BURU 10-Q/A
Nuburu, Inc. (BURU)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Amendment No. 1)
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
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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.
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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 November 8, 2024, the registrant had
Nuburu, Inc. (referred to herein as the "Company," "Nuburu," "we," "us," or "our") is filing this Amendment No. 1 on Form 10-Q (this "Amendment No. 1") to amend our Quarterly Report on Form 10-Q for the three months ended March 31, 2024, originally filed with the Securities and Exchange Commission (the “SEC”) on May 15, 2024 (the “Original 10-Q”).
Background of Restatement
The purpose of this Amendment No. 1 is to restate amounts included in the Company's previously issued financial statements as of March 31, 2024 to (i) reclassify convertible preferred stock that is redeemable at a future point in time from permanent equity to mezzanine equity and (ii) increase the carrying value of such preferred stock to reflect the redemption value of the outstanding preferred stock. Additionally, the impact of the loss recorded during the year ended December 31, 2022 related to the accounting for the Legacy Nuburu Convertible Notes (as described in Note 8 in the condensed consolidated financial statements) at fair value is reflected as an adjustment to accumulated deficit for these periods.
The restatement had no impact on total net cash flows from operating, investing or financing activities.
Restatement of Previously Issued Consolidated Financial Statements
The Company filed an Amendment No. 4 to its previously filed annual report on Form 10-K/A as of and for the year ended December 31, 2023 on November 8, 2024 to restate its previously issued financial statements as of and for the year ended December 31, 2023, the comparative period therein as of and for the year ended December 31, 2022 and for each of the quarterly periods ended March 31, 2023, June 30, 2023 and September 30, 2023. Accordingly, investors should rely solely on such amended filing for financial statements and other financial data relating to these periods.
For additional information related to the March 31, 2024 restatement, see Note 14, “Restatement of Previously Issued Consolidated Financial Statements and Previously Issued Unaudited Interim Condensed Consolidated Financial Statements ” of the condensed consolidated financial statements. Additionally, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources” included in this Amendment No. 1 on Form 10-Q/A is being amended to reflect the effect of the restatement described above on accumulated deficit.
The Company has attached to this Form 10-Q/A updated certifications executed as of the date of this Amendment by the Principal Executive Officer and Principal Financial Officer as required by Sections 302 and 906 of the Sarbanes Oxley Act of 2002. These updated certifications are attached as Exhibits 31.1 and 32.1 to this Amendment.
Internal Control Considerations
In connection with the restatement, our management has assessed the effectiveness of our internal control over financial reporting. The Audit Committee of the Company's Board of Directors, with concurrence of management, has concluded that, in light of the errors described above, a material weakness existed in the Company's internal controls over financial reporting as of March 31, 2024 and December 31, 2023. Management plans to enhance processes by increasing the number of accounting professionals with the necessary skill sets, providing ongoing training for key personnel, and designing and implementing appropriate risk assessment and internal control procedures. For a discussion of management's consideration of our disclosure controls and procedures, internal controls over financial reporting and the material weakness identified, see Item 4. Controls and Procedures of this Amendment No. 1 on Form 10-Q/A.
NUBURU, INC.
FORM 10-Q
TABLE OF CONTENTS
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (this "Quarterly Report") contains forward-looking statements within the meaning of 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”), which statements involve substantial risk and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans, or intentions. Forward-looking statements contained in this Quarterly Report include, but are not limited to, statements about:
Forward-looking statements are not guarantees of performance. You should not put undue reliance on these statements, which speak only as of the date hereof. The forward-looking statements contained in this Quarterly Report are based on our current expectations and beliefs concerning future developments and their potential effects on our business. There can be no assurance that future developments affecting our business will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control), or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors under the heading "Risk Factors" in this Quarterly Report and in our Annual Report on Form 10-K for the year ended December 31, 2023 (our "Annual Report"), as amended, as well as the following important factors:
3
Should one or more of these risks or uncertainties materialize, or should any of the assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We do not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
Frequently Used Terms
Unless otherwise stated in Item 1. Financial Statements and accompanying footnotes, or the context otherwise requires, references in this Quarterly Report to:
“Business Combination” are to the business combination of Legacy Nuburu with a subsidiary of Tailwind, with Legacy Nuburu surviving such business combination as a wholly owned subsidiary of Tailwind;
“Business Combination Agreement” are to that certain Business Combination Agreement, dated as of August 5, 2022, by and among Tailwind, Nuburu and Merger Sub, Inc., as the same has been or may be amended, modified, supplemented or waived from time to time;
“Closing” are to the consummation of the Transactions;
“Closing Date” are to January 31, 2023, the date on which the Transactions were consummated;
“Exchange Ratios” are to the quotients as defined in, and calculated in accordance with, the Business Combination Agreement, which was included as an exhibit to our Current Report on Form 8-K (File No. 001-39489) filed with the SEC on February 6, 2023;
“Legacy Nuburu” are to Nuburu Subsidiary, Inc., a Delaware corporation (f/k/a Nuburu, Inc. before the Closing Date);
"Public Warrants" are to the 16,710,785 whole warrants of the Company sold to public investors in the Tailwind IPO (defined below);
“SEC” are to the Securities and Exchange Commission;
“Tailwind” are to Tailwind Acquisition Corp, a Delaware corporation and our predecessor company prior to the consummation of the Transactions, which changed its name to Nuburu, Inc. following the consummation of the Transactions, and its consolidated subsidiaries;
“Tailwind IPO” are to the initial public offering by Tailwind which closed on September 9, 2020; and
“Transactions” are to the Business Combination, together with the other transactions contemplated by the Business Combination Agreement and the related agreements.
Unless the context otherwise requires, all references in this section to “Nuburu,” the “Company,” “we,” “us,” “our,” and other similar terms refer to: (i) Legacy Nuburu and its subsidiaries prior to the Closing, and (ii) Nuburu, Inc., a Delaware corporation, and its consolidated subsidiary, Nuburu Subsidiary, Inc., after the Closing.
4
PART 1 – FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
NUBURU, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (As Restated)
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March 31, |
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December 31, |
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(As Restated) (Unaudited) |
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(As Restated) |
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ASSETS |
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Current assets |
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Cash and cash equivalents |
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$ |
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$ |
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Accounts receivable |
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Inventories, net of reserve of $ |
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Deferred financing costs |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Right-of-use assets |
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Other assets |
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TOTAL ASSETS |
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$ |
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$ |
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LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT |
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Current liabilities |
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Accounts payable |
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$ |
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$ |
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Accrued expenses |
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Current portion of operating lease liability |
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Contract liabilities |
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Current portion of notes payable |
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Total current liabilities |
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Operating lease liability |
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Convertible notes payable |
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Warrant liabilities |
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TOTAL LIABILITIES |
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Convertible preferred stock, $ |
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Stockholders’ Deficit |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated deficit |
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Total Stockholders’ Deficit |
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TOTAL LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT |
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$ |
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$ |
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The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
5
NUBURU, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(UNAUDITED)
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Three Months Ended |
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2024 |
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2023 |
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Revenue |
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$ |
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$ |
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Cost of revenue |
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Gross margin |
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Operating expenses: |
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Research and development |
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Selling and marketing |
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General and administrative |
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Total operating expenses |
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Loss from operations |
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Interest income |
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Interest expense |
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Other income, net |
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Loss before provision for income taxes |
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$ |
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Provision for income taxes |
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Net loss and comprehensive loss |
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Net loss per common share, basic and diluted |
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$ |
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$ |
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Weighted-average common shares used to compute net loss per common share, basic and diluted |
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The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
6
NUBURU, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT)
(UNAUDITED) (As Restated)
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Convertible |
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Common Stock |
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Shares |
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Amount |
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Shares |
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Amount |
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Additional |
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Accumulated |
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Total |
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Balance as of December 31, 2023 |
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$ |
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$ |
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$ |
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$ |
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Issuance of Common Stock |
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— |
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— |
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— |
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Issuance of Common Stock from releases of restricted stock units |
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— |
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— |
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— |
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— |
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Restricted stock units used for tax withholdings |
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— |
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— |
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( |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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( |
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Balance as of March 31, 2024 |
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$ |
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$ |
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$ |
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$ |
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Convertible |
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Common Stock |
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Shares(1) |
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Amount |
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Shares(1) |
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Amount |
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Additional |
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Accumulated |
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Total |
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Balance as of December 31, 2022 |
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$ |
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$ |
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$ |
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$ |
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Issuance of Common Stock and Series A preferred stock upon conversion of convertible notes in connection with the reverse recapitalization |
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— |
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Conversion of Legacy Nuburu convertible preferred stock into Common Stock in connection with the reverse recapitalization |
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( |
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— |
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Issuance of Common Stock and Series A preferred stock upon the reverse recapitalization, net of issuance costs |
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— |
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Issuance of Common Stock and Series A preferred stock to satisfy certain reverse recapitalization costs |
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— |
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Recognition of Public Warrants upon the reverse recapitalization |
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— |
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— |
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— |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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Balance as of March 31, 2023 |
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$ |
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$ |
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$ |
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$ |
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$ |
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(1)
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
7
NUBURU, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
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Three Months Ended |
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2024 |
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2023 |
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Cash Flows from Operating Activities: |
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Net loss |
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$ |
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$ |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Depreciation and amortization |
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Stock-based compensation |
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Change in fair value of warrant liabilities |
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Inventory reserve adjustments |
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Amortization of debt discount |
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— |
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Amortization of deferred financing costs |
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— |
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Changes in operating assets and liabilities: |
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Accounts receivable |
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Inventories |
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Prepaid expenses and other current assets |
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Operating lease right-of-use asset |
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Accounts payable |
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Accrued expenses |
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Contract liabilities |
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Operating lease liability |
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Net cash used in operating activities |
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Cash Flows from Investing Activities: |
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Purchase of property and equipment |
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— |
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Net cash used in investing activities |
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— |
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Cash Flows from Financing Activities: |
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Proceeds from issuance of common stock |
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— |
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Restricted stock units used for tax withholdings |
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Proceeds from the issuance of Legacy Nuburu preferred stock |
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— |
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Proceeds from reverse recapitalization |
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— |
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Payment of transaction costs related to the reverse recapitalization |
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— |
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Proceeds from issuance of Legacy Nuburu convertible promissory notes |
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— |
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Repayment of related party convertible promissory notes |
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— |
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Payment of deferred financing costs |
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Net cash provided by financing activities |
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NET CHANGE IN CASH DURING THE PERIOD |
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CASH AND CASH EQUIVALENTS ―BEGINNING OF PERIOD |
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CASH AND CASH EQUIVALENTS ―END OF PERIOD |
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$ |
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$ |
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: |
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Cash paid for interest |
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$ |
— |
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$ |
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Cash paid for income taxes |
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$ |
— |
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$ |
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SUPPLEMENTAL NON-CASH INVESTING AND FINANCING ACTIVITIES: |
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Transfer of property and equipment from inventory |
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$ |
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$ |
— |
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Purchase of property and equipment in accounts payable and accrued expenses |
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$ |
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$ |
— |
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Deferred financing costs included in accounts payable and accrued expenses |
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$ |
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$ |
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Transaction costs related to the reverse recapitalization not yet paid |
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$ |
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$ |
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Issuance of Common Stock upon conversion of preferred stock in connection with the reverse recapitalization |
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$ |
— |
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$ |
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The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
8
NUBURU, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. BACKGROUND AND ORGANIZATION
Nuburu, Inc. (“Nuburu” or the “Company”) and its wholly-owned subsidiary Nuburu Subsidiary, Inc., is a leading innovator in high-power, high-brightness blue laser technology that is focused on bringing breakthrough improvements to a broad range of high-value applications including welding and 3D printing.
