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
|
|
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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(Address of principal executive offices)
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(Zip Code)
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which
registered
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None
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N/A
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N/A |
Large accelerated filer ☐
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Accelerated filer ☐
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Smaller reporting company
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|
Emerging growth company
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Page
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PART I – FINANCIAL INFORMATION
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Item 1.
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4 |
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4 |
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5 |
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6 |
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8 |
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9 |
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Item 2.
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17 |
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Item 3.
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21 |
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Item 4.
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21 |
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PART II – OTHER INFORMATION
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Item 1.
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22 |
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Item 1A.
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22 |
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Item 2.
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22 | |
Item 3.
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22 | |
Item 4.
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22 | |
Item 5.
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22 |
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Item 6.
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23 |
|
25 |
September 30, 2022
|
December 31, 2021
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|||||||
ASSETS
|
||||||||
Current Assets:
|
||||||||
Cash
|
$
|
|
$
|
|
||||
Accounts receivable, net of allowance for doubtful accounts of $
|
|
|
||||||
Inventory
|
|
|
||||||
Prepaid expenses and other current assets
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|
|
||||||
Total Current Assets
|
|
|
||||||
Property, Equipment and Other, net
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|
|
||||||
Other Intangible Assets, net
|
|
|
||||||
Goodwill
|
|
|
||||||
Total Assets
|
$
|
|
$
|
|
||||
LIABILITIES
|
||||||||
Current Liabilities:
|
||||||||
Senior secured promissory note payable, in default
|
$
|
|
$
|
|
||||
Convertible promissory notes payable, in default
|
|
|
||||||
Convertible promissory notes, related parties, in default
|
|
|
||||||
Convertible promissory notes payable
|
||||||||
Convertible promissory notes payable, related parties
|
||||||||
Advances on future cash receipts
|
||||||||
Accounts payable
|
|
|
||||||
Accrued expenses
|
|
|
||||||
Accrued employee compensation
|
|
|
||||||
Due under factoring ageement
|
||||||||
Warrant liability
|
|
|
||||||
Current portion of SBA loans
|
|
|
||||||
Accrued interest
|
|
|
||||||
Accrued interest, related parties
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|
|
||||||
Current portion of lease and contract liabilities
|
|
|
||||||
Other
|
|
|
||||||
Total Current Liabilities
|
|
|
||||||
Non-current Liabilities
|
||||||||
SBA loans
|
|
|
||||||
Lease liabilities
|
|
|
||||||
Contract liabilities
|
|
|
||||||
Deferred tax liability
|
|
|
||||||
Total Non-current Liabilities
|
|
|
||||||
Total Liabilities
|
|
|
||||||
Commitments and Contingencies (Footnote 11)
|
||||||||
STOCKHOLDERS’ DEFICIT
|
||||||||
Preferred Stock, par value $
|
|
|
||||||
Common Stock, par value $
|
|
|
||||||
Additional Paid-in Capital
|
|
|
||||||
Accumulated Deficit
|
(
|
)
|
(
|
)
|
||||
Accumulated Other Comprehensive Loss
|
(
|
)
|
(
|
)
|
||||
