Cover Page
Cover Page - shares | 3 Months Ended | |
Mar. 31, 2023 | May 19, 2023 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Mar. 31, 2023 | |
Document Transition Report | false | |
Entity File Number | 001-33720 | |
Entity Registrant Name | Remark Holdings, Inc. | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 33-1135689 | |
Entity Address, Address Line One | 800 S. Commerce St. | |
Entity Address, City or Town | Las Vegas | |
Entity Address, State or Province | NV | |
Entity Address, Postal Zip Code | 89106 | |
City Area Code | 702 | |
Local Phone Number | 701-9514 | |
Title of 12(b) Security | Common Stock, $0.001 par value per share | |
Trading Symbol | MARK | |
Security Exchange Name | NASDAQ | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 14,350,058 | |
Entity Central Index Key | 0001368365 | |
Current Fiscal year End Date | --12-31 | |
Document Fiscal Year Focus | 2023 | |
Document Fiscal Period Focus | Q1 | |
Amendment Flag | false |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Mar. 31, 2023 | Dec. 31, 2022 |
Assets | ||
Cash | $ 364 | $ 52 |
Trade accounts receivable, net | 2,719 | 3,091 |
Inventory, net | 309 | 308 |
Deferred cost of revenue | 7,485 | 7,463 |
Prepaid expense and other current assets | 1,275 | 1,374 |
Total current assets | 12,152 | 12,288 |
Property and equipment, net | 1,660 | 1,699 |
Operating lease assets | 135 | 180 |
Other long-term assets | 226 | 269 |
Total assets | 14,173 | 14,436 |
Liabilities | ||
Accounts payable | 9,751 | 9,602 |
Advances from related parties | 1,077 | 1,174 |
Obligations to issue common stock | 4,984 | 1,892 |
Accrued expense and other current liabilities | 7,139 | 7,222 |
Contract liability | 481 | 308 |
Notes payable | 16,488 | 14,607 |
Total current liabilities | 39,920 | 34,805 |
Operating lease liabilities, long-term | 30 | 56 |
Total liabilities | 39,950 | 34,861 |
Commitments and contingencies | ||
Stockholders’ Deficit | ||
Preferred stock, 0.001 par value; 1,000,000 shares authorized; zero issued | 0 | 0 |
Common stock, 0.001 par value; 175,000,000 shares authorized; 13,633,992 and 11,539,564 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively | 14 | 12 |
Additional paid-in-capital | 372,071 | 368,945 |
Accumulated other comprehensive loss | (1,177) | (859) |
Accumulated deficit | (396,685) | (388,523) |
Total stockholders’ deficit | (25,777) | (20,425) |
Total liabilities and stockholders’ deficit | $ 14,173 | $ 14,436 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares | Mar. 31, 2023 | Dec. 31, 2022 |
Statement of Financial Position [Abstract] | ||
Preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized (in shares) | 1,000,000 | 1,000,000 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Common stock par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized (in shares) | 175,000,000 | 175,000,000 |
Common stock, shares, issued (in shares) | 13,633,992 | 11,539,564 |
Common stock, shares, outstanding (in shares) | 13,633,992 | 11,539,564 |
Unaudited Condensed Consolidate
Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | |
Income Statement [Abstract] | ||
Revenue, including amounts from China Business Partner (See Note 15) | $ 826 | $ 4,667 |
Cost and expense | ||
Cost of revenue (excluding depreciation and amortization) | 455 | 4,270 |
Sales and marketing | 366 | 148 |
Technology and development | 169 | 455 |
General and administrative | 2,833 | 3,939 |
Depreciation and amortization | 46 | 41 |
Total cost and expense | 3,869 | 8,853 |
Operating loss | (3,043) | (4,186) |
Other income (expense) | ||
Interest expense | (1,544) | (2,186) |
Finance cost related to obligations to issue common stock | (3,576) | 0 |
Loss on investment | 0 | (19,056) |
Other gain (loss), net | 1 | (1) |
Total other expense, net | (5,119) | (21,243) |
Loss before income taxes | (8,162) | (25,429) |
Provision for income taxes | 0 | 0 |
Net loss | (8,162) | (25,429) |
Other comprehensive income | ||
Foreign currency translation adjustments | (318) | 2 |
Comprehensive loss | $ (8,480) | $ (25,427) |
Weighted-average shares outstanding, basic (in shares) | 13,004,071 | 10,515,777 |
Weighted-average shares outstanding, diluted (in shares) | 13,004,071 | 10,515,777 |
Net income (loss) per share, basic (in dollars per share) | $ (0.63) | $ (2.42) |
Net income (loss) per share, diluted (in dollars per share) | $ (0.63) | $ (2.42) |
Unaudited Condensed Consolida_2
Unaudited Condensed Consolidated Statements of Stockholders’ Equity (Deficit) - USD ($) $ in Thousands | Total | Common Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Income (Loss) | Accumulated Deficit |
Beginning balance (in shares) at Dec. 31, 2021 | 10,515,777 | ||||
Beginning balance at Dec. 31, 2021 | $ 31,034 | $ 11 | $ 364,333 | $ (270) | $ (333,040) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Net loss | (25,429) | (25,429) | |||
Share-based compensation | 514 | 514 | |||
Foreign currency translation | 2 | 2 | |||
Ending balance (in shares) at Mar. 31, 2022 | 10,515,777 | ||||