Nuburu was originally incorporated in Delaware on July 21, 2020 under the name Tailwind Acquisition Corp. (“Tailwind”) as a special purpose acquisition company, formed for the purpose of effecting an initial business combination with one or more target businesses. On September 9, 2020 (the “IPO Closing Date”), we consummated our initial public offering (the “IPO”). On January 31, 2023, we consummated a business combination with Nuburu Subsidiary, Inc. f/k/a Nuburu, Inc. (“Legacy Nuburu”), a privately held operating company which merged into our subsidiary Compass Merger Sub, Inc. (the “Business Combination”) and changed our name to “Nuburu, Inc.,” and we became the owner, directly or indirectly, of all of the equity interests of Nuburu Subsidiary, Inc. and its subsidiaries. In light of the fact that the Business Combination has closed and our ongoing business will be the business formerly operated by Legacy Nuburu, these financial statements primarily include information regarding Legacy Nuburu’s business.
Throughout the notes to the condensed consolidated financial statements, unless otherwise noted, the “Company,” “we,” “us” or “our” and similar terms refer to Legacy Nuburu prior to the consummation of the Business Combination, and Nuburu and its subsidiaries after the consummation of the Business Combination.
Going Concern and Liquidity
The Company devotes its efforts to business planning, research and development, and raising capital. The Company is an emerging growth company that has not yet achieved full commercialization and is expected to incur losses until it does.
From inception through March 31, 2024, the Company has incurred operating losses and negative cash flows from operating activities. For the three months ended March 31, 2024 and 2023, the Company has incurred operating losses, including net losses of $
Until the Company can generate sufficient revenue to cover its operating expenses, working capital, and capital expenditures, it will rely on private and public capital raising efforts.
The Company plans to finance its operations with proceeds from the issuance and sale of equity securities or debt; however, there is no assurance that management's plans to obtain additional debt or equity financing will be successfully implemented or implemented on terms favorable to the Company.
Certain Significant Risks and Uncertainties
The Company’s current business activities consist of business planning, research and development efforts to design and develop high-power, high-brightness blue laser technology, and capital raising to finance the Company through full commercialization. The Company is subject to the risks associated with such activities, including the need to further develop its technology and its marketing and distribution channels; further develop its supply chain and manufacturing; and hire additional management and other key personnel. Successful completion of the Company’s development program and, ultimately, the attainment of profitable operations, are dependent upon future events, including its ability to access potential markets and secure long-term financing.
The Company’s future results of operations involve a number of risks and uncertainties. Factors that could affect the Company’s future operating results and cause actual results to vary materially from expectations include, but are not limited to, rapid technological change, competition from substitute products and larger companies, protection of proprietary technology, ability to maintain distributor relationships and dependence on key individuals.
Restatement
See Note 14, “Restatement of Previously Issued Consolidated Financial Statements and Previously Issued Unaudited Interim Condensed Consolidated Financial Statements ”, for additional information regarding the restatement of amounts included in the Company's previously issued financial statements as of March 31, 2024.
9
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X of the SEC. Certain information or footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results, and cash flows for the periods presented.
The results of operations for the three months ended March 31, 2024 and 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024 or any future period. These unaudited condensed consolidated financial statements and their notes should be read in conjunction with the Company’s Annual Report on Form 10-K as filed with the SEC on April 15, 2024, and as subsequently amended.
Principles of Consolidation
The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. All significant intercompany balances and transactions have been eliminated in consolidation.
Reclassification
Certain prior period balances in the consolidated statements of cash flows have been combined or reclassified to conform to current period presentation pursuant to Rule 10-01(a)(2) of Regulation S-X of the SEC. Such reclassifications had no impact on net income, cash flows or shareholders' equity previously reported.
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Significant Accounting Policies
Lessor Accounting
Beginning in 2024, the Company has begun to lease certain of its constructed lasers to its customers, which the Company accounts for under the Financial Accounting Standards Board's (the "FASB") Accounting Standards Codification ("ASC") Topic 842 - Leases ("ASC 842"). The Company typically transfers legal ownership of the lasers to its customers at the end of the lease.
The sales and cost of sales are recognized at the inception of the lease, which is when control is transferred to the lessee. The Company accounts for the transfer of control as a sales type lease in accordance with ASC 842-10-25-2. The underlying asset is derecognized, and revenue is recorded when collection of payments is probable. This is in accordance with the revenue recognition principle in FASB ASC 606 - Revenue from contracts with customers. The investment in a sales-type lease consists of the sum of the minimum lease payments receivable less any unearned interest income and estimated executory costs. Minimum lease payments are part of the lease agreement between the Company (as the lessor) and the customer (as the lessee). The discount rate implicit in the lease is used to calculate the present value of minimum lease payments. The minimum lease payments consist of the gross lease payments net of executory costs and contingent rentals, if any. Unearned interest is amortized to income over the lease term to produce a constant periodic rate of return on the net investment in the lease. While
10
revenue is recognized at the inception of the lease, the cash flow from the sales-type lease occurs over the course of the lease, which results in interest income and reduction of receivables.
During the three months ended March 31, 2024, the Company recognized $
Recently Issued Accounting Pronouncements
In December 2023, the FASB issued ASU 2023-09 — Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The ASU requires that an entity disclose specific categories in the effective tax rate reconciliation as well as reconciling items that meet a quantitative threshold. Further, the ASU requires additional disclosures on income tax expense and taxes paid, net of refunds received, by jurisdiction. The new standard is effective for annual periods beginning after December 15, 2024 on a prospective basis with the option to apply it retrospectively. Early adoption is permitted. The adoption of this guidance will result in the Company being required to include enhanced income tax related disclosures. The Company is currently evaluating the impact this standard will have on its consolidated financial statements.
NOTE 3. REVERSE RECAPITALIZATION
On January 31, 2023, upon the consummation of the Business Combination, all holders of
Legacy Nuburu Class / Series |
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Exchange Ratio |
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Legacy Nuburu Common Stock |
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Legacy Nuburu Series A Preferred Stock |
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Legacy Nuburu Series A-1 Preferred Stock |
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Legacy Nuburu Series B Preferred Stock |
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Legacy Nuburu Series B-1 Preferred Stock |
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Legacy Nuburu Series C Preferred Stock |
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This resulted in
The other related events that occurred in connection with the Closing are summarized below:
11
After giving effect to the Business Combination as described above, the number of shares of Common Stock and Series A preferred stock issued and outstanding immediately following the consummation of the Business Combination was as follows:
|
|
Common Shares |
|
|
Series A |
|
||
Tailwind public shares |
|
|
|
|
|
— |
|
|
Tailwind Sponsor Class B shares |
|
|
|
|
|
— |
|
|
Total shares of Tailwind common stock outstanding immediately prior to the Business Combination |
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|
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— |
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|
Less: forfeiture of the Tailwind Sponsor Class B Common Stock other than |
|
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( |
) |
|
|
— |
|
Tailwind Sponsor Series A Preferred Stock |
|
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— |
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Tailwind public shares issuance of Series A Preferred Stock |
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— |
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Legacy Nuburu shares |
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Lincoln Park Commitment Shares |
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— |
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Anzu Warrant Shares |
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— |
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Total shares of Nuburu Common Stock outstanding immediately after the Business Combination(1)(2) |
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(1) Excludes
(2) Excludes
The Business Combination is accounted for as a reverse recapitalization in accordance with GAAP because Legacy Nuburu has been determined to be the accounting acquirer. Under this method of accounting, Tailwind, which is the legal acquirer, is treated as the accounting acquiree for financial reporting purposes and Legacy Nuburu, which is the legal acquiree, is treated as the accounting acquirer. Accordingly, the consolidated assets, liabilities and results of operations of Legacy Nuburu have become the historical financial statements of Nuburu, and Tailwind’s assets, liabilities and results of operations have been consolidated with Legacy Nuburu’s beginning on the acquisition date. For accounting purposes, the financial statements of Nuburu represent a continuation of the financial statements of Legacy Nuburu with the Business Combination being treated as the equivalent of Legacy Nuburu issuing stock for the net assets of Tailwind, accompanied by a recapitalization. The net assets of Tailwind are stated at historical costs and no goodwill or other intangible assets have been recorded. Operations prior to the Business Combination will be presented as those of Legacy Nuburu in future reports of Nuburu.
Legacy Nuburu was determined to be the accounting acquirer based on evaluation of the following facts and circumstances:
All periods prior to the Business Combination have been retrospectively adjusted using the Exchange Ratios for the equivalent number of shares outstanding immediately after the Closing to effect the reverse recapitalization.
