8-K
Kaival Brands Innovations Group, Inc. (KAVL)
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
8-K
CURRENT
REPORT
PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES
EXCHANGE ACT OF 1934
Dateof Report (Date of earliest event reported): January 30, 2023
KaivalBrands Innovations Group, Inc.
(Exact name of registrant as specified in its charter)
| Delaware | 000-56016 | 83-3492907 |
|---|---|---|
| (State<br> or other jurisdiction<br><br> of incorporation) | (Commission<br> File Number) | (I.R.S.<br> Employer<br><br> Identification No.) |
4460Old Dixie Highway
Grant,Florida 32949
(Address of principal executive office, including zip code)
Telephone:(833) 452-4825
(Registrant’s telephone number, including area code)
Securities
registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common<br> Stock, par value $0.001 per share | KAVL | The Nasdaq<br> Stock Market, LLC |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition.
On January 30, 2023, Kaival Brands Innovations Group, Inc. (the “Company”) issued a press release announcing its financial results for the fourth fiscal quarter and the full year ended October 31, 2022. The full text of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.
In accordance with General Instruction B.2 of Form 8-K, the information contained in or incorporated into this Item 2.02 of this Current Report on Form 8-K, including Exhibit 99.1, is furnished under Item 2.02 of Form 8-K and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in any such filing.
| Exhibit No. | Description |
|---|---|
| 99.1 | Press release of the Company, dated January 30, 2023, announcing the Fiscal Fourth Quarter 2022 and Full-Year 2022 Financial Results |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Kaival Brands Innovations Group, Inc. | ||
|---|---|---|
| Dated: January 30, 2023 | By: | /s/ Eric Mosser |
| Eric Mosser | ||
| President and Chief Operating Officer |
EXHIBIT 99.1
Kaival Brands Reports Fiscal Fourth Quarter 2022and Full-Year 2022 Financial Results
Kaival Looks Towards Fiscal 2023 Following PhilipMorris International Distribution Agreement and Favorable Decision by Appellate Court Allowing for Renewed Non-Tobacco Flavored BIDI^â^Sticks Sales Outlook in US
GRANT, Fla., January 30, 2023 /Globenewswire/ --Kaival Brands Innovations Group, Inc. (NASDAQ: KAVL) (“Kaival Brands,” the “Company” or “we,” “our” or similar terms), the exclusive U.S. distributor of all products manufactured by Bidi Vapor, LLC (“Bidi Vapor”), including the BIDI^®^ Stick electronic nicotine delivery system, which are intended for adults 21 and over, today announced its financial results for the fiscal 2022 fourth quarter and full year ended October 31, 2022.
Eric Mosser, President & Chief Operating Officer of Kaival Brands, stated “Fiscal 2022 was an exceptionally challenging year for us, primarily due to regulatory action by the FDA that was ultimately overturned in August. For a portion of fiscal 2022, we were prohibited from selling our flavored BIDI Sticks, and our 2022 revenues reflect the significant extended impact of this. The good news is that this impediment is behind us. Moreover, despite the challenges, we accomplished several important milestones during the year which we believe has laid the foundation for renewed growth and progress in 2023, including expanding existing sales channel relationships and initiating significant new ones. We expect and hope that the FDA will continue to pull bad actors from the marketplace, paving the way for companies like ours to provide our products to adult smokers deserving of premium e-cigarette product and experience.”
