Wag! Group Co.（「Wag!」，「Wag」，「公司」，「我們」或「我們的」），前身爲CHW收購公司（「CHW」），在特拉華州註冊，總部位於加利福尼亞州舊金山。該公司開發並支持通過網站和移動應用程序（「平台」或「市場」）提供的專有技術，使最終用戶例如寵物家長能夠與獨立服務和產品提供者連接，以獲取服務和產品。該公司在美國運營。
2. 重要會計政策
報告範圍
公司的未經審計的簡明合併中期基本報表已根據證券交易委員會（"SEC"）法規S-X第10條的規定編制。因此，如法規S-X第10條所允許的，未包含美國普遍接受的會計原則（"U.S. GAAP"）對完整基本報表所要求的所有信息。截至2023年12月31日的簡明合併資產負債表是根據該日期的審計基本報表得出的，並未包含法規S-X第10條所允許的U.S. GAAP所要求的所有披露。截止2024年9月30日的公司的未經審計的簡明合併基本報表以及截至2024年和2023年9月30日的三個月和九個月的報表包括Wag! Group Co.及其所有子公司。管理層認爲，附帶的基本信息包含所有的調整，包括正常的經常性調整，這些調整對公正陳述截止2024年9月30日及2024年和2023年截至9月30日的公司的未經審計的簡明合併基本報表是必要的。這些未經審計的簡明合併基本報表應與公司截至2023年12月31日的年度報告（"2023 10-K"）一起閱讀。截至2024年和2023年9月30日的三個月和九個月的經營結果，並不一定代表預計在2024年12月31日結束的年度可能取得的結果。
2022年8月9日（「合併日期」），Wag! Labs, Inc.（「傳統Wag!」）、CHW收購公司（「CHW」）和CHW合併子公司（「合併子公司」）根據2022年2月2日簽署的業務合併協議和合並計劃（「CHW業務合併協議」）的條款，完成了傳統Wag!和CHW的業務合併，該合併是通過合併子公司與傳統Wag!合併實現的，傳統Wag!作爲CHW的全資子公司存續（「合併」，以及與CHW業務合併協議下其他交易一起稱爲「CHW業務合併」）。在2022年8月9日合併完成後，經過2022年7月28日舉行的CHW股東特別大會（「特別會議」）的批准，公司更名爲Wag! Group Co.，並有效接管了CHW的所有重要業務。
2022年8月9日，公司與Blue Torch Finance, LLC（連同其關聯基金以及任何其他提供承諾的方，包括在該日期後加入的任何額外貸款人、代理人、安排人或其他方，統稱爲「Blue Torch」）簽訂了一項融資協議和認股權證協議，根據該協議，Among other things, Blue Torch同意延長約$32.2百萬的高級擔保定期貸款（「融資協議」）。融資協議以公司及其子公司的大部分資產作爲第一優先安防權益擔保。
公司的融資協議下的義務由其某些子公司在滿足重要性閾值的情況下提供擔保。這些義務，包括擔保，均以公司及其子公司擔保人的幾乎所有個人財產作爲擔保，依據於2022年8月9日同時簽署的安防協議。融資協議規定了以下財務契約：(i) 截至每月計算期結束時，公司的年度累計營業收入應超過某些閾值；以及 (ii) 流動性在任何時候不得少於 $5百萬。截止到2024年9月30日，公司遵守這些契約。
Comparison of the Three and Nine Months Ended September 30, 2024 and 2023
The following table sets forth our results of operations for the three and nine months ended September 30, 2024 and 2023. These results of operations are not necessarily indicative of the future results of operations that may be expected for any future period.