Total Stockholders’ Deficit
|
(
|
)
|
(
|
)
|
||||
Total Liabilities and Stockholders’ Deficit
|
$
|
|
$
|
|
Three Months Ended September 30,
|
Nine Months Ended September 30,
|
|||||||||||||||
2022
|
2021
|
2022
|
2021
|
|||||||||||||
Revenues:
|
||||||||||||||||
Accessory and parts revenue
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Product
|
|
|
|
|
||||||||||||
Rental Income
|
||||||||||||||||
License fees and other
|
|
|
|
|
||||||||||||
Total Revenue
|
|
|
|
|
||||||||||||
Cost of Revenues
|
|
|
|
|
||||||||||||
Gross Margin
|
|
|
|
|
||||||||||||
Operating Expenses:
|
||||||||||||||||
General and administrative
|
||||||||||||||||
Selling and marketing
|
||||||||||||||||
Research and development
|
|
|
|
|
||||||||||||
Gain on disposal of assets
|
( |
) | ||||||||||||||
Depreciation and amortization
|
||||||||||||||||
Total Operating Expenses
|
|
|
|
|
||||||||||||
Operating Loss
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
Other Income (Expense):
|
||||||||||||||||
Interest expense
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
Interest expense, related party
|
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Change in fair value of derivative liabilities
|
|
|
|
|
||||||||||||
Loss on issuance of debt
|
|
(
|
)
|
(
|
)
|
(
|
)
|
|||||||||
Gain / (loss) on extinguishment of debt
|
( |
) | ( |
) | ||||||||||||
Gain / (loss) on foreign currency exchange
|
|
(
|
)
|
(
|
)
|
|
||||||||||
Other Income (Expense), net
|
|
(
|
)
|
|
(
|
)
|
||||||||||
Net Loss before Income Taxes
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
Provision for Income Taxes
|
|
|
|
|
||||||||||||
Net Loss
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
|
||||||||||||||||
Other Comprehensive Loss |
||||||||||||||||
Foreign currency translation adjustments
|
|
|
|
(
|
)
|
|||||||||||
Total Comprehensive Loss
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
||||
Loss per Share:
|
||||||||||||||||
Basic and Diluted
|
$ | ( |
) | |
$ | ( |
) | $ | ( |
) | $ | ( |
) | |||
Weighted average shares outstanding, basic and diluted |
||||||||||||||||
Basic and Diluted
|
Three Months Ended September 30, 2022
|
||||||||||||||||||||||||||||||||
Preferred Stock
|
Common Stock
|
|||||||||||||||||||||||||||||||
Number of
|
Number of
|
Accumulated
|
||||||||||||||||||||||||||||||
Shares |
Shares
|
Other | ||||||||||||||||||||||||||||||
Issued and
|
Issued and
|
Additional Paid-
|
Accumulated
|
Comprehensive | ||||||||||||||||||||||||||||
Outstanding |
Par Value
|
Outstanding
|
Par Value
|
in Capital
|
Deficit | Loss | Total |
|||||||||||||||||||||||||
Balances as of June 30, 2022
|
|
$
|
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
|||||||||||||||
Shares issued for settlement of debt and warrants
|
|
|
|
|
|
|
||||||||||||||||||||||||||
Net loss
|
-
|
|
-
|
|
|
(
|
)
|
|
(
|
)
|
||||||||||||||||||||||
Balances as of September 30, 2022
|
|
$
|
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
Three Months Ended September 30, 2021
|
||||||||||||||||||||||||||||||||
Preferred Stock
|
Common Stock
|
|||||||||||||||||||||||||||||||
Number of
|
Number of
|
Accumulated
|
||||||||||||||||||||||||||||||
Shares | Shares | Other | ||||||||||||||||||||||||||||||
Issued and
|
Issued and
|
Additional Paid-
|
Accumulated
|
Comprehensive | ||||||||||||||||||||||||||||
Outstanding |
Par Value
|
Outstanding |
Par Value
|
in Capital
|
Deficit | Loss | Total | |||||||||||||||||||||||||
Balances as of June 30, 2021
|
|
$
|
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
|||||||||||||||
Net loss
|
-
|
|
-
|
|
|
(
|
)
|
|
(
|
)
|
||||||||||||||||||||||
Balances as of September 30, 2021
|
|
$
|
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
Nine Months Ended September 30, 2022
|
||||||||||||||||||||||||||||||||
|
Preferred Stock
|
Common Stock
|
||||||||||||||||||||||||||||||
Number of | Number of | Accumulated | ||||||||||||||||||||||||||||||
Shares | Shares | Other | ||||||||||||||||||||||||||||||
Issued and | Issued and | Additional Paid- | Accumulated |
Comprehensive
|
||||||||||||||||||||||||||||
Outstanding | Par Value |
Outstanding |
Par Value |
in Capital | Deficit | Loss | Total |
|||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||
Balances as of December 31, 2021
|
|
$
|
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
|||||||||||||||
Cashless warrant exercise
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
Warrant exercise
