UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 1-K
ANNUAL REPORT
PURSUANT TO REGULATION A OF THE SECURITIES ACT OF 1933
For the fiscal year ended December 31, 2021
Miso Robotics, Inc.
(Exact name of registrant as specified in its charter)
Commission File Number: 24R-00307
| Delaware | 81-2995859 | |
| (State
or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
|
680 East Colorado Blvd. Pasadena, CA |
91101 | |
| (Address of principal executive offices) | (Zip Code) |
| 626-244-8053 | ||
| Registrant’s telephone number, including area code |
| Series C Preferred Stock Series D Preferred Stock Series E Preferred Stock |
| (Title of each class of securities issued pursuant to Regulation A) |
TABLE OF CONTENTS
In this Annual Report, references to “Miso Robotics, Inc..”, “Miso”, “we,” “us,” “our,” or the “company” mean Miso Robotics, Inc.
THIS ANNUAL REPORT MAY CONTAIN FORWARD-LOOKING STATEMENTS AND INFORMATION RELATING TO, AMONG OTHER THINGS, THE COMPANY, ITS BUSINESS PLAN AND STRATEGY, AND ITS INDUSTRY. THESE FORWARD-LOOKING STATEMENTS ARE BASED ON THE BELIEFS OF, ASSUMPTIONS MADE BY, AND INFORMATION CURRENTLY AVAILABLE TO THE COMPANY’S MANAGEMENT. WHEN USED IN THE OFFERING MATERIALS, THE WORDS “ESTIMATE,” “PROJECT,” “BELIEVE,” “ANTICIPATE,” “INTEND,” “EXPECT” AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. THESE STATEMENTS REFLECT MANAGEMENT’S CURRENT VIEWS WITH RESPECT TO FUTURE EVENTS AND ARE SUBJECT TO RISKS AND UNCERTAINTIES THAT COULD CAUSE THE COMPANY’S ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE CONTAINED IN THE FORWARD-LOOKING STATEMENTS. INVESTORS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE ON WHICH THEY ARE MADE.
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Company History
Miso Robotics launched in 2016 to create the world’s first autonomous robotic kitchen assistant for commercial kitchens. Automation is important for the restaurant and prepared food industries, which are struggling to make a meaningful profit due to the increase in labor cost.
The company is named after the foundation of miso soup, fermented soybeans. Fermentation is one of the first disruptive food technologies, leveraging the work of tiny microbes to provide massive improvements in nourishment at scale - reducing food waste, improving flavors, and unlocking more nutrition with less effort.
Miso now employs a respected team of roboticists, engineers and industrial designers from Caltech, Cornell, MIT, Carnegie Mellon, UCLA, Olin, Harvey Mudd, Art Center, NASA, Tesla, and SpaceX.
Miso Robotics launched the first autonomous kitchen assistant, “Flippy”, in CaliBurger Pasadena in March 2018. Flippy’s first action in a commercial kitchen was to flip hamburgers. Burger patties are placed down by a human chef on the grill. Flippy uses AI to see the patties and flip them over at the proper time.
In the summer of 2018, Flippy was trained with a new skill: frying. Levy, a premium sports and entertainment hospitality company, piloted Flippy as a frying assistant from July 30, 2018, through the World Series of 2018 at the Chick ‘n Tots stand in Dodger Stadium, the home of the Los Angeles Dodgers. Levy, upgraded to Flippy in a mobile cart format at the start of the 2019 season. Flippy has helped stadium team members consistently cook and serve more than 50,000 pounds of fresh chicken tenders and tater tots to Dodger fans, producing up to 80 baskets of food per hour.
In the fall of 2018, Flippy was upgraded to a mobile cart that allowed commercial restaurants to roll Flippy into storage to clean equipment and floors according to their SOP.
In May of 2019, Flippy was upgraded once again with a smaller footprint and deployed to the home of Diamondbacks at Chase Field in Phoenix, Arizona.
In November 2019, Miso signed a commercial contract with CaliBurger worth $11,000,000. The contract is for the rollout of 100 Flippys across 50 CaliBurger locations in a new kitchen layout dubbed "CaliBurger 2.0", and is described in more detail below. In October 2019 as a part of this contract, Miso Robotics deployed two Flippys one at the grill and one at the fryer at CaliBurger's location in Ft. Myers, Florida.
In February of 2020 Miso Robotics unveiled “Flippy 2.0”, Robot on a Rail (ROAR). ROAR integrates the bot into a mounted rail system, allowing it to work on several tasks at once. This new system will require zero real estate footprint and is forecasted to reduce automation costs by an additional 50%.
In April of 2020 Miso announced a new AI-powered kitchen assistant tool, CookRight. CookRight uses computer vision to track order accuracy and aid kitchen staff in ensuring that all food is cooked perfectly. Alongside CookRight, kitchen staff have access to an intuitive, gamified dashboard that enables them to supervise multiple workflows simultaneously.
In July of 2020 Miso entered into an agreement with White Castle to develop, pilot, and undertake a beta rollout of Miso Robotics' Flippy robot for the restaurant’s North American restaurants. White Castle piloted Miso’s Robot on a Rail (ROAR) system at a Chicago-area restaurant across Q3 and Q4 of 2020 and was the restaurant to utilize the ROAR system in a commercial environment. In October 2020 Miso and White Castle announced plans to expand their partnership, targeting up to ten new locations as part of a beta rollout of Flippy to the company’s North American restaurants.
In September 2020 Miso introduced a new software, ChefUI. ChefUI is run as a web-based application and displayed on a touchscreen monitor mounted on the ROAR system. It acts as the conduit between human and robot to work together and cook using the ROAR system.
Miso also made notable additions to the team across the year. First, in October 2020 the Company welcomed Michael Bell as its new Chief Executive Officer. Prior to joining as CEO, Michael was the COO at Ordermark, a restaurant technology company, where he led the enterprise sales function and its top-down go-to-market strategy. He also served as the Chairman of the Board of Directors at Miso. Second, in November 2020 Miso named its first Chief Strategy Officer, Jake Brewer. Prior to joining Miso, Jake was VP of Restaurant Excellence at CKE Restaurants, the parent company for Carl’s Jr. restaurants, where he led customer experience, engineering, field training, and more.
In June 2021 Miso announced its intention to build an intelligence backed automated beverage dispenser, named Sippy, that will integrate with the point of sales (POS) system and come equipped with a guided workflow for employees to ensure accurate order completion synced with driver and customer arrival times. The machine will be able to automatically pour drinks and advance beverages to enable an easy grab-and-go format for staff. The potential revenue from the Sippy product line is minimal compared to what could be possible from Flippy, and the degree to which this product line finds market adoption will not have a material impact on the overall success of the Company.
Across 2019 and 2020, the Company earned non-recurring revenues from robotics consulting services provided. In H1 2021 the Company ceased providing these services to focus on upcoming deployments of Flippy.
In Q4, 2021 Miso Robotics unveiled the newest version of their flagship product, “Flippy 2”, which features significantly improved performance and functionality and was developed based on key learnings from the pilot with White Castle. Flippy 2 integrates the bot into a mounted rail system, allowing it to work on several tasks at once, and features a new AutoBin system which uses AI vision to automatically identify, cook and dispense food items into hot holding areas. This new system takes up less space in the kitchen and performs two times as many food preparation tasks increasing production by 30%.
In October, 2021 Miso Robotics announced the Flippy Wings product line. Flippy Wings is the only robotic chicken wing frying solution designed from the ground up for high volume restaurants. Flippy Wings fries fresh, frozen or hand-breaded chicken products, avoiding cross contamination and increasing throughput while reducing costs. Flippy Wings is currently being tested with a restaurant partner, and is being tailored and tuned to specifications.
Miso Robotics has created valuable partnerships with key disruptors in the restaurant industry. Miso Robotics is positioned to work with customers in the Quick Service Restaurant system to integrate Flippy into an overhead rail system to reduce the footprint.
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Principal Products and Services
Flippy 2
Miso Robotics uses a cloud-connected Miso AI platform that enables the Company’s autonomous robotic kitchen assistants to perform frying and grilling cooking tasks. The product is designed as a platform, with extensible skill sets that will enable the same robot to interact with new kitchen equipment over time (as those new skills are developed). In addition, Miso Robotics’ kitchen assistant product line has received full certification by NSF International for meeting sanitation standards for commercial kitchen equipment and secured an ETL Listed Mark by Intertek for meeting UL electrical safety standards.
Miso Robotics was founded with the idea of giving eyes and a brain to a robotic arm so it could work in commercial kitchens with real-time situational awareness and real-time robotic controls. The Company’s robotic kitchen assistant was designed as a software platform that could automate the cooking of all manner of foods and recipes, with all equipment and restaurant brands, and all kitchen formats.
Miso’s autonomous robotic Kitchen Assistants are focused on helping with the most repetitive, dangerous and least desirable tasks in the kitchen. The first “Flippy” grilling burgers was our proof of concept. Flippy can now fry many different kinds of foods as well. These tasks can be improved and optimized for consistency, ensuring each meal is cooked to the perfect temperature with minimal food waste. Beyond frying, grilling, and other cooking, expect them over time to help with tasks like chopping onions, cutting other vegetables and even cleaning.
The Kitchen Assistant improves and learns over time based on the data available. Ultimately, this frees up kitchen staff to spend more time with customers. The Company believes the future of food is on-demand, accessible, personalized, and scalable. Miso is building the technology platform leveraging automation, machine learning, and robotics advancements to deliver this future.
CookRight
An advanced AI platform that incorporates machine learning, sensors and computer vision, CookRight has served as the foundation of Miso Robotics’ flagship product, Flippy. The software allows cooks to track a food item on a grill and monitor cooking time automatically to deliver precision-level cooking. CookRight not only improves the cooking process but also assists in ensuring accurate order completion by simplifying tasks and providing operational assistance through an easy-to-navigate user interface that helps employees focus on customer service needs such as speed, accuracy and quality.
Flippy Wings
Flippy Wings is the only robotic chicken wing frying solution designed from the ground up for high volume restaurants. Flippy Wings fries fresh, frozen or hand-breaded chicken products, avoiding cross contamination and increasing throughput while reducing costs. Flippy Wings is currently being tested with a restaurant partner, and is being tailored and tuned to specifications.
Sippy
In June 2021 Miso began development of an intelligence backed automated beverage dispenser, named Sippy, that will integrate with the point of sales (POS) system and come equipped with a guided workflow for employees to ensure accurate order completion synced with driver and customer arrival times. The machine will be able to automatically pour drinks and advance beverages to enable an easy grab-and-go format for staff.
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Market
The Quick Service Restaurant (QSR) and fast-food industry is a $273 Billion industry globally and has been experiencing historic growth over the past five years, with the QSR market growing 4.1% annually during this period. While the amount of QSR establishments continues to increase within the U.S. to a total of 286,967 in 2019, the labor market for fast - food workers has tightened, creating a labor shortage for QSRs. This shortage can be attributed to multiple factors such as a low unemployment rate, fewer teenagers in the workforce, and a boom in restaurant openings. Miso Robotics is poised to help cure QSR owners and managers of this frustration and provide a solution to the lack of labor.
Labor expenses in a Quick Service Restaurant are currently greater than 25% of annual revenue, a number that has remained relatively steady over the past 10 years according to IBISWorld’s 2020 Industry Report. While a QSR consists of many different employee positions, cooks specifically account for 60% of the total wage expense for a restaurant. Miso Robotics’ automation solution can help increase the throughput and efficiency of these cooks, bringing down this majority expense and increasing their profitability in the kitchen.
Restaurants already see a 150% turnover today from a dissatisfied workforce. Pair this with an aging workforce that cannot handle some of the physical demands that come with the job and commercial kitchens are struggling to recruit and retain talent. Intelligent automation not only creates an avenue for meaningful work for the next generation through the creation of new jobs like a Chef Tech (employees trained to manage the robot) but also takes the physical burden off more mature employees who want to contribute later in life.
The tasks that Miso’s technology can perform are some of the most dangerous tasks in the kitchen, not to mention messy and menial, ultimately improving the employee experience by freeing up time for them to focus on more meaningful work, like warm customer service that a robot can’t simply match.
Design & Development
Miso Robotics has built an autonomous kitchen assistant platform. On this platform, the Company has built NSF and ETL certified systems that grill burgers and operate the fryer. The autonomous cooking platform allows Miso to quickly develop new cooking skills. The Company has deployed systems to CaliBurger, Levy Restaurants, and White Castle. Miso has 13 patents pending, with four having been granted.