Three Months Ended
Change
Nine Months Ended
Change
September 30, 2024
September 30, 2023
$
%
September 30, 2024
September 30, 2023
$
%
(in thousands, except percentages)
Revenues
$
13,204
$
21,800
(8,596)
(39.4)
%
$
55,074
$
62,243
(7,169)
(11.5)
%
Costs and expenses:
Cost of revenues (exclusive of depreciation and amortization shown separately below)
1,146
1,441
(295)
(20.5)
%
3,874
3,710
164
4.4
%
Platform operations and support
2,798
2,968
(170)
(5.7)
%
8,472
9,630
(1,158)
(12.0)
%
Sales and marketing
8,862
12,755
(3,893)
(30.5)
%
35,554
36,788
(1,234)
(3.4)
%
Royalty
—
—
—
100.0
%
—
1,791
(1,791)
(100.0)
%
General and administrative
4,231
4,682
(451)
(9.6)
%
12,279
14,487
(2,208)
(15.2)
%
Depreciation and amortization
583
414
169
40.8
%
1,741
1,170
571
48.8
%
Total costs and expenses
17,620
22,260
(4,640)
(20.8)
%
61,920
67,576
(5,656)
(8.4)
%
Interest expense
1,497
1,915
(418)
(21.8)
%
4,979
5,686
(707)
(12.4)
%
Interest income
(105)
(232)
127
(54.7)
%
(332)
(714)
382
(53.5)
%
Loss on extinguishment of debt
454
—
454
100.0
%
1,180
—
1,180
100.0
%
Other expense, net
—
12
(12)
(100.0)
%
—
21
(21)
(100.0)
%
Loss before income taxes
(6,262)
(2,155)
(4,107)
190.6
%
(12,673)
(10,326)
(2,347)
22.7
%
Income taxes
—
41
(41)
(100.0)
%
81
79
2
2.5
%
Equity in net earnings of equity method investments
—
—
—
100.0
%
—
553
(553)
(100.0)
%
Net loss
$
(6,262)
$
(2,196)
(4,066)
185.2
%
$
(12,754)
$
(9,852)
(2,902)
29.5
%
Revenues
Revenues decreased by $8.6 million, or approximately 39.4%, from $21.8 million for the three months ended September 30, 2023 to $13.2 million for the three months ended September 30, 2024. The decrease was attributable to a $1.1 million decrease in Services revenue, a $7.1 million decrease in Wellness revenue, and a $0.4 million decrease in Pet Food & Treats revenue as a result of a 42% decrease in Platform Participants year-over-year and decreased revenue-per-action conversion activity.
Revenues decreased by $7.2 million, or approximately 11.5%, from $62.2 million for the nine months ended September 30, 2023 to $55.1 million for the nine months ended September 30, 2024. The decrease was primarily attributable to a $1.8 million decrease in Services revenue and a $5.6 million decrease in Wellness revenue as a result of a 42% decrease in Platform Participants year-over-year and decreased revenue-per-action conversion activity, partially offset by a $0.3 million increase in Pet Food & Treats revenue as a result of increased revenue-per-action conversion activity.
Cost of Revenues, Exclusive of Depreciation and Amortization
Cost of revenues, exclusive of depreciation and amortization, decreased by $0.3 million, or approximately 20.5%, from $1.4 million for the three months ended September 30, 2023 to $1.1 million for the three months ended September 30, 2024. The decrease was primarily attributable to a decrease in product costs related to certain pet insurance products and a decrease in payment processing fees as a result of lower Services revenue.
Cost of revenues, exclusive of depreciation and amortization, increased by $0.2 million, or approximately 4.4%, from $3.7 million for the nine months ended September 30, 2023 to $3.9 million for the nine months ended September 30, 2024. The increase was primarily attributable to an increase in product costs related to the sale of merchandise and certain pet insurance products, partially offset by a decrease in payment processing fees as a result of lower Services revenue.
Platform Operations and Support
Platform operations and support expenses decreased by $0.2 million, or approximately 5.7%, from $3.0 million for the three months ended September 30, 2023 to $2.8 million for the three months ended September 30, 2024. The decrease was primarily attributable to a $0.4 million decrease in personnel costs and a $0.1 million decrease in technology, facilities, and other allocated costs, partially offset by a $0.2 million increase in professional services.
Platform operations and support expenses decreased by $1.2 million, or approximately 12.0%, from $9.6 million for the nine months ended September 30, 2023 to $8.5 million for the nine months ended September 30, 2024. The decrease was primarily attributable to a $1.5 million decrease in personnel costs and a $0.2 million decrease in technology, facilities, and other allocated costs, partially offset by a $0.5 million increase in professional services.
Sales and Marketing
Sales and marketing expenses decreased by $3.9 million, or approximately 30.5%, from $12.8 million for the three months ended September 30, 2023 to $8.9 million for the three months ended September 30, 2024. The decrease was primarily attributable to a $2.3 million decrease in investing in new and expanding existing partnerships related to our Wellness offerings, a $1.5 million decrease in personnel costs, and a $0.3 million decrease in professional services.
Sales and marketing expenses decreased by $1.2 million, or approximately 3.4%, from $36.8 million for the nine months ended September 30, 2023 to $35.6 million for the nine months ended September 30, 2024. The decrease was primarily attributable to a $1.7 million increase in investing in new and expanding existing partnerships related to our Wellness offerings, partially offset by a $3.0 million decrease in personnel costs and a $0.2 million decrease in professional services.