Fourth Quarter and Full-Year 2022 Highlights
| ● | On<br> or about May 13, 2022, the U.S. Food and Drug Administration (“FDA”) placed the<br> tobacco-flavored Classic BIDI^®^ Stick into the final Phase III scientific review. |
|---|---|
| ● | In<br> June, the Company’s wholly owned subsidiary, Kaival Brands International, LLC (“KBI”),<br> entered into an international licensing agreement with Philip Morris Products S.A. (“PMPSA”),<br> a wholly owned affiliate of Philip Morris International Inc., for the development and distribution<br> of electronic nicotine delivery system (“ENDS”) products in markets outside the<br> U.S., subject to market (or regulatory) assessment. |
| ● | In<br> July, the Company announced the launch of PMPSA’s custom-branded self-contained e-vapor<br> product, VEEBA, being sold in Canada, with royalties due to KBI pursuant to the international<br> licensing agreement. |
| ● | In<br> August, the U.S. Court of Appeals for the Eleventh (11th) Circuit ruled in favor of Bidi<br> Vapor in its appeal of the FDA’s Marketing Denial Order (“MDO”) issued<br> to the non-tobacco flavored BIDI^®^ Sticks. The court set aside or vacated the<br> MDO and remanded the PMTAs back to FDA for further review. |
| ● | In<br> December, KMS, Kaival’s marketing & sales vendor, hired Dean Simmons, a former<br> Vice President of Sales of Swisher International, in preparation for an expected resurgence<br> of revenue growth following a pivotal legal victory for Bidi Vapor this past summer. |
Summary of Fourth Quarter and Full Year FiscalResults
Revenues: Revenues for the fourth fiscal quarter ended October 31, 2022 were approximately $3.0 million, compared to approximately $0.1 million for the prior fourth fiscal quarter. Revenues for the full fiscal year ended October 31, 2022 were approximately $12.8 million, compared to approximately $58.8 million for fiscal year 2021. Revenues decreased in fiscal year 2022, primarily in the first two fiscal quarters, due to Bidi Vapor’s receipt of the MDO, our resulting inability to sell our products and also generally due to increased competition, which we believe was the result of the lack of enforcement by federal and state authorities against sub-par and low-priced vaping products, including illegal synthetic nicotine disposable ENDS, that continued to enter the market illegally without FDA authorization.
Following the 11^th^ Circuit Court decision vacating the FDA’s MDO in August, we began to aggressively reignite sales efforts and expect an upturn in sales of all BIDI^®^ Sticks, anticipated to begin to show results in the second quarter of fiscal year 2023 (which sales remain subject to FDA’s enforcement discretion). We also anticipate that if the FDA begins enforcement against illegally marketed or synthetic-nicotine vaping products, there may be an increased demand for compliant and legal vaping products, such as the BIDI^®^ Stick.
Cost of Revenue, Net, and Gross Profit (Loss): Gross profit for the fourth fiscal quarter ended October 31, 2022 was approximately $1.1 million, compared to approximately $(1.0) million gross loss for the prior fourth fiscal quarter. Gross profit for the full fiscal year ended October 31, 2022 was approximately $1.2 million, compared to approximately $11.9 million for fiscal year 2021. Total cost of revenue for the fourth fiscal quarter ended October 31, 2022 was approximately $1.9 million, compared to approximately $0.9 million for the prior fourth fiscal quarter, and approximately $11.5 million for fiscal year 2022, compared to approximately $46.8 million for fiscal year 2021. The decrease in gross profit volume is primarily driven by the downturn in sales of our products, beginning in the third quarter and continuing through the end of fiscal year 2022, which was primarily the result of the negative impact the MDO and the overall impact the regulatory landscape had on our business. Additionally, the cost of the discounts, coupons and promotions programs, that we implemented in the third quarter of fiscal year 2021 to assist in growing and retaining the customer base and store shelf space, contributed a lower gross profit margin per unit of products sales for that period of time, as these discounts, coupons and promotions decreased our revenues.
Operating Expenses: Total operating expenses for the fourth fiscal quarter ended October 31, 2022 were approximately $3.8 million, compared to approximately $4.3 million for the prior fourth fiscal quarter, and were approximately $15.6 million for fiscal year 2022, compared to approximately $22.4 million for fiscal year 2021. For the fiscal year 2022, operating expenses consisted primarily of advertising and promotion fees of approximately $2.7 million, stock option compensation expense of approximately $6.0 million, professional fees of approximately $3.2 million, salaries and wages of $1.7 million, and all other general and administrative expenses of approximately $2.0 million. In fiscal year 2021, operating expenses consisted of advertising and promotional expenses of approximately $3.2 million, which included commissions paid to our third-party marketing consultant QuikfillRx, and general and administrative expenses of approximately $10.2 million. We expect future operating expenses to increase while we generate increased sales growth and invest in our infrastructure to support the planned revenue and business growth.