The Miso platform incorporates robotics with artificial intelligence, machine learning, computer vision and data analytics to create products that make restaurants safer, easier and friendlier.
| · | Miso AI - Leveraging data from Miso products, third-party products and equipment, point-of-sale, the supply chain, labor and more Miso AI enables people and robots to operate more efficiently by forecasting the future and improves consistency across-the-board by knowing exactly how items should be prepared. | |
| · | Robotics Framework - Miso’s pioneering AI and machine learning, computer vision, sensor systems powers robotics to optimize modern kitchens. | |
| · | Kitchen Intelligence - Analytics powered by artificial intelligence tracks the performance of Miso products, compiles equipment, product, labor and customer data into reporting that delivers first-of-its-kind kitchen insights. | |
| · | Integrations - The Miso Platform integrates with existing restaurant point of sale systems, enterprise business intelligence tools and kitchen equipment such as fryers, hot holding, product dispensers and others. | |
| · | Miso Fleet - The platform has a secured infrastructure and real-time support tools to regularly deploy over-the-air updates as the system improves and gets better over time and offer live professional support. |
Miso Robotics has worked with NSF and ETL to get its kitchen assistants certified for use in commercial kitchens. The Company has deployed systems to CaliBurger, Levy Restaurants, White Castle, Inspire Brands, Panera Bread, and Chipotle.
Miso continues to add new capabilities to the system, reduce its overall cost, and design easier ways to integrate it into more kitchen environments.
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Manufacturing
Miso currently manufactures the Miso Robotics Kitchen Assistant 2.0 using a third-party manufacturing partner.
Miso currently manufactures our Flippy Wings, CookRight, and Sippy products in our facility. The Company’s manufacturing workshop is listed with NSF (National Sanitation Foundation) and is also part of our ETL listing through Intertek. Both listings are regulatory requirements for utilizing the Miso Robotics Kitchen Assistants in a commercial kitchen.
The strategy for manufacturing will change over time dependent on production volumes and commitments. Miso’s pre-production products will be produced at our manufacturing facility while the Company works on the cost and quality of the manufacturing process.
The Miso Robotics Kitchen Assistants currently uses a six-axis robotic arm. The Miso Robotic Kitchen Assistant is robotic arm agnostic and does not require a specific robotic arm manufacturer. The Miso Robotics Kitchen Assistant software platform enables the Miso Robotics Kitchen Assistant to work with any robotic arm. The components used to create the Miso Robotics Kitchen Assistant are sourced through licensed manufacturers. This allows Miso Robotics manufacturing to focus on software requirements and work closely with contract manufacturers to execute the production of Miso Robotics Kitchen Assistants. The Company is actively pursuing new vendors for the various products used to create the Kitchen Assistant.
Sales & Marketing
Miso Robotics has already acquired three large customers who have also been helpful during the design, development, and testing of Flippy (More information about those customers in the customer section below). Regarding further sales and marketing, Miso Robotics has obtained an enormous interest in the press. Since the Company’s founding in 2016, Miso’s robotic kitchen assistant, also known as “Flippy”, has been featured in numerous news and media outlets, including the Wall Street Journal, Forbes, VentureBeat, USA Today, CBS News, BBC News, TechCrunch, The Spoon, and many more.
After piloting Flippy for several months at a location in the Midwestern United States in 2020, White Castle decided to expand its relationship with Miso and target up to ten additional locations at which to deploy Flippy. This decision further validates Miso’s value proposition and led to increased interest from additional potential customers.
Miso is currently engaged with 10 of the top 25 restaurant brands with dozens of pilots initiated with the largest and most innovative quick service and fast food restaurant chains globally.
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Competition
Although there are several competitors who have built robotic machines for use in kitchens, none are as smart and versatile as Flippy from Miso Robotics. Flippy can essentially do anything a human arm can do, which allows us to market it to existing restaurants, creating a much larger market for our product. Our 13 patents pending and 4 granted create an equally important barrier to entry against potential competition.
| ● | Creator |
○ Total funding to date: $18.4 million
○ Creator has built a robotic burger maker that creates burgers in an assembly line fashion. The machine takes up a large footprint in a restaurant and it is not ideal to be sold to existing restaurants because it only makes one style of burger and is not versatile enough to make anything else.
| ● | Spyce |
○ Total funding to date: $25.9 million
○ Spyce is a robotic restaurant that creates vegetable-centric bowls. This company is not currently selling products to existing restaurants, which makes them an indirect competitor to Miso while it further validates the need for automation in the Kitchen. In 2021, Spyce was acquired by Sweetgreen.
| ● | Chowbotics |
○ Total funding to date: $20.8 million
○ Chowbotics uses robots to solve problems in food service including compromised cleanliness and inefficiency. It is targeting cafeterias, restaurants, and hotels. Its first robot, Sally, offers fully customized, fresh and healthy salads. Similar to Creator, their current solutions are not versatile enough to compete with Miso. In 2021, Chowbotics was acquired by DoorDash.
| ● | Lab2Fab |
○ Owned by Middleby Corp.
○ Restaurant and bar management platform uses robotics, artificial intelligence, machine learning, and augmented reality to improve both front-of-house and back-of-house operations.
Customers
White Castle – White Castle is America’s first fast-food burger chain with 375 locations across the country. In June of 2020, the Company entered into an agreement with White Castle to develop, pilot, and undertake a beta rollout of Miso Robotics' Flippy robot for White Castle's North American restaurants. As part of the pilot, White Castle deployed the new version of Flippy, Robot-on-a-Rail (ROAR), into a Chicago-area kitchen for testing and future integration. The deployment put autonomous frying to work for enhanced production speeds, improved labor allocation, and an added layer of health and safety in the cooking process. In October 2020, White Castle and Miso Robotics announced plans to expand their relationship. Miso and White Castle will target up to 10 new locations as part of a beta rollout of Flippy to White Castle’s North American restaurants.
Additionally, Miso is in talks with many of the leading QSR and fast-food chains about bringing Miso’s suite of kitchen automation tools to their kitchens.
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Employees
The Company currently has 91 full time employees and 1 part time employee. Of the full-time employees, 57 work in engineering, 13 work in operations, 8 work product development, 10 are executives or managers, and 3 work in program management. The one part time employee works in engineering.
The Company currently leases its main office at 680 E Colorado Blvd, Pasadena, CA. This location is the Company’s headquarters. The company also leases space at 650 E Green St, Pasadena, CA which is uses as a research and development center and test kitchen . The lease on the properties have a term of 6 years and 5 years, and began on April 1, 2022 and November 1, 2021, respectively. The Company still has a lease at 561 East Green Street, Pasadena, CA, which ends in 2023.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of the Company’s consolidated financial condition and results of operations should be read in conjunction with our financial statements and the related notes included in this Offering Circular. The following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements.
Operating Results – Fiscal Years Ended December 31, 2020 and 2021
The Company generated revenue of $31,650 through the year ending December 31, 2021 as it ramped up business development activities and deployed pilot units in test kitchens and live restaurants. For the period ended December 31, 2020 the Company generated revenue of $298,752, the majority of this revenue was from multiple one-time consulting engagements and automation studies.
Miso’s costs and expenses primarily consist of salaries from employees related to engineering, research and development, and business development. For the twelve-month period ended December 31, 2021, the Company spent $1,533,885 on non-salary research and development related costs, $7,850,301 on salaries, $6,125,863 in sales and marketing expenses primarily around marketing of its offering, and $6,211,039 on overhead, general & administrative, legal, consultants, and non-engineering salaries.
Across 2021, the Company saw an increase to its operating expenses, primarily in research and development, salaries, and contractors as it continued to launch new products and advance its current product suite. The Company expects these costs to increase in 2022 as it continues to focus on deployments, new customers, and product development.
Liquidity and Capital Resources – Fiscal Years Ended December 31, 2020 and 2021
As of December 31, 2021, the Company’s cash on hand was $13,742,525, compared with $1,767,841 as of December 31, 2020, which did not include an investment receivable of $7,469,164 from its Series C financing round. These funds hit the Company’s main operating account in January 2021. The Company launched a Series D financing round through Regulation A+ and Regulation D in May 2021 and as of December 31, 2021, had raised $25,942,391 in subscriptions into this round, $24,887,661 of which was through Regulation A+ and $1,054,730 was through Regulation D. Both rounds closed in November 2021.
Revenue for the year ended December 31, 2021 was $31,650 mostly from the deployment of one Flippy in November 2021, this is compared to revenue of $298,752 for the year ended December 31, 2020. A large portion of the Company’s revenue in 2020 was from automation studies and one-time consulting engagements. The Company has deployed multiple Flippy 2 units in test kitchens and live restaurants in the United States, however the majority of these are pilot deployments and are not yet generating revenue.
The Company is continuing to raise capital in its Regulation A+ round and it opened up a Series E fundraising round in January 2022. The Company will continue to fundraise in order to support operations and growth, with an eventual goal of profitability in the coming years.
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Plan of Operations
To date, Miso has generated minimal revenues. The Company is growing quickly and continues to hire a large team of engineers. Its engineering and product development teams have focused on developing new generations of our automated kitchen assistants, as well as new product lines like CookRight, Flippy Wings, and Sippy, as well as developing intellectual property. The funds previously raised have enabled Miso to aggressively pursue top engineering talent, and the Company has grown its overall team from 31 to 91 full-time employees across the past year, including hiring a new Chief Technology Officer. Additionally, the funds from previous raises enabled the Company to continue to pursue its product and business development goals.
In June 2021 Miso announced the commercial availability of its CookRight software as a standalone offering, and in the same month announced its plan to build an intelligence-backed, automated beverage dispenser that will bring enhanced functionality for commercial kitchens. In October 2021 Miso unveiled the Flippy Wings product line. The first Flippy Wings unit is currently being tested with a corporate partner, and being tailored and tuned to specifications. The Company is on track to install multiple Flippy Wings units in 2022. The Company is also working to develop its Sippy product line. The potential revenue from the Sippy product line is minimal compared to what could be possible from Flippy, and the degree to which this product line finds market adoption will not have a material impact on the overall success of the Company.
Miso is currently seeking to raise up to $40,000,000 pursuant to an offering of our Series E Preferred Stock under Tier 2 of Regulation A. Through April 30, 2022, the Company has raised more than $5,000,000 into the round. If we raise the maximum offering amount through this offering, we believe that we would be able to accelerate the product development our newest lines of business, as well as increase production velocity of our flagship product, Flippy. Miso has continued to see increased interest in its products both domestically and internationally, and additional funding will allow us to continue to engage with more partners and customers. In addition, we would anticipate not needing to raise additional capital for the business. If we raise less than 50% of the maximum, however, we would likely need to raise additional funds within 6 to 18 months.
Trend Information
The Company’s primary focus is to execute its go-to-market strategy with the goal of entering into one or more additional commercial agreements by the end of 2021. The Company is currently targeting quick service restaurants (QSRs), larger restaurant chains, systems integrators, and food and restaurant supply producers as potential customers. Miso has also entered into partnership agreements with complementary organizations in an effort to improve food safety an accessibility in robotics.
The Company saw a significant spike in commercial interest during the year ended December 31, 2020. The most notable result of this interest was the commercial agreement entered into with White Castle, America’s first fast-food burger chain, which is discussed further below.
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In June of 2020, the Company entered into an agreement with White Castle to develop, pilot, and undertake a beta rollout of Miso Robotics' Flippy robot for White Castle's North American restaurants.
In October of 2020, Miso Robotics announced global commercial availability of the Flippy Overhead Robot-on-a-Rail (OHROAR).
In October of 2020, Miso Robotics and White Castle announced plans to expand implementations of Miso’s autonomous kitchen assistant, Flippy. Miso and White Castle will target up to 10 new locations as part of a beta rollout of Flippy to White Castle’s North American restaurants.
In June 2021 Miso announced the commercial availability of its CookRight software as a standalone offering.
In June 2021 Miso announced its plans to build an intelligence-backed automated beverage dispenser that will bring enhanced functionality for commercial kitchens.
In October 2021 Miso announced its Flippy Wings product line.
Across 2019 and 2020, the Company earned non-recurring revenues from robotics consulting services provided. In H1 2021 the Company ceased providing these services to focus on upcoming deployments of Flippy. The Company began generating revenue again in H2 2021, which was related to a one-time consulting engagement and Flippy installation fees and SaaS revenue.
The restaurant and food services industry is ripe for disruption, especially as labor costs increase and the overall pool of labor in the industry because scarce. The Company believes it is in a unique position to take advantage of changes in the industry by helping future customers increase labor utilization, decrease labor costs, and improve overall throughput and profitability.
