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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 March 31, 2024

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: (512) 885-0035

 

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 May 16, 2024, the registrant had 19,855,863 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 and Business Section

39

 

 

Item 3 Quantitative and Qualitative Disclosures About Market Risk

94

 

 

Item 4 Controls and Procedures

94

 

 

Part II. Other Information

 

 

 

Item 1 Legal Proceedings

96

 

 

Item 1A Risk Factors

96

 

 

Item 5 Other Information

96

 

 

Item 6 Exhibits

97

 

i


 

Item 1. Financial Statements

INTERACTIVE STRENGTH INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

(In thousands, except share and per share amounts)

 

 

March 31,

 

 

December 31,

 

 

2024

 

 

2023

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

 

 

$

 

Accounts receivable, net of allowances

 

 

177

 

 

 

1

 

Inventories, net

 

 

6,074

 

 

 

2,607

 

Vendor deposits

 

 

1,830

 

 

 

1,815

 

Prepaid expenses and other current assets

 

 

798

 

 

 

933

 

Total current assets

 

 

8,879

 

 

 

5,356

 

Property and equipment, net

 

 

392

 

 

 

444

 

Right-of-use-assets

 

 

641

 

 

 

283

 

Intangible assets, net

 

 

8,488

 

 

 

2,254

 

Long-term inventories, net

 

 

2,897

 

 

 

2,908

 

Vendor deposits long term

 

 

310

 

 

 

309

 

Goodwill

 

 

13,231

 

 

 

 

Other assets

 

 

4,726

 

 

 

5,248

 

Total Assets

 

$

39,564

 

 

$

16,802

 

Liabilities, preferred stock and stockholders' deficit

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

13,251

 

 

$

10,562

 

Accrued expenses and other current liabilities

 

 

5,647

 

 

 

906

 

Operating lease liability, current portion

 

 

322

 

 

 

54

 

Deferred revenue

 

 

192

 

 

 

77

 

Loan payable

 

 

14,745

 

 

 

5,806

 

Senior secured notes

 

 

 

 

 

3,096

 

Income tax payable

 

 

7

 

 

 

7

 

Embedded derivatives

 

 

68

 

 

 

122

 

Convertible note payable

 

 

4,301

 

 

 

904

 

Total current liabilities

 

 

38,533

 

 

 

21,534

 

Operating lease liability, net of current portion

 

 

348

 

 

 

229

 

Warrant liabilities

 

 

937

 

 

 

591

 

Total liabilities

 

$

39,818

 

 

$

22,354

 

Commitments and contingencies (Note 13)

 

 

 

 

 

 

Series B preferred stock, par value $0.0001; 1,500,000 and 0 shares authorized as of March 31, 2024 and December 31, 2023, respectively; 1,500,000 and 0 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively.

 

 

2,688

 

 

 

 

Stockholders' deficit

 

 

 

 

 

 

Series A preferred stock, par value $0.0001; 5,000,000 and 0 shares authorized as of March 31, 2024 and December 31, 2023, respectively; 4,930,895 and 0 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively.

 

 

1

 

 

 

 

Series A Preferred Stock subscription receivable, 1,500,000 shares

 

 

(3,000

)

 

 

 

Common stock, par value $0.0001; 900,000,000 shares authorized as of March 31, 2024 and December 31, 2023, respectively; 19,433,801 and 14,192,083 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively.

 

 

7

 

 

 

7

 

Additional paid-in capital

 

 

178,216

 

 

 

161,252

 

Accumulated other comprehensive income

 

 

139

 

 

 

100

 

Accumulated deficit

 

 

(178,305

)

 

 

(166,911

)

Total stockholders' deficit

 

 

(2,942

)

 

 

(5,552

)

Total liabilities, preferred stock and stockholders' deficit

 

$

39,564

 

 

$

16,802

 

 

 

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 March 31,

 

 

2024

 

 

2023

 

Revenue:

 

 

 

 

 

 

Fitness product revenue

 

$

53

 

 

$

72

 

Membership revenue

 

 

155

 

 

 

24

 

Training revenue

 

 

155

 

 

 

61

 

Total revenue

 

 

363

 

 

 

157

 

Cost of revenue:

 

 

 

 

 

 

Cost of fitness product revenue

 

 

(379

)

 

 

(743

)

Cost of membership

 

 

(1,019

)

 

 

(962

)

Cost of training

 

 

(165

)

 

 

(103

)

Total cost of revenue

 

 

(1,563

)

 

 

(1,808

)

Gross loss

 

 

(1,200

)

 

 

(1,651

)

Operating expenses:

 

 

 

 

 

 

Research and development

 

 

2,023

 

 

 

3,113

 

Sales and marketing

 

 

256

 

 

 

600

 

General and administrative

 

 