Net Loss: Net loss for the fourth fiscal quarter ended October 31, 2022 was approximately $(2.7) million, compared to approximately $(1.6) million for the prior fourth fiscal quarter, and approximately $(14.4) million for the full fiscal year 2022, or $(0.36) basic and diluted net loss per share, compared to a net loss of approximately $(9.0) million, or $(0.38) basic and diluted net loss per share, for fiscal year 2021. The increase in net loss for the fiscal year 2022, as compared to net loss in fiscal year 2021, is attributable to the revenue and expense factors noted above.
Cash Position: We consider all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. There were no cash equivalents on October 31, 2022, or October 31, 2021. Cash and restricted cash on October 31, 2022, and October 31, 2021, were $3.7 million and $7.8 million, respectively.
Restricted cash consists of cash held short-term in escrow as required. As of October 31, 2022, and October 31, 2021, we had $0 and $65,007 in restricted cash, respectively, for amounts held in escrow.
Additional information regarding the Company’s results of operations for the fiscal year ended October 31, 2022 will be available in the Company’s Annual Report on Form 10-K for such reporting period, which report will be filed with the Securities and Exchange Commission. Readers are encouraged to review such Annual Report in its entirety, including the risk factors related to the Company’s business described therein.
ABOUT BIDI VAPOR
Based in Melbourne, Florida, Bidi Vapor maintains a commitment to responsible, adult-focused marketing, supporting age-verification standards and sustainability through its BIDI^®^ Cares recycling program. Bidi Vapor’s premier device, the BIDI^®^ Stick, is a premium product made with high-quality components, a UL-certified battery and technology designed to deliver a consistent vaping experience for adult smokers 21 and over. Bidi Vapor is also adamant about strict compliance with all federal, state and local guidelines and regulations. At Bidi Vapor, innovation is key to its mission, with the BIDI® Stick promoting environmental sustainability, while providing a unique vaping experience to adult smokers.
Nirajkumar Patel, the Company’s Chief Science and Regulatory Officer and director, owns and controls Bidi Vapor. As a result, Bidi Vapor is considered a related party of the Company.
For more information, visit www.bidivapor.com.
ABOUT KAIVAL BRANDS
Based in Grant, Florida, Kaival Brands is a company focused on incubating innovative and profitable products into mature and dominant brands, with a current focus on the distribution of electronic nicotine delivery systems (ENDS) also known as “e-cigarettes”. Our business plan is to seek to diversify into distributing other nicotine and non-nicotine delivery system products (including those related to hemp-derived cannabidiol (known as CBD) products. Kaival Brands and Philip Morris Products S.A. (via sublicense from Kaival Brands) are the exclusive global distributors of all products manufactured by Bidi Vapor.
Learn more about Kaival Brands at https://ir.kaivalbrands.com/overview/default.aspx.