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DIRECTORS, EXECUTIVE OFFICERS, AND SIGNIFICANT EMPLOYEES
| Name | Position | Age | Term in Office | ||||
| Executive Officers | |||||||
| Mike Bell | Chief Executive Officer | 57 | Indefinite, appointed August 2020 | ||||
| Buck Jordan | Chairman, President | 41 | Indefinite, appointed August 2020 | ||||
| Kevin Morris | Chief Financial Officer | 39 | Indefinite, appointed September 2019 | ||||
| Directors | |||||||
| Buck Jordan | Chairman | 41 | Indefinite, appointed August 2020 | ||||
| Joseph Essas | Director | 50 | Indefinite, appointed December 2019 | ||||
| Massimo Noja De Marco | Director | 59 | Indefinite, appointed November 2019 | ||||
| Kevin Morris | Director | 39 | Indefinite, appointed March 2022 | ||||
| Thomas Bruderman | Director | 53 | Indefinite, appointed March 2020 | ||||
| Significant Employees | |||||||
| Rob Anderson | Head of Mechanical Engineering | 28 | Indefinite, appointed September 2016 |
Mike Bell, Chief Executive Officer
Mike Bell was appointed CEO of Miso Robotics in August 2020 after serving as the Chairman of the Board of Directors for nearly one year. For the past twenty-five years, Mike has served as CEO/President/COO in early-stage tech startups and public company roles. Most recently, Michael served as Chief Operating Officer at Ordermark, a leading restaurant technology company. Prior to Ordermark, Mike was President at Bridg, a venture-backed software company providing a B2C CRM for some of the nation’s leading restaurant brands. He also served as CEO/President of Infrascale, SOS Online Backup, 3PL Central, and Software.com. Early in his career, Mike co-founded Encore Software and served as its CEO for fourteen years. During this time Mike and his team grew Encore to become one of the largest consumer software publishers in North America and one of the fastest-growing – having twice been named to Inc. Magazine’s Inc 500 list.
Kevin Morris, Chief Financial Officer
Kevin is the CFO of Miso of Robotics and manages the company’s finances and accounting. He was appointed to this role in September 2019. Prior to this, from July 2014 to April 2019, he was the CFO and COO of Denim.LA, Inc., and managed the company’s finances, operations, and customer service. He was formerly (from July 2014 to January 2016) a consultant to the company and became an employee in February 2016. Kevin is originally from Huntington Beach, California and received his bachelor’s in Applied Mathematics and Computer Science from the University of California, Berkeley. Upon graduation, he worked at Deloitte Consulting where he specialized in technical integrations and strategy. After attending the UCLA Anderson Graduate School of Management where he received his MBA, he worked for American Airlines as the head of pricing strategy for ancillary products and for the airline’s Asia-Pacific network. With a strong desire to work in the apparel industry, Kevin worked as the Vice-President of Sales for an Adidas licensee from February 2013 to June 2014, overseeing the global sales and marketing strategy for multiple Adidas sports categories.
Rob Anderson, Head of Mechanical Engineering
Rob Anderson is a Co-Founder and the Head of Mechanical Engineering at Miso Robotics. He leads the hardware development of Miso's autonomous cooking platform. Rob is driven to build teams around technology to elevate the way people eat and live their daily lives. Prior to founding Miso Robotics, Rob worked at Microsoft in 2015 where he supported the international development of the Surface manufacturing lines. At SpaceX in 2016, Rob also helped develop internal tools to understand component lifetime after multiple rocket launches. He earned his degree in Mechanical Engineering from the California Institute of Technology in 2016, where he founded an interdisciplinary program to evaluate the next generation of energy storage for vehicles.
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James “Buck” Jordan, Chairman
James (“Buck”) Jordan founded Miso Robotics in 2016 and was a Director of the company from 2017 through March 2019. Buck is currently the acting President and Chairman of the Board of Directors of Miso Robotics. In addition to his roles at Miso, Buck has been a Partner at Wavemaker Partners since 2018 and founded Wavemaker Labs, a corporate venture studio in 2016. Prior to that, Buck was Managing Partner at an early-stage venture fund, Canyon Creek Capital, a position he has held since 2010. Buck is a technologist and early-stage venture investor with a successful track record of building businesses at the leading edge of technology and in transformative high growth markets such as robotics, digital media, and consumer products. He has led investments in successful startups such as Relativity Space, Gyft, Winc, Miso Robotics, ChowNow, Jukin Media, and several others. His operating expertise was honed during his time as a management consultant, working on Capitol Hill in Senator Arlen Spector's office, and as an Army Blackhawk Pilot.
Joseph Essas, Director
Joseph Essas has been serving as Chief Technology Officer at OpenTable (part of Booking Holdings) since 2012. In his role, Joseph oversees all Product Development and Engineering initiatives at the Company as well as Data Science and Operations. Prior to joining OpenTable, Joseph served as the Chief Technology Officer for eHarmony where he was responsible for overseeing and guiding the technical development, operation and growth of the Company. Previously, Mr. Essas served as Vice President of Engineering of Yahoo! where he managed engineering teams for the search marketing division. Mr. Essas attended Jerusalem College of Technology.
Massimo Noja De Marco, Director
Massimo Noja De Marco serves as Kitchen United’s Chief Culinary Officer. Prior to joining the Company, Massimo owned and operated PH+E, a boutique consulting firm focusing on opening restaurants, hotels and bars across the US, Mexico and Europe, a role he held starting in 2014. He served as Vice President of Operations for SBE Entertainment, controlling all operational aspects for the Restaurants and Nightlife division. Previously he covered the same role at Wolfgang Puck Catering and Events, overseeing operations for all venues in S. California, including major events and awards shows, such as the Academy Awards. Formerly, Massimo owned and operated restaurants in NYC and Los Angeles and ran the Food and Beverage Department for The Ritz Carlton Marina Del Rey and Hillcrest Country Club in Beverly Hills. Massimo was raised in a seven-generation family in Hospitality in the Lake District outside of Milan, Italy, where he graduated with a degree in Hospitality Management and a bachelor’s in Public Relations from IULM University in Milan. For three years he ran the family business composed of boutique hotels and restaurants in Italy.
Thomas Bruderman, Director
Thomas Bruderman is a founder and Managing Partner of MAG Ventures, an early to mid-stage venture fund. Mr. Bruderman founded MAG Ventures in 2007. Prior to founding MAG, he was Senior Equity Trader and responsible for the entire healthcare group at Fidelity Investments (FMR) in Boston, Massachusetts. During his seven-plus years at Fidelity, from 1998 to 2005, Mr. Bruderman’s responsibilities included trading, personnel management and investment research and analysis. Before being recruited to Fidelity Investments, Mr. Bruderman was Managing Director and Head of Equities at Merit Capital, a Connecticut-based boutique Investment Bank.
Additionally, Mr. Bruderman is Chairman of AI based cybersecurity company DarkLight and Vice-Chairman and Corporate Secretary of emerging media company, Allyance Media Group. Mr. Bruderman has over twenty-five years of experience in the finance and asset management industry, spanning both financial structuring and operational experience. He earned a BS in Finance from Providence College.
10
Compensation of Directors and Executive Officers
For the year ended December 31, 2021, the Company compensated its three highest paid executive officers and follows:
| Name | Capacity in which compensation was received |
Cash Compensation |
Other Compensation |
Total Compensation |
||||||||||
| Michael Bell | CEO | $ | 250,000 | $ | 0 | $ | 250,000 | |||||||
| Buck Jordan | President | $ | 120,000 | $ | 0 | $ | 120,000 | |||||||
| Kevin Morris | CFO | $ | 0 | $ | 0 | $ | 0 | |||||||
For the year ended December 31, 2021, Directors of the Company received neither cash compensation nor compensation of any other kind for their services to the Company.
In 2021, the Board authorized 175,000 options for Common Stock to the Company’s Chief Financial Officer, Kevin Morris and 175,000 options for Common Stock to the Company’s President, Buck Jordan.
11
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITYHOLDERS
| Title of Class | Name and address of beneficial owner |
Amount and nature of beneficial ownership |
Amount and nature of beneficial ownership acquirable |
Percent of class |
Total voting power per beneficial owner (5) |
|||||||||||||||||
| Officers and Directors | ||||||||||||||||||||||
| Common Stock | Ryan Sinnet 141 N Parkwood Ave Apt 11, Pasadena, CA 91107 |
N/A | 1,841,917 | 13.15 | % | N/A | ||||||||||||||||
| Common Stock | Buck Jordan 1134 11th Street Suite 101, Santa Monica, CA 90403 |
1,326,381 | 917,266 | 18.44 | % | 3.49 | % | |||||||||||||||
| Common Stock |
Michael Bell 1028 9th Street Manhattan Beach, CA 90266 |
215,796 | 1,632,533 | 15.19 | % | 0.56 | % | |||||||||||||||
| Common Stock | All directors and officers as a group | (1) | 350,000 | 513,163 | 7.09 | % | 0.92 | % | ||||||||||||||
| Other Significant Holders | ||||||||||||||||||||||
| Common Stock | John Miller | (2)(3) | 235,235 | N/A | 1.93 | % | 2.34 | % | ||||||||||||||
| Common Stock | Avista Investments. LLC | (2)(6) | 1,400,000 | N/A | 11.51 | % | 1.89 | % | ||||||||||||||
| Common Stock | CCC HelloTech, LP | (2)(4) | 1,435,000 | N/A | 11.80 | % | 43.02 | % | ||||||||||||||
| Common Stock | Match Robotics VC, LLC | (2) | 1,234,800 | N/A | 8.62 | % | 43.02 | % | ||||||||||||||
| Common Stock | Future VC, LLC | (2)(4) | 1,400,000 | N/A | 11.51 | % | 43.02 | % | ||||||||||||||
| Common Stock | Canyon Creek Capital | (2)(4) | 1,050,000 | N/A | 8.63 | % | 43.02 | % | ||||||||||||||
| Common Stock | Future VC SPV, LLC | (2)(4) | 1,156,827 | 1,168,167 | 17.44 | % | 43.02 | % | ||||||||||||||
| Series A Preferred Stock | Rise of Miso, LLC | (2)(3) | 61,055 | N/A | 13.51 | % | 2.34 | % | ||||||||||||||
| Series A Preferred Stock | Match Robotics VC, LLC | (2) | 121,630 | N/A | 15.80 | % | 43.02 | % | ||||||||||||||
| Series A Preferred Stock | Future VC SPV, LLC | (2)(4) | 395,227 | N/A | 51.34 | % | 43.02 | % | ||||||||||||||
| Series A Preferred Stock | Grazadio Family Trust | (2) | 80,539 | N/A | 10.46 | % | 2.53 | % | ||||||||||||||
| Series B Preferred Stock | Rise of Miso, LLC | (2)(3) | 105,995 | N/A | 10.62 | % | 2.34 | % | ||||||||||||||
| Series B Preferred Stock | Future VC SPV, LLC | (2)(4) | 402,790 | N/A | 40.38 | % | 43.02 | % | ||||||||||||||
| Series B Preferred Stock | Grazadio Family Trust | (2) | 145,154 | N/A | 14.55 | % | 2.53 | % | ||||||||||||||
| Series C Preferred Stock |
New Direction Trust Company 1070 West Century Drive Louisville, CO 80027 |
(7) | 917,848 | N/A | 24.66 | % | 16.92 | % | ||||||||||||||
(1) No executive officers or directors, other than those named above, beneficially own more than 10% of any class of the Company’s voting securities.
(2) The following address may be used for each significant holder: C/O Miso Robotics, Inc., 680 E Colorado Blvd, Pasadena, CA 91101
(3) Rise of Miso, LLC and CaliBurger are controlled by John Miller who is an investor in the Company
(4) Future VC SPV, LLC, Match Robotics VC, LLC, Canyon Creek Capital, and CCC HelloTech, LP are all controlled by Buck Jordan, who is an investor in the Company as well as its current Chief Executive Officer.
(5) Indicates the total voting power of each holder’s security ownership across all five classes of voting securities. This column excludes any acquirable ownership.
(6) Avista Investments, LLC is controlled by Harry Tsao
(7) Holding securities for the benefit of certain investors in the Regulation A+ offering.
Amounts are as of December 31, 2021. The fifth column (Percent of Class) includes a calculation of the amount the person owns now, plus the amount that person is entitled to acquire, such as the result of options issued under the Company’s 2017 Stock Plan. That amount is then shown as a percentage of the outstanding amount of securities in that class if no other people exercised their rights to acquire those securities. The result is a calculation of the maximum amount that person could ever own based on their current and acquirable ownership, which is why the amounts in this column will not add up to 100%.