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Shares issued in conjuction with Note Payable
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Shared issed for settlement of debt and warrants
|
||||||||||||||||||||||||||||||||
Shares issued for services
|
|
|
|
|
|
|
||||||||||||||||||||||||||
Net loss
|
-
|
|
-
|
|
|
(
|
)
|
|
(
|
)
|
||||||||||||||||||||||
Foreign currency translation adjustment
|
-
|
|
-
|
|
|
|
|
|
||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||
Balances as of September 30, 2022
|
|
$
|
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
Nine Months Ended September 30, 2021
|
||||||||||||||||||||||||||||||||
|
Preferred Stock
|
Common Stock
|
||||||||||||||||||||||||||||||
Number of | Number of | Accumulated | ||||||||||||||||||||||||||||||
Shares | Shares | Other | ||||||||||||||||||||||||||||||
Issued and | Issued and | Additional Paid- | Accumulated | Comprehensive | ||||||||||||||||||||||||||||
Outstanding | Par Value | Outstanding | Par Value | in Capital | Deficit | Loss | Total | |||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||
Balances as of December 31, 2020
|
|
$
|
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
|||||||||||||||
Cashless warrant exercise
|
|
|
|
|
(
|
)
|
|
|
|
|||||||||||||||||||||||
Reclassification of warrant liability due to cashless warrant exercise
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Net loss
|
-
|
|
-
|
|
|
(
|
)
|
|
(
|
)
|
||||||||||||||||||||||
Foreign currency translation adjustment
|
-
|
|
-
|
|
|
|
(
|
)
|
(
|
)
|
||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||
Balances as of September 30, 2021
|
|
$
|
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
Nine Months Ended September 30,
|
||||||||
2022
|
2021
|
|||||||
Cash Flows - Operating Acivities:
|
||||||||
Net loss
|
$
|
(
|
)
|
$
|
(
|
)
|
||
Adjustments to reconcile net loss to net cash used by operating activities
|
||||||||
Depreciation and Amortization
|
|
|
||||||
Bad debt expense
|
|
|
||||||
Income tax expense
|
|
|||||||
Shares issued for service | ||||||||
Loss (Gain) on extinguishment of debt | ( |
) | ||||||
Gain on sale of property and equipment, net
|
( |
) | ||||||
Change in fair value of derivative liabilities
|
( |
) |
(
|
)
|
||||
Loss on issuance of debt
|
||||||||
Amortization of debt issuance costs and original issue discount
|
|
|
||||||
Accrued interest
|
|
|
||||||
Interest payable, related parties
|
|
|
||||||
Changes in operating assets and liabilities
|
||||||||
Accounts receivable - trade
|
|
(
|
)
|
|||||
Inventory
|
(
|
)
|
|
|||||
Prepaid expenses and other assets
|
(
|
)
|
(
|
)
|
||||
Accounts payable
|
(
|
)
|
|
|||||
Accrued expenses
|
|
|
||||||
Accrued employee compensation
|
(
|
)
|
|
|||||
Contract liabilties
|
(
|
)
|
|
|||||
Net Cash Used in Operating Activities
|
(
|
)
|
(
|
)
|
||||
Cash Flows - Investing Activities
|
||||||||
Proceeds from sale of property and equipment
|
|
|
||||||
Purchase of property and equipment
|
( |
) | ||||||
Net Cash Flows Provided by (Used in) Investing Activities
|
|
(
|
)
|
|||||
Cash Flows - Financing Activities
|
||||||||
Proceeds from senior promissory notes
|
||||||||
Proceeds from short term notes
|
|
|
||||||
Proceeds from factoring, net
|
( |
) | ||||||
Proceeds from SBA loan
|
||||||||
Proceeds from warrant exercises
|
|
|
||||||
Proceeds from convertible promissory notes
|
||||||||
Payments of principal on finance leases
|
(
|
)
|
(
|
)
|
||||
Payments of principal on convertible promissory notes, related parties, convertible promissory notes and SBA loans | ( |
) | ( |
) | ||||
Net Cash Flows Provided by Financing Activities
|
|
|
||||||
Effect of Exchange Rates on Cash
|
(
|
)
|
(
|
)
|
||||
Net Change in Cash During Period
|
|
(
|
)
|
|||||
Cash at Beginning of Period
|
|
|
||||||
Cash at End of Period
|
$
|
|
$
|
|
||||
Supplemental Information:
|
||||||||
Cash paid for interest
|
$
|
|
$
|
|
||||
Non-cash Investing and Financing Activities:
|
||||||||
Reclassification of warrant liability due to cashless warrant exercise
|
$
|
|
$
|
|
||||
Settlement of debt and warrants with stock
|
$ | |||||||
Warrants issued in conjunction with senior secured promissory note payable
|
||||||||
Common shares issued in conjunction with senior secured promissory note payable
|
||||||||
Embedded conversion option with issuances of convertible debt | ||||||||
Working capital balances refinanced into Convertible notes payable | ||||||||
Warrant issuance in conjunction with convertible debt |
1.