Cautionary Note Regarding Forward-Looking Statements
This press release and the statements of the Company’s management and partners included herein and related to the subject matter herein includes statements that constitute “forward-looking statements” (as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended), which are statements other than historical facts. You can identify forward-looking statements by words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “intend,” “may,” “plan,” “position,” “should,” “strategy,” “target,” “will,” and similar words. All forward-looking statements speak only as of the date of this press release. Although we believe that the plans, intentions, and expectations reflected in or suggested by the forward-looking statements are reasonable, there is no assurance that these plans, intentions, or expectations will be achieved. Therefore, actual outcomes and results (including, without limitation, the results of the Company sales and marketing efforts and the impact of the August 2022 11th Circuit Court of Appeals decision as described herein) could materially and adversely differ from what is expressed, implied, or forecasted in such statements. Our business may be influenced by many factors that are difficult to predict, involve uncertainties that may materially affect results, and are often beyond our control. Factors that could cause or contribute to such differences include, but are not limited to: (i) future actions by the FDA in response to the 11^th^ Circuit Court’s decision that could impact our business and prospects, (ii) the outcome of FDA’s scientific review of Bidi Vapor’s pending PMTAs, (iii) the success of our agreement with Philip Morris International, (iv) how quickly domestic and international markets adopt our products, (v) the scope of future FDA enforcement of regulations in the ENDS industry, (vi) the FDA’s approach to the regulation of synthetic nicotine and its impact on our business, (vii) potential federal and state flavor bans and other restrictions on ENDS products, (viii) the duration and scope of the COVID-19 pandemic and impact on the demand for the products we distribute, (ix) general economic uncertainty in key global markets and a worsening of global economic conditions or low levels of economic growth, (x) the effects of steps that we could take to reduce operating costs, (xi) our inability to generate and sustain profitable sales growth, including sales growth in the international markets, (xii) circumstances or developments that may make us unable to implement or realize anticipated benefits, or that may increase the costs, of our current and planned business initiatives, (xiii) significant changes in our relationships with our distributors or sub-distributors and (xiv) other factors detailed by us in our public filings with the Securities and Exchange Commission, including the disclosures under the heading “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended October 31, 2022, filed with the Securities and Exchange Commission on January 27, 2023 and accessible at www.sec.gov. All forward-looking statements included in this press release are expressly qualified in their entirety by such cautionary statements. Except as required under the federal securities laws and the Securities and Exchange Commission’s rules and regulations, we do not have any intention or obligation to update any forward-looking statements publicly, whether as a result of new information, future events, or otherwise.
Investor Relations:
Stephen Sheriff, Director of Communications and Administration
Ir.kaivalbrands.com
investors@kaivalbrands.com
-- Tables Follow –
Kaival Brands Innovations Group, Inc.
Consolidated Balance Sheets
| October 31,<br> 2021 | |||||
|---|---|---|---|---|---|
| ASSETS | |||||
| CURRENT ASSETS: | |||||
| Cash | 3,685,893 | $ | 7,760,228 | ||
| Restricted cash | — | 65,007 | |||
| Accounts receivable | 574,606 | 1,985,186 | |||
| Other receivable – related parties – short term | 1,539,486 | — | |||
| Inventory deposit – related party | — | 2,925,000 | |||
| Inventories | 1,239,725 | 15,326,370 | |||
| Prepaid expenses | 426,407 | 319,531 | |||
| Income tax receivable | 1,607,302 | 1,753,594 | |||
| Total current assets | 9,073,419 | 30,134,916 | |||
| Other receivable – related party – net of current portion | 2,164,646 | — | |||
| Right of use asset- operating lease | 1,198,969 | 55,604 | |||
| TOTAL ASSETS | 12,437,034 | $ | 30,190,520 | ||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||
| CURRENT LIABILITIES: | |||||
| Accounts payable | 40,023 | $ | 242,829 | ||
| Accounts payable- related party | — | 12,667,769 | |||
| Accrued expenses | 1,099,157 | 579,604 | |||
| Customer deposits | 44,973 | — | |||
| Deferred revenue | 235,274 | — | |||
| Operating lease obligation, short term | 166,051 | 13,020 | |||
| Customer refund due | — | 316,800 | |||
| Total current liabilities | 1,585,478 | 13,820,022 | |||
| LONG TERM LIABILITIES | |||||
| Operating lease obligation, net of current portion | 1,050,776 | 46,185 | |||
| TOTAL LIABILITIES | 2,636,254 | $ | 13,866,207 | ||
| STOCKHOLDERS’ EQUITY: | |||||
| Preferred stock 5,000,000 shares authorized; Series A Convertible Preferred stock (0.001 par value, 3,000,000 shares authorized, 0 and 3,000,000 shares issued and outstanding as of October 31, 2022, and October 31, 2021, respectively) | — | 3,000 | |||
| Common stock (0.001 par value, 1,000,000,000 shares authorized, 56,169,090 and 30,195,312 issued and outstanding as of October 31, 2022, and October 31, 2021, respectively) | 56,169 | 30,195 | |||
| Additional paid-in capital | 29,375,787 | 21,551,959 | |||
| Accumulated deficit | (19,631,176 | ) | (5,260,841 | ) | |
| Total Stockholders’ Equity | 9,800,780 | 16,324,313 | |||
| TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY | 12,437,034 | $ | 30,190,520 |
All values are in US Dollars.
