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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ________

Commission File Number: 001-41610

 

INTERACTIVE STRENGTH INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

82-1432916

( State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

1005 Congress Ave, Suite 925

Austin , Texas

78701

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (310) 697-8655

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common stock, $0.0001 par value per share

 

TRNR

 

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No ☒

APPLICABLE ONLY TO CORPORATE ISSUERS:

As of November 10, 2023, the registrant had 14,313,185 shares of common stock, $0.0001 par value per share, outstanding.

 

 


 

TABLE OF CONTENTS

 

Risk Factor Summary

 

 

 

Part I. Financial Information

 

 

 

Item 1 Financial Statements

1

 

 

Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations

26

 

 

Item 3 Quantitative and Qualitative Disclosures About Market Risk

48

 

 

Item 4 Controls and Procedures

48

 

 

Part II. Other Information

 

 

 

Item 1 Legal Proceedings

50

 

 

Item 1A Risk Factors

50

 

 

Item 5 Other Information

62

 

 

Item 6 Exhibits

63

 

i


 

Item 1. Financial Statements

INTERACTIVE STRENGTH INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

(In thousands, except share and per share amounts)

 

 

 

September 30,

 

 

December 31,

 

 

2023

 

 

2022

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

30

 

 

$

226

 

Accounts receivable, net of allowances

 

 

7

 

 

 

 

Inventories, net

 

 

1,443

 

 

 

4,567

 

Vendor deposits

 

 

3,280

 

 

 

3,603

 

Prepaid expenses and other current assets

 

 

962

 

 

 

1,426

 

Total current assets

 

 

5,722

 

 

 

9,822

 

Property and equipment, net

 

 

583

 

 

 

1,326

 

Right-of-use-assets

 

 

296

 

 

 

110

 

Intangible assets, net

 

 

2,866

 

 

 

3,834

 

Long-term inventories, net

 

 

3,121

 

 

 

 

Deferred offering costs

 

 

 

 

 

2,337

 

Other assets

 

 

5,683

 

 

 

7,018

 

Total Assets

 

$

18,271

 

 

$

24,447

 

Liabilities and stockholders' equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

8,921

 

 

$

7,743

 

Accrued expenses and other current liabilities

 

 

1,951

 

 

 

5,304

 

Operating lease liability, current portion

 

 

53

 

 

 

106

 

Deferred revenue

 

 

66

 

 

 

29

 

Loan payable

 

 

6,266

 

 

 

6,708

 

Senior secured notes

 

 

1,038

 

 

 

 

Income tax payable

 

 

7

 

 

 

7

 

Convertible note payable

 

 

 

 

 

4,270

 

Total current liabilities

 

 

18,302

 

 

 

24,167

 

Operating lease liability, net of current portion

 

 

243

 

 

 

9

 

Warrant liabilities

 

 

 

 

 

3,004

 

Total liabilities

 

$

18,545

 

 

$

27,180

 

Commitments and contingencies (Note 13)

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

 

Common stock, par value $0.0001; 900,000,000 and 369,950,000 shares authorized as of September 30, 2023 and December 31, 2022, respectively; 14,178,514 and 2,450,922 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively.

 

 

7

 

 

 

4

 

Additional paid-in capital

 

 

154,942

 

 

 

112,436

 

Accumulated other comprehensive income

 

 

286

 

 

 

365

 

Accumulated deficit

 

 

(155,509

)

 

 

(115,538

)

Total stockholders' equity (deficit)

 

 

(274

)

 

 

(2,733

)

Total liabilities and stockholders' equity (deficit)

 

$

18,271

 

 

$

24,447

 

 

 

1


 

INTERACTIVE STRENGTH INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(unaudited)

(In thousands, except share and per share amounts)

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Fitness product revenue

 

$

206

 

 

$

144

 

 

$

502

 

 

$

402

 

Membership revenue

 

 

38

 

 

 

25

 

 

 

94

 

 

 

53

 

Training revenue

 

 

62

 

 

 

32

 

 

 

183

 

 

 

32

 

Total revenue

 

 

306

 

 

 

201

 

 

 

779

 

 

 

487

 

Cost of revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Cost of fitness product revenue

 

 

(360

)

 

 

(764

)

 

 

(1,529

)

 

 

(2,047

)

Cost of membership

 

 

(960

)

 

 

(1,545

)

 

 

(2,861

)

 

 

(3,537

)

Cost of training

 

 

(109

)

 

 

(387

)

 

 

(300

)

 

 

(1,077

)

Total cost of revenue

 

 

(1,429

)

 

 

(2,696

)

 

 

(4,690

)

 

 

(6,661

)

Gross loss

 

 

(1,123

)

 

 

(2,495

)

 

 

(3,911

)

 

 

(6,174

)

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

2,357

 

 

 

4,854

 

 

 

7,796

 

 

 

15,284

 

Sales and marketing

 

 

282

 

 

 

1,193

 

 

 

1,473

 

 

 

5,194

 

General and administrative

 

 

6,313

 

 

 

6,131

 

 

 

30,043

 

 

 

11,774

 

Total operating expenses

 

 

