10-Q

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

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, a 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.

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 ☒

As of May 9, 2023, there were 11,087,202 shares of the registrant’s common stock outstanding, par value $0.0001 per share.

This Quarterly Report on Form 10-Q (this “Report”) contains forward-looking statements. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical facts contained in this Report, including statements concerning possible or assumed future actions, business strategies, events or results of operations, and any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

In some cases, you can identify forward-looking statements by terms such as “may,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential” or “continue” or the negative of these terms or other similar expressions. The forward-looking statements in this Report are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements speak only as of the date of this Report and are subject to a number of important factors that could cause actual results to differ materially from those in the forward-looking statements, including the risks, uncertainties and assumptions described under the section in our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the Securities and Exchange Commission (the “SEC”) on March 23, 2023 titled “Risk Factors.” These forward-looking statements are subject to numerous risks, including, without limitation, the following:

Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified and some of which are beyond our control, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur, and actual results could differ materially from those projected in the forward-looking statements. Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties. As a result of these factors, we cannot assure you that the forward-looking statements in this Report will prove to be accurate. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.

You should read this Report completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

Unaudited Condensed Consolidated Balance Sheets
(In thousands, except share and per share data)

See the accompanying notes to the unaudited condensed consolidated financial statements.

Nogin, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Operations
(In thousands, except share and per share data)

See the accompanying notes to the unaudited condensed consolidated financial statements

Nogin, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Cash Flows
(In thousands)

See the accompanying notes to the unaudited condensed consolidated financial statements

Nogin, Inc. and Subsidiaries
Note to Unaudited Condensed Consolidated Financial Statements

DESCRIPTION OF BUSINESS

Nogin, Inc. (together with its subsidiaries, the “Company” or “Nogin”) is an e-commerce, technology platform provider that delivers Commerce-as-a-Service (“CaaS”) solutions as a headless, flexible full stack enterprise commerce platform with cloud services and optimizations along with experts for brands and retailers that provide a unique combination of customizability and sales efficiency. The Company manages clients’ front-to-back-end operations so clients can focus on their business. The Company’s business model is based on providing a comprehensive e-commerce solution to its customers on a revenue sharing basis. Unless the context otherwise requires, references in this subsection to “we,” “our,” “Nogin” and the “Company” refer to the business and operations of Legacy Nogin (as defined below) and its consolidated subsidiaries prior to the Business Combination (as defined below) and to Nogin, Inc. (formerly known as Software Acquisition Group Inc. III) and its consolidated subsidiaries following the consummation of the Business Combination.

The Company’s headquarters and principal place of business are in Tustin, California.

Reverse Stock Split

On March 18, 2023, the Company’s Board of Directors approved a one-for-twenty reverse stock split of its common stock. The reverse stock split became effective upon filing of a certificate of amendment to the Company’s second amended and restated certificate of incorporation on March 28, 2023. Upon the effectiveness of the reverse stock split, (i) every twenty shares of outstanding common stock were reclassified and combined into one share of common stock and (ii) the number of common stock for which each outstanding option and warrant to purchase common stock is exercisable was proportionately decreased and the exercise price per share of common stock of each outstanding option and warrant to purchase common stock was proportionately increased. No fractional shares were issued as a result of the reverse stock split. The total number of authorized shares of common stock and the par value per share of common stock did not change as a result of the reverse stock split. Accordingly, all share and per share amounts for all periods presented in these financial statements and notes thereto have been adjusted retroactively, where applicable, to reflect the reverse stock split and exercise price of each outstanding option and warrant as if the transaction had occurred as of the beginning of the earliest period presented.

Business Combination

On August 26, 2022 (the “Closing Date”), the Company completed its previously announced Business Combination pursuant to the Agreement and Plan of Merger (the “Merger Agreement”), dated as of February 14, 2022 (as amended on April 19, 2022 and August 26, 2022), by and among the Company (formerly known as Software Acquisition Group Inc. III (“SWAG”)), Nuevo Merger Sub, Inc., a wholly owned subsidiary of SWAG (“Merger Sub”), and Branded Online, Inc. dba Nogin (“Legacy Nogin”). Pursuant to the Merger Agreement, Merger Sub was merged with and into Legacy Nogin, with Legacy Nogin surviving the Business Combination as a wholly owned subsidiary of the Company (the “Business Combination” and, together with the other transactions contemplated by the Merger Agreement, the “Transactions”).