The accompanying notes are an integral part of these consolidated financial statements.
Kaival Brands Innovations Group, Inc.
Consolidated Statements of Operations
| For the Years<br> Ended October 31, | ||||||
|---|---|---|---|---|---|---|
| 2022 | 2021 | |||||
| Revenues | ||||||
| Revenues, net | $ | 12,701,539 | $ | 59,378,208 | ||
| Revenues – related parties | 68,139 | 154,560 | ||||
| Royalty revenue | 117,292 | — | ||||
| Excise tax on products | (125,513 | ) | (756,338 | ) | ||
| Total revenues, net | 12,761,457 | 58,776,430 | ||||
| Cost of revenue | ||||||
| Cost of revenue – related party | 11,345,912 | 46,528,501 | ||||
| Cost of revenue – other | 174,520 | 314,049 | ||||
| Total cost of revenue | 11,520,432 | 46,842,550 | ||||
| Gross profit | 1,241,025 | 11,933,880 | ||||
| Operating expenses | ||||||
| Advertising and promotions | 2,679,308 | 3,195,883 | ||||
| General and<br>administrative expenses | 12,950,373 | 19,207,028 | ||||
| Total operating expenses | 15,629,681 | 22,402,911 | ||||
| Other income | ||||||
| Interest income | 4 | 395 | ||||
| Total other income | 4 | 395 | ||||
| Loss before income taxes | (14,388,652 | ) | (10,468,636 | ) | ||
| Provision (benefit) for income taxes | (18,317 | ) | (1,435,198 | ) | ||
| Net loss | $ | (14,370,335 | ) | $ | (9,033,438 | ) |
| Net loss per common share – basic and diluted | $ | (0.36 | ) | $ | (0.38 | ) |
| Weighted average number of common shares outstanding – basic and diluted | 39,710,389 | 24,000,246 |
The accompanying notes are an integral part of these consolidated financial statements.
| Kaival Brands Innovations Group, Inc. | |||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Consolidated Statements of Changes in Stockholders’ Equity | |||||||||||||||||||||
| For the years ended October 31, 2022 and 2021 | |||||||||||||||||||||
| Convertible Preferred Shares | Par Value Convertible Preferred Shares | Common Shares | Par Value Common Shares | Additional Paid-in Capital | Accumulated Deficit | Total | |||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| (Series A) | (Series A) | ||||||||||||||||||||
| Balances, October 31, 2020 | 3,000,000 | $ | 3,000 | 23,106,886 | $ | 23,107 | $ | 618,904 | $ | 3,772,597 | $ | 4,417,608 | |||||||||
| Stock issued for services – RSUs | — | — | 221,666 | 221 | 505,100 | — | 505,321 | ||||||||||||||
| Common stock settled and canceled | — | — | (92,871 | ) | (93 | ) | (254,017 | ) | — | (254,110 | ) | ||||||||||
| Common stock issued for compensation | — | — | 674,803 | 675 | 8,943,425 | — | 8,944,100 | ||||||||||||||
| Stock option expense | — | — | — | — | 1,773,947 | — | 1,773,947 | ||||||||||||||
| Common stock issued for cash, net of financing cost | — | — | 5,405,000 | 5,405 | 8,300,367 | — | 8,305,772 | ||||||||||||||
| Common stock issued for warrant exercise | — | — | 879,828 | 880 | 1,664,233 | — | 1,665,113 | ||||||||||||||
| Net loss | — | — | — | — | — | (9,033,438 | ) | (9,033,438 | ) | ||||||||||||
| Balances, October 31, 2021 | 3,000,000 | $ | 3,000 | 30,195,312 | $ | 30,195 | $ | 21,551,959 | $ | (5,260,841 | ) | $ | 16,324,313 | ||||||||
| Stock issued for services – RSUs | — | — | 123,256 | 123 | 172,256 | — | 172,379 | ||||||||||||||
| Common shares settled and cancelled | — | — | (44,720 | ) | (45 | ) | (59,817 | ) | — | (59,862 | ) | ||||||||||