In connection with the Closing of the Business Combination, the Company received net proceeds from the Business Combination totaling $
12
NOTE 4. BALANCE SHEET COMPONENTS
Inventories, Net
Inventories, net as of March 31, 2024 and December 31, 2023 consisted of the following:
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March 31, |
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December 31, |
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Raw materials and supplies |
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$ |
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$ |
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Work-in-process |
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Finished goods |
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Inventories, gross |
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Less: inventory reserve |
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( |
) |
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( |
) |
Inventories, net |
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$ |
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|
$ |
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||
During the three months ended March 31, 2024 and 2023, the Company recorded net lower of cost or net realizable value charges of $
Property and Equipment, Net
Property and equipment, net as of March 31, 2024 and December 31, 2023 consisted of the following:
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March 31, |
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December 31, |
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Machinery and equipment |
|
$ |
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$ |
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||
Leasehold improvements |
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Furniture and office equipment |
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Computer equipment and software |
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Property and equipment, gross |
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Less: accumulated depreciation and amortization |
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( |
) |
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( |
) |
Property and equipment, net |
|
$ |
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|
$ |
|
||
Depreciation and amortization expense related to property and equipment was $
Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets as of March 31, 2024 and December 31, 2023 consisted of the following:
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March 31, |
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|
December 31, |
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Prepaid insurance |
|
$ |
— |
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$ |
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Other prepaid assets |
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Other current assets |
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Total prepaid expenses and other current assets |
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$ |
|
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$ |
|
||
Accrued Liabilities
Accrued liabilities as of March 31, 2024 and December 31, 2023 consisted of the following:
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|
March 31, |
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|
December 31, |
|
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Accrued payroll and related benefits |
|
$ |
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$ |
|
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Accrued legal, accounting and professional fees |
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Accrued transaction costs related to the reverse recapitalization |
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Accrued taxes payable |
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Accrued interest |
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Other |
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|
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Total accrued expenses |
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$ |
|
|
$ |
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NOTE 5. FAIR VALUE MEASUREMENTS
Assets and liabilities recorded at fair value on a recurring basis in the balance sheets are categorized based upon the level of judgment associated with the inputs used to measure their fair values. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the
13
principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, as follows:
Level 1: Valuations based on quoted prices for identical assets and liabilities in active markets.
Level 2: Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.
Level 3: Valuations based on unobservable inputs reflecting our own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment.
The assets’ or liabilities’ fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
The Company’s financial instruments that are carried at fair value consist of Level 1 and Level 3 assets and liabilities. Level 1 assets include highly liquid bank deposits and money market funds, which were not material as of March 31, 2024 and December 31, 2023. Level 1 liabilities include the Public Warrants and are classified as Level 1 due to the use of an observable market quote in an active market. The Company measured the fair value of the Public Warrants on the date of the Closing of the Business Combination based on the close price of the Public Warrant price. Level 3 liabilities include the Junior Note Warrants and Legacy Nuburu Convertible Notes (each as defined in Note 8) and are classified as Level 3 due to the use of unobservable inputs in the valuation of the liability, as further described in Note 10. During the three months ended March 31, 2024 and 2023,
The gains and losses from re-measurement of Level 1 and Level 3 financial liabilities are recorded as part of other (expense) income, net in the condensed consolidated statements of operations and comprehensive loss. During the three months ended March 31, 2024 and 2023, the Company recorded gains of $
The following tables set forth the fair value of the Company’s financial liabilities by level within the fair value hierarchy as of March 31, 2024 and December 31, 2023:
|
|
At March 31, 2024 |
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|||||||||||||
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Level 1 |
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|
Level 2 |
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Level 3 |
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Total |
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||||
Public Warrants(1) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Junior Note Warrants |
|
|
— |
|
|
|
— |
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||
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At December 31, 2023 |
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|||||||||||||
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Level 1 |
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Level 2 |
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Level 3 |
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Total |
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||||
Public Warrants(1) |
|
$ |
— |
|
|
$ |
— |
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|
$ |
— |
|
|
$ |
— |
|
Junior Note Warrants |
|
|
— |
|
|
|
— |
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||
(1) The Public Warrants are a Level 1 fair value measurement, as noted further below and in Note 10 of these consolidated financial statements.
Level 1 Financial Liabilities
The following table sets forth a summary of the changes in fair value of the Company’s Level 1 financial liabilities:
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Three Months Ended March 31, |
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Three Months Ended March 31, |
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2024 |
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2023 |
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Fair value, beginning of period |
|
$ |
— |
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$ |
— |
|
Recognition of Public Warrants upon the reverse recapitalization |
|
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— |
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|
|
|
|
|
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— |
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|
( |
) |
|
Fair value, end of period |
|
$ |
— |
|
|
$ |
|
|
On December 12, 2023, the New York Stock Exchange American (“NYSE American”) notified the Company, and publicly announced, that the NYSE American had determined to (a) commence proceedings to delist the Company’s Public Warrants, each whole warrant exercisable to purchase one share of the Company’s common stock, par value $
14
Level 3 Financial Liabilities
Junior Note Warrants
The following table sets forth a summary of the changes in fair value of the Company's Junior Note Warrants issued in November 2023:
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Three Months Ended March 31, |
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Three Months Ended March 31, |
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||
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2024 |
|
|
2023 |
|
||
Fair value, beginning of period |
|
$ |
|
|
$ |
— |
|
|
|
|
( |
) |
|
|
— |
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|
Fair value, end of period |
|
$ |
|
|
$ |
— |
|
|
Legacy Nuburu Convertible Notes
The following table sets forth a summary of the changes in fair value of the Company's Legacy Nuburu Convertible Notes, which were cancelled and converted into shares of Legacy Nuburu common stock in connection with the Business Combination:
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Three Months Ended March 31, |
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2023 |
|
|
Fair value, beginning of period |
|
$ |
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|
Cancellation and conversion in connection with the Business Combination |
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( |
) |
Fair value as of March 31, 2023 |
|
$ |
— |
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NOTE 6. COMMITMENTS AND CONTINGENCIES
Operating Lease
The Company leases office space in Centennial, Colorado under a noncancelable operating lease agreement. The Company leases and occupies approximately
As of March 31, 2024 and March 31, 2023, the weighted-average remaining lease term was
During the three months ended March 31, 2024 and 2023, the Company recognized the following lease costs arising from the lease transaction:
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Three months ended March 31, |
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2024 |
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2023 |
|
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Operating lease cost |
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$ |
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$ |
|
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The Company recognized the following cash flow transactions arising from lease transactions:
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Three months ended March 31, |
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2024 |
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2023 |
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Cash paid for amounts included in the measurement of lease liabilities |
|
$ |
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$ |
|
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Right-of-use assets obtained in exchange for new operating lease liabilities |
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On March 31, 2024, the future payments and interest expense for the operating leases are as follows:
Year Ending December 31, |
|
Future Payments |
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|
2024 |
|
$ |
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|
2025 |
|
|
|
|
Total undiscounted cash flows |
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|
Less: imputed interest |
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|
( |
) |
Present value of lease liabilities |
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$ |
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|
15
Legal Proceedings
In the normal course of business, the Company may become involved in legal proceedings. The Company will accrue a liability for legal proceedings when it is probable that a liability has been incurred and the amount can be reasonably estimated. Significant judgment is required to determine both probability and the estimated amount. When only a range of possible loss can be established, the most probable amount in the range is accrued. If no amount within this range is a better estimate than any other amount within the range, the minimum amount in the range is accrued. At March 31, 2024 and December 31, 2023, the Company was not involved in any material legal proceedings.
Purchase Commitments
As of March 31, 2024, the Company had approximately $
NOTE 7. REVENUE
The Company’s primary revenue-generating activity involves sales of high-powered lasers and related installation services. The Company has sales to customers throughout the U.S., Europe, and Asia. All sales are settled in U.S. dollars.
The following table presents revenue disaggregated by geography:
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Three months ended March 31, |
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2024 |
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2023 |
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United States |
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$ |
|
|
$ |
|
||
Asia |
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|
|
|
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|
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Europe |
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|
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|
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Total |
|
$ |
|
|
$ |
|
||
Revenue from contracts with customers are disaggregated as follows:
|
|
Three months ended March 31, |
|
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2024 |
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2023 |
|
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Revenue recognized at a point in time |
|
$ |
|
|
$ |
|
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Revenue recognized over time |
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Total |
|
$ |
|
|
$ |
|
||
Contract liabilities consist of customer deposits that are applied to invoices as the performance obligation is performed.
|
|
Accounts Receivable |
|
|
Contract Liabilities |
|
||
January 1, 2023 |
|
$ |
|
|
$ |
|
||
December 31, 2023 |
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|
|
|
|
|
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March 31, 2024 |
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|
|
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|
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During the three months ended March 31, 2024 and 2023, the Company recognized $
NOTE 8. NOTES AND CONVERTIBLE NOTES PAYABLE
As of March 31, 2024 and December 31, 2023, the Company's outstanding debt consisted of the following. Please refer to the remainder of this footnote for more information on the debt issued during the periods presented.
|
|
March 31, |
|
|
December 31, |
|
||
Junior Notes Issued November 2023 |
|
$ |
|
|
$ |
|
||
Unamortized debt discount |
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|
( |
) |
|
|
( |
) |
Unamortized deferred financing costs |
|
|
( |
) |
|
|
( |
) |
Current portion of notes payable |
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|
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|
||
Senior Convertible Notes Issued June 2023 |
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|
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|
||
Convertible notes payable, long-term |
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|
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|
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Total debt |
|
$ |
|
|
$ |
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||
16
Junior Notes Issued November 2023
On November 13, 2023, the Company entered into Note and Warrant Purchase Agreements (the "Junior Note Purchase Agreements") with the lenders identified therein (the "Lenders") providing for (i) zero-interest promissory notes, issued with a
The Junior Notes are junior and secured by the Company's patent portfolio pursuant to a security agreement among the parties (the "Security Agreement"). The Junior Notes will mature on the earlier of: (i) the Company closing a credit facility in principal amount of at least $
Refer to Note 10 for the Company's accounting for the Junior Note Warrants. As a result of that accounting, the Notes contain the original issue discount of $
The table below summarizes the issuance of the Junior Notes and Junior Note Warrants to related parties:
Noteholder |
|
Principal Amount of Legacy Convertible Notes |
|
|
W-G Investments LLC(1) |
|
$ |
|
|
David Seldin(2) |
|
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|
|
Ron Nicol(3) |
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|
|
CST Global LLC(4) |
|
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Curtis N Maas Revocable Trust(5) |
|
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|
|
Ake Almgren(6) |
|
|
|
|
(1)
(2)
(3)
Senior Convertible Notes Issued June 2023
On June 12, 2023 and June 16, 2023, the Company entered into Note and Warrant Purchase Agreements (the “Senior Convertible Note Purchase Agreements”) with certain investors (each, an “Investor”) for the sale of (i) convertible promissory notes (“Senior Convertible Notes”) in the aggregate principal amount of $
The Senior Convertible Notes are senior, secured obligations of the Company, which became secured by the Company's patent portfolio per the Security Agreement as of November 2023, bear interest at the rate of
The table below summarizes the sale of the Senior Convertible Notes and Senior Note Warrants to related parties:
Investor |
|
Principal Amount of Convertible Notes |
|
|
Wilson-Garling 2023 Family Trust(1) |
|
$ |
|
|
David Seldin(2) |
|
|
|
|
Eunomia, LP(3) |
|
|
|
|
CST Global LLC(4) |
|
|
|
|
Curtis N Maas Revocable Trust(5) |
|
|
|
|
(1)
17
(2)
(3)
(4)
(5)
Legacy Nuburu Convertible Notes
Over the course of multiple closings in March, August and December 2022 and January 2023, Legacy Nuburu issued and sold Company Notes payable to various investors with aggregate gross proceeds of $
18
The table below summarizes the sale of the Company Notes to related parties.