Ending balance at Mar. 31, 2022 | $ 6,121 | $ 11 | 364,847 | (268) | (358,469) |
Beginning balance (in shares) at Dec. 31, 2022 | 11,539,564 | 11,539,564 | |||
Beginning balance at Dec. 31, 2022 | $ (20,425) | $ 12 | 368,945 | (859) | (388,523) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Net loss | (8,162) | (8,162) | |||
Share-based compensation | $ 143 | 143 | |||
Common stock issuance upon note payable conversion (in shares) | 2,094,428 | 2,094,428 | |||
Common stock issued upon note payable conversion | $ 2,985 | $ 2 | 2,983 | ||
Foreign currency translation | $ (318) | (318) | |||
Ending balance (in shares) at Mar. 31, 2023 | 13,633,992 | 13,633,992 | |||
Ending balance at Mar. 31, 2023 | $ (25,777) | $ 14 | $ 372,071 | $ (1,177) | $ (396,685) |
Unaudited Condensed Consolida_3
Unaudited Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | Dec. 31, 2022 | |
Cash flows from operating activities: | |||
Net loss | $ (8,162) | $ (25,429) | |
Adjustments to reconcile net loss to net cash used in operating activities: | |||
Depreciation, amortization and impairments | 46 | 41 | |
Share-based compensation | 156 | 429 | |
Cost of extending note payable | 750 | 1,095 | |
Finance cost related to obligations to issue common stock | 3,576 | 0 | |
Accrued interest included in note payable | 1,139 | 0 | |
Loss on investment | 0 | 19,056 | |
Provision for doubtful accounts | 6 | 0 | |
Other | (9) | 43 | |
Changes in operating assets and liabilities: | |||
Accounts receivable | 84 | (1,052) | |
Inventory | (1) | (146) | |
Deferred cost of revenue | (22) | (4,176) | |
Prepaid expense and other assets | 176 | 2,281 | |
Operating lease assets | 47 | (52) | |
Accounts payable, accrued expense and other liabilities | (1) | (666) | |
Contract liability | 162 | (142) | |
Operating lease liabilities | (27) | 30 | |
Net cash used in operating activities | (2,080) | (8,688) | |
Cash flows from investing activities: | |||
Proceeds from sale of investment | 0 | 1,849 | |
Purchases of property, equipment and software | (4) | (10) | |
Payment of amounts capitalized to software in progress | 0 | (949) | |
Net cash provided by (used in) investing activities | (4) | 890 | |
Cash flows from financing activities: | |||
Proceeds from obligations to issue common stock - ELOC | 1,000 | 0 | |
Proceeds from obligations to issue common stock - Debentures | 1,500 | 0 | |
Advances from related parties | 259 | 0 | |
Repayments of advances from related parties | (355) | 0 | |
Repayments of debt | (8) | (3,698) | |
Net cash provided by (used in) financing activities | 2,396 | (3,698) | |
Net change in cash | 312 | (11,496) | |
Cash: | |||
Beginning of period | 52 | 14,187 | $ 14,187 |
End of period | 364 | 2,691 | $ 52 |
Supplemental cash flow information: | |||
Cash paid for interest | $ 250 | $ 1,092 |
ORGANIZATION AND BUSINESS
ORGANIZATION AND BUSINESS | 3 Months Ended |
Mar. 31, 2023 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
ORGANIZATION AND BUSINESS | NOTE 1. ORGANIZATION AND BUSINESS Organization and Business Remark Holdings, Inc. and its subsidiaries (“Remark”, “we”, “us”, or “our”) constitute a diversified global technology business with leading artificial intelligence (“AI”) and data-analytics solutions. The common stock of Remark Holdings, Inc. is listed on the Nasdaq Capital Market (“Nasdaq”) under the ticker symbol MARK. We primarily sell AI-based products and services. We currently recognize substantially all of our revenue from China, with additional revenue from sales in the U.S. Corporate Structure We are a holding company incorporated in Delaware and not a Chinese operating company. As a holding company, we conduct most of our operations through our subsidiaries, each of which is wholly owned. We have historically conducted a significant part of our operations through contractual arrangements between our wholly-foreign-owned enterprise (“WFOE”) and certain variable interest entities (“VIEs”) based in China to address challenges resulting from laws, policies and practices that may disfavor foreign-owned entities that operate within industries deemed sensitive by the Chinese government. We were the primary beneficiary of the VIEs because the contractual arrangements governing the relationship between the VIEs and our WFOE, which included an exclusive call option agreement, exclusive business cooperation agreement, a proxy agreement and an equity pledge agreement, enabled us to (i) exercise effective control over the VIEs, (ii) receive substantially all of the economic benefits of the VIEs, and (iii) have an exclusive call option to purchase, at any time, all or part of the equity interests in and/or assets of the VIEs to the extent permitted by Chinese laws. Because we were the primary beneficiary of the VIEs, we consolidated the financial results of the VIEs in our consolidated financial statements in accordance with generally accepted accounting principles (“GAAP”). We terminated all of the contractual arrangements between the WFOE