12
INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
In September 2019, the Company issued a promissory note to Future VC SPV, LLC, an entity with common management for a principal amount of $782,167. In conjunction with the note, the Company granted warrants to purchase 546,427 shares of common stock to the entity. In 2020, the Company issued additional notes to this entity for proceeds of $889,982 and grants warrants to purchase 621,747 shares of common stock. In April 2021, the Company converted these notes, and accrued interest, into shares of Series C Preferred Stock at a per share price of $13.728, a 20% discount to the offering per share price of $17.16.
During the year ended December 31, 2021, the Company incurred $412,111 in expenses with Wavemaker Labs, an entity with common management, for consulting services rendered. As of December 31, 2021, the Company had accounts payable of $29,265 with Wavemaker Labs.
13
2.1 Seventh Amended and Restated Certificate of Incorporation(1)
3.1 Form of Promissory Note(3)
4.1 Miso Robotics Form of Series E Subscription Agreement(5)
6.1 Note Purchase Agreement(6)
6.2 Rise of Miso, LLC Promissory Note(7)
6.3 Future VC SPV, LLC Promissory Note(8)
(1) Filed as an exhibit to the Miso Robotics, Inc. Regulation A Offering Statement on Form 1-A (Commission File No. 024-11112) and incorporated herein by reference.
(2) Filed as an exhibit to the Miso Robotics, Inc. Regulation A Offering Statement on Form 1-A (Commission File No. 024-11112) and incorporated herein by reference.
(3) Filed as an exhibit to the Miso Robotics, Inc. Regulation A Offering Statement on Form 1-A (Commission File No. 024-11112) and incorporated herein by reference.
(4) Filed as an exhibit to the Miso Robotics, Inc. Regulation A Offering Statement on Form 1-A (Commission File No. 024-11112) and incorporated herein by reference.
(5) Filed as an exhibit to the Miso Robotics, Inc. Regulation A Offering Statement on Form 1-A (Commission File No. 024-11112) and incorporated herein by reference.
(6) Filed as an exhibit to the Miso Robotics, Inc. Regulation A Offering Statement on Form 1-A (Commission File No. 024-11112) and incorporated herein by reference.
(7) Filed as an exhibit to the Miso Robotics, Inc. Regulation A Offering Statement on Form 1-A (Commission File No. 024-11112) and incorporated herein by reference.
(8) Filed as an exhibit to the Miso Robotics, Inc. Regulation A Offering Statement on Form 1-A (Commission File No. 024-11112) and incorporated herein by reference.
(9) Filed as an exhibit to the Miso Robotics, Inc. Regulation A Offering Statement on Form 1-A (Commission File No. 024-11112) and incorporated herein by reference.
15
SIGNATURES
Pursuant to the requirements of Regulation A, the issuer has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Miso Robotics, Inc.
| By | /s/ Michael Bell | |
| Michael Bell, Chief Executive Officer | ||
| Miso Robotics, Inc. | ||
| Date: June 22, 2022 | ||
The following persons in the capacities and on the dates indicated have signed this Offering Statement.
| By | /s/ Michael Bell | |
| Michael Bell, Chief Executive Officer | ||
| Miso Robotics, Inc. | ||
| Date: June 22, 2022 | ||
| By | /s/ Kevin Morris | |
| Kevin Morris, Chief Financial Officer, Principal Accounting Officer | ||
| Miso Robotics, Inc. | ||
| Date: June 22, 2022 | ||
| By | /s/ James Jordan | |
| James Jordan, Director | ||
| Miso Robotics, Inc. | ||
| Date: June 22, 2022 | ||
16
CONSOLIDATED FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR’S REPORT
DECEMBER 31, 2021 and 2020
| F-1 |
To the Board of Directors of
Miso Robotics, Inc.
Pasadena, California
INDEPENDENT AUDITOR’S REPORT
Opinion
We have audited the accompanying consolidated financial statements of Miso Robotics, Inc. and subsidiary (the “Company”), which comprise the consolidated balance sheets as of December 31, 2021 and 2020, and the related consolidated statements of operations, stockholders’ equity/(deficit), and cash flows for the years then ended, and the related notes to the consolidated financial statements.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2021 and 2020, and the results of its consolidated operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are required to be independent of the Company and to meet our other ethical responsibilities in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Substantial Doubt About the Company’s Ability to Continue as a Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As described in Note 2 to the consolidated financial statements, the Company has not generated profits since inception, has sustained net losses of $25,135,863 and $10,684,792 for the years ended December 31, 2021 and 2020, respectively, and has incurred negative cash flows from operations for the years ended December 31, 2021 and 2020. As of December 31, 2021, the Company had an accumulated deficit of $51,477,045 and cash of $13,742,525, relative to negative operating cash flows of $23,018,343 in 2021. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our opinion is not modified with respect to this matter.
Responsibilities of Management for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
Artesian CPA, LLC
1624 Market Street, Suite 202 | Denver, CO 80202
p: 877.968.3330 f: 720.634.0905
info@ArtesianCPA.com | www.ArtesianCPA.com
| F-2 |
In preparing the consolidated financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the consolidated financial statements are available to be issued.
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements, including omissions, are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the consolidated financial statements.
In performing an audit in accordance with generally accepted auditing standards, we:
| • | Exercise professional judgment and maintain professional skepticism throughout the audit. |
| • | Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. |
| • | Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. Accordingly, no such opinion is expressed. |
| • | Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the consolidated financial statements. |
| • | Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for a reasonable period of time. |
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control related matters that we identified during the audit.
/s/ Artesian CPA, LLC
Denver, Colorado
June 16, 2022
Artesian CPA, LLC
1624 Market Street, Suite 202 | Denver, CO 80202
p: 877.968.3330 f: 720.634.0905
info@ArtesianCPA.com | www.ArtesianCPA.com
| F-3 |
MISO ROBOTICS, INC.
CONSOLIDATED BALANCE SHEETS
| December 31, | ||||||||
| 2021 | 2020 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 13,742,525 | $ | 1,767,841 | ||||
| Accounts receivable, net | 31,650 | 95,285 | ||||||
| Inventory | 731,180 | 418,032 | ||||||
| Prepaid expenses and other current assets | 419,129 | 86,054 | ||||||
| Deferred offering costs | 6,875 | - | ||||||
| Total current assets | 14,931,359 | 2,367,212 | ||||||
| Property and equipment, net | 783,003 | 205,160 | ||||||
| Deposits | 173,917 | 150,000 | ||||||
| Total assets | $ | 15,888,279 | $ | 2,722,372 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 2,195,449 | $ | 86,330 | ||||
| Accounts payable, related party | - | 128,716 | ||||||
| Accrued expenses and other current liabilities | 174,192 | 625,014 | ||||||
| Deferred rent | - | 12,720 | ||||||
| Loan payable, current portion | - | 297,649 | ||||||
| Venture debt, net of discount | - | 2,963,705 | ||||||
| Total current liabilities | 2,369,641 | 4,114,134 | ||||||
| Loan payable, net of current portion | - | 152,351 | ||||||
| Total liabilities | 2,369,641 | 4,266,485 | ||||||
| Commitments and contingencies (Note 11) | ||||||||
| Stockholders' equity (deficit): | ||||||||
| Series D convertible preferred stock, $0.0001 par value, 706,464 shares authorized, 402,847 and 0 shares isused and outstanding as of December 31, 2021 and 2020; liquidation preference of $22,809,197 and $0 as of December 31, 2021 and 2020, respectively | 40 | - | ||||||
| Series C convertible preferred stock, $0.0001 par value, 1,748,252 shares authorized, 1,518,093 and 979,868 shares isused and outstanding as of December 31, 2021 and 2020; liquidation preference of $26,050,476 and $16,814,535 as of December 31, 2021 and 2020, respectively | 152 | 98 | ||||||
| Series B convertible preferred stock, $0.0001 par value, 997,616 shares authorized, issued and outstanding as of December 31, 2021 and 2020; liquidation preference of $10,050,083 as of both December 31, 2021 and 2020 | 100 | 100 | ||||||
| Series A convertible preferred stock, $0.0001 par value, 769,784 shares authorized, issued and outstanding as of December 31, 2021 and 2020; liquidation preference of $3,164,433 as of both December 31, 2021 and 2020 | 77 | 77 | ||||||
| Common stock, $0.0001 par value, 70,000,000 and 49,000,000 shares authorized as of December 31, 2021 and 2020, respectively; 12,165,650 and 12,124,595 shares issued and outstanding as of December 31, 2021 and 2020, 163,938 and 301,196 shares unvested as of December 31, 2021 and 2020, respectively | 1,216 | 1,212 | ||||||
| Additional paid-in capital | 66,182,996 | 32,264,796 | ||||||
| Subscription receivable | (1,188,848 | ) | (7,469,164 | ) | ||||
| Non-controlling interests | (50 | ) | - | |||||
| Accumulated deficit | (51,477,045 | ) | (26,341,232 | ) | ||||
| Total stockholders' equity (deficit) | 13,518,638 | (1,544,113 | ) | |||||
| Total liabilities and stockholders' equity (deficit) | $ | 15,888,279 | $ | 2,722,372 | ||||
See Independent Auditor’s Report and accompany notes, which are an integral part of these consolidated financial statements.
| F-4 |
MISO ROBOTICS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
| Year Ended | ||||||||
| December 31, | ||||||||
| 2021 | 2020 | |||||||
| Net revenue | $ | 31,650 | $ | 298,752 | ||||
| Cost of net revenue | 233,399 | 531,064 | ||||||
| Gross profit (loss) | (201,749 | ) | (232,312 | ) | ||||
| Operating expenses: | ||||||||
| Research and development | 11,172,891 | 2,828,334 | ||||||
| Sales and marketing | 7,808,416 | 4,274,587 | ||||||
| General and administrative | 5,660,828 | 2,690,096 | ||||||
| Total operating expenses | 24,642,135 | 9,793,017 | ||||||
| Loss from operations | (24,843,884 | ) | (10,025,329 | ) | ||||
| Other income (expense): | ||||||||
| Interest expense | (796,579 | ) | (696,081 | ) | ||||
| Interest income | - | 198 | ||||||
| Other income | 504,600 | 36,420 | ||||||
| Total other income (expense), net | (291,979 | ) | (659,463 | ) | ||||
| Provision for income taxes | - | - | ||||||
| Net loss | $ | (25,135,863 | ) | $ | (10,684,792 | ) | ||
| Net loss attributable to noncontrolling interests | (50 | ) | - | |||||
| Net loss attributable to Miso Robotics stockholders | $ | (25,135,813 | ) | $ | (10,684,792 | ) | ||
| Weighted average common shares outstanding - basic and diluted | 12,139,642 | 11,823,399 | ||||||
| Net loss per common share attributable to Miso Robotics stockholders - basic and diluted | $ | (2.07 | ) | $ | (6.33 | ) | ||
See Independent Auditor’s Report and accompany notes, which are an integral part of these consolidated financial statements.