5,962

 

 

 

15,847

 

Total operating expenses

 

 

8,241

 

 

 

19,560

 

Loss from operations

 

 

(9,441

)

 

 

(21,211

)

Other income (expense), net:

 

 

 

 

 

 

Other (expense) income, net

 

 

(370

)

 

 

117

 

Interest (expense) income

 

 

(2,000

)

 

 

208

 

Gain upon debt forgiveness

 

 

 

 

 

2,595

 

Loss upon extinguishment of debt and accounts payable

 

 

(1,066

)

 

 

 

Change in fair value of convertible notes

 

 

(316

)

 

 

(80

)

Change in fair value of warrants

 

 

1,799

 

 

 

2,410

 

Total other income (expense), net

 

 

(1,953

)

 

 

5,250

 

Loss before provision for income taxes

 

 

(11,394

)

 

 

(15,961

)

Income tax expense

 

 

 

 

 

 

Net loss attributable to common stockholders

 

$

(11,394

)

 

$

(15,961

)

Net loss per share - basic and diluted

 

$

(0.67

)

 

$

(2.09

)

Weighted average common stock outstanding—basic and diluted

 

 

16,994,445

 

 

 

7,653,940

 

 

 

 

Three Months Ended March 31,

 

 

2024

 

 

2023

 

Net loss

 

$

(11,394

)

 

$

(15,961

)

Other comprehensive loss:

 

 

 

 

 

 

Foreign currency translation gain (loss)

 

 

39

 

 

 

(115

)

Total comprehensive loss

 

$

(11,355

)

 

$

(16,076

)

 

 

2


 

INTERACTIVE STRENGTH INC. AND SUBSIDIARIES

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

(unaudited)

(In thousands, except share amounts)

 

 

 

Convertible Preferred Stock Series B

 

Convertible Preferred Stock Series A

 

Common Stock

 

Class A Common Stock

 

Class B Common Stock

 

Subscription Receivable Preferred Stock Series A

 

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

 

 

 

 

 

 

 

 

 

 

 

Balances at December 31, 2022

 

 

$

 

 

 

$

 

 

 

$

 

 

2,416,698

 

 

4

 

 

34,224

 

$

 

 

 

 

112,436

 

 

365

 

 

(115,538

)

 

(2,733

)

Issuance of Common stock

 

 

 

 

 

 

 

 

 

8,676,924

 

 

3

 

 

 

 

 

 

 

 

 

 

 

 

4,449

 

 

 

 

 

 

4,452

 

Issuance of Common stock upon conversion of Class A Common Stock

 

 

 

 

 

 

 

 

 

2,416,698

 

 

4

 

 

(2,416,698

)

 

(4

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of Class B common stock upon exercise of stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

646,433

 

 

 

 

 

 

14

 

 

 

 

 

 

14

 

Issuance of Common stock upon conversion of Class B Common Stock

 

 

 

 

 

 

 

 

 

680,657

 

 

 

 

 

 

 

 

(680,657

)

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

15,057

 

 

 

 

 

 

15,057

 

Net exercise of options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

323

 

 

 

 

 

 

323

 

Foreign currency translation loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(115

)

 

 

 

(115

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(15,961

)

 

(15,961

)

Balances at March 31, 2023

 

 

$

 

 

 

$

 

 

11,774,279

 

$

7

 

 

 

$

 

 

 

$

 

$

 

$

132,279

 

$

250

 

$

(131,499

)

$

1,037

 

 

 

 

 

 

 

 

Convertible Preferred Stock Series B

 

Convertible Preferred Stock Series A

 

Common Stock

 

Class A Common Stock

 

Class B Common Stock

 

Subscription Receivable Preferred Stock Series A

 

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

 

 

 

 

 

 

 

 

 

 

 

Balances at December 31, 2023

 

 

$

 

 

 

 

 

 

14,192,083

 

 

7

 

 

 

 

 

 

 

 

 

 

 

 

161,252

 

 

100

 

 

(166,911

)

 

(5,552

)

Issuance of preferred stock Series A upon conversion of debt

 

 

 

 

 

3,430,895

 

 

1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10,082

 

 

 

 

 

 

10,082

 

Subscription receivable for issuance of Series A preferred stock

 

 

 

 

 

1,500,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,000

)

 

 

 

 

 

 

 

(3,000

)

Issuance of preferred stock series B upon acquisition of CLMBR, Inc.

 

1,500,000

 

 

2,688

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock upon acquisition of CLMBR, Inc.