and the VIEs and exercised our rights under the exclusive call option agreements between the WFOE and the VIEs such that, effective as of September 19, 2022, we obtained 100% of the equity ownership of the entities we formerly consolidated as VIEs and which we now consolidate as wholly-owned subsidiaries. The following diagram illustrates our corporate structure, including our significant subsidiaries, as of the date of this Form 10-Q. The diagram omits certain entities which are immaterial to our results of operations and financial condition. We are subject to certain legal and operational risks associated with having a significant portion of our operations in China. Chinese laws and regulations governing our current business operations, including the enforcement of such laws and regulations, are sometimes vague and uncertain and can change quickly with little advance notice. The Chinese government may intervene in or influence the operations of our China-based subsidiaries at any time and may exert more control over offerings conducted overseas and/or foreign investment in China-based issuers, which could result in a material change in our operations and/or the value of our securities. In addition, any actions by the Chinese government to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers could significantly limit or completely hinder our ability to offer or continue to offer our securities to investors and cause the value of such securities to significantly decline or become worthless. In recent years, the Chinese government adopted a series of regulatory actions and issued statements to regulate business operations in China, including those related to the use of variable interest entities, cybersecurity, data security, export control and anti-monopoly concerns. As of the date of this Form 10-Q, we have neither been involved in any investigations on cybersecurity review initiated by any Chinese regulatory authority, nor received any inquiry, notice or sanction. As of the date of this Form 10-Q, no relevant laws or regulations in China explicitly require us to seek approval from the China Securities Regulatory Commission (“CSRC”) for any securities listing. As of the date of this Form 10-Q, we have not received any inquiry, notice, warning or sanctions regarding our planned overseas listing from the CSRC or any other Chinese governmental authorities relating to securities listings. However, since these statements and regulatory actions are newly published, official guidance and related implementation rules have not all been issued. It is highly uncertain what potential impact such modified or new laws and regulations will have on our ability to conduct our business, accept investments or list or maintain a listing on a U.S. or foreign exchange. As of the date of this Form 10-Q, we are not required to seek permissions from the CSRC, the Cyberspace Administration of China (the “CAC”), or any other entity that is required to approve our operations in China. Nevertheless, Chinese regulatory authorities may in the future promulgate laws, regulations or implement rules that require us or our subsidiaries to obtain permissions from such regulatory authorities to approve our operations or any securities listing. Holding Foreign Companies Accountable Act The Holding Foreign Companies Accountable Act (the “HFCA Act”) was enacted on December 18, 2020. The HFCA Act states that if the Securities and Exchange Commission (the “SEC”) determines that a company has filed audit reports issued by a registered public accounting firm that has not been subject to inspection by the Public Company Accounting Oversight Board (the “PCAOB”) for three consecutive years beginning in 2021, the SEC shall prohibit such shares from being traded on a national securities exchange or in the over the counter trading market in the United States. On December 2, 2021, the SEC adopted amendments to finalize rules implementing the submission and disclosure requirements in the HFCA Act. The rules apply to registrants that the SEC identifies as having filed an annual report with an audit report issued by a registered public accounting firm that is located in a foreign jurisdiction and that the PCAOB is unable to inspect or investigate completely because of a position taken by an authority in a foreign jurisdiction. The Consolidated Appropriations Act, 2023, which was signed into law on December 29, 2022, amended the HFCA Act to reduce the number of consecutive non-inspection years required to trigger the trading prohibition under the HFCA Act from three years to two years. On December 16, 2021, the PCAOB issued a report on its determination that it is unable to inspect or investigate completely PCAOB-registered public accounting firms headquartered in mainland China and in Hong Kong because of positions taken by Chinese and Hong Kong authorities in those jurisdictions. On August 26, 2022, the CSRC, the Ministry of Finance of the PRC, and the PCAOB signed a Statement of Protocol (the “Protocol”), taking the first step toward opening access for the PCAOB to completely inspect and investigate registered public accounting firms headquartered in mainland China and Hong Kong. On December 15, 2022, the PCAOB vacated its 2021 determination that the positions taken by authorities in mainland China and Hong Kong prevented it from inspecting and investigating completely registered public accounting firms headquartered in those jurisdictions. In view of the PCAOB’s decision to vacate its 2021 determination and until such time as the PCAOB issues any new adverse determination, the SEC has stated that there are no issuers at risk of having their securities subject to a trading prohibition under the HFCA Act. Each year, the PCAOB will reassess its determinations on whether it can inspect and investigate completely audit firms in China, and if, in the future, the PCAOB determines it cannot do so, or if Chinese authorities do not allow the PCAOB complete access for inspections and investigations for two consecutive years, companies engaging China-based public accounting firms would be delisted pursuant to the HFCA Act. Our auditor, Weinberg & Company, an independent registered public accounting firm headquartered in the United States is currently subject to PCAOB inspections and has been inspected by the PCAOB on a regular basis. However, if the PCAOB is unable to inspect the work papers of our accounting firm in the future, such lack of inspection could cause trading in our common stock to be prohibited under the HFCA Act, and as a result, an exchange may determine to delist our common stock. The delisting and the cessation of trading of our common stock, or the threat of our common stock being delisted and prohibited from being traded, may materially and adversely affect the value of our common stock. Transfer of Cash or Assets Dividend Distributions As of the date of this Form 10-Q, none of our subsidiaries have made any dividends or distributions to Remark. We have never declared or paid dividends or distributions on our common equity. We currently intend to retain all available funds and any future consolidated earnings to fund our operations and continue the development and growth of our business; therefore, we do not anticipate paying any cash dividends. Under Delaware law, a Delaware corporation’s ability to pay cash dividends on its capital stock requires the corporation to have either net profits or positive net assets (total assets less total liabilities) over its capital. If we determine to pay dividends on any of our common stock in the future, as a holding company, we may rely on dividends and other distributions on equity from our subsidiaries for cash requirements, including the funds necessary to pay dividends and other cash contributions to our stockholders. Our WFOE’s ability to distribute dividends is based upon its distributable earnings. Current Chinese regulations permit our WFOE to pay dividends to its shareholder only out of its registered capital amount, if any, as determined in accordance with Chinese accounting standards and regulations, and then only after meeting the requirement regarding statutory reserve. If our WFOE incurs debt in the future, the instruments governing the debt may restrict its ability to pay dividends or make other payments to us. Any limitation on the ability of our WFOE to distribute dividends or other payments to us could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our businesses, pay dividends or otherwise fund and conduct our business. In addition, any cash dividends or distributions of assets by our WFOE to its stockholder are subject to a Chinese withholding tax of as much as 10%. The Chinese government also imposes controls on the conversion of Chinese Renminbi (“RMB”) into foreign currencies and the remittance of currencies out of China. Therefore, we may experience difficulties in completing the administrative procedures necessary to obtain and remit foreign currency for the payment of dividends from our profits, if any. If we are unable to receive all of the revenues from our operations through our China-based subsidiaries, we may be unable to pay dividends on our common stock. COVID-19 Our consolidated financial statements for the three months ended March 31, 2023 continued to show the negative impact that the COVID-19 pandemic has had on our business. Preventative measures related to COVID-19 outbreaks may continue to adversely affect our business and financial results, as could economic and geopolitical conditions in some international regions, and we do not yet know what will be the ultimate effects on our business. The COVID-19 pandemic caused a broad shift towards remote working arrangements for many businesses worldwide and injected uncertainty and delay into decision-making processes for such businesses. Though the most restrictive preventative measures have been eased in China, city-wide lockdowns, travel restrictions, closures of non-essential