| F-5 |
MISO ROBOTICS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
| Series
D Convertible | Series
C Convertible | Series
B Convertible | Series
A Convertible | Additional | Total Stockholders' | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Preferred Stock | Preferred Stock | Preferred Stock | Preferred Stock | Common Stock | Paid-in | Subscription | Noncontrolling | Accumulated | Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Receivable | Interests | Deficit | (Deficit) | ||||||||||||||||||||||||||||||||||||||||||||||
| Balances at December 31, 2019 | - | $ | - | - | $ | - | 997,616 | $ | 100 | 769,784 | $ | 77 | 12,124,595 | $ | 1,212 | $ | 16,205,099 | $ | - | $ | - | $ | (15,656,440 | ) | $ | 550,048 | ||||||||||||||||||||||||||||||||||
| Issuance of Series C preferred stock | - | - | 972,487 | 97 | - | - | - | - | - | - | 16,687,779 | (7,469,164 | ) | - | - | 9,218,713 | ||||||||||||||||||||||||||||||||||||||||||||
| Offering costs | - | - | - | - | - | - | - | - | - | - | (1,681,054 | ) | - | - | - | (1,681,054 | ) | |||||||||||||||||||||||||||||||||||||||||||
| Issuance of preferred stock for services | - | - | 7,381 | 1 | - | - | - | - | - | - | 126,665 | - | - | - | 126,666 | |||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | - | - | - | - | - | - | - | - | - | - | 455,875 | - | - | - | 455,875 | |||||||||||||||||||||||||||||||||||||||||||||
| Issuance of debt discount | - | - | - | - | - | - | - | - | - | - | 470,431 | - | - | - | 470,431 | |||||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | - | - | - | - | - | - | (10,684,792 | ) | (10,684,792 | ) | |||||||||||||||||||||||||||||||||||||||||||
| Balances at December 31, 2020 | - | - | 979,868 | 98 | 997,616 | 100 | 769,784 | 77 | 12,124,595 | 1,212 | 32,264,796 | (7,469,164 | ) | - | (26,341,232 | ) | (1,544,113 | ) | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of Series C preferred stock | - | - | 341,925 | 34 | - | - | - | - | - | - | 6,158,588 | 7,469,164 | - | - | 13,627,786 | |||||||||||||||||||||||||||||||||||||||||||||
| Conversion of venture debt into preferred stock | - | - | 196,300 | 20 | - | - | - | - | - | - | 2,694,786 | - | - | - | 2,694,806 | |||||||||||||||||||||||||||||||||||||||||||||
| Issuance of Series D preferred stock | 402,847 | 40 | - | - | - | - | - | - | - | - | 25,942,351 | (1,188,848 | ) | - | - | 24,753,543 | ||||||||||||||||||||||||||||||||||||||||||||
| Exercise of stock options | - | - | - | - | - | - | - | - | 41,055 | 4 | 44,913 | - | - | - | 44,917 | |||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | - | - | - | - | - | - | - | - | - | - | 579,655 | - | - | - | 579,655 | |||||||||||||||||||||||||||||||||||||||||||||
| Offering costs | - | - | - | - | - | - | - | - | - | - | (1,502,093 | ) | - | - | - | (1,502,093 | ) | |||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | - | - | - | - | - | (50 | ) | (25,135,813 | ) | (25,135,863 | ) | ||||||||||||||||||||||||||||||||||||||||||
| Balances at December 31, 2021 | 402,847 | $ | 40 | 1,518,093 | $ | 152 | 997,616 | $ | 100 | 769,784 | $ | 77 | 12,165,650 | $ | 1,216 | $ | 66,182,996 | $ | (1,188,848 | ) | $ | (50 | ) | $ | (51,477,045 | ) | $ | 13,518,637 | ||||||||||||||||||||||||||||||||
See Independent Auditor’s Report and accompanying notes, which are an integral part of these consolidated financial statements.
| F-6 |
MISO ROBOTICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
| Year Ended | ||||||||
| December 31, | ||||||||
| 2021 | 2020 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | (25,135,863 | ) | $ | (10,684,792 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Stock-based compensation expense | 579,655 | 455,875 | ||||||
| Stock issued for services | - | 126,666 | ||||||
| Amortization of debt discount | 670,943 | 437,392 | ||||||
| Bad debt expense | 45,285 | 36,616 | ||||||
| Depreciation expense | 116,866 | 102,201 | ||||||
| Other income - PPP forgiveness | (450,000 | ) | - | |||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | 18,350 | (59,281 | ) | |||||
| Inventory | (313,148 | ) | (87,587 | ) | ||||
| Prepaid expenses and other current assets | (333,075 | ) | (46,650 | ) | ||||
| Deferred offering costs | (6,875 | ) | - | |||||
| Accounts payable | 1,980,403 | (12,043 | ) | |||||
| Accrued expenses and other current liabilities | (178,164 | ) | 452,245 | |||||
| Deferred revenue | - | (467 | ) | |||||
| Deferred rent | (12,720 | ) | 2,513 | |||||
| Net cash used in operating activities | (23,018,344 | ) | (9,277,314 | ) | ||||
| Cash flows from investing activities: | ||||||||
| Purchases of property and equipment | (694,709 | ) | (61,691 | ) | ||||
| Deposits | (23,917 | ) | 77,636 | |||||
| Net cash provided by (used in) investing activities | (718,626 | ) | 15,945 | |||||
| Cash flows from financing activities: | ||||||||
| Proceeds from issuance of venture debt, net of fees | - | 889,982 | ||||||
| Repayments of venture debt | (1,212,500 | ) | - | |||||
| Proceeds from loan payable | - | 450,000 | ||||||
| Proceeds from issuance of Series C preferred stock | 13,627,786 | |||||||
| Proceeds from issuance of Series Dpreferred stock | 24,753,543 | 9,218,713 | ||||||
| Exercise of stock options | 44,917 | - | ||||||
| Offering costs | (1,502,093 | ) | (1,551,263 | ) | ||||
| Net cash provided by financing activities | 35,711,653 | 9,007,432 | ||||||
| Net decrease in cash and cash equivalents | 11,974,683 | (253,936 | ) | |||||
| Cash and cash equivalents at beginning of year | 1,767,841 | 2,021,777 | ||||||
| Cash and cash equivalents at end of year | $ | 13,742,524 | $ | 1,767,841 | ||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid for income taxes | $ | - | $ | - | ||||
| Cash paid for interest | $ | 181,757 | $ | - | ||||
| Supplemental disclosure of non-cash financing activities: | ||||||||
| Conversion of venture debt and accrued interest to preferred stock | $ | 2,694,806 | $ | - | ||||
| Warrants issued with venture debt | $ | - | $ | 123,968 | ||||
| Beneficial conversion feature on venture debt | $ | - | $ | 346,463 | ||||
| Subscription receivable on Series C preferred stock | $ | - | $ | 7,469,164 | ||||
| Subscription receivable on Series D preferred stock | $ | 1,188,848 | $ | - | ||||
See Independent Auditor’s Report and accompany notes, which are an integral part of these consolidated financial statements.
| F-7 |
MISO ROBOTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| 1. | NATURE OF OPERATIONS |
Miso Robotics, Inc. (the “Company”) was incorporated on June 20, 2016 as Super Volcano, Inc. under the laws of the State of Delaware. The Company changed its name to Miso Robotics, Inc. on October 3, 2016. The Company develops and manufactures artificial intelligence-driven robots that assist chefs to make food at restaurants. The Company is headquartered in Pasadena, California.
In November 2021, the Company became a founding stockholder in Ally Robotics, Inc., (“Ally”) a Delaware corporation whereby the Company was issued 6,600,000 shares of Ally’s common stock in exchange for a 93% interest in Ally. As such, Ally became a subsidiary of the Company (see Note 3). Ally was formed to build affordable, safe, lightweight, and smart robotic arms for the restaurant industry.
| 2. | GOING CONCERN |
The Company has evaluated whether there are certain conditions and events, considered in the aggregate, that raise substantial doubt and the Company’s ability to continue as a going concern within one year after the date that the consolidated financial statements are issued.
The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has not generated profits since inception, has sustained net losses of $25,135,863 and $10,684,792 for the years ended December 31, 2021 and 2020, respectively, and has incurred negative cash flows from operations for the years ended December 31, 2021 and 2020. As of December 31, 2021, the Company had an accumulated deficit of $51,477,045 and cash of $13,742,525, relative to negative operating cash flows of $23,018,343 in 2021. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern for the next twelve months is dependent upon its ability to generate sufficient cash flows from operations to meet its obligations, which it has not been able to accomplish to date, and/or to obtain additional capital financing. No assurance can be given that the Company will be successful in these efforts.
| 3. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Basis of Presentation
The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America ("GAAP"). The Company’s fiscal year is December 31.
Principles of Consolidation
These consolidated financial statements include the accounts of Miso Robotics and Ally since November 30, 2021. All inter-company transactions and balances have been eliminated in consolidation.
Stock Split
On January 11, 2022, the Company effected a 7-for-1 forward stock split of its authorized, designated, issued and outstanding shares of common stock. Accordingly, all share and per share amounts of the Company for all periods presented in the accompanying consolidated financial statements and notes thereto have been adjusted retroactively, where applicable, to reflect this stock split.
Use of Estimates
The preparation of the Company’s consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, the valuations of common stock and stock options. The Company bases its estimates on historical experience, known trends and other market-specific or other relevant factors that it believes to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates when there are changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Actual results could differ from those estimates.
| F-8 |
MISO ROBOTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents. The Company generally maintains balances in various operating accounts at financial institutions that management believes to be of high credit quality, in amounts that may exceed federally insured limits. The Company has not experienced any losses related to its cash and cash equivalents and does not believe that it is subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships. At December 31, 2021 and 2020, all of the Company's cash and cash equivalents were held at one accredited financial institution. As of December 31, 2021 and 2020, the Company had cash of $13,241,359 and $1,517,841, respectively, in excess of federally insured limits.
Cash and Cash Equivalents
The Company considers all highly liquid investments with maturities of three months or less at the date of purchase to be cash equivalents.
Fair Value Measurements
Certain assets and liabilities of the Company are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:
| • | Level 1—Quoted prices in active markets for identical assets or liabilities. |
| • | Level 2—Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data. |
| • | Level 3—Unobservable inputs that are supported by little or no market activity that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques. |
The carrying values of the Company’s assets and liabilities approximate their fair values.
Accounts Receivable
Accounts receivable are derived from products and services delivered to customers and are stated at their net realizable value. Each month, the Company reviews its receivables on a customer-by-customer basis and evaluates whether an allowance for doubtful accounts is necessary based on any known or perceived collection issues. Any balances that are eventually deemed uncollectible are written off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. As of December 31, 2021 and 2020, the Company had an allowance for doubtful accounts of $62,160 and $63,491, respectively. During the years ended December 31, 2021 and 2020, the Company recorded bad debt expense of $45,285 and $36,616, respectively, and in 2021, the Company recorded $46,616 in recovered accounts receivable in other income.
| F-9 |
MISO ROBOTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Inventory
Inventory is stated at the lower of cost or market and accounted for using the specific identification cost method. As of December 31, 2021 and 2020, inventory consisted of robotic raw materials purchased from the Company’s suppliers. Management reviews its inventory for obsolescence and impairment as it is determined necessary. Inventory that is held for future sale but was deployed under revenue generating contracts in 2021 was amortized on a straight-line basis for the portion of its expected useful life used during the period to reduce the carrying value to the net realizable value and recognize the costs associated with the revenue activities. As of December 31, 2021, there were $215,604 in inventory deposits for materials that the Company has not yet received. This amount is included in prepaid expenses and other current assets in the consolidated balance sheets. Inventory consists of the following:
| December 31, | ||||||||
| 2021 | 2020 | |||||||
| Raw materials | $ | 259,585 | $ | 218,931 | ||||
| Work in progress | 53,955 | 85,908 | ||||||
| Finished goods | 417,640 | 113,193 | ||||||
| $ | 731,180 | $ | 418,032 | |||||
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization expense is recognized using the straight-line method over the estimated useful life of each asset, as follows:
| Estimated Useful Life | ||
| Computer equipment and software | 2 - 3 years | |
| Kitchen equipment | 5 years | |
| Furniture and fixtures | 5 years | |
| Leasehold improvements | Shorter of lease term or 5 years |
Estimated useful lives are periodically assessed to determine if changes are appropriate. Maintenance and repairs are charged to expense as incurred. When assets are retired or otherwise disposed of, the cost of these assets and related accumulated depreciation or amortization are eliminated from the consolidated balance sheet and any resulting gains or losses are included in the consolidated statement of operations loss in the period of disposal.
Impairment of Long-Lived Assets
The Company continually monitors events and changes in circumstances that could indicate carrying amounts of long-lived assets may not be recoverable. When such events or changes in circumstances are present, the Company assesses the recoverability of long-lived assets by determining whether the carrying value of such assets will be recovered through undiscounted expected future cash flows. If the total of the future cash flows is less than the carrying amount of those assets, the Company recognizes an impairment loss based on the excess of the carrying amount over the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or the fair value less costs to sell. The Company did not record any impairment losses on long-lived assets during the years ended December 31, 2021 or 2020.
Revenue Recognition
The Company adopted ASU 2014-09, Revenue from Contracts with Customers, and its related amendments (collectively known as “ASC 606”), effective January 1, 2019 using the modified retrospective transition approach applied to all contracts. Therefore, the reported results for the years ended December 31, 2021 and 2020 reflect the application of ASC 606. Management determined that there were no retroactive adjustments necessary to revenue recognition upon the adoption of the ASU 2014-09. The Company determines revenue recognition through the following steps:
| • | Identification of a contract with a customer; |
| • | Identification of the performance obligations in the contract; |
| • | Determination of the transaction price; |
| • | Allocation of the transaction price to the performance obligations in the contract; and |
| • | Recognition of revenue when or as the performance obligations are satisfied. |
Revenue is recognized when control of the promised goods or services is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. As a practical expedient, the Company does not adjust the transaction price for the effects of a significant financing component if, at contract inception, the period between customer payment and the transfer of goods or services is expected to be one year or less.
| F-10 |
MISO ROBOTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company derives its revenue from hardware and software usage of its installed units as well as consulting services. Sales tax is collected on sales in California and these taxes are recorded as a liability until remitted.