Royalty
Royalty expenses were $1.8 million for the nine months ended September 30, 2023. These expenses represent fees paid by us to be the exclusive marketer of certain pet insurance products.
General and Administrative
General and administrative expenses decreased by $0.5 million, or approximately 9.6%, from $4.7 million for the three months ended September 30, 2023 to $4.2 million for the three months ended September 30, 2024. The decrease was primarily attributable to a $0.2 million decrease in personnel costs and a $0.2 million decrease in business licenses, fees, and permits.
General and administrative expenses decreased by $2.2 million, or approximately 15.2%, from $14.5 million for the nine months ended September 30, 2023 to $12.3 million for the nine months ended September 30, 2024. The decrease was primarily attributable to a $0.9 million decrease in personnel costs, a $0.5 million decrease in legal settlements, a $0.5 million decrease in business licenses, fees, and permits, and a $0.3 million decrease in professional services.
Depreciation and amortization expenses increased by $0.2 million, or approximately 40.8%, from $0.4 million for the three months ended September 30, 2023 to $0.6 million for the three months ended September 30, 2024. The increase was primarily attributable to the acquisition of WoofWoofTV in 2023 and the related amortization of acquired intangible assets.
Depreciation and amortization expenses increased by $0.6 million, or approximately 48.8%, from $1.2 million for the nine months ended September 30, 2023 to $1.7 million for the nine months ended September 30, 2024. The increase was primarily attributable to the acquisition of WoofWoofTV in 2023 and the related amortization of acquired intangible assets.
Interest Expense, Net
Interest expense, net was as follows:
Three Months Ended
Change
Nine Months Ended
Change
September 30, 2024
September 30, 2023
$
%
September 30, 2024
September 30, 2023
$
%
(in thousands, except percentages)
Interest expense
$
1,497
$
1,915
(418)
(21.8)
%
$
4,979
$
5,686
(707)
(12.4)
%
Interest income
(105)
(232)
127
(54.7)
%
(332)
(714)
382
(53.5)
%
Interest expense, net
$
1,392
$
1,683
(291)
(17.3)
%
$
4,647
$
4,972
(325)
(6.5)
%
Interest expense, net decreased by $0.3 million, or approximately 17.3%, from $1.7 million for the three months ended September 30, 2023 to $1.4 million for the three months ended September 30, 2024. The decrease was primarily attributable to a decrease in interest expense as a result of a decrease in the amount outstanding under the Financing Agreement.
Interest expense, net decreased by $0.3 million, or approximately 6.5%, from $5.0 million for the nine months ended September 30, 2023 to $4.6 million for the nine months ended September 30, 2024. The decrease was primarily attributable to a decrease in interest expense as a result of a decrease in the amount outstanding under the Financing Agreement.
Loss on Extinguishment of Debt
During the three months ended September 30, 2024, we recognized a $0.5 million loss on extinguishment of debt related to a $5.0 million prepayment of the Financing Agreement during the third quarter of 2024 (See Note 7, Long-Term Debt, to the Condensed Consolidated Financial Statements included in Part I, Item 1, Financial Statements, of this Quarterly Report on Form 10-Q).
During the nine months ended September 30, 2024, we recognized a $1.2 million loss on extinguishment of debt related to prepayments of $10.0 million of the Financing Agreement during 2024 (See Note 7, Long-Term Debt, to the Condensed Consolidated Financial Statements included in Part I, Item 1, Financial Statements, of this Quarterly Report on Form 10-Q).
Liquidity and Capital Resources
We have historically generated negative cash flows from operations and have primarily financed our operations through private and public sales of equity securities and debt. In July 2024, we issued and sold an aggregate of 7.4 million shares of common stock at a price of $1.35 per share in a registered public offering. The aggregate net proceeds were approximately $8.6 million, after deducting offering costs of $0.8 million and underwriting discounts and commissions of $0.6 million. As of September 30, 2024, we had cash and cash equivalents of $8.4 million.
We expect operating losses to continue in the foreseeable future as we continue to invest in growing our business. Our primary uses of cash include operating costs such as product and technology expenses, marketing expenses, personnel expenses and other expenditures necessary to support our operations and our growth.