While Legacy Nogin became a wholly-owned subsidiary of the Company, Legacy Nogin was deemed to be the acquirer in the Business Combination for accounting purposes. Accordingly, the Business Combination was accounted for as a reverse recapitalization, in which case the condensed consolidated financial statements of the Company represent a continuation of Legacy Nogin and the issuance of common stock and cash consideration in exchange for the net assets of SWAG recognized at historical costs and no recognition of goodwill or other intangible assets. Operations prior to the Business Combination are those of Legacy Nogin and all share and per-share data included in these condensed consolidated financial statements have been retroactively adjusted to give effect to the Business Combination.

As a result of the Business Combination, equity holders of Legacy Nogin received approximately 2.7 million shares of the Company’s common stock (“Common Stock”) and cash consideration of $15.0 million, of which $10.9 million was deferred on the Closing Date (Note 9).

The treatment of the Business Combination as a reverse recapitalization was based on the stockholders of Legacy Nogin holding the majority of voting interests of the Company, Legacy Nogin’s existing management team serving primarily as the initial management team of the Company, Legacy Nogin’s appointment of the majority of the initial board of directors of the Company and Legacy Nogin’s operations comprising the ongoing operations of the Company.

In connection with the Business Combination, the Company received proceeds of approximately $58.8 million from SWAG’s trust account, net of redemptions by SWAG’s public shareholders, as well as approximately $65.5 million in proceeds from the contemporaneous issuance of convertible notes (the “Convertible Notes”). The aggregate cash raised has been used for general business purposes, the paydown of Legacy Nogin’s outstanding debt, the payment of transaction costs and the payment of the cash consideration.

The following table reconciles the elements of the Business Combination to the condensed consolidated statements of cash flows and the condensed consolidated statements of convertible redeemable preferred stock and stockholders’ deficit for the three months ended March 31, 2023:


	Recapitalization
Cash - SWAG trust and cash, net of redemptions		58,841
Cash - PIPE equity financing		1,052
Less: Transaction and advisory fees paid in cash		(54,409	)
Less: Cash election consideration paid in cash at the Closing Date		(4,109	)
Net proceeds from Business Combination		1,375
Plus: Issuance of common stock to settle certain transaction costs		3,588
Less: non-cash items charged against additional paid-in capital		(17,510	)
Less: Deferred cash election consideration (Note 9)		(9,198	)
Net contributions from Business Combination and PIPE equity financing		(21,745	)

The number of shares of Common Stock outstanding immediately following the consummation of the Business Combination was as follows:


	Number of Shares
SWAG Common Stock, outstanding prior to the Business Combination		1,425,492


Title of each class	Trading Symbol	Name of each exchange on which registered
Common stock, par value $0.0001 per share	NOGN	The Nasdaq Stock Market LLC
Warrants, each whole warrant exercisable for one share of common stock at an exercise price of $11.50 per share	NOGNW	The Nasdaq Stock Market LLC


	Page
Part I - Financial Information	1
Item 1. Financial Statements	1
Condensed Consolidated Balance Sheets as of March 31, 2023 (unaudited) and December 31, 2022	1
Condensed Consolidated Statements of Operations for the three months ended March 31, 2023 and 2022 (unaudited)	2
Condensed Consolidated Statements of Stockholders’ Deficit for the three months ended March 31, 2023 and 2022 (unaudited)	3
Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2023 and 2022 (unaudited)	4
Notes to Condensed Consolidated Financial Statements (unaudited)	5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3. Quantitative and Qualitative Disclosures About Market Risk	44
Item 4. Controls and Procedures	44
Part II - Other Information	45
Item 1. Legal Proceedings	45
Item 1A. Risk Factors	45
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	45
Item 3. Defaults Upon Senior Securities	45
Item 4. Mine Safety Disclosures	45
Item 5. Other Information	45
Item 6. Exhibits	46
Signatures	47