Hardware
Each product sold to a customer typically represents a distinct performance obligation. The Company satisfies its performance obligation and revenue is recorded at the point in time when products are installed as the Company has determined that this is the point that control transfers to the customer. The Company invoices customers upon delivery of the products, and payments from such customers are due upon invoicing. Orders or set-up fees that have been paid but performance obligations have not been met are recorded to deferred revenue.
Software
Software as a service (SaaS) and usage fees are recognized as revenue as the performance obligation is satisfied over time. Revenue is recognized monthly over the life of the contract. Service fees that have been invoiced or paid but performance obligations have not been met are recorded to deferred revenue.
Consulting
Consulting services are recognized at the point in time when the performance obligation has been completed.
Disaggregation of Revenue
The following table presents the Company's revenue disaggregated by revenue source:
| Year Ended | ||||||||
| December 31, | ||||||||
| 2021 | 2020 | |||||||
| Hardware and installations | $ | 12,650 | $ | 56,385 | ||||
| Software and usage fees | 14,000 | 67,367 | ||||||
| Consulting services | 5,000 | 175,000 | ||||||
| $ | 31,650 | $ | 298,752 | |||||
Significant Judgements
The Company estimates warranty claims reserves based on historical results and research and determined that a warranty reserve was not necessary as of December 31, 2021 and 2020.
Contract Balances
The Company invoices customers based upon contractual billing schedules, and accounts receivable are recorded when the right to consideration becomes unconditional. Contract liabilities represent a set-up fee prepayment received from a customer in advance of performance obligations met.
As of December 31, 2021 and 2020, accounts receivable included $12,150 and $45,285 in unbilled receivables, respectively.
Cost of Net Revenues
Cost of net revenues consists primarily of inventory sold, parts used in building machines for sale, tooling and supplies, depreciation of certain equipment, allocations of facility costs, and allocations of personnel time in assembly, installation, and servicing.
Advertising and Promotion
Advertising and promotional costs are expensed as incurred. Advertising and promotional expense for the years ended December 31, 2021 and 2020 amounted to approximately $6,682,000 and $3,715,000, respectively, which is included in sales and marketing expense.
Research and Development Costs
Costs incurred in the research and development of the Company’s products are expensed as incurred.
| F-11 |
MISO ROBOTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Concentrations
During the year ended December 31, 2021 and 2020, two customers accounted for a total of 84% and 92% of the Company’s revenue, respectively. As of December 31, 2021, two customers accounted for 60% and 24% of the Company’s accounts receivable. As of December 31, 2020, two customers accounted for 52% and 48% of the Company’s accounts receivable.
The Company is dependent on third-party vendors to supply inventory and products for research and development activities and parts for building products. In particular, the Company relies and expects to continue to rely on a small number of vendors. The loss of one of these vendors may have a negative short-term impact on the Company’s operations; however, the Company believes there are acceptable substitute vendors that can be utilized longer-term.
Convertible Instruments
U.S. GAAP requires companies to bifurcate conversion options from their host instruments and account for them as free-standing derivative financial instruments according to certain criteria. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. An exception to this rule is when the host instrument is deemed to be conventional as that term is described under applicable U.S. GAAP.
When the Company has determined that the embedded conversion options should not be bifurcated from their host instruments, the Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their stated date of redemption. The Company also records, when necessary, deemed dividends for the intrinsic value of conversion options embedded in preferred shares based upon the differences between the fair value of the underlying common stock at the commitment date of the transaction and the effective conversion price embedded in the preferred shares.
Accounting for Preferred Stock
ASC 480, Distinguishing Liabilities from Equity, includes standards for how an issuer of equity (including equity shares issued by consolidated entities) classifies and measures on its consolidated balance sheet certain financial instruments with characteristics of both liabilities and equity.
Management is required to determine the presentation for the preferred stock as a result of the redemption and conversion provisions, among other provisions in the agreement. Specifically, management is required to determine whether the embedded conversion feature in the preferred stock is clearly and closely related to the host instrument, and whether the bifurcation of the conversion feature is required and whether the conversion feature should be accounted for as a derivative instrument. If the host instrument and conversion feature are determined to be clearly and closely related (both more akin to equity), derivative liability accounting under ASC 815, Derivatives and Hedging, is not required. Management determined that the host contract of the preferred stock is more akin to equity, and accordingly, liability accounting is not required by the Company. The Company has presented preferred stock within stockholders' equity.
Costs incurred directly for the issuance of the preferred stock are recorded as a reduction of gross proceeds received by the Company, resulting in a discount to the preferred stock. The discount is not amortized.
Deferred Offering Costs
The Company complies with the requirements of FASB ASC 340-10-S99-1 with regards to offering costs. Prior to the completion of an offering, offering costs are capitalized. The deferred offering costs are charged to additional paid-in capital or as a discount to debt, as applicable, upon the completion of an offering or to expense if the offering is not completed.
| F-12 |
MISO ROBOTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Stock-Based Compensation
The Company accounts for stock-based compensation in accordance with ASC 718, Compensation - Stock Compensation. The Company measures all stock-based awards granted to employees, directors and non-employee consultants based on the fair value on the date of the grant and recognizes compensation expense for those awards, net of estimated forfeitures, over the requisite service period, which is generally the vesting period of the respective award. For awards with service-based vesting conditions, the Company records the expense for using the straight-line method. For awards with performance-based vesting conditions, the Company records the expense if and when the Company concludes that it is probable that the performance condition will be achieved.
The Company classifies stock-based compensation expense in its consolidated statement of operations in the same manner in which the award recipient’s payroll costs are classified or in which the award recipient’s service payments are classified.
The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model. The Company historically has been a private company and lacks company-specific historical and implied volatility information for its stock. Therefore, it estimates its expected stock price volatility based on the historical volatility of publicly traded peer companies and expects to continue to do so until such time as it has adequate historical data regarding the volatility of its own traded stock price. The expected term of the Company’s stock options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is based on the fact that the Company has never paid cash dividends on common stock and does not expect to pay any cash dividends in the foreseeable future. Determining the appropriate fair value of stock-based awards requires the input of subjective assumptions. The assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment. As a result, if factors change and management uses different assumptions, stock-based compensation expense could be materially different for future awards.
Income Taxes
The Company uses the liability method of accounting for income taxes as set forth in ASC 740, Income Taxes. Under the liability method, deferred taxes are determined based on the temporary differences between the financial statement and tax basis of assets and liabilities using tax rates expected to be in effect during the years in which the basis differences reverse. A valuation allowance is recorded when it is unlikely that the deferred tax assets will not be realized. We assess our income tax positions and record tax benefits for all years subject to examination based upon our evaluation of the facts, circumstances and information available at the reporting date. In accordance with ASC 740-10, for those tax positions where there is a greater than 50% likelihood that a tax benefit will be sustained, our policy will be to record the largest amount of tax benefit that is more likely than not to be realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. For those income tax positions where there is less than 50% likelihood that a tax benefit will be sustained, no tax benefit will be recognized in the financial statements.
| F-13 |
MISO ROBOTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Net Loss per Share
Net earnings or loss per share is computed by dividing net income or loss by the weighted-average number of common shares outstanding during the period, excluding shares subject to redemption or forfeiture. The Company presents basic and diluted net earnings or loss per share. Diluted net earnings or loss per share reflect the actual weighted average of common shares issued and outstanding during the period, adjusted for potentially dilutive securities outstanding. Potentially dilutive securities are excluded from the computation of the diluted net loss per share if their inclusion would be anti-dilutive. As all potentially dilutive securities are anti-dilutive as of December 31, 2021 and 2020, diluted net loss per share is the same as basic net loss per share for each year. Potentially dilutive items outstanding as of December 31, 2021 and 2020 are as follows:
| Year Ended | ||||||||
| December 31, | ||||||||
| 2021 | 2020 | |||||||
| Series A Preferred Stock (convertible to common stock) | 5,388,488 | 5,388,488 | ||||||
| Series B Preferred Stock (convertible to common stock) | 6,983,312 | 6,983,312 | ||||||
| Series C Preferred Stock (convertible to common stock) | 10,626,651 | 6,859,076 | ||||||
| Series D Preferred Stock (convertible to common stock) | 2,819,929 | - | ||||||
| Venture debt* | - | 2,021,005 | ||||||
| Common stock warrants | 2,656,829 | 2,574,173 | ||||||
| Options to purchase common stock | 6,625,752 | 4,750,711 | ||||||
| Total potentially dilutive shares | 35,100,961 | 28,576,765 | ||||||
*In 2021, the Company converted its venture debt, after some notes settled in cash, for 196,300 shares of Series C preferred stock.
Recently Adopted Accounting Pronouncements
In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842). This ASU requires a lessee to recognize a right-of-use asset and a lease liability under most operating leases in its balance sheet. The ASU is effective for annual and interim periods beginning after December 15, 2021. Early adoption is permitted. The Company is currently evaluating the impact on its consolidated financial statements.
In August 2020, FASB issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity; Own Equity (“ASU 2020-06”), as part of its overall simplification initiative to reduce costs and complexity of applying accounting standards while maintaining or improving the usefulness of the information provided to users of financial statements. Among other changes, the new guidance removes from GAAP separation models for convertible debt that require the convertible debt to be separated into a debt and equity component, unless the conversion feature is required to be bifurcated and accounted for as a derivative or the debt is issued at a substantial premium. As a result, after adopting the guidance, entities will no longer separately present such embedded conversion features in equity, and will instead account for the convertible debt wholly as debt. The new guidance also requires use of the “if-converted” method when calculating the dilutive impact of convertible debt on earnings per share, which is consistent with the Company’s current accounting treatment under the current guidance. The guidance is effective for financial statements issued for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years, with early adoption permitted, but only at the beginning of the fiscal year. The Company is currently evaluating the impact the adoption of ASU 2020-06 will have on the Company’s consolidated financial statements.
Management does not believe that any other recently issued, but not yet effective, accounting standards could have a material effect on the accompanying consolidated financial statements. As new accounting pronouncements are issued, the Company will adopt those that are applicable under the circumstances.
| 4. | PROPERTY AND EQUIPMENT, NET |
Property and equipment, net consists of the following:
| December 31, | ||||||||
| 2021 | 2020 | |||||||
| Computer equipment and software | $ | 220,876 | $ | 137,914 | ||||
| Kitchen and lab equipment | 120,533 | 120,533 | ||||||
| Furniture and fixtures | 47,260 | 34,962 | ||||||
| Leasehold improvements | 667,534 | 184,536 | ||||||
| 1,056,203 | 477,945 | |||||||
| Less: Accumulated depreciation | (273,200 | ) | (272,785 | ) | ||||
| $ | 783,003 | $ | 205,160 | |||||
| F-14 |
MISO ROBOTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Depreciation and amortization expense of $116,866 and $102,201 for the years ended December 31, 2021 and 2020, respectively, were included in general and administrative expenses in the consolidated statements of operations.
| 5. | ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES |
Accrued expenses and other current liabilities consist of the following:
| December 31, | ||||||||
| 2021 | 2020 | |||||||
| Accrued personnel costs | $ | 34,486 | $ | 129,497 | ||||
| Accrued legal and professional fees | 114,706 | 166,687 | ||||||
| Accrued interest payable | - | 328,830 | ||||||
| Other | 25,000 | - | ||||||
| $ | 174,192 | $ | 625,014 | |||||
| 6. | DEBT |
Venture Debt
In September 2019, the Company issued six senior secured promissory notes (the “2019 Notes”) for an aggregate principal amount of $2,744,667. In 2020, the Company received an additional $889,982 (collectively the “Notes”) in proceeds from three additional notes with the same terms with a maturity date of September 2021. Upon a vote of the majority in principal amount, the Notes are subject to automatic conversion upon an equity financing of common or preferred stock of proceeds of $2,000,000. Upon the future equity financing, the outstanding principal and any unpaid accrued interest shall automatically convert at a conversion price of 80% of the lowest price per share of the equity securities sold in the future equity financing. The noteholders may elect to convert the principal and any unpaid accrued interest at any time into the type of equity securities issued in the Company’s most recently completed equity financing of proceeds of $2,000,000. The noteholders may convert the principal and unpaid accrued interest at a conversion price of 80% of the price per share of the equity securities sold in the completed equity financing. Prepayments are allowed, subject to various provisions, including an initial minimum payment amount of $500,000 and additional increments of $100,000. Upon the occurrence of an event of default, the Notes shall accrue interest at 13% per annum. The Notes are senior to all other debts and obligations of the Company, were collateralized by all assets of the Company. In conjunction with the Notes, the Company incurred fees of $6,703, which were recorded as a discount to the Notes and are amortized under the effective interest method to interest expense over the life of the Notes. During the years ended December 31, 2021 and 2020, $3,219 and $3,219 was amortized to interest expense, respectively.