Pursuant to the requirements of FASB ASC Topic 205-40, Presentation of Financial Statements—Going Concern, management must evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern for one year from the date these financial statements are issued. This evaluation does not take into consideration the potential mitigating effect of management's plans that have not been fully implemented or are not within our control as of the date the financial statements are issued. When substantial doubt exists under this methodology, management evaluates whether the mitigating effect of its plans sufficiently alleviates substantial doubt about our ability to continue as a going concern. The mitigating effect of management's plans, however, is only considered if both (1) it is probable that the plans will be effectively implemented within one year after the date that the financial statements are issued, and (2) it is probable that the plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about our ability to continue as a going concern within one year after the date that the financial statements are issued.
As of September 30, 2024, we had cash and cash equivalents of approximately $8.4 million and accounts receivable of $6.5 million, and the amount outstanding under our debt obligations was $20.7 million, of which $20.3 million and $0.4 million related to the Financing Agreement and PPP Loan, respectively. Additionally, for the nine months ended September 30, 2024, net loss was $12.8 million and net cash used in operating activities was $5.3 million. Our ability to continue as a going concern is dependent on our ability to generate significant cash flows, obtain sufficient proceeds from any future offerings of securities, renegotiate the existing terms of the Financing Agreement, and/or obtain alternative financing prior to the maturity of the Financing Agreement in August 2025. We expect operating losses to continue in the foreseeable future as we continue to invest in growing our business. To alleviate these conditions, we completed a registered public offering of common stock in July 2024 for net proceeds of approximately $8.6 million (See Note 9, Stockholders’ Equity (Deficit), to the Condensed Consolidated Financial Statements included in Part I, Item 1, Financial Statements, of this Quarterly Report on Form 10-Q for more information) and management is actively engaged in discussions to refinance the Financing Agreement. However, there can be no assurance that we will be able to complete the refinancing as it is ultimately outside of our control.
Due to our projected cash needs (which includes amounts due under the Financing Agreement) combined with our current liquidity level and history of net losses and cash used to fund operating activities, there is substantial doubt regarding our ability to continue as a going concern for a period of at least one year from the date of issuance of these unaudited condensed consolidated financial statements.
Our future capital requirements and the adequacy of available funds will depend on many factors, including, but not limited to, our ability to grow our revenue and the impact of the factors described in Part II, Item 1A, Risk Factors, of this Quarterly Report on Form 10-Q and Part I, Item 1A, Risk Factors, of our 2023 10-K. We may seek additional equity or debt financing. See the section titled “Risk Factors—Risks Related to Our Operations—We may require additional capital to support business growth and this capital might not be available on acceptable terms, or at all” within the 2023 10-K.
Cash Flows
The following table summarizes our cash flows for the periods indicated:
Net cash used in operating activities for the nine months ended September 30, 2024 was $5.3 million, an increase of $0.7 million from $4.6 million for the nine months ended September 30, 2023. The increase was primarily due to $1.0 million of unfavorable changes in operating assets and liabilities, partially offset by a $0.4 million decrease in net loss excluding non-cash and reconciling items disclosed within our condensed consolidated statement of cash flows. The $1.0 million of unfavorable changes in operating assets and liabilities was primarily driven by unfavorable changes in accounts payable, accrued expenses and other current liabilities, and other non-current liabilities, partially offset by favorable changes in accounts receivable, prepaid expenses and other current assets, and deferred revenue. The $0.4 million decrease in net loss excluding non-cash and reconciling items was primarily driven by lower costs and expenses and favorable changes in non-cash and reconciling items including stock-based compensation, loss on extinguishment of debt, and depreciation and amortization, partially offset by lower revenues.
Changes in Cash Flows from Investing Activities
Net cash used in investing activities for the nine months ended September 30, 2024 was $1.4 million, a decrease of $9.3 million from $10.7 million for the nine months ended September 30, 2023. The decrease was primarily due to a $9.0 million decrease in cash paid for acquisitions, net of cash acquired and a $1.5 million decrease in cash paid for equity method investments, partially offset by a $1.2 million increase in purchases of property and equipment.
Changes in Cash Flows from Financing Activities
Net cash used in financing activities for the nine months ended September 30, 2024 was $3.2 million, an increase of $1.8 million from $1.4 million for the nine months ended September 30, 2023. The increase was primarily due to a $10.3 million increase in repayment of debt related to prepayments of $10.0 million prepayment of the Financing Agreement during 2024 (See Note 7, Long-Term Debt, to the Condensed Consolidated Financial Statements included in Part I, Item 1, Financial Statements, of this Quarterly Report on Form 10-Q), partially offset by a $8.6 million increase in proceeds from registered public offering of common stock, net of issuance costs (See Note 9, Stockholders’ Equity (Deficit), to the Condensed Consolidated Financial Statements included in Part I, Item 1, Financial Statements, of this Quarterly Report on Form 10-Q).