Noteholder |
|
Principal Amount of Legacy Convertible Notes |
|
|
W-G Investments LLC(1) |
|
$ |
|
|
David Seldin(2) |
|
|
|
|
Ron Nicol(3) |
|
|
|
|
CST Global LLC(4) |
|
|
|
|
Curtis N Maas Revocable Trust(5) |
|
|
|
|
Ake Almgren(6) |
|
|
|
|
(2)
(3)
(4)
(5)
(6)
NOTE 9. CONVERTIBLE PREFERRED STOCK
Legacy Nuburu Preferred Stock Financing
In multiple closings in December 2021 and January 2022, Legacy Nuburu sold an aggregate of
Series A Preferred Stock
Ranking
The Company’s Preferred Stock ranks senior to the Company’s Common Stock with respect to rights on the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company.
Dividends
Holders of the Company’s Preferred Stock participate, on an as-converted basis (without regard to any conversion limitations) in all dividends paid to the holders of the Company’s Common Stock.
Conversion Rights
The Preferred Stock is convertible at any time into Common Stock at a conversion rate equal to $
Any conversion will be settled only in shares of Common Stock; provided, that, upon any conversion that would result in the holders beneficially owning greater than
19
Mandatory Conversion
If the VWAP is greater than
Voting Rights
The holders of Preferred Stock are not entitled to vote at or receive notice of any meeting of stockholders, except the holders of Preferred Stock are entitled to certain consent rights on matters related to (i) the creation or authorization of the creation of any equity or debt securities of the Company that rank senior or equal to certain rights of the Preferred Stock and (ii) the authorization of any adverse change to the powers, preferences, or special rights of the Preferred Stock set forth in the Company’s Certificate of Incorporation or Bylaws, and shall have voting rights as required by law.
Redemption
On the second anniversary of the Closing Date, or January 31, 2025 (the “Test Date”), the Company is obligated to redeem the maximum portion of the Preferred Stock permitted by law in cash at an amount equal to the Original Issuance Price as of such date if the Conversion Price exceeds the VWAP. If, on the Test Date, the Conversion Price is equal to or less than the VWAP, the Company must convert all shares of Preferred Stock then outstanding into shares of the Company’s Common Stock at the then applicable Conversion Price. Notwithstanding the foregoing, the Company shall not be required to redeem any shares of Preferred Stock to the extent the Company does not have legally available funds to effect such redemption. The mandatory redemption and conversion provisions described herein are further subject to certain limitations detailed in the Certificate of Designations. As a result of such redemption feature, the Company recorded the Preferred Stock at its redemption value and classified the Preferred Stock as mezzanine equity on the condensed consolidated balance sheets.
Series A Preferred Stock Issuances
The Company is authorized to issue
Upon the Closing of the Business Combination, all
Additionally, upon the Closing of the Business Combination, the cancellation and conversion of all Legacy Nuburu Company Notes into shares of Legacy Nuburu common stock in accordance with its terms as of immediately prior to the Effective Time resulted in the issuance of
As of the Closing, each Legacy Nuburu stockholder waived its right to participate in the Preferred Stock Issuance (for clarity, excluding any shares received as a result of the conversion of any Legacy Company Notes prior to the Closing, which were entitled to participate in the Preferred Stock Issuance). Legacy Nuburu stockholders were entitled to receive approximately
Each Tailwind stockholder who did not redeem their shares received a share of Nuburu Series A preferred stock. This resulted in the issuance of
Tailwind and the Tailwind Sponsor entered into the Sponsor Support and Forfeiture Agreement. In connection with the Business Combination, the
Wilson Sonsini Goodrich & Rosati, Professional Corporation (“WSGR”) was engaged by Legacy Nuburu to act as its counsel for the Business Combination. As partial compensation for the services provided by WSGR to Legacy Nuburu in connection with the Business Combination, the Company agreed to issue to WSGR
Legacy Nuburu entered into an engagement letter with Anzu Partners on August 30, 2022 pursuant to which Legacy Nuburu, in recognition of past Services, (i) agreed to pay $
20
Conversions
In November 2023, a holder of Series A Preferred Stock converted
NOTE 10. WARRANTS
Liability Classified Public Warrants
November 2023 Junior Note Warrants
In connection with the Junior Notes discussed in Note 8 - Notes and Convertible Notes Payable the Company issued the Junior Note Warrants to purchase up to
Based on the terms of the Junior Note Purchase Agreements, the Junior Note Warrants were evaluated under FASB ASC 815-40 - Derivatives and Hedging-Contracts in Entity's Own Equity ("ASC 815-40") and the Company concluded they did not initially meet the criteria to be classified in stockholders' equity (deficit). Specifically, there were contingent exercise provisions and settlement provisions that existed, as described above, where the number of shares available under the Junior Note Warrants may be adjusted. Because the number of outstanding common shares was not a fair value input to a fixed-for-fixed model, the Junior Note Warrants are treated as liabilities and are remeasured at each reporting date. The proceeds of $
|
|
|
Upon Issuance |
|
|
As of December 31, 2023 |
|
|
As of March 31, 2024 |
Common Stock Warrants: |
|
|
|
|
|
|
|
|
|
Stock price |
|
$ |
|
$ |
|
$ |
|||
Expected term (in years) |
|
|
|
|
|
|
|||
Expected volatility |
|
|
|
|
|
|
|||
Risk-free interest rate |
|
|
|
|
|
|
|||
Expected dividend yield |
|
|
|
|
|
|
Public Warrants
In connection with the closing of the Business Combination, Nuburu assumed the
Each whole Public Warrant entitles the registered holder to purchase one share of Common Stock at a price of $
Redemptions of Public Warrants when the price of Common Stock equals or exceeds $
If and when the Public Warrants become redeemable by the Company, it may exercise its redemption right even if the Company is unable to register or qualify the underlying securities for sale under all applicable state securities laws.
21
Redemption of Public Warrants when the price per share of Common Stock equals or exceeds $
Equity Classified Common Stock Warrants
June 2023 Senior Note Warrants
In connection with the issuance of the Senior Convertible Notes discussed in Note 8 - Notes and Convertible Notes Payable, the Company issued the Senior Note Warrants to purchase up to
As the Senior Note Warrants were part of a bundled transaction, the gross proceeds from the issuance of $
|
|
|
Upon Issuance |
Common Stock Warrants: |
|
|
|
Expected term (in years) |
|
|
|
Expected volatility |
|
|
|
Risk-free interest rate |
|
|
|
Expected dividend yield |
|
|
The allocated proceeds from the Senior Note Warrants of $
NOTE 11. STOCK-BASED COMPENSATION
As of March 31, 2024, the Company had an active stock-based incentive compensation plan and an employee stock purchase plan: the 2022 Equity Incentive Plan (the “2022 Plan”) and the 2022 Employee Stock Purchase Plan (the “ESPP”). All new equity compensation grants are issued under these two plans; however, outstanding awards previously issued under inactive plans will continue to vest and remain exercisable in accordance with the terms of the respective plans.
The 2022 Plan provides for the grant of stock and stock-based awards including stock options, restricted stock, restricted stock units, performance awards, and stock appreciation rights. As of March 31, 2024, there are approximately
Stock-Based Compensation Expense
Total stock-based compensation expense recognized in the Company’s condensed consolidated statements of operations and comprehensive loss is classified as follows:
|
|
Three months ended March 31, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Cost of revenue |
|
$ |
|
|
$ |
|
||
Research and development |
|
|
|
|
|
|
||
Selling and marketing |
|
|
|
|
|
|
||
General and administrative |
|
|
|
|
|
|
||
Total stock-based compensation expense |
|
$ |
|
|
$ |
|
||
22
The Company’s stock-based compensation expense is based on the value of the portion of stock-based payment awards that are ultimately expected to vest. During the three months ended March 31, 2024 and 2023, stock-based compensation relating to stock-based awards granted to consultants was $
Restricted Stock Units
The Company grants Restricted Stock Units ("RSUs") to its employees for their services with a liquidity event requirement. The RSUs granted to employees vest over a period of time from the grant date and are subject to the participants continuing service to the Company over the period.
|
|
RSUs |
|
|||||
|
|
Number of Shares |
|
|
Weighted Average Grant Date Fair Value |
|
||
Unvested at December 31, 2023 |
|
|
|
|
$ |
|
||
RSUs granted |
|
|
|
|
$ |
|
||
RSUs vested |
|
|
( |
) |
|
$ |
|
|
RSUs forfeited |
|
|
|
|
$ |
|
||
Unvested at March 31, 2024 |
|
|
|
|
$ |
|
||
The total grant date fair value of RSUs vested was $
As of March 31, 2024, total unrecognized stock-based compensation costs related to RSUs were $
Stock Options
The Company's outstanding stock options generally expire
|
|
Number of Stock Options Outstanding |
|
|
Weighted-Average Exercise Price |
|
|
Weighted-Average Remaining Contractual Life (Years) |
|
|
Aggregate Intrinsic Value |
|
||||
Options outstanding at December 31, 2023 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Options granted |
|
|
|
|
$ |
|
|
|
|
|
|
|
||||
Options exercised |
|
|
|
|
$ |
|
|
|
|
|
|
|
||||
Options cancelled or forfeited |
|
|
( |
) |
|
$ |
|
|
|
|
|
|
|
|||
Options outstanding at March 31, 2024 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Options exercisable at March 31, 2024 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Options vested and expected to vest at March 31, 2024 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
The weighted-average grant date fair value of options granted to employees and consultants was $
Aggregate intrinsic value represents the difference between the estimated fair value of the underlying Common Stock and the exercise price of outstanding, in-the-money options. The aggregate intrinsic value of options exercised was
As of March 31, 2024, total unrecognized stock-based compensation cost related to stock options was $
Determining the appropriate fair value of stock based awards requires the input of subjective assumptions including the fair value of the Company’s Common Stock, the expected life of the option, and expected stock price volatility. The Company used the Black Scholes option pricing model to value its stock option awards.