The Company recognized a beneficial conversion feature with respect to the voluntary conversion rights of the noteholders. The beneficial conversion feature was initially valued at a fair value of $697,749 for the 2019 Notes and $346,463 for the 2020 Notes, and was recorded as a discount to the note payable balance that is being amortized under the effective interest method over the life of the notes.
In April 2021, the Company converted principal of $2,422,148 and accrued interest of $272,658 of venture debt to Series C Preferred Stock at a per share price of $13.728, a 20% discount to the offering per share price of $17.16, into 196,300 shares of Series C Preferred Stock. In March 2021, the Company repaid $1,394,257, comprised of principal of $1,212,500 and accrued interest of $181,757, of venture debt to Rise of Miso, LLC and another investor. In connection with the conversions and repayments, the Company amortized the remaining $670,943 of unamortized debt discount to interest expense for the year ended December 31, 2021.
The Notes bore interest at 10% per annum and incurred interest expense of $125,636 and $258,689 for the years ended December 31, 2021 and 2020, respectively.
In connection with the Notes, the Company also granted to the holders warrants to purchase common stock equal to the principal amount of the Notes divided by the warrant exercise price. As of December 31, 2021 and 2020, there were warrants for an aggregate of 2,539,173 shares of common stock outstanding, which were issued to the noteholders with an exercise price of $1.43 per share, expiring after 10 years. As discussed in Note 8, these warrants were valued at $11,582 for the 2019 Notes and $123,968 for the 2020 Notes, and is recorded as a discount to the note payable balance that are being amortized under the effective interest method over the life of the notes.
| F-15 |
MISO ROBOTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
During the year ended December 31, 2020, $434,173 of the debt discount was amortized to interest expense. As of December 31, 2020, the outstanding principal was $3,634,648 and unamortized discount of $670,943, resulting in a net carrying value of $2,963,705.
PPP Loan
In April 2020, the Company entered into a loan with a lender in an aggregate principal amount of $450,000 pursuant to the Paycheck Protection Program (“PPP”) under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The PPP Loan is evidenced by a promissory note (“ PPP Loan”). Subject to the terms of the Note, the PPP Loan bears interest at a fixed rate of one percent (1%) per annum, with the first six months of interest deferred, has an initial term of two years, and is unsecured and guaranteed by the Small Business Administration. The Company may apply to the Lender for forgiveness of the PPP Loan, with the amount which may be forgiven equal to the sum of payroll costs, covered rent, and covered utility payments incurred by the Company during the applicable forgiveness period, calculated in accordance with the terms of the CARES Act. The Note provides for customary events of default including, among other things, cross-defaults on any other loan with the lender. The PPP Loan may be accelerated upon the occurrence of an event of default. The loan proceeds were used for payroll and other covered payments and in August 2021 received notification of full forgiveness. As such, the Company recorded other income of $450,000 in the consolidated statements of operations.
| 7. | STOCKHOLDERS’ EQUITY (DEFICIT) |
Convertible Preferred Stock
The Company has issued Series A, Series B, Series C and Series D convertible preferred stock (collectively referred to as “Preferred Stock”). As of January 11, 2022, the Company's certificate of incorporation, as amended and restated, authorized the Company to issue a total of 11,684,802 shares of Preferred Stock, of which 769,784 shares were designated as Series A Preferred Stock, 997,616 shares were designated as Series B Preferred Stock, 1,748,252 shares were designated as Series C Preferred Stock, 706,464 shares were designated as Series D Preferred Stock, and 7,462,686 were designated as Series E Preferred Stock. The Preferred Stock have a par value of $0.0001 per share.
In 2020, the Company executed a Regulation A+ offering and issued 972,487 shares of Series C preferred stock at a price of $17.16 per share (“Series C Original Issue Price”) for gross proceeds of $16,687,877, including a subscription receivable of $7,469,164 as of December 31, 2020.
In 2020, the Company issued 7,381 shares of Series C preferred stock for services performed. The fair value of $126,666 was included as sales and marketing expenses in the consolidated statements of operations.
In 2021, the Company completed a Regulation A+ offering and issued 330,562 shares of Series C preferred stock for gross proceeds of $5,963,643. The Company also collected $7,469,164 of subscriptions receivable from 2020.
In 2021, the Company completed a Regulation D offering and issued 11,363 shares of Series C preferred stock for gross proceeds of $194,979.
In 2021, the Company executed Regulation A+ and Regulation D offerings of Series D preferred stock. Under the Regulation A+ offering, the Company issued 385,286 shares for gross proceeds of $24,887,661. Under the Regulation D offering, the Company issued 17,561 shares for gross proceeds of $1,054,730. The Company originally issued the shares at a price of $56.62 per share (“Series D Original Issue Price”), and in October 2021, the Company increased the price in the offering to $67.94 per share. As of December 31, 2021, the Company had a subscription receivable of $1,188,848 pertaining to the Regulation A offering.
In April 2021, the Company converted principal of $2,422,148 and accrued interest of $272,658 of venture debt to Series C Preferred Stock at a per share price of $13.728, a 20% discount to the offering per share price of $17.16, into 196,300 shares of Series C Preferred Stock.
| F-16 |
MISO ROBOTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of both December 31, 2021 and 2020, 769,784 shares of Series A preferred stock were issued and outstanding. As of both December 31, 2021 and 2020, 997,616 shares of Series B preferred stock were issued and outstanding. As of December 31, 2021 and 2020, 1,518,093 and 979,868 shares of Series C preferred stock were issued and outstanding, respectively. As of December 31, 2021 and 2020, 402,847 and 0 shares of Series D preferred stock were issued and outstanding, respectively.
The holders of the Preferred Stock have the following rights and preferences:
Voting
The holders of Preferred Stock are entitled to vote, together with the holders of common stock as a single class, on all matters submitted to stockholders for a vote and have the right to vote the number of shares equal to the number of shares of common stock into which each share of Preferred Stock could convert on the record date for determination of stockholders entitled to vote.
The holders of Series B preferred stock, voting exclusively and as a separate class, are entitled to elect one director of the Company. The holders of Series A preferred stock, voting exclusively and as a separate class, are entitled to elect one director of the Company.
Dividends
The Company shall not declare, pay or set aside any dividends on shares of other classes of capital stock unless the holders of Preferred Stock then outstanding shall first receive, or simultaneously receive, on a pari passu basis, a dividend on each outstanding share of Preferred Stock on an as-converted basis.
Liquidation
In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company or deemed liquidation event, the Series B, Series C, Series D and Series E stockholders, on a pari passu basis, shall be entitled to a liquidation preference equal to the greater of (i) the original issuance price applicable to each series, plus any dividends declared but unpaid, or (ii) such amount per share as would have been payable had all shares of Series B, Series C, Series D, and Series E preferred stock been converted into common stock. Upon this completion, the Series A stockholders will then be entitled to a liquidation preference in the same manner. After the payment of all preferential amounts to preferred stockholders, the remaining assets available for distribution shall be distributed among common stockholders on a pro-rata basis. The liquidation preference per share for Series A, Series B, Series C, Series D and Series E preferred stock are $4.1108, $10.0744, $17.16, $56.62 and $10.05 respectively.
The total liquidation preferences as of December 31, 2021 and 2020 amounted to $62,074,189 and $30,029,051, respectively.
Conversion
Each share of Preferred Stock is convertible into common stock, at the option of the holder, at any time after the date of issuance. In addition, each share of Preferred Stock will be automatically converted into shares of common stock at the applicable conversion ratio then in effect (i) upon the closing of a firm-commitment public offering resulting in at least $100,000,000 of gross proceeds to the Company at a price of at least $21.00 per share of common stock, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization, or (ii) upon the written consent of the holders of a majority of the then-outstanding shares of Preferred Stock, voting together as a single class.
The conversion ratio of each series of Preferred Stock is determined by dividing the original issue price of each series by the conversion price of each series. The conversion price per share is $0.59 for Series A preferred stock, $1.44 for Series B preferred stock, $2.45 for Series C preferred stock and $8.09 for Series D preferred stock, each subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization. Accordingly, as of December 31, 2021 and 2020, each share outstanding of each series of Preferred Stock was convertible into shares of common stock on a one-for-seven basis.
Common Stock
The Company authorized 70,000,000 and 49,000,000 shares of common stock at $0.0001 par value as of December 31, 2021 and 2020, respectively. The Company increased its authorized shares to 80,000,000 in January 2022.
Common stockholders have voting rights of one vote per share and are entitled to elect one director of the Company. The voting, dividend, and liquidation rights of the holders of common stock are subject to and qualified by the rights, powers, and preferences of preferred stockholders.
| F-17 |
MISO ROBOTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
During the year ended December 31, 2021, the Company issued 41,055 shares of common stock pursuant to exercises of stock options for proceeds of $44,917.
As of December 31, 2021 and 2020, there were 12,165,650 and 12,124,595 shares issued and outstanding, respectively.
| 8. | STOCK-BASED PAYMENTS |
Common Stock Warrants
In connection with the Notes (see Note 6), the Company granted to the holders warrants to purchase common stock equal to the principal amount of the Notes divided by the warrant exercise price. As of December 31, 2021 and 2020, warrants for an aggregate of 2,539,173 shares of common stock were issued to the noteholders with an exercise price of $1.43 per share, expiring after 10 years. The fair value of the warrants was calculated under the Black-Scholes method, which was recorded as a discount to the Notes and was recognized under the effective interest method over the life of the Notes.
In 2021, the Company granted 64,036 warrants to purchase common stock with an exercise price of $2.94 per share and 18,620 warrants with an exercise price of $8.09 per share. All warrants vested immediately with a term of 10 years, except for 12,432 warrants issued which will expire after 5 years.
In September 2020, the Company granted 35,000 warrants to purchase common stock for services at an exercise price of $0.78 per share. The fair value of $14,150 was included in general and administrative expenses in the statements of operations.
A summary of information related to warrants for the years ended December 31, 2021 and 2020 is as follows:
| Warrants | Weighted Average Exercise Price | Instrinsic Value | ||||||||||
| Outstanding as of December 31, 2019 | 1,917,433 | $ | 1.43 | $ | - | |||||||
| Granted | 656,740 | 1.40 | ||||||||||
| Exercised | - | - | ||||||||||
| Forfeited | - | - | ||||||||||
| Outstanding as of December 31, 2020 | 2,574,173 | $ | 1.42 | $ | - | |||||||
| Granted | 82,656 | 4.10 | ||||||||||
| Exercised | - | - | ||||||||||
| Forfeited | - | - | ||||||||||
| Outstanding as of December 31, 2021 | 2,656,829 | $ | 1.51 | $ | 1,129,644 | |||||||
| Exerciseable as of December 31, 2021 | 2,656,829 | $ | 1.51 | $ | 1,129,644 | |||||||
The Company recorded stock-based compensation expense of $50,589 and $14,150 for the years ended December 31, 2021 and 2020, respectively.
The following table presents, on a weighted average basis, the assumptions used in the Black-Scholes option-pricing model to determine the grant-date fair value of warrants granted:
| Year Ended | ||||||||
| December 31, | ||||||||
| 2021 | 2020 | |||||||
| Risk-free interest rate | 0.39% - 1.16 | % | 0.14% - 0.47 | % | ||||
| Expected term (in years) | 4.62 | 4.95 | ||||||
| Expected volatility | 70.00 | % | 72.70 | % | ||||
| Expected dividend yield | 0 | % | 0 | % | ||||
| F-18 |
MISO ROBOTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Super Volcano, Inc. 2016 Stock Plan
The Company has adopted the Super Volcano, Inc. 2016 Stock Plan (“2016 Plan”), as amended and restated, which provides for the grant of shares of stock options and restricted stock awards to employees, non-employee directors, and non-employee consultants. The number of shares authorized by the 2016 Plan was 3,264,842 shares as of December 31, 2021. The option exercise price generally may not be less than the underlying stock’s fair market value at the date of the grant and generally have a term of ten years. The amounts granted each calendar year to an employee or non-employee is limited depending on the type of award. Stock options comprise all of the awards granted since the 2016 Plan’s inception. As of December 31, 2021, there were 35,000 shares available for grant under the 2016 Plan. Stock options granted under the 2016 Plan typically vest over a four-year period.