Paycheck Protection Program Loan
On August 5, 2020, the Company received loan proceeds of approximately $5.1 million from a financial institution pursuant to the Paycheck Protection Program established by the Coronavirus Aid, Relief, and Economic Security Act, of which $3.5 million was subsequently forgiven. The PPP Loan matures on August 5, 2025 and bears interest at a fixed rate of 1.00%. Principal and interest payments are payable monthly, and as of September 30, 2024, the amount outstanding under the PPP Loan was $0.4 million.
For additional information regarding the PPP Loan, refer to Note 7, Long-Term Debt, to the Condensed Consolidated Financial Statements included in Part I, Item 1, Financial Statements, of this Quarterly Report on Form 10-Q.
Blue Torch Financing and Warrant Agreement
On August 9, 2022, we entered into a financing agreement and warrant agreement with Blue Torch, pursuant to which, among other things, Blue Torch agreed to extend an approximately $32.2 million senior secured term loan (the “Financing Agreement”). The Financing Agreement is secured by a first priority security interest in substantially all assets of us and our subsidiaries.
For additional information regarding the Financing Agreement, refer to Note 7, Long-Term Debt, to the Condensed Consolidated Financial Statements included in Part I, Item 1, Financial Statements, of this Quarterly Report on Form 10-Q.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements, as defined by applicable rules and regulations of the SEC, that are reasonably likely to have a current or future material effect on our financial condition, results of operations, liquidity, capital expenditures, or capital resources.
U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the year. We base our estimates and assumptions on current facts, historical experience and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of revenues and expenses. Actual results could differ from those estimates.
There have been no material changes to our critical accounting policies since the 2023 10-K. For a description of critical accounting policies that affect our significant judgments and estimates used in the preparation of our condensed consolidated financial statements, see Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of the 2023 10-K.
JOBS Act Accounting Election
We are an “emerging growth company,” as defined in the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have elected to use this extended transition period until we are no longer an emerging growth company or until we affirmatively and irrevocably opt out of the extended transition period. Accordingly, our consolidated financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.
New Accounting Pronouncements
See discussion under Note 2, Significant Accounting Policies, to the Condensed Consolidated Financial Statements included in Part I, Item 1, Financial Statements, of this Quarterly Report on Form 10-Q for information on new accounting pronouncements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As a smaller reporting company, we are not required to provide the information required by this Item.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, refers to controls and other procedures that are designed to provide reasonable assurance that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to provide reasonable assurance that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Because there are inherent limitations in all control systems, a control system, no matter how well conceived and operated, can provide only reasonable, as opposed to absolute, assurance that the objectives of the control system are met. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2024. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, due to the material weaknesses in internal control over financial reporting described below, our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were not effective at a reasonable assurance level.
Previously Reported Material Weaknesses in Internal Control over Financial Reporting
As previously disclosed in our 2023 10-K, in connection with the audit of our financial statements for the fiscal year ended December 31, 2023, we identified the following material weaknesses, which still exist as of September 30, 2024. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our financial statements will not be prevented or detected on a timely basis. We identified a material weakness in our internal control over financial reporting related to insufficient resources needed to fully implement our internal control risk assessment process, evaluate the technical accounting aspects of certain material transactions and effectively design and implement certain process level controls. We also identified a material weakness regarding the risk assessment process related to information technology general controls and activities of service organizations, the design and implementation of logical access, segregation of duties and program change controls and certain process level controls related to information used in the execution of those controls that impact our financial reporting processes.
These material weaknesses resulted in the immaterial misstatement of our consolidated financial statements for the year ended December 31, 2023 and for quarterly periods in 2023. Additionally, these material weaknesses could result in a misstatement of the account balances or disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected.
Remediation Plan
We have implemented, or are in the process of implementing, measures designed to remediate the control deficiencies that led to the material weaknesses.
•We have hired finance and accounting personnel with the appropriate level of knowledge and experience to establish and maintain internal control over financial reporting.
•We have designed and implemented controls over our internal control risk assessment process to identify and assess risk and implement or enhance controls to mitigate those risks.
•We have redesigned and implemented our information technology (“IT”) general controls, including logical access controls and program change controls, and hired additional IT personnel.