The Company estimates the fair value of the options utilizing the Black-Scholes option pricing model, which is dependent upon several variables, including expected option term, expected volatility of the Company’s share price over the expected term, expected risk-free interest rate over the expected option term, and expected dividend yield rate over the expected option term, and actual forfeiture rates.
23
for option grants during the three months ended March 31, 2024 and 2023, respectively, are as follows:
|
|
Three Months Ended March 31, |
||
|
|
2024 |
|
2023 |
Expected term (in years) |
|
|
||
Expected volatility |
|
|
||
Risk-free interest rate |
|
|
||
Expected dividend yield |
|
|
||
NOTE 12. INCOME TAX
Due to its current operating losses, the Company recorded
Due to the Company’s history of cumulative losses and after considering all the available objective evidence, management concluded that it is not more likely than not that all of the Company’s net deferred tax assets will be realized in the future. Accordingly, the Company’s deferred tax assets, which include net operating loss (“NOL”) carryforwards and tax credits related primarily to research and development, continue to be subject to a valuation allowance as of March 31, 2024. The Company expects to continue to maintain a full valuation allowance until there is sufficient evidence to support recoverability of its deferred tax assets.
Utilization of the NOL carryforwards and credits may be subject to a substantial annual limitation due to the ownership change limitations provided by Section 382 and Section 383 of the Internal Revenue Code of 1986, as amended, and similar state provisions. Generally, in addition to certain entity reorganizations, the limitation applies when one or more "5-percent stockholders" increase their ownership, in the aggregate, by more than
NOTE 13. NET LOSS PER SHARE
Diluted earnings per share (“EPS”) includes the dilutive effect of Common Stock equivalents and is computed using the weighted-average number of Common Stock and Common Stock equivalents outstanding during the reporting period. Diluted EPS for the three months ended March 31, 2024 and 2023 excluded Common Stock equivalents because the effect of their inclusion would be anti-dilutive or would decrease the reported loss per share.
|
|
For the Three Months Ended March 31, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Stock options outstanding |
|
|
|
|
|
|
||
Warrants to purchase Common Stock - liability classified |
|
|
|
|
|
|
||
Warrants to purchase Common Stock - equity classified |
|
|
|
|
|
— |
|
|
Unvested restricted stock units |
|
|
|
|
|
|
||
If-converted Common Stock from Series A Preferred Stock(1) |
|
|
|
|
|
|
||
If-converted Common Stock from convertible notes |
|
|
|
|
|
— |
|
|
Total |
|
|
|
|
|
|
||
(1)
NOTE 14. RESTATEMENT OF PREVIOUSLY ISSUED CONSOLIDATED FINANCIAL STATEMENTS AND PREVIOUSLY ISSUED UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Restatement Background
On October 21, 2024, the Board of Directors and management, upon the recommendation of the Audit Committee of the Board of Directors, concluded that the Company’s previously issued financial statements as of and for the year ended December 31, 2023, the comparative period therein as of and for the year ended December 31, 2022 and unaudited condensed consolidated financial statements as of and for each of the interim quarterly periods ended March 31, 2023, June 30, 2023, September 30, 2023, March 31, 2024, and June 30, 2024 should no longer be relied upon due to errors that are described below and that such financial statements should be restated. The Company evaluated the materiality of these errors both qualitatively and quantitatively in accordance with Staff Accounting Bulletin (“SAB”) No. 99, Materiality and SAB No. 108, Considering the Effects of Prior Year Misstatements in Current Year Financial Statements, and determined the effect of these corrections was material to each period discussed above. As a result, the Company has restated previously issued financial statements for year ended December 31, 2023 as reflected in Amendment No. 4 to the Annual Report on Form 10-K for the year ended December 31, 2023 filed
24
on November 8, 2024 (the “Amended 10-K”) and is restating the unaudited interim condensed consolidated financial statements for the periods ending March 31, 2024 and June 30, 2024, in accordance with ASC 250, Accounting Changes and Error Corrections.
We have determined that these errors were the result of a material weakness in internal control over financial reporting that is reported in management’s report on internal control over financial reporting as of December 31, 2023 in Part II, Item9A, “Controls and Procedures” of the Amended 10-K and Item 4 of this report.
The Company has not filed, and does not intend to file, amendments to the previously filed Quarterly Reports on Form 10-Q for the quarters ended March 31, June 30, and September, 2023, but instead has restated its unaudited interim condensed consolidated financial statements in the Amended 10-K filed November 8, 2024.
The restatements of the Company's previously issued financial statements include the (i) reclassification of convertible preferred stock that is redeemable at a future point in time from permanent equity to mezzanine equity and (ii) increase in the carrying value of such preferred stock to reflect the redemption value of the outstanding preferred stock. Additionally, the impact of the loss recorded during the year ended December 31, 2022 related to the accounting for the Legacy Nuburu Convertible Notes (as described in Note 8) at fair value is reflected as an adjustment to accumulated deficit for the restated periods.
The restatement had no impact on total net cash flows from operating, investing or financing activities.
Condensed Consolidated Balance Sheets
|
|
As of March 31, 2024 (Unaudited) |
|
|||||||||
|
|
Originally Reported |
|
|
Restatement Adjustment |
|
|
As |
|
|||
LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT |
|
|
|
|
|
|
|
|
|
|||
Convertible preferred stock, $ |
|
$ |
|
|
$ |
|
|
$ |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Stockholders’ Deficit |
|
|
|
|
|
|
|
|
|
|||
Additional paid-in capital |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Accumulated deficit |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Total Stockholders’ Deficit |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
25
NOTE 15. SUBSEQUENT EVENTS
Special Shareholder Meeting
On February 22, 2024, the Company held a Special Meeting of Stockholders where stockholders of record as of January 22, 2024 approved proposals to authorize the Company to: (i)
Securities Purchase Agreement
On April 3, 2024, the Company entered into a Securities Purchase Agreement (the “SPA”) with certain accredited investors pursuant to which such investors agreed to purchase from the Company $
Pursuant to the SPA, the Company issued to such investors warrants exercisable for an amount of Common Stock equal to
26
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The interim financial statements included in this Quarterly Report and this Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the financial statements and notes thereto for the year ended December 31, 2023, and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, contained in the Annual Report filed with the SEC on April 15, 2024, as subsequently amended by the Form 10-K/As filed with the SEC on April 29, 2024, August 12, 2024, September 6, 2024 and November 8, 2024 (as amended, the "Annual Report"). In addition to historical information, this discussion and analysis contains forward-looking statements within the meaning of 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”). These forward-looking statements are subject to risks and uncertainties, including those under “Risk Factors” in this Quarterly Report and our Annual Report that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements.
Unless otherwise indicated, references in this section to “Nuburu,” “we,” “us,” “our” and the “Company” refer to Nuburu, Inc. and its consolidated subsidiary, Nuburu Subsidiary, Inc.
The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Company Overview
Nuburu, Inc. is a leading innovator in high-power, high-brightness blue laser technology that is focused on bringing breakthrough improvements to a broad range of high-value applications, including welding and 3D printing. By delivering increased speed and quality we hope to enhance productivity and cost efficiency for manufacturers in the e-mobility, consumer electronics, aerospace and defense, and 3D printing markets as well as to find additional applications currently not yet serviced by existing laser technologies.
We have invented, patented, and developed what we believe to be the next pivotal point for manufacturing technology, with the potential to revolutionize the manufacturing industry by changing how products are made. Our technology is also aligned with the need to reduce carbon generation in manufacturing. The Nuburu laser system outperforms currently available alternatives by more efficiently coupling heat into the material being processed, thereby helping to promote a more sustainable future by using less energy and, in turn, generating less carbon in the manufacturing process.
A fundamental physical characteristic is that metals absorb blue laser light better than infrared laser light. In the case of materials such as gold, copper, silver and aluminum, the advantage of blue laser light is substantial. The better absorption results in substantial improvements in the quality of the part produced, the yield of parts during production and the speed at which the part can be produced. We believe that these advantages enable efficiencies in the overall productivity of the manufacturing line and can extend the life of the products produced. We also believe that these characteristics will be advantageous to our customers, whether in upgrading existing manufacturing processes or enabling entirely new approaches to manufacturing through the use of Nuburu’s laser systems in either industrial welding or 3D printing technology applications.
Nuburu is currently shipping blue laser systems for welding applications such as batteries, large screen displays, and cell phone components. Nuburu has over 220 granted and pending patents and patent applications globally, which include: blue laser applications such as welding, blue laser technologies, single mode blue laser technology, blue Raman laser technologies, addressable array technologies, and 3D printing using blue lasers. Notably, Nuburu has been awarded patent protection for the use of high-power blue lasers.
Given the size, complexity and value of our blue laser technology, our sales to date have come from long-term discussions between our management team and our current customers. Based on our experiences so far, we expect the approximate adoption timelines of our customers from first contact to first purchase order to range up to 22-24 months. Going forward, we intend to expand our marketing efforts and as we pursue a more widespread adoption of our blue laser technology.
We have developed and trained and expect to continue to develop and train third-party distributors that provide sales and customer support functions in their specific territory, including business development and sales, application and service support and local marketing. Our distributors are, and are expected to be, an integral part of our sales and marketing strategy. The Americas region is managed from our headquarters, but we have distributor partners located in key countries worldwide to help target current and prospective customers in Asia (particularly in China, Japan, Singapore, South Korea, India, and Taiwan) and in Europe.