businesses and other quarantine measures could be reinstituted at any time. Recovering from the effects of the preventative measures in China that resulted from the Chinese government’s Zero-COVID policy and that significantly limited the operational capabilities of our China-based subsidiaries has taken some time as we and our customers and partners work to ramp up business again. Many cities across large swaths of China, including economically significant regions such as Shanghai, as recently as the end of 2022 were fully or partially locked down for weeks or even months. Such lockdowns have had a material adverse impact on our business, including on the collection of our accounts receivable and our ability to complete projects in China to generate revenue, and may continue to adversely impact our business until customers and potential customers believe they can operate and expand their businesses without fear of lockdowns or other severely restrictive preventative measures. The full extent of the impact of the pandemic on our business and financial results will depend largely on future developments, including resurgences and further spread of existing or new COVID-19 variants, the duration of any remaining preventative measures implemented by domestic and foreign governments, the impact on capital and financial markets and the related impact on the financial circumstances of our customers, all of which are highly uncertain and cannot be predicted. The pandemic-related situation continues to change rapidly, and additional impacts of which we are not currently aware may arise. We are closely monitoring worldwide developments and are continually assessing the potential impact on our business. Going Concern During the three months ended March 31, 2023, and in each fiscal year since our inception, we have incurred operating losses which have resulted in a stockholders’ deficit of $25.8 million as of March 31, 2023. Additionally, our operations have historically used more cash than they have provided. Net cash used in operating activities was $2.1 million during the three months ended March 31, 2023. As of March 31, 2023, our cash balance was $0.4 million. Our history of recurring operating losses, working capital deficiencies and negative cash flows from operating activities give rise to, and management has concluded that there is, substantial doubt regarding our ability to continue as a going concern. Our independent registered public accounting firm, in its report on our consolidated financial statements for the year ended December 31, 2022, has also expressed substantial doubt about our ability to continue as a going concern. Our consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. We intend to fund our future operations and meet our financial obligations through revenue growth from our AI and data analytics offerings. We cannot, however, provide assurance that revenue, income and cash flows generated from our businesses will be sufficient to sustain our operations in the twelve months following the filing of this Form 10-Q. As a result, we are actively evaluating strategic alternatives including debt and equity financings. Conditions in the debt and equity markets, as well as the volatility of investor sentiment regarding macroeconomic and microeconomic conditions (in particular, as a result of the COVID-19 pandemic, global supply chain disruptions, inflation and other cost increases, and the geopolitical conflict in Ukraine), will play primary roles in determining whether we can successfully obtain additional capital. We cannot be certain that we will be successful at raising additional capital. A variety of factors, many of which are outside of our control, affect our cash flow; those factors include the effects of the COVID-19 pandemic, regulatory issues, competition, financial markets and other general business conditions. Based on financial projections, we believe that we will be able to meet our ongoing requirements for at least the next 12 months with existing cash and based on the probable success of one or more of the following plans: • develop and grow new product line(s) • obtain additional capital through debt and/or equity issuances. However, projections are inherently uncertain and the success of our plans is largely outside of our control. As a result, there is substantial doubt regarding our ability to continue as a going concern, and we may fully utilize our cash resources prior to June 30, 2023. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended |
Mar. 31, 2023 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation We prepared the accompanying unaudited Condensed Consolidated Balance Sheet as of March 31, 2023, with the audited Consolidated Balance Sheet amounts as of December 31, 2022 presented for comparative purposes, and the related unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss, the Condensed Consolidated Statements of Cash Flows and the Condensed Consolidated Statements of Stockholders’ Deficit in accordance with the instructions for Form 10-Q. In compliance with those instructions, we have omitted certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with U.S. GAAP, though management believes the disclosures made herein are sufficient to ensure that the information presented is not misleading. Our results of operations and our cash flows as of the end of the interim periods reported herein do not necessarily indicate the results we may experience for the remainder of the year or for any other future period. Management believes that we have included all adjustments (including those of a normal, recurring nature) considered necessary to fairly present our unaudited Condensed Consolidated Balance Sheet and our unaudited Condensed Consolidated Statement of Stockholders’ Deficit, each as of March 31, 2023, as well as our unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss and Condensed Consolidated Statements of Cash Flows for all periods presented. You should read our unaudited condensed consolidated interim financial statements and footnotes in conjunction with our consolidated financial statements and footnotes included within the Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Form 10-K”). Consolidation We include all of our subsidiaries in our condensed consolidated financial statements, eliminating all significant intercompany balances and transactions during consolidation. Use of Estimates We prepare our consolidated financial statements in conformity with GAAP. While preparing our financial statements, we make estimates and assumptions that affect amounts reported and disclosed in the consolidated financial statements and accompanying notes. Accordingly, actual results could differ from those estimates. On an ongoing basis, we evaluate our estimates, including those related to accounts receivable, deferred cost of revenue, share-based compensation, deferred income taxes, and inventory reserve, among other items. The impact of the COVID-19 pandemic continues to unfold. As a result, many of our estimates and assumptions required increased judgment and carry a higher degree of variability and volatility. As events continue to evolve and additional information becomes available, our estimates may change materially in future periods. Cash Our cash consists of funds held in bank accounts. We maintain cash balances in United States dollars (“USD”), British pounds (“GBP”), RMB and Hong Kong dollars (“HKD”). The following table, reported in USD, disaggregates our cash balances by currency denomination (in thousands): March 31, 2023 December 31, 2022 Cash denominated in: USD $ 238 $ 11 RMB 66 19 GBP 5 17 HKD 55 5 Total cash $ 364 $ 52 We maintain substantially all of our USD-denominated cash at a U.S. financial institution where the balances are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. At times, however, our cash balances may exceed the FDIC-insured limit. As of March 31, 2023, we do not believe we have any significant concentrations of credit risk. Cash held by our non-U.S. subsidiaries is subject to foreign currency fluctuations against the USD, although such risk is somewhat mitigated because we transfer U.S. funds to China to fund local operations. If, however, the USD is devalued significantly against the RMB, our cost to further develop our business in China could exceed original estimates. Fair Value of Financial Instruments Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants (an exit price). When reporting the fair values of our financial instruments, we prioritize those fair value measurements into one of three levels based on the nature of the inputs, as follows: Level 1: Valuations based on quoted prices in active markets for identical assets and liabilities; Level 2: Valuations based on observable inputs that do not meet the criteria for Level 1, including quoted prices in inactive markets and observable market data for similar, but not identical instruments; and Level 3: Valuations based on unobservable inputs, which are based upon the best available information when external market data is limited or unavailable. The fair value hierarchy requires us to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. For some products or in certain market conditions, observable inputs may not be available. We believe the reported carrying amounts for cash, marketable securities, receivables, prepaids and other current assets, accounts payable, accrued expense and other current liabilities, and short-term debt approximate their fair values because of the short-term nature of these financial instruments. Foreign Currency Translation We report all currency amounts in USD. Our overseas subsidiaries, however, maintain their books and records in their functional currencies, which are GBP in the United Kingdom (“U.K.”) and RMB in China. In general, when consolidating our subsidiaries with non-USD functional currencies, we translate the amounts of assets and liabilities into USD using the exchange rate