8,952

 

 

 

12,178

 

 

 

39,312

 

 

 

32,252

 

Loss from operations

 

 

(10,075

)

 

 

(14,673

)

 

 

(43,223

)

 

 

(38,426

)

Other income (expense), net:

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense), net

 

 

(179

)

 

 

(417

)

 

 

25

 

 

 

(740

)

Interest (expense)

 

 

(154

)

 

 

(187

)

 

 

(1,382

)

 

 

(748

)

Gain upon debt forgiveness

 

 

 

 

 

523

 

 

 

2,595

 

 

 

523

 

Change in fair value of convertible notes

 

 

 

 

 

 

 

 

(252

)

 

 

(24

)

Change in fair value of warrants

 

 

 

 

 

 

 

 

2,266

 

 

 

 

Total other income (expense), net

 

 

(333

)

 

 

(81

)

 

 

3,252

 

 

 

(989

)

Loss before provision for income taxes

 

 

(10,408

)

 

 

(14,754

)

 

 

(39,971

)

 

 

(39,415

)

Income tax expense

 

 

 

 

 

 

 

 

 

 

 

 

Net loss attributable to common stockholders

 

$

(10,408

)

 

$

(14,754

)

 

$

(39,971

)

 

$

(39,415

)

Net loss per share - basic and diluted

 

$

(0.73

)

 

$

(30.16

)

 

$

(3.40

)

 

$

(93.10

)

Weighted average common stock outstanding—basic and diluted

 

 

14,186,222

 

 

 

489,132

 

 

 

11,750,907

 

 

 

423,362

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Net loss

 

$

(10,408

)

 

$

(14,754

)

 

$

(39,971

)

 

$

(39,415

)

Other comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation (loss) gain

 

 

172

 

 

 

441

 

 

 

(79

)

 

 

931

 

Total comprehensive loss

 

$

(10,236

)

 

$

(14,313

)

 

$

(40,050

)

 

$

(38,484

)

 

 

2


 

INTERACTIVE STRENGTH INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

(unaudited)

(In thousands, except share amounts)

 

 

Series Seed
 0 - 10

 

Convertible Preferred Stock Series A

 

Series A-1

 

Series A-2

 

 

 

Common Stock

 

Class A Common Stock

 

Class B Common Stock

 

Additional Paid-In Capital

 

Accumulated Other Comprehensive (Income) Loss

 

Accumulated Deficit

 

Total Stockholders' Equity (Deficit)

 

Shares

 

Amount

 

Shares

 

Amount

 

Shares

 

Amount

 

Shares

 

Amount

 

Shares

 

Amount

 

Shares

 

Amount

 

Shares

 

Amount

 

 

 

 

 

 

 

 

 

Balances at December 31, 2021

 

42,999

 

$

7,594

 

 

86,703

 

$

19,535

 

 

10,208

 

$

2,604

 

 

 

$

 

 

 

$

 

 

181,362

 

$

3

 

 

31,703

 

$

 

$

37,806

 

$

(159

)

$

(57,313

)

$

(19,663

)

Issuance of Class A common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

267,384

 

 

3

 

 

 

 

 

 

2,060

 

 

 

 

 

 

2,063

 

Issuance of Series A-2 preferred stock upon conversion of convertible notes

 

 

 

 

 

 

 

 

 

 

 

 

 

124,313

 

 

5,926

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of Series A-2 preferred stock, net of issuance costs of $66

 

 

 

 

 

 

 

 

 

 

 

 

 

631,292

 

 

30,028

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of Class B common stock upon exercise of stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

501

 

 

 

 

8

 

 

 

 

 

 

8

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

97

 

 

 

 

 

 

97

 

Foreign currency translation gain

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

167

 

 

 

 

167

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(12,691

)

 

(12,691

)

Balances at March 31, 2022

 

42,999

 

$

7,594

 

 

86,703

 

$

19,535

 

 

10,208

 

$

2,604

 

 

755,605

 

$

35,954

 

 

 

$

 

 

448,746

 

$

6

 

 

32,204

 

$

 

$

39,971

 

$

8

 

$

(70,004

)

$

(30,019

)

Issuance of Series A-2 preferred stock, net of issuance costs of $27

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(27

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of Class B common stock upon exercise of stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2

 

 

 

 

 

 

2

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

100

 

 

 

 

 

 

100

 

Foreign currency translation gain

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

323

 

 

 

 

323

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(11,970

)

 

(11,970

)

Balances at June 30, 2022

 

42,999

 

 

7,594

 

 

86,703

 

 

19,535

 

 

10,208

 

 

2,604

 

 

755,605

 

 

35,927

 

 

 

 

 

 

448,746

 

 

6

 

 

32,204

 

 

 

 

40,073

 

 

331

 

 

(81,974

)

 

(41,564

)

Issuance of Class A common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8

 

 

(3

)

 

 

 

 

 

 

 

 

 

 

 

(3

)

Issuance of Series A-2 preferred stock, net of issuance costs of $4

 

 

 

 

 

 

 

 

 

 

 

 

 

1

 

 

(4

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of Class B common stock upon exercise of stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

57