We generated total revenue of $93,549 and $469,989 and had net losses of $5,700,653 and $4,767,517 during the three months ended March 31, 2024 and 2023, respectively.
We expect to incur significant expenses and operating losses for the foreseeable future, as we:
Accordingly, we may seek to fund our operations through public or private equity financings, debt financings or other sources. However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. Our failure to raise capital or enter into such other arrangements as and when needed would have a negative impact on our financial condition.
27
The Business Combination
On January 31, 2023, we consummated the Business Combination. We received net proceeds from the Business Combination totaling $3,243,079, prior to deducting transaction and issuance costs, which exceed this amount.
The Business Combination is accounted for as a reverse recapitalization for financial statement reporting purposes with Legacy Nuburu deemed to be the acquirer and Tailwind deemed to be the acquiree. Under this method of accounting, Tailwind will be treated as the acquired company for financial statement reporting purposes.
Being an SEC-registered and publicly traded company has required us to hire additional personnel and to implement procedures and processes to address public company regulatory requirements and customary practices. Compared to the operations of Legacy Nuburu, we have incurred and expect to incur additional annual expenses as a public company for, among other things, directors’ and officers’ liability insurance, director fees, and additional internal and external accounting, legal, and administrative resources, including increased personnel costs, audit and other professional service fees.
Recent Developments
Operational Efficiency and Cost Reduction Measures
In the first quarter of 2024, management initiated measures designed to improve operational efficiency and reduce costs during fiscal year 2024, which included implementing temporary furloughs of employees. Management is reallocating resources and reducing operating and general administrative expenses to more properly align the Company’s costs to anticipated near-term revenue, given the time required to qualify products with certain customers and establish long-term financing to support operations.
Special Shareholder Meeting
On February 22, 2024, we held a Special Meeting of Stockholders where stockholders of record as of January 22, 2024 approved proposals to authorize the Company to: (i) effect a reverse stock split of the Company's issued and outstanding Common Stock within a range from 1-for 30 to 1-for-75, with the exact ratio of the reverse stock split to be determined by the Company's board of directors, and (ii) issue up to $50.0 million of securities in one or more non-public offerings, where the maximum discount at which securities may be offered may be equivalent to a discount of up to 30% below the market price of the Company's Common Stock. As of the date of this report, we have not effected the reverse stock split, but intend to effect the split in the near future.
April 2024 SPA Agreement
On April 3, 2024, we entered into a Securities Purchase Agreement (the “SPA”) with certain accredited investors pursuant to which such investors agreed to purchase from the Company $3,000,000 of newly issued shares (the “Shares”) of the Company’s Common Stock, at a per Share purchase price of $0.125 per Share, or 24,000,000 shares.
Pursuant to the SPA, the Company issued to the investors warrants exercisable for an amount of Common Stock equal to 100% of the Shares, which will be exercisable for $0.1625 per share of Common Stock and have a 5-year term. The investors also have the right to nominate two directors for election to the Company’s board of directors.
Key Factors Affecting Our Performance
Commercial Launch of Products
In 2022 and early 2023, we began the production and shipment of our AO-650 laser. We announced the commercial launch of the first laser in the NUBURU BLTM series, the BL-250, in January 2023. We announced the commercial launch of the BL-1Kw in June 2023 and in the early second quarter of 2024, we have expanded our BL product line to include the BL-300. We have shifted our future focus to manufacturing and shipping the BL series.
Adoption of our Blue Laser Technology
We believe that Nuburu blue laser technology offers a superior solution to improving a variety of aspects of welding and 3D printing, particularly in the manufacturing of batteries, consumer electronics, electric vehicles, renewable energy products and displays. However, our financial results will depend on the degree to which potential and current customers recognize the benefits of our blue laser technology and invest in our products. The selection process for our products is lengthy, typically up to 22-24 months, and may require us to incur costs in pursuing opportunities with no assurance that our products will be selected.
Capital Equipment
Our business is expected to depend substantially on capital expenditures by end users, particularly by manufacturers using our products for materials processing, which includes general manufacturing, automotive (particularly electric vehicles), other transportation, aerospace, heavy industry, consumer, semiconductor, and electronics. Although applications within materials processing are broad, the capital equipment market in general is cyclical and historically has experienced sudden and severe downturns. For the foreseeable future, our operations will continue to depend upon capital expenditures by end users of materials processing equipment and will be subject to the broader fluctuations of capital equipment spending.
Recent inflationary pressures are resulting in global central banks adopting less accommodating monetary policies and increasing interest rates. Higher interest rates could impact global growth and could lead to a recession that may reduce the investment in capital equipment. In addition, higher interest rates would increase the cost of equipment financed with leases or debt.
28
Establishing Manufacturing Capacity
Nuburu’s lasers are designed to be compatible with automated manufacturing methods. Nuburu continually improves the design of its lasers as well as the automation equipment required to manufacture these systems. We expect to work to reduce waste and limit costs while developing robust manufacturing processes with the aim of enhancing our competitive advantage in the marketplace. To do this, we are incorporating the Six Sigma Lean methodologies as well as ISO quality standards to ensure we meet customer expectations. With Six Sigma, we expect to further improve the quality of our products and decrease the variations that cause rework or defects. By incorporating the 5S pillars of the Six Sigma process into our day-to-day work life, we expect to develop a streamlined productive work environment ensuring organized and improved cycle times, with the aim of reducing the cost of goods sold. Through these tools we aim to create an environment that demands quality and performance, while reducing downtime and defects that are generated from undefined processes and underutilized talent.
We anticipate that as we ramp up our manufacturing, we will require additional engineers and production personnel to build out and then operate our manufacturing capabilities.
Research and Development Expenses
We plan to continue to invest in research and development to improve our existing components and products and develop new components, products, systems and applications technology. We believe that these investments will sustain our position as a leader in the blue laser industry and will support the development of new products that can address new markets and growth opportunities. The amount of research and development expense we incur may vary from period to period.
Inflationary Pressure
The U.S. economy has experienced increased inflation recently, including as a result of expansive monetary policy. Our cost to manufacture our systems is heavily influenced by the cost of the key components and materials used in each system, cost of labor, as well as cost of equipment.
Components of Statements of Operations
Revenue
Revenue consists of revenue recognized from sales and installation services of high-powered lasers. We have customers in the United States, Europe and Asia. In all sales arrangements, revenue is recognized when control of the promised goods or services is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to receive in exchange for those goods or services.
Cost of Revenue
Cost of revenue primarily consists of the cost of materials, overhead and employee compensation associated with the manufacturing of our high-powered lasers. Product cost also includes lower of cost or net realizable value inventory (“LCNRV”) adjustments if the carrying value of the inventory is greater than its net realizable value.
Operating Expenses
Research and Development
Research and development expenses consist primarily of compensation and related costs for personnel, including stock-based compensation, employee benefits, training, travel, third-party consulting services and laboratory supplies incurred to further our commercialization development efforts. We expense research and development costs as incurred. We anticipate research and development expenses to increase significantly as we expand our product portfolio.
Selling and Marketing
Selling and marketing expenses consist primarily of compensation and related costs for our direct sales force, sales management and marketing, and include stock-based compensation, employee benefits and travel expenses. Selling and marketing expenses also include costs related to trade shows and marketing programs. We expense selling and marketing costs as incurred. We expect selling and marketing expenses to increase in future periods as we expand our sales force, marketing, and customer support organizations and increase our participation in trade shows and marketing programs.
General and Administrative
Our general and administrative expenses consist primarily of compensation and related costs for our finance, human resources and other administrative personnel, and include stock-based compensation, employee benefits and travel expenses. In addition, general and administrative expenses include our third-party consulting and advisory services, legal, audit, accounting services and facilities costs. We expect our general and administrative expenses to increase for the foreseeable
29
future as we scale headcount with the growth of our business, and as a result of operating as a public company, including compliance with the rules and regulations of the SEC, legal, audit, additional insurance expenses, investor relations activities, and other administrative and professional services.
Interest Income
Interest income consists primarily of interest income received on our cash and cash equivalents.
Interest Expense
Interest expense consists primarily of interest owed on our outstanding debt, as further described in Note 8 in the condensed consolidated financial statements included in Item 1 of this Quarterly Report.
Other Income (Expense), Net
Other income (expense), net consists primarily of changes in the fair value of our liability-classified warrants, which are re-measured to fair value at each balance sheet date with the corresponding gain or loss from the adjustment recorded as a component of other income (expense), net. Refer to Note 10 in the condensed consolidated financial statements included in Item 1 of this Quarterly Report for more information.
Results of Operations
Comparison of the three months ended March 31, 2024 and 2023
The following tables set forth our operations for the periods presented:
|
|
Three Months Ended |
|
|
|
|
||||||
|
|
2024 |
|
|
2023 |
|
|
$ Change |
|
|||
Revenue |
|
$ |
93,549 |
|
|
$ |
469,989 |
|
|
$ |
(376,440 |
) |
Cost of revenue |
|
|
856,956 |
|
|
|
1,212,437 |
|
|
|
(355,481 |
) |
Gross margin |
|
|
(763,407 |
) |
|
|
(742,448 |
) |
|
|
(20,959 |
) |
Operating expenses: |
|
|
|
|
|
|
|
|
|
|||
Research and development |
|
|
766,495 |
|
|
|
1,332,305 |
|
|
|
(565,810 |
) |
Selling and marketing |
|
|
345,590 |
|
|
|
176,256 |
|
|
|
169,334 |
|
General and administrative |
|
|
2,889,345 |
|
|
|
3,050,259 |
|
|
|
(160,914 |
) |
Total operating expenses |
|
|
4,001,430 |
|
|
|
4,558,820 |
|
|
|
(557,390 |
) |
Loss from operations |
|
|
(4,764,837 |
) |
|
|
(5,301,268 |
) |
|
|
536,431 |
|
Interest income |
|
|
11,740 |
|
|
|
32,427 |
|
|
|
(20,687 |
) |
Interest expense |
|
|
(950,867 |
) |
|
|
— |
|
|
|
(950,867 |
) |
Other income, net |
|
|
3,311 |
|
|
|
501,324 |
|
|
|
(498,013 |
) |
Loss before provision for income taxes |
|
$ |
(5,700,653 |
) |
|
$ |
(4,767,517 |
) |
|
$ |
(933,136 |
) |
Provision for income taxes |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Net loss and comprehensive loss |
|
$ |
(5,700,653 |
) |
|
$ |
(4,767,517 |
) |
|
$ |
(933,136 |
) |
Revenue. Revenue decreased $376,440 during the three months ended March 31, 2024 compared to the same period in 2023. This decrease is primarily due to a decrease in the number of laser system sales during the period as we work to optimize the BLTM series.