 

 

 

 

 

 

 

 

 

1,428,922

 

 

0

 

 

 

 

 

 

 

 

 

 

 

 

1,014

 

 

 

 

 

 

1,014

 

Issuance of Common stock upon waiver to enter into Note Agreement

 

 

 

 

 

 

 

 

 

250,000

 

 

0

 

 

 

 

 

 

 

 

 

 

 

 

177

 

 

 

 

 

 

177

 

Issuance of shares upon issuance of convertible notes

 

 

 

 

 

 

 

 

 

750,000

 

 

0

 

 

 

 

 

 

 

 

 

 

 

 

547

 

 

 

 

 

 

547

 

Issuance of Common stock from equity line of credit

 

 

 

 

 

 

 

 

 

1,311,081

 

 

0

 

 

 

 

 

 

 

 

 

 

 

 

692

 

 

 

 

 

 

692

 

Issuance of Common stock upon conversion of convertible notes

 

 

 

 

 

 

 

 

 

1,485,943

 

 

0

 

 

 

 

 

 

 

 

 

 

 

 

866

 

 

 

 

 

 

866

 

Issuance of Common stock upon exercise of stock options

 

 

 

 

 

 

 

 

 

15,772

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,586

 

 

 

 

 

 

3,586

 

Foreign currency translation loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

39

 

 

 

 

39

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(11,394

)

 

(11,394

)

Balances at March 31, 2024

 

1,500,000

 

$

2,688

 

 

4,930,895

 

$

1

 

 

19,433,801

 

$

7

 

 

 

$

 

 

 

$

 

$

(3,000

)

$

178,216

 

$

139

 

$

(178,305

)

$

(2,942

)

 

3


 

INTERACTIVE STRENGTH INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(unaudited)

(In thousands)

 

Three Months Ended March 31,

 

 

2024

 

 

2023

 

Cash Flows From Operating Activities:

 

 

 

 

 

 

Net loss

 

$

(11,394

)

 

$

(15,961

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

Foreign currency

 

 

(49

)

 

 

106

 

Depreciation

 

 

191

 

 

 

276

 

Amortization

 

 

1,697

 

 

 

1,323

 

Non-cash lease expense

 

 

54

 

 

 

27

 

Inventory valuation loss

 

 

 

 

 

73

 

Stock-based compensation

 

 

3,366

 

 

 

14,639

 

Loss on extinguishment of debt and accounts payable

 

 

1,066

 

 

 

 

Gain upon debt forgiveness

 

 

 

 

 

(2,595

)

Interest expense (income)

 

 

671

 

 

 

(208

)

Amortization of debt discount

 

 

1,329

 

 

 

 

Common stock issued to lender in connection with entering Equity Line of Credit Agreement

 

 

368

 

 

 

 

Change in fair value of convertible notes

 

 

316

 

 

 

80

 

Warrants issued to service providers and warrant issuance expense

 

 

345

 

 

 

 

Change in fair value of derivatives

 

 

(54

)

 

 

 

Change in fair value of warrants

 

 

(1,799

)

 

 

(2,410

)

Changes in operating assets and liabilities

 

 

 

 

 

 

Accounts receivable

 

 

(42

)

 

 

(11

)

Inventories

 

 

(130

)

 

 

(21

)

Prepaid expenses and other current assets

 

 

198

 

 

 

150

 

Vendor deposits

 

 

46

 

 

 

116

 

Other assets

 

 

5

 

 

 

19

 

Accounts payable

 

 

123

 

 

 

257

 

Accrued expenses and other current liabilities

 

 

936

 

 

 

(572

)

Deferred revenue

 

 

(146

)

 

 

6

 

Operating lease liabilities

 

 

(56

)

 

 

(32

)

Net cash used in operating activities

 

 

(2,959

)

 

 

(4,738

)

Cash Flows From Investing Activities:

 

 

 

 

 

 

Acquisition of business, cash paid, net of cash acquired

 

 

(1,447

)

 

 

 

Acquisition of software and content

 

 

(263

)

 

 

(416

)

Net cash used in investing activities

 

 

(1,710

)

 

 

(416

)

Cash Flows From Financing Activities:

 

 

 

 

 

 

Payments of related party loans

 

 

(240

)

 

 

(96

)

Proceeds from senior secured notes

 

 

 

 

 

2,000

 

Redemption on convertible notes

 

 

(90

)

 

 

 

Payment of loans

 

 

(135

)

 

 

 

Proceeds from issuance of convertible notes, net of issuance costs

 

 

4,756

 

 

 

 

Proceeds from the issuance of common stock A

 

 

 

 

 

4,247

 

Proceeds from the exercise of common stock options

 

 

 

 

 

30

 

Proceeds from the issuance of common stock from equity line of credit

 

 

324

 

 

 

 

Net cash provided by financing activities

 

 

4,615

 

 

 

6,181

 

Effect of exchange rate on cash

 

 

54

 

 

 

(203

)

Net Change In Cash and Cash Equivalents

 

 

-

 

 

 

824

 

Cash and restricted cash at beginning of year

 