•We have redesigned and implemented our controls related to the assessment of service organizations and segregation of duties.
•We designed and implemented control enhancements to evaluate the technical accounting aspects of material transactions.
•We designed and implemented control enhancements across certain business process-level controls, including the information used in the operation of the control.
•We engaged third-party consultants to assist management in evaluating the design and performing operating effectiveness testing of certain internal controls over financial reporting.
We will consider the material weaknesses to be remediated once the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. In addition, as we continue to monitor the effectiveness of our internal control over financial reporting, we may implement additional internal control changes as we deem necessary.
Changes in Internal Control over Financial Reporting
Other than as described above, there were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) identified during the evaluation that occurred during our quarter ended September 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
See discussion under Note 8, Commitments and Contingencies, to the Condensed Consolidated Financial Statements included in Part I, Item 1, Financial Statements, of this Quarterly Report on Form 10-Q, which is incorporated herein by reference.
Item 1A. Risk Factors
We are supplementing the risk factors previously disclosed in Part I, Item 1A, Risk Factors, of our 2023 10-K and Part II, Item 1A, Risk Factors, of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2024 (“Q2 2024 10-Q”) to include the following risk factor, which should be read in conjunction with the other risk factors presented in our 2023 10-K and Q2 2024 10-Q.
We have failed to comply with the continued listing requirements of Nasdaq, our common stock may be delisted and the price of our common stock and our ability to access the capital markets could be negatively impacted.
On September 24, 2024, we received a written notice from the staff of the Listing Qualifications Department of Nasdaq that for 30 consecutive business days from August 9, 2024 to September 23, 2024, the closing bid price of our common stock listed on the Nasdaq Global Market was below $1.00 and no longer meets the minimum bid price requirement for continued listing on the Nasdaq Global Market under Nasdaq Listing Rules 5450(a)(1), which requires a minimum bid price of $1.00 per share (the “Minimum Bid Price Requirement”). The staff also notified us that for 30 consecutive business days from August 8, 2024 to September 23, 2024 our Market Value of Listed Securities (“MVLS”) was below the $50,000,000 minimum required for continued listing on the Nasdaq Global Market under Nasdaq Listing Rule 5450(b)(2)(A). The notice had no immediate effect on the listing or trading of our common stock.
In accordance with Nasdaq Listing Rules 5810(c)(3)(A) and 5810(c)(3)(C), we have a period of 180 calendar days or until March 24, 2025, to regain compliance with the Minimum Bid Price Requirement and the MVLS Requirement or we will receive written notification that our securities are subject to delisting. We are considering options to resolve the non-compliance with the Minimum Bid Price Requirement and MVLS Requirement. However, there can be no assurance that we will regain or maintain compliance with the applicable continued listing standards set forth in the Nasdaq Listing Rules. Delisting from Nasdaq could make trading our common stock more difficult for investors, potentially leading to declines in our share price and liquidity. In addition, without a Nasdaq market listing, stockholders may have a difficult time getting a quote for the sale or purchase of our common stock, the sale or purchase of our common stock would likely be made more difficult and the trading volume and liquidity of our common stock could decline.
In the event we are delisted from Nasdaq, the only established trading market for our common stock would be eliminated, and we would be forced to list our shares on the OTC Markets or another quotation medium, depending on our ability to meet the specific listing requirements of those quotation systems. As a result, an investor would likely find it more difficult to trade or obtain accurate price quotations for our shares. Delisting would likely also reduce the visibility, liquidity, and value of our common stock, reduce institutional investor interest in our company, and may increase the volatility of our common stock. Delisting could also cause a loss of confidence of potential industry partners, lenders, and employees, which could further harm our business and our future prospects.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
(c)On September 5, 2024, David Cane, our Chief Customer Officer, adopted a 10b5-1 trading arrangement providing for the sale from time to time of an aggregate of up to 99,328 shares of common stock. The trading plan is intended to satisfy the affirmative defense in Rule 10b5-1(c). The duration of the trading plan is until December 12, 2025, or earlier if all transactions under the trading plan are completed.
No other officers, as defined in Rule 16a-1(f), or directors adopted or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement,” as defined in Regulation S-K Item 408, during the last fiscal quarter.
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* Filed herewith.
** Furnished herewith.
† Certain schedules have been omitted pursuant to Item 601(a)(5) of Regulation S-K under the Securities Act. The Company agrees to furnish supplementally any omitted schedules to the Securities and Exchange Commission upon request.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