Cost of Revenue. Cost of revenue decreased $355,481 during the three months ended March 31, 2024 compared to the same period in 2023. This decrease is primarily due to a period-over-period decrease of $861,000 of direct job costs due to decreased production of the laser systems as we focus on optimizing the BL-250 and the BL-300. This decrease was partially offset by increases of approximately $410,000 of operations personnel expenses as we expanded our production team later in 2023 and approximately $146,000 of other overhead costs period-over-period.
Research and Development. Research and development expenses decreased $565,810 during the three months ended March 31, 2024 compared to the same period in 2023. This decrease is primarily due to approximately $242,000 of lower spend on the BLTM series as it transitioned to production in 2023 as well as $241,000 of lower personnel costs due to the cost reduction measures instituted by management in the first quarter of 2024, as further discussed in "Recent Developments" above.
Selling and Marketing. Selling and marketing expenses increased $169,334 during the three months ended March 31, 2024 compared to the same period in 2023. This increase is primarily due to the addition of our new Chief Marketing and Sales Officer in March 2023 as well as other sales and marketing personnel hired during late 2023 and early 2024.
General and Administrative. General and administrative expenses decreased $160,914 during the three months ended March 31, 2024 compared to the same period in 2023. This decrease is primarily driven by decreased professional fees associated with legal, compliance and accounting matters, which were heightened in the first quarter of 2023 due to the Business Combination and the transition to being a public company.
30
Interest Income. Interest income decreased $20,687 during the three months ended March 31, 2024 compared to the same period in 2023 due to lower cash balances between periods.
Interest Expense. Interest expense increased $950,867 during the three months ended March 31, 2024 compared to the same period in 2023 primarily due to higher debt balances between periods. Interest expense in the first quarter of 2024 was comprised of interest accrued on the Senior Convertible Notes and the debt discount amortization for the Junior Notes. No interest was incurred during the first quarter of 2023. Refer to Note 8 in the condensed consolidated financial statements included in Item 1 of this Quarterly Report for more information on our debt obligations.
Other income (expense), net. Other income (expense), net decreased $498,013 during the three months ended March 31, 2024 compared to the same period in 2023 due to the decrease in the fair value of the Public Warrants as of March 31, 2023. The difference in the fair value of the Public Warrants as of March 31, 2023 and the Closing decreased significantly and led to a gain of $501,324 recorded during the first quarter of 2023. As of December 31, 2023, the Public Warrants have a zero value due to being delisted from the NYSE American, as further discussed in Note 10 to the condensed consolidated financial statements included in Item 1 of this Quarterly Report. The gain recorded in the first quarter of 2024 resulted from the slight decrease in fair value of the Junior Note Warrants between December 31, 2023 and March 31, 2024.
Liquidity and Capital Resources
Overview
Liquidity describes the ability of a company to generate sufficient cash flows to meet the cash requirements of its business operations, including working capital needs, debt service, acquisitions, contractual obligations, and other commitments. As of the date of this Quarterly Report, we have yet to generate meaningful revenue from our business operations and have funded capital expenditure and working capital requirements through debt and equity financing.
As of March 31, 2024, we had cash and cash equivalents of $231,885 as compared to $2,148,700 as of December 31, 2023. Our cash flows from operations are not sufficient to fund our current operating model and expansion plans. On the second anniversary of the Closing Date, the Company must also, under certain circumstances, redeem the maximum portion of the Preferred Stock as permitted by law in cash at an amount equal to the Original Issuance Price as of such date. Notwithstanding the foregoing, the Company shall not be required to redeem any shares of Preferred Stock to the extent the Company does not have legally available funds to effect such redemption.
From inception through March 31, 2024, we have incurred operating losses and negative cash flows from operating activities. For the three months ended March 31, 2024 and 2023, we have incurred operating losses, including net losses of $5,700,653 and $4,767,517, respectively, and we have an accumulated deficit of $102,987,442 as of March 31, 2024. We anticipate that we will incur net losses for the foreseeable future and, even if we increase our revenue, there is no guarantee that it will ever become profitable. All of the aforementioned factors raise substantial doubt about our ability to continue as a going concern. We expects to continue to expand our operations, including by investing in manufacturing, sales and marketing, research and development and infrastructure to support our growth.
Until we can generate sufficient revenue to cover our operating expenses, working capital, and capital expenditures, we will rely on private and public capital raising efforts.
We would also obtain additional funds if the holders of our Public Warrants and private warrants issued in 2023 (refer to Note 10 in the condensed consolidated financial statements included in Item 1 of this Quarterly Report for more information) were to exercise their warrants. However, the exercise price is $11.50 per share of Common Stock for our Public Warrants, $1.03 per share of Common Stock for our Senior Note Warrants, and $0.25 per share of Common Stock for our Junior Note Warrants, respectively, which exceeds $0.131, the closing price of our Common Stock on the NYSE American on May 14, 2024. The likelihood that warrant holders will exercise the warrants and any cash proceeds that we would receive is dependent upon the market price of our Common Stock. If the market price for our Common Stock is less than the exercise price per share, we believe warrant holders will be unlikely to exercise their warrants.
The further development of our products, commencement of commercial operations and expansion of our business will require a significant amount of cash for expenditures. Our ability to successfully manage this growth will depend on many factors, including our working capital needs, the availability of equity or debt financing and, over time, our ability to generate cash flows from operations.
Given the Company’s current liquidity position, the Company will need to raise additional capital. If we raise additional funds by issuing equity securities, this would result in dilution to our stockholders. If we raise additional funds by issuing any additional preferred stock, such securities may also provide for rights, preferences, or privileges senior to those of holders of Common Stock. If we raise additional funds by issuing debt securities, such debt securities would have rights, preferences and privileges senior to those of holders of Common Stock. The terms of debt securities or borrowings could impose significant restrictions on our operations. The credit market and financial services industry have in the past, and may in the future, experience periods of uncertainty that could impact the availability and cost of equity and debt financing.
31
Cash Flows
The following table summarizes our cash flows from operating, investing and financing activities for the periods presented.
|
|
Three Months Ended |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Net cash used in operating activities |
|
$ |
(2,093,442 |
) |
|
$ |
(4,050,573 |
) |
Net cash used in investing activities |
|
|
- |
|
|
|
(344,801 |
) |
Net cash provided by financing activities |
|
|
176,627 |
|
|
|
3,038,166 |
|
Cash flows from operating activities
Our cash flows used in operating activities to date have been primarily comprised of costs related to research and development, selling and marketing, and other general and administrative activities. We expect our expenses related to personnel, research and development, selling and marketing, and general and administrative activities to increase as a result of operating as a public company.
Net cash used in operating activities was $2,093,442 and $4,050,573 for the three months ended March 31, 2024 and 2023, respectively. The decrease in net cash flows used in operating activities is primarily driven by decreased operating expenses and changes in working capital, partially offset by decreases in revenue.
Cash flows from investing activities
Our cash flows from investing activities have been comprised primarily of purchases of equipment and installation of improvements to our leased facilities and headquarters.
Net cash used in investing activities was nil and $344,801 for the three months ended March 31, 2024 and 2023, respectively. The decrease was primarily due to purchases of equipment to build out our production line that occurred during the first quarter of 2023.
Cash flows from financing activities
We have financed our operations primarily through the sale of preferred stock and promissory notes.
Net cash provided by financing activities was $176,627 and $3,038,166 for the three months ended March 31, 2024 and 2023, respectively. Net cash provided by financing in activities in the first quarter of 2024 is comprised of proceeds from the issuance of Common Stock, offset by payments of accrued debt issuance costs for the Junior Notes. Net cash provided by financing in activities in the first quarter of 2023 is comprised of proceeds received from the issuance of convertible promissory notes and warrants, proceeds from the issuance of Common Stock from the Lincoln Park Purchase Agreement, and the proceeds received from the Closing of the Business Combination. These combined proceeds were partially offset by payments of transaction costs associated with the Business Combination.
Key Operating and Financial Metrics (Non-GAAP Results)
We regularly review several metrics, including the metrics presented in the table below, to measure our performance, identify trends affecting our business, prepare financial projections, and make strategic decisions. We believe that these key business metrics provide meaningful supplemental information for management and investors in assessing our historical and future operating performance. The calculation of the key metrics and other measures discussed below may differ from other similarly-titled metrics used by other companies.
The following table presents our key performance indicators for the three months ended.
|
|
Three Months Ended |
|
|
|
|
||||||
|
|
2024 |
|
|
2023 |
|
|
$ Change |
|
|||
Revenue |
|
$ |
93,549 |
|
|
$ |
469,989 |
|
|
$ |
(376,440 |
) |
Total gross margin |
|
|
(763,407 |
) |
|
|
(742,448 |
) |
|
|
(20,959 |
) |
EBITDA(1) |
|
|
(4,504,631 |
) |
|
|
(4,673,829 |
) |
|
|
169,198 |
|
Capital expenditures |
|
|
— |
|
|
|
(344,801 |
) |
|
|
344,801 |
|
Free cash flow(1) |
|
|
(2,093,442 |
) |
|
|
(4,395,374 |
) |
|
|
2,301,932 |
|
(1) EBITDA and Free cash flow are non-GAAP financial measures. See “Non-GAAP Information” below for our definitions of, and additional information about, EBITDA and Free cash flow and for a reconciliation to the most directly comparable U.S. GAAP financial measures.
32
Non-GAAP Information
In addition to our results determined in accordance with GAAP, we believe the following non-GAAP measures are useful in evaluating our operational performance. We use the following non-GAAP financial information to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that non-GAAP financial information, when taken collectively and in context, may be helpful to investors in assessing our operating performance and trends and in comparing our financial measures with those of comparable companies that may present similar non-GAAP financial measures.