on the balance sheet date, and the amounts of revenue and expense are translated at the average exchange rate prevailing during the period. The gains and losses resulting from translation of financial statement amounts into USD are recorded as a separate component of accumulated other comprehensive loss within stockholders’ deficit. We used the exchange rates in the following table to translate amounts denominated in non-USD currencies as of and for the periods noted: 2023 2022 Exchange rates at March 31st: GBP:USD 1.237 1.313 RMB:USD 0.146 0.158 HKD:USD 0.127 0.128 Average exchange rate during the three months ended March 31st: RMB:USD 0.146 0.158 GBP:USD 1.214 1.317 Revenue Recognition AI-Based Products We generate revenue by developing AI-based products, including fully-integrated AI solutions which combine our proprietary technology with third-party hardware and software products to meet end-user specifications. Under one type of contract for our AI-based products, we provide a single, continuous service to clients who control the assets as we create them. Accordingly, we recognize the revenue over the period of time during which we provide the service. Under another type of contract, we have performance obligations to provide fully-integrated AI solutions to our customer and we recognize revenue at the point in time when each performance obligation is completed and delivered to, tested by and accepted by our customer. We recognize revenue when we transfer control of the promised goods or services to our customers, and we recognize an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services. If there is uncertainty related to the timing of collections from our customer, which may be the case if our customer is not the ultimate end user of our goods, we consider this to be uncertainty of the customer’s ability and intention to pay us when consideration is due. Accordingly, we recognize revenue only when we have transferred control of the goods or services and collectability of consideration from the customer is probable. When customers pay us prior to when we satisfy our obligation to transfer control of promised goods or services, we record the amount that reflects the consideration to which we expect to be entitled as a contract liability until such time as we satisfy our performance obligation. For contracts under which we have not yet completed the performance obligation, deferred costs are recorded for any amounts incurred in advance of the performance obligation. For our contracts with customers, we generally extend short-term credit policies to our customers, typically up to one year for large-scale projects. We record the incremental costs of obtaining contracts as an expense when incurred. We offer extended warranties on our products for periods of one Other We generate revenue from other sources, such as from advertising and marketing services. We recognize the revenue from these contracts at the point in time when we transfer control of the good sold to the customer or when we deliver the promised promotional materials or media content. Substantially all of our contracts with customers that generate Other revenue are completed within one year or less. Inventory We use the first-in first-out method to determine the cost of our inventory, then we report inventory at the lower of cost or net realizable value. We regularly review our inventory quantities on hand and record a provision for excess and obsolete inventory based primarily on our estimated sales forecasts. At March 31, 2023 and December 31, 2022, reserve for inventory was $2.2 million and $2.2 million, respectively. Refundable Tax Credits We charge the cost of our research and development efforts to operations as incurred. Our subsidiary in the United Kingdom is entitled to receive certain government assistance in the form of refundable research and development tax credits from taxation authorities, based on qualifying expenditures incurred during the fiscal year. The refundable credits are not dependent on our ongoing tax status or tax position and accordingly are not considered part of income taxes. We record refundable tax credits as a reduction of technology and development expense when we can reasonably estimate the amount and it is more likely than not that such amount will be received. During the three months ended March 31, 2023, we recorded a tax credit of approximately $0.5 million. Internal Use Software We acquire or develop applications and other software that help us meet our internal needs with respect to operating our business. For such projects, planning cost and other costs related to the preliminary project stage, as well as costs incurred for post-implementation activities, are expensed as incurred. We capitalize costs incurred during the application development phase only when we believe it is probable the development will result in new or additional functionality. The types of costs capitalized during the application development phase include