,548 | $ 25,548 | |
Subsequent Event [Member] | |||
Subsequent Event [Abstract] | |||
Aggregate principal amount | $ 1,200 | ||
Proceeds from private placement | $ 1,200 | ||
First Warrant [Member] | Subsequent Event [Member] | |||
Subsequent Event [Abstract] | |||
Warrants to purchase common stock (in shares) | 30.7 | ||
Warrant exercise price (in dollars per share) | $ 0.067 | ||
Second Warrant [Member] | Subsequent Event [Member] | |||
Subsequent Event [Abstract] | |||
Warrants to purchase common stock (in shares) | 30.7 | ||
Warrant exercise price (in dollars per share) | $ 0.04 |
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