| Common stock issued for compensation | — | — | 39,637 | 40 | 65,283 | — | 65,323 | ||||||||||||||
| Exercise of common stock warrants | — | — | 855,605 | 856 | 1,624,794 | — | 1,625,650 | ||||||||||||||
| Converted Series A Convertible Preferred Stock | (3,000,000 | ) | (3,000 | ) | 25,000,000 | 25,000 | (22,000 | ) | — | — | |||||||||||
| Stock option expense | — | — | — | — | 6,043,312 | — | 6,043,312 | ||||||||||||||
| Net loss | — | — | — | — | — | (14,370,335 | ) | (14,370,335 | ) | ||||||||||||
| Balances, October 31, 2022 | — | $ | — | 56,169,090 | $ | 56,169 | $ | 29,375,787 | $ | (19,631,176 | ) | $ | 9,800,780 |
The accompanying notes are an integral part of these consolidated financial statements.
Kaival Brands Innovations Group, Inc.
Consolidated Statements of Cash Flows
| For the Year Ended | For the Year Ended | |||||
|---|---|---|---|---|---|---|
| October 31, 2022 | October 31, 2021 | |||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||
| Net loss | $ | (14,370,335 | ) | $ | (9,033,438 | ) |
| Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||
| Stock based compensation | 237,702 | 9,449,421 | ||||
| Stock options expense | 6,043,312 | 1,773,947 | ||||
| ROU operating lease expense | 132,890 | 14,529 | ||||
| Write off of inventory | 259,563 | — | ||||
| Changes in current assets and liabilities: | ||||||
| Accounts receivable | 1,410,580 | (583,624 | ) | |||
| Other receivable – related party | (3,704,132 | ) | 15,360 | |||
| Prepaid expenses | (106,876 | ) | (319,531 | ) | ||
| Inventory | 13,827,082 | (15,319,987 | ) | |||
| Inventory deposit – related party | 2,925,000 | (2,925,000 | ) | |||
| Income tax receivable | 146,292 | (1,753,594 | ) | |||
| Accounts payable | (202,806 | ) | 242,829 | |||
| Accounts payable – related party | (12,667,769 | ) | 11,258,208 | |||
| Accrued expenses | 519,553 | (482,501 | ) | |||
| Deferred revenue | 235,274 | (623,096 | ) | |||
| Income tax accrual | — | (1,331,856 | ) | |||
| Customer deposits | 44,973 | — | ||||
| Customer refund due | (316,800 | ) | 316,800 | |||
| Payments on operating lease liability | (118,633 | ) | (11,708 | ) | ||
| Net cash used in operating activities | (5,705,130 | ) | (9,313,241 | ) | ||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||
| Common stock issued for cash, net of financing cost | — | 8,305,772 | ||||
| Proceeds from the exercise of warrants | 1,625,650 | 1,665,113 | ||||
| Settled RSU shares with cash | (59,862 | ) | (254,110 | ) | ||
| Net cash provided by financing activities | 1,565,788 | 9,716,775 | ||||
| Net change in cash and restricted cash | $ | (4,139,342 | ) | $ | 403,534 | |
| Beginning cash and restricted cash balance | 7,825,235 | 7,421,701 | ||||
| Ending cash and restricted cash balance | $ | 3,685,893 | $ | 7,825,235 | ||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | ||||||
| Interest paid | $ | — | $ | — | ||
| Income taxes paid | $ | — | $ | 1,637,102 | ||
| NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||||||
| Conversion<br>of Series A Preferred Stock Shares to Common Stock Shares | $ | 25,000 | $ | — | ||
| ROU asset and operating lease obligation recognized under Topic 842 | $ | 1,276,255 | $ | — |
The accompanying notes are an integral part of these consolidated financial statements.