	March 31,			December 31,
	2023			2022
ASSETS
Current assets:
Cash	$	617		$	15,385
Accounts receivable, net		1,924			1,578
Inventory		14,444			15,726
Prepaid expenses and other current assets		3,810			2,539
Total current assets		20,795			35,228
Property and equipment, net		1,476			1,595
Right-of-use asset, net (Note 19)		17,350			17,391
Goodwill		6,748			6,748
Intangible assets, net		5,439			5,493
Investment in unconsolidated affiliates		6,759			7,404
Other non-current asset		1,065			1,074
Total assets	$	59,632		$	74,933
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable	$	18,457		$	19,605
Due to clients		6,633			10,891
Related party payables		219			1,033
Loans (Note 7)		2,922			—
Promissory notes (Note 7)		4,807			—
Accrued expenses and other liabilities (Note 6)		15,028			17,826
Lease liabilities, current portion (Note 19)		4,565			4,367
Total current liabilities		52,631			53,722
Convertible notes (Note 7)		56,260			60,852
Deferred tax liabilities		368			394
Lease liabilities, net of current portion (Note 19)		14,775			15,223
Other long-term liabilities (Note 6)		17,840			17,766
Total liabilities		141,874			147,957
Commitments and contingencies (Note 19)

STOCKHOLDERS' DEFICIT
Common stock, $0.0001 par value, 500,000,000 shares authorized; 3,334,714 shares issued and outstanding as of March 31, 2023 and December 31, 2022		—			—
Additional paid-in capital		9,953			9,270
Accumulated deficit		(92,195	)		(82,294	)
Total stockholders’ deficit		(82,242	)		(73,024	)
Total liabilities and stockholders’ deficit	$	59,632		$	74,933


	Three Months Ended March 31,
	2023			2022
Net service revenue	$	8,917		$	8,533
Net product revenue		6,544			12,922
Net revenue from related parties		1,214			3,744
Total net revenue		16,675			25,199
Operating costs and expenses:
Cost of services (1)		5,530			5,435
Cost of product revenue (1)		3,942			10,251
Sales and marketing		702			566
Research and development		963			1,577
General and administrative		17,325			17,222
Depreciation and amortization		202			201
Total operating costs and expenses		28,664			35,252
Operating loss		(11,989	)		(10,053	)
Interest expense		(2,014	)		(652	)
Change in fair value of promissory notes		(159	)		—
Change in fair value of derivative instruments		847			—
Change in fair value of unconsolidated affiliates		(645	)		(1,033	)
Change in fair value of convertible notes		4,591			—
Other (loss) income, net		(558	)		1,954
Loss before income taxes		(9,927	)		(9,784	)
(Benefit) Provision for income taxes		(26	)		158
Net loss	$	(9,901	)	$	(9,942	)

Net loss per common share – basic and diluted	$	(2.11	)	$	(5.02	)
Weighted average shares outstanding – basic and diluted		4,688,331			1,981,097


	Convertible Redeemable Preferred Stock
	Series A					Series B					Common Stock
	Shares			Amount		Shares			Amount		Shares			Amount			Additional Paid-in Capital			Treasury Stock			Accumulated Deficit			Total Stockholders’ Deficit
Balance, December 31, 2021		2,042,483		$	4,687		1,459,462		$	6,502		9,129,358		$	1		$	4,361		$	(1,330	)	$	(16,262	)	$	(13,230	)
Retroactive application of reverse recapitalization (1)		6,822,012			—		4,874,688			—		30,492,588			3			(3	)		—			—			—
Retroactive application of reverse stock split (2)		(8,421,271	)		—		(6,017,443	)		—		(37,640,849	)		(4	)		4			—			—			—
Balance, December 31, 2021, as adjusted		443,224			4,687		316,707			6,502		1,981,097			—			4,362			(1,330	)		(16,262	)		(13,230	)
Stock-based Compensation		—			—		—			—		—			—			58			—			—			58
Net loss		—			—		—			—		—			—			—			—			(9,942	)		(9,942	)
Balance, March 31, 2022		443,224		$	4,687		316,707		$	6,502		1,981,097		$	—		$	4,420		$	(1,330	)	$	(26,204	)	$	(23,114	)

Balance, December 31, 2022		—			—		—			—		3,334,714			—			9,270			—			(82,294	)		(73,024	)
Stock-based compensation		—			—		—			—		—			—			253			—			—			253
Fair value of equity classified warrants in common stock		—			—		—			—		—			—			430			—			—			430
Net loss		—			—		—			—		—			—			—			—			(9,901	)		(9,901	)
Balance, March 31, 2023		—		$	—		—		$	—		3,334,714		$	—		$	9,953		$	—		$	(92,195	)	$	(82,242	)


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


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


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☒