 

-

 

 

 

226

 

Cash and restricted cash at end of year

 

$

 

 

$

1,050

 

Supplemental Disclosure Of Cash Flow Information:

 

 

 

 

 

 

Property & equipment in AP

 

 

18

 

 

 

18

 

Inventories in AP and accrued

 

 

650

 

 

 

1,078

 

Capitalized software and content in AP

 

 

 

 

 

18

 

Issuance of common stock and Series B Preferred Stock for the acquisition of business

 

 

3,702

 

 

 

 

Offering costs in AP and accrued

 

 

69

 

 

 

1,598

 

Issuance of Series A Preferred Stock through conversion of debt

 

 

10,082

 

 

 

 

Subscription receivable for issuance of Series A Preferred Stock for modification of loan

 

 

3,000

 

 

 

 

Conversion of convertible notes into common stock

 

 

866

 

 

 

 

Decrease in right-of-use asset and operating lease liabilities due to lease termination

 

 

 

 

 

61

 

Issuance of Common Stock from convertible notes

 

 

547

 

 

 

 

Issuance of Common Stock from Rights Offering

 

 

 

 

 

202

 

Net exercise of options

 

 

 

 

 

313

 

Stock-based compensation capitalized in software

 

 

220

 

 

 

 

 

 

4


 

INTERACTIVE STRENGTH INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.
Description of Business and Basis of Presentation

Description and Organization

Interactive Strength Inc. is the parent company of two leading brands serving the commercial and at-home markets with specialty fitness equipment and virtual training: CLMBR and FORME. CLMBR manufactures vertical climbing equipment and provides a unique digital and on-demand training platform. FORME is a hardware manufacturer and digital fitness service provider that combines award-winning smart gyms with live 1:1 personal training (from real humans) to deliver an immersive experience. The combination of technology with expert training leads to better outcomes for both consumers and trainers alike. CLMBR and FORME offer unique fitness solutions for both the commercial and at-home markets. Our Members are defined as any individual who has a Forme or CLMBR account through a paid connected fitness membership.

Initial Public Offering

In May 2023, the Company closed its initial public offering ("IPO") in which we issued and sold 1.5 million shares of common stock at a public offering price of $8.00 per share and excluding shares sold in the IPO by certain of our existing stockholders. Total proceeds, after deducting underwriting commissions of $1.2 million and other offering expenses of $4.6 million, was $6.2 million.

Acquisition of CLMBR, Inc.

On October 6, 2023, the Company entered into an asset purchase agreement (the “Asset Purchase Agreement”) with CLMBR and CLMBR1, LLC (collectively, the “Sellers”) to purchase and acquire substantially all of the assets and assume certain liabilities of the Sellers. On January 22, 2024, the Company and the Sellers entered into an amended and restated Asset Purchase Agreement (the “Amended Agreement”). On February 2, 2024, pursuant to the Amended Agreement, the Company completed the acquisition for a total purchase price of approximately $15.9 million, consisting of (i) cash of $30,000, (ii) shares of the Company’s common stock with a fair value of $1.0 million, 1,428,922 shares, (iii) shares of the Company’s non-voting Series B preferred stock with a fair value of $2.7 million, 1,500,000 shares, (iv) contingent consideration with a fair value of $1.3 million, and (v) the retirement of $9.4 million of senior debt and $1.4 million in related fees, such retirement to be in the form of a $1.4 million cash payment to the lender of the senior debt and the issuance of an $8.0 million promissory note to such lender (the “Acquisition”).

The Acquisition was accounted for under the acquisition method of accounting under ASC 805, Business Combinations. Assets acquired and liabilities assumed were recorded in the condensed consolidated balance sheet at their estimated fair values as of February 2, 2024, with the remaining unallocated purchase price recorded as goodwill. See Note 21 that outlines the Company’s consideration transferred and the identifiable net assets acquired at their estimated fair value as of February 2, 2024.

Basis of Presentation and Consolidation

The accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and applicable rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). The condensed consolidated financial statements include the accounts of Interactive Strength Inc. and its subsidiaries in which the Company has a controlling financial interest. All intercompany balances and transactions have been eliminated.

In the opinion of management, the accompanying unaudited interim condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, cash flows, and the changes in equity for the interim period.

Liquidity and Capital Resources

In accordance with Accounting Standards Update ASU No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40), or ASU 205-40, management evaluated whether there are certain conditions and 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 the accompanying condensed consolidated financial statements were issued.

As an emerging growth company, the Company is subject to certain inherent risks and uncertainties associated with the development of an enterprise. In this regard, since the Company’s inception, substantially all of management’s efforts have been devoted to making investments in research and development including the development of revenue generating products and services and the development of a commercial organization, all at the expense of short-term profitability.

 

5