EBITDA and Free Cash Flow
We define “EBITDA” as income (loss), plus (minus) depreciation and amortization expenses, plus (minus) interest, plus (minus) taxes and define “Free cash flow” as net cash from (used in) operating activities less capital expenditures. EBITDA and Free cash flow are intended as supplemental measures of our performance that are neither required by, nor presented in accordance with, GAAP and these measures should not be considered a substitute for net income (loss), and net cash used in operating activities reported in accordance with GAAP. Our computation of EBITDA and Free cash flow may not be comparable to other similarly titled measures computed by other companies, because all companies may not calculate EBITDA or Free cash flow in the same fashion.
Limitations of Non-GAAP Measures
There are a number of limitations related to EBITDA, including the following:
Because of these and other limitations, EBITDA and Free cash flow should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. We compensate for these limitations by relying primarily on our GAAP results and using EBITDA and Free cash flow on a supplemental basis. You should review the reconciliation of our net loss to EBITDA and net loss to Free cash flow below and not rely on any single financial measure to evaluate our business.
Our presentation of EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items and our presentation of Free cash flow does not necessarily indicate whether cash flows will be sufficient to fund our cash needs.
Reconciliation
The following table reconciles our net loss (the most directly comparable GAAP measure) to EBITDA for the periods presented:
|
|
Three Months Ended |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Net loss |
|
$ |
(5,700,653 |
) |
|
$ |
(4,767,517 |
) |
Interest (income) expense, net |
|
|
939,127 |
|
|
|
(32,427 |
) |
Income tax expense |
|
|
— |
|
|
|
— |
|
Depreciation and amortization |
|
|
256,895 |
|
|
|
126,115 |
|
EBITDA |
|
$ |
(4,504,631 |
) |
|
$ |
(4,673,829 |
) |
The following table reconciles our net cash used in operating activities (the most directly comparable GAAP measure to Free cash flow) to Free cash flow for the three months ended:
|
|
Three Months Ended |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Net cash used in operating activities |
|
$ |
(2,093,442 |
) |
|
$ |
(4,050,573 |
) |
Capital expenditures |
|
|
- |
|
|
|
(344,801 |
) |
Free cash flow |
|
$ |
(2,093,442 |
) |
|
$ |
(4,395,374 |
) |
33
Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of March 31, 2024. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.
For our contractual obligations that are expected to have an effect on our liquidity and cash flow, see section “Notes to Condensed Consolidated Financial Statements – Note 6 – Commitments and Contingencies” in the condensed consolidated financial statements.
Critical Accounting Estimates
Our condensed consolidated financial statements are prepared in conformity with U.S. GAAP, which requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses. We evaluate our estimates and assumptions on an ongoing basis. Our estimates and assumptions are based on historical experience and on various other factors that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates.
There have been no significant changes to our accounting policies during the three months ended March 31, 2024, as compared to the critical accounting policies described in our audited financial statements included in the Annual Report (as defined above).
Recently Issued and Adopted Accounting Pronouncements
We review new accounting standards to determine the expected financial impact, if any, that the adoption of each new standard will have. For the recently issued and adopted accounting standards that we believe may have an impact on our condensed consolidated financial statements, see the section entitled “Notes to Condensed Consolidated Financial Statements – Note 2 – Summary of Significant Accounting Policies” in the condensed consolidated financial statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.
Item 4. Controls and Procedures
Disclosure controls are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized, and reported within the time period specified in the SEC’s rules and forms. Disclosure controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including the principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our principal executive officer and principal financial and accounting officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended March 31, 2024, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our principal executive officer and principal financial and accounting officer have concluded that during the period covered by this report our disclosure controls and procedures were not effective due to a material weakness in our internal control over financial reporting described below.
Material Weakness in Internal Control over Financial Reporting
We identified a material weakness in our control environment around the accounting and presentation of complex financial instrument transactions that was not effectively designed or maintained. This material weakness resulted in the restatements of the Company’s financial statements as of and for the year ended December 31, 2023, the comparative period therein as of and for the year ended December 31, 2022 and for each of the quarterly periods ended March 31, 2023, June 30, 2023, September 30, 2023 (as filed on Amendment No. 4 on Form 10-K/A on November 8, 2024) and the quarterly period ended March 31, 2024 covered by this Amendment No. 1 on Form 10-Q/A. Additionally, this material weakness could result in material misstatements of the financial statements that would not be prevented or detected on a timely basis.
Management’s Remediation Efforts
We plan to take steps to enhance and improve the design of our internal control over financial reporting. To remediate such weaknesses, we intend to implement the following changes during our fiscal year ending December 31, 2025: (i) hire additional qualified personnel to address inadequate segregation of duties and ineffective risk management; and (ii) adopt sufficient written policies and procedures for accounting and financial reporting. The remediation efforts set out in (i) and (ii) are dependent upon our receiving additional financing to cover the costs of implementing the changes required. If we are unsuccessful in securing such funds, remediation efforts may be adversely affected in a material manner.
See Note 14, “Restatement of Previously Issued Consolidated Financial Statements and Previously Issued Unaudited Interim Condensed Consolidated Financial Statements ” in Item 1 of this Amendment No. 1 on Form 10-Q/A for additional information.
34
Limitations on Effectiveness of Controls and Procedures
We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Changes in Internal Control Over Financial Reporting
There was no change in our internal control over financial reporting that occurred during the most recent fiscal quarter of 2024 covered by this Quarterly Report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
35
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
The information under the caption “Commitments and Contingencies” in Note 6 of the unaudited condensed consolidated financial statements of this Quarterly Report is incorporated herein by reference.
Item 1A. Risk Factors.
In addition to the other information contained in this Quarterly Report on Form 10-Q, you should consider the following risk factor, which supplements those contained in in Part I, Item 1A. “Risk Factors” of our most recently filed Amended 10-K, in evaluating our results of operations, financial condition, business and operations or an investment in the shares of our company. Other than the risk factor set forth below, there have been no material changes from the risk factors disclosed in our Amended 10-K. If any of the risks discussed in our Amended 10-K are realized, our business, financial condition, results of operations and prospects could be materially and adversely affected.
We have had to restate previously issued consolidated financial statements and, as part of that process, we identified material weaknesses in our internal control over financial reporting. If we are unable to develop and maintain effective internal control over financial reporting, we may not be able to accurately report our financial results in a timely manner, which may adversely affect investor confidence in us and may adversely affect our business, financial condition and results of operations.
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 annual or interim financial statements will not be prevented or detected on a timely basis. Effective internal control over financial reporting is necessary for us to provide reliable financial reporting and prevent fraud.
On October 21, 2024, our Board of Directors and management, upon the recommendation of the Audit Committee of our Board of Directors, concluded that our previously issued financial statements as of and for the year ended December 31, 2023, the comparative period therein as of and for the year ended December 31, 2022 and unaudited condensed consolidated financial statements as of and for each of the interim quarterly periods ended March 31, 2023, June 30, 2023, September 30, 2023, March 31, 2024, and June 30, 2024 should no longer be relied upon due to material weaknesses in our control environment related to the accounting and presentation of complex financial instrument transactions, as further described in Note 15, Restatement of Previously Issued Consolidated Financial Statements and Previously Issued Unaudited Interim Condensed Consolidated Financial Statements, in Part I, Item 1 of this Quarterly Report.
To remediate such weaknesses, we intend to implement the following changes during our fiscal year ending December 31, 2025: (i) hire additional qualified personnel to address inadequate segregation of duties and ineffective risk management; and (ii) adopt sufficient written policies and procedures for accounting and financial reporting. These remediation measures may be time-consuming and costly, and there is no assurance that these initiatives will ultimately have the intended effects. Any failure to maintain effective internal control over financial reporting could adversely impact our ability to report our financial position and results from operations on a timely and accurate basis. If our financial statements are not accurate or are not filed on a timely basis, we could be subject to regulatory scrutiny, investigations or enforcement actions, which could have an adverse effect on our business, financial condition and results of operations. Ineffective internal control over financial reporting could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our stock.
We can provide no assurance that the measures that we plan to take in the future will remediate the material weaknesses identified or that any additional material weaknesses or restatements of financial results will not arise in the future due to a failure to implement and maintain adequate internal control over financial reporting or a circumvention of these controls. In addition, even if we are successful in strengthening our controls and procedures, in the future those controls and procedures may not be adequate to prevent or identify irregularities or errors or to facilitate the fair presentation of our consolidated financial statements.
Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities.
None other than as set forth in the Current Reports on Form 8-K we filed with the SEC on February 6, 2023, as amended, March 10, 2023, June 13, 2023, June 29, 2023, November 15, 2023, April 4, 2024, and May 6, 2024 which are hereby incorporated by reference.
Item 3. Defaults Upon Senior Securities.
Not applicable.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
36
Item 6. Exhibits
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
|
|
|
Incorporated by Reference |
|||
No. |
|
Description of Exhibit |
Form |
File No. |
Exhibit No. |
Filing Date |
2.1† |
|
8-K |
001-39489 |
2.1 |
August 8, 2022 |
|
3.1 |
|
8-K |
001-39489 |
3.2 |
September 9, 2020 |
|
3.2 |
|
Amended and Restated Certificate of Incorporation of the Company. |
8-K |
001-39489 |
3.1 |
February 6, 2023 |
3.3 |
|
8-K |
001-39489 |
3.3 |
February 6, 2023 |
|
31.1* |
|
|
|
|
|
|
31.2* |
|
|
|
|
|
|
32.1** |
|
|
|
|
|
|
32.2** |
|
|
|
|
|
|
101.INS |
|
Inline XBRL Instance Document – The instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document. |
|
|
|
|
101.SCH |
|
Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents |
|
|
|
|
104 |
|
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
|
|
|
|
* Filed herewith
** Furnished herewith.
† Certain of the exhibits and schedules to these exhibits have been omitted in accordance with Regulation S-K Item 601(a)(5). The registrant agrees to furnish a copy of all omitted exhibits and schedules to the SEC upon its request.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: November 14, 2024 |
Nuburu, Inc. |
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By: |
/s/ Ron Nicol |
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Name: |
Ron Nicol |
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Title: |
Executive Chairman |
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(Principal Executive Officer) |
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By: |
/s/ Brian Knaley |
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Name: |
Brian Knaley |
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Title: |
Chief Executive Officer |
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(Principal Financial and Accounting Officer) |
38