Miso Robotics, Inc. 2017 Stock Plan
The Company has adopted the Miso Robotics, Inc. 2017 Stock Plan (“2017 Plan”), as amended and restated, which provides for the grant of shares of stock options and restricted stock awards to employees, non-employee directors, and non-employee consultants. The number of shares authorized by the 2017 Plan was 6,550,936 shares as of December 31, 2021. The option exercise price generally may not be less than the underlying stock’s fair market value at the date of the grant and generally have a term of ten years. The amounts granted each calendar year to an employee or non-employee is limited depending on the type of award. Stock options and restricted common stock comprise all of the awards granted since the 2017 Plan’s inception. As of December 31, 2021, there were 935,046 shares available for grant under the 2017 Plan. Stock options granted under the 2017 Plan typically vest over a four-year period.
A summary of information related to stock options for the years ended December 31, 2021 and 2020 is as follows:
| Options | Weighted Average Exercise Price | Instrinsic Value | ||||||||||
| Outstanding as of December 31, 2019 | 2,936,990 | $ | 0.76 | $ | - | |||||||
| Granted | 1,897,287 | 0.85 | ||||||||||
| Exercised | - | - | ||||||||||
| Forfeited | (83,566 | ) | 1.43 | |||||||||
| Outstanding as of December 31, 2020 | 4,750,711 | $ | 0.79 | $ | 659,781 | |||||||
| Granted | 2,436,581 | 1.07 | ||||||||||
| Exercised | (41,055 | ) | 1.09 | |||||||||
| Forfeited | (520,485 | ) | 1.35 | |||||||||
| Outstanding as of December 31, 2021 | 6,625,752 | $ | 0.85 | $ | 6,716,453 | |||||||
| Exerciseable as of December 31, 2021 | 3,308,269 | $ | 0.69 | $ | 3,881,139 | |||||||
| December 31, | ||||||||
| 2021 | 2020 | |||||||
| Weighted average grant-date fair value of options granted during year | $ | 0.71 | $ | 0.48 | ||||
| Weighted average duration (years) to expiration of outstanding options at year-end | 7.78 | 7.82 | ||||||
The following table presents, on a weighted average basis, the assumptions used in the Black-Scholes option-pricing model to determine the grant-date fair value of stock options granted to employees and directors:
| Year Ended | ||||||||
| December 31, | ||||||||
| 2021 | 2020 | |||||||
| Risk-free interest rate | 0.86%-1.32 | % | 0.53 | % | ||||
| Expected term (in years) | 5.0 - 7.0 | 6.08 | ||||||
| Expected volatility | 70.00 | % | 66.90 | % | ||||
| Expected dividend yield | 0 | % | 0 | % | ||||
| F-19 |
MISO ROBOTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The total grant-date fair value of the options granted during the years ended December 31, 2021 and 2020 was $1,723,442 and $907,828, respectively. Stock-based compensation expense for stock options of $490,791 and $305,352 was recognized under FASB ASC 718 for the years ended December 31, 2021 and 2020, respectively. Total unrecognized compensation cost related to non-vested stock option awards amounted to $2,114,117 and $955,768 as of December 31, 2021 and 2020, respectively, and will be recognized over a weighted average period of 31 months as of December 31, 2021.
Restricted Common Stock
As of December 31, 2021 and 2020, the Company had 2,164,015 restricted shares of common stock under the 2017 Plan outstanding, respectively. As of December 31, 2021 and 2020, 2,000,077 and 1,862,819 shares were vested, respectively. The Company recorded stock-based compensation expense of $38,275 and $136,373 in the statements of operations for the years ended December 31, 2021 and 2020, respectively. Total unrecognized compensation cost related to non-vested restricted common stock amounted to $11,988 and $32,466 as of December 31, 2021 and 2020, respectively, which is expected to be recognized in 2022.
Classification
Stock-based compensation expense was classified in the statements of operations as follows:
| Year Ended | ||||||||
| December 31, | ||||||||
| 2021 | 2020 | |||||||
| Research and development expenses | $ | 397,248 | $ | 76,279 | ||||
| General and administrative expenses | 182,407 | 379,596 | ||||||
| $ | 579,655 | $ | 455,875 | |||||
| 9. | INCOME TAXES |
Deferred taxes are recognized for temporary differences between the basis of assets and liabilities for financial statements and income tax purposes. The differences relate primarily to depreciable assets using accelerated depreciation methods for income tax purposes, stock-based compensation expense, research and development, other GAAP to tax differences, and net operating loss carryforwards. As of December 31, 2021 and 2020, the Company had net deferred tax assets before valuation allowance of $10,124,807 and $7,037,417, respectively. The following table presents the deferred tax assets and liabilities by source:
| December 31, | ||||||||
| 2021 | 2020 | |||||||
| Deferred tax assets (liabilities): | ||||||||
| Net operating loss carryforwards | $ | 9,431,263 | $ | 6,488,551 | ||||
| Stock-based compensation | 16,017 | 16,017 | ||||||
| Research and development tax credit carryforwards | 717,012 | 342,485 | ||||||
| Depreciation timing difference | (39,485 | ) | 98,449 | |||||
| Accrued interest | - | 91,915 | ||||||
| Valuation allowance | (10,124,807 | ) | (7,037,417 | ) | ||||
| Net deferred tax assets (liabilities) | $ | - | $ | - | ||||
The Company recognizes deferred tax assets to the extent that it believes that these assets are more likely than not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. The Company assessed the need for a valuation allowance against its net deferred tax assets and determined a full valuation allowance is required due to taxable losses for the years ended December 31, 2021 and 2020, cumulative losses through December 31, 2021, and no history of generating taxable income. Therefore, valuation allowances of $10,124,807 and $7,037,417 were recorded as of December 31, 2021 and 2020, respectively. Valuation allowance increased by $3,087,390 and $2,863,710 during the years ended December 31, 2021 and 2020, respectively. Deferred tax assets were calculated using the Company’s combined effective tax rate, which it estimated to be 28.0%. The effective rate is reduced to 0% for 2021 and 2020 due to the full valuation allowance on its net deferred tax assets.
| F-20 |
MISO ROBOTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company’s ability to utilize net operating loss carryforwards will depend on its ability to generate adequate future taxable income. At December 31, 2021 and 2020, the Company had net operating loss carryforwards available to offset future taxable income in the amounts of $33,740,922 and $23,213,191, respectively.
The Company has evaluated its income tax positions and has determined that it does not have any uncertain tax positions. The Company will recognize interest and penalties related to any uncertain tax positions through its income tax expense.
The Company may in the future become subject to federal, state and local income taxation though it has not been since its inception, other than minimum state tax. The Company is not presently subject to any income tax audit in any taxing jurisdiction, though its 2018-2021 tax years remain open to examination.
| 10. | RELATED PARTY TRANSACTIONS |
Of the notes discussed in Note 6, in September 2019, the Company issued a promissory note to Future VC SPV, LLC, an entity with common management for a principal amount of $782,167. In conjunction with the note, the Company granted warrants to purchase 546,427 shares of common stock to the entity. In 2020, the Company issued additional notes to this entity for proceeds of $889,982 and grants warrants to purchase 621,747 shares of common stock. In April 2021, the Company converted these notes, and accrued interest, into shares of Series C Preferred Stock at a per share price of $13.728, a 20% discount to the offering per share price of $17.16.
During the year ended December 31, 2021, the Company incurred $465,841 in expenses with Wavemaker Labs, an entity with common management, for consulting services rendered, which are recorded to general and administrative expenses and sales and marketing expenses in the statement of operations in the amounts of $277,541 and $188,300, respectively. As of December 31, 2021, the Company had accounts payable of $29,265 with Wavemaker Labs.
As of December 31, 2020, the Company had accounts payable of $128,716 to an entity with common management.
| 11. | COMMITMENTS AND CONTINGENCIES |
Lease Agreements
In August 2017, the Company entered into an operating lease to sublease office space. The lease term commenced on December 1, 2017 and expires on May 31, 2023. The lease agreement requires base rent payments of $9,000 per month with annual escalations of approximately 3%. The lease required a security deposit of $150,000.
In May 2018, the Company entered into an operating lease for office and lab space. The lease term commenced on June 1, 2018 and expired on May 31, 2020. The lease agreement required monthly base rent payments of $15,075 through May 31, 2019 and $15,527 for the year thereafter, plus operating costs estimated at $950 per month. The lease required a security deposit of $31,055 and advance rent payment of $46,581, which were returned in 2020.
In June 2018, the Company entered into an operating lease to lease kitchen facilities. The lease term commenced on June 1, 2018, expired on May 31, 2020, and was renewed for an additional two-year term to May 31, 2022. The lease agreement required monthly base rent payments of $4,000 through May 31, 2019 and $4,120 - $4,371 for the years thereafter, plus operating costs of $500 per month.
In November 2021, the Company entered into an operating lease for office space. The lease term commenced on November 1, 2021 and expires on October 31, 2026 with an option to extended for an additional sixty month period. The lease agreement requires base rent payments of $21,250 per month with annual escalations of approximately 3%, plus $1,803 in common area charges per month. The lease required a security deposit of $23,917, which is refundable at the end of the lease term.
Rent expense for the years ended December 31, 2021 and 2020 was $275,554 and $256,424, respectively.
Future minimum lease commitments under operating and capital leases as of December 31, 2021 are as follows:
| Year Ending December 31, | ||||
| 2022 | $ | 398,209 | ||
| 2023 | 314,611 | |||
| 2024 | 271,882 | |||
| 2025 and thereafter | 519,209 | |||
| Total | $ | 1,503,911 | ||
Contingencies
The Company may be subject to pending legal proceedings and regulatory actions in the ordinary course of business. The results of such proceedings cannot be predicted with certainty, but the Company does not anticipate that the final outcome, if any, arising out of any such matters will have a material adverse effect on its business, financial condition or results of operations.
| F-21 |
MISO ROBOTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| 12. | SUBSEQUENT EVENTS |
On January 11, 2022, the Company amended its Certificate of Incorporation and effected a 7-for-1 forward stock split of its authorized, designated, issued and outstanding shares of common stock. Accordingly, all share and per share amounts of the Company for all periods presented in the accompanying consolidated financial statements and notes thereto have been adjusted retroactively, where applicable, to reflect this stock split. The Series A – D preferred stock conversion prices were proportionally adjusted as a result of the stock split. Furthermore, the Company increased its authorized shares of common and preferred stock to 80,000,000 shares and 11,684,802 shares, respectively, including 7,462,686 shares designated as Series E preferred stock.
In January 2022, the Company increased its stock option reserves under the Miso Robotics, Inc. 2017 Stock Plan by 1,517,838 shares, bringing the total number of shares reserved under the Plan to 8,068,774.
In January 2022, the Company entered into a convertible note receivable agreement with Ally Robotics, Inc. for a principal amount of $1,000,000. The note earns interest at 5% per annum and matures on the earlier of a) January 7, 2024 or b) at the closing of the next equity financing, at the Company’s election. The conversion price is a 20% discount to the lowest share pricing in the triggering equity financing. This note is senior to all other unsecured debts of the Ally Robotics.
Through the issuance date, the Company has received approximately $1,280,000 in proceeds from the issuance of Series D preferred stock.
In February 2022, the Company initiated a Regulation A+ offering for the issuance of Series E preferred stock. Through the issuance date, the Company has accumulated gross proceeds of $6,696,968, equivalent to 666,365 shares subscribed from the offering.
In January 2022, the Company entered into an operating lease for office space located in Pasadena, California. The lease term commences on April 1, 2022 and expires on April 30, 2028, with an option to extend for an additional sixty month period. The lease agreement requires base rent payments of $48,365 per month starting on the lease commencement date and $93,475 per month starting on January 1, 2023, which includes the monthly base rent for the must-take space, with annual escalations of approximately 3%, plus approximately a 21% share of the premise real estate taxes and operating costs. The lease requires a letter of credit for $1,753,036. The lease includes an improvement allowance of $754,470.
Management has evaluated subsequent events through June 16, 2022, the date the consolidated financial statements were available to be issued. Based on this evaluation, no additional material events were identified which require adjustment or disclosure in these consolidated financial statements.
| F-22 |