|
Nature of the Business and Basis of Presentation
|
2. |
Going Concern
|
3. |
Summary of Significant Accounting Policies
|
4. |
Loss per Share
|
Three Months Ended
|
Nine Months Ended | |||||||||||||||
September 30, 2022
|
September 30, 2021
|
September 30, 2022 |
September 30, 2021
|
|||||||||||||
Weighted average shares outstanding
|
||||||||||||||||
Common shares
|
|
|
||||||||||||||
Common shares issuable assuming exercise of nominally priced warrants
|
|
|
||||||||||||||
Weighted average shares outstanding
|
|
|
Nine Months Ended | ||||||||
September 30, 2022
|
September 30, 2021
|
|||||||
Common stock options
|
|
|
||||||
Common stock purchase warrants
|
|
|
||||||
Convertible notes payable
|
|
|
||||||
|
|
|
5. |
Accrued Expenses
|
|
2022
|
2021
|
||||||
Registration penalties
|
$
|
|
$
|
|
||||
License fees
|
|
|
||||||
Board of director’s fees
|
|
|
||||||
Other
|
|
|
||||||
|
$
|
|
$
|
|
6.
|
Concentration of Credit Risk and Limited Suppliers
|
September 30, 2022
|
December 31, 2021
|
|||||||
Accounts Receivable:
|
||||||||
Customer A
|
|
%
|
|
%
|
||||
Customer B
|
% | % |
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, 2022
|
September 30, 2021
|
September 30, 2022
|
September 30, 2021
|
|||||||||||||
Purchases:
|
||||||||||||||||
Vendor A
|
|
%
|
|
%
|
% | % | ||||||||||
Vendor B
|
n/a
|
n/a
|
n/a | % |
7. |
Notes Payable
|
As of 09/30/2022 (dollars in thousands)
|
Maturity Date
|
Interest Rate
|
Conversion Price
|
Principal
|
Remaining Debt Discount
|
Remaining Embedded Conversion Option
|
Carrying Value
|
||||||||||||||||||
Senior secured promissory note payable
|
|
|
%
|
n/a
|
$ |
|
$ |
(
|
)
|
$ |
|
$ |
|
||||||||||||
2021 Convertible promissory notes payable
|
|
|
%
|
$ |
|
|
|
|
|
||||||||||||||||
Convertible promissory notes payable, related parties
|
|
|
%
|
$ |
|
|
|
|
|
||||||||||||||||
Convertible notes payable
|
|
|
%
|
$ |
|
|
(
|
)
|
|
|
|||||||||||||||
Convertible notes payable, related parties
|
|
|
%
|
$ |
|
|
(
|
)
|
|
|
|||||||||||||||
Advances on future cash receipts
|
|
n/a
|
n/a
|
|
(
|
)
|
|
|
|||||||||||||||||
Total short-term debt as of September 30, 2022, including notes in default
|
$ |
|
$ |
(
|
)
|
$ |
|
$ |
|
As of 12/31/2021 (dollars in thousands)
|
Maturity Date
|
Interest Rate
|
Conversion Price
|
Principal
|
Remaining Debt Discount
|
Remaining Embedded Conversion Option
|
Carrying Value
|
||||||||||||||||||
Senior secured promissory note payable
|
|
|
%
|
n/a
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
|
||||||||||||
2021 Convertible promissory notes payable
|
|
|
%
|
$
|
|
|
(
|
)
|
|
|
|||||||||||||||
Convertible promissory notes payable, related parties
|
|
|
%
|
$
|
|
|
|
|
|
||||||||||||||||
SBA loan #2
|
|
|
%
|
n/a
|
|
|
|
|
|||||||||||||||||
Advances on future cash receipts
|
|
n/a
|
n/a
|
|
(
|
)
|
|
|
|||||||||||||||||
Total debt outstanding, including amounts in default
|
|