fees incurred with third parties for consulting, programming and other development activities performed to complete the software. We amortize our internal use software on a straight-line basis over an estimated useful life of three years. If we identify any internal use software to be abandoned, the cost less the accumulated amortization, if any, is recorded as amortization expense. Once we have fully amortized internal use software costs that we capitalized, we remove such amounts from their respective accounts. Net Income (Loss) per Share We calculate basic net income (loss) per share using the weighted-average number of common stock shares outstanding during the period. For the calculation of diluted net income (loss) per share, we give effect to all the shares of common stock that were outstanding during the period plus the number of additional common shares that would have been outstanding if all dilutive potential common shares had been issued, using the treasury stock method. Potential common shares are excluded from the computation when their effect is anti-dilutive. Dilutive potential shares of common stock consist of incremental shares of common stock issuable upon exercise of stock options and warrants. For the three months ended March 31, 2023 and 2022, there were no reconciling items related to either the numerator or denominator of the loss per share calculation, as their effect would have been anti-dilutive. Securities which may have affected the calculation of diluted earnings per share for the three months ended March 31, 2023 if their effect had been dilutive include 1,626,346 total outstanding stock options, and 1,011,440 outstanding warrants to purchase common stock. Segments Existing GAAP, which establishes a management approach to segment reporting, defines operating segments as components of an entity about which separate, discrete financial information is available for evaluation by the chief operating decision maker. We have identified our Chief Executive Officer as our chief operating decision maker, who reviews operating results to make decisions about allocating resources and assessing performance based upon only one operating segment. Recently Issued Accounting Pronouncements In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-06 (“ASU 2020-06”), Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity . The ASU will simplify the accounting for convertible instruments by reducing the number of accounting models for convertible debt instruments and convertible preferred stock. Limiting the accounting models will result in fewer embedded conversion features being separately recognized from the host contract as compared with current GAAP. Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting and (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital. The ASU also amends the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. With regard to our financial reporting, ASU 2020-06 will be effective January 1, 2024, and early adoption is permitted, but no earlier than January 1, 2021, including interim periods within that year. We are currently evaluating what effect(s) the adoption of ASU 2020-06 may have on our consolidated financial statements, but we do not believe the impact of the ASU will be material to our financial position, results of operations and cash flows. The effect will largely depend on the composition and terms of the financial instruments at the time of adoption. We have reviewed all accounting pronouncements recently issued by the FASB and the SEC. The authoritative pronouncements that we have already adopted did not have a material effect on our financial condition, results of operations, cash flows or reporting thereof, and except as otherwise noted above, we do not believe that any of the authoritative pronouncements that we have not yet adopted will have a material effect upon our financial condition, results of operations, cash flows or reporting thereof. |
CONCENTRATION OF RISK
CONCENTRATION OF RISK | 3 Months Ended |
Mar. 31, 2023 | |
Risks and Uncertainties [Abstract] | |
CONCENTRATION OF RISK | NOTE 3. CONCENTRATION OF RISK Revenue and Accounts Receivable The disaggregation of revenue tables in Note 4 demonstrate the concentration in our revenue from certain products and the geographic concentration of our business. We also have a concentration in the volume of business we transacted with customers, as during the three months ended March 31, 2023, one of our customers represented about 50% of our revenue, while during three months ended March 31, 2022, two customers represented about 48% and 46%, respectively, of our revenue. At March 31, 2023, accounts receivable from four of our customers represented about 26%, 11%, 11% and 10%, respectively, of our gross accounts receivable, while at December 31, 2022, accounts receivable from our three largest customers represented about 23%, 16% and 10%, respectively, of our gross accounts receivable. Deferred Cost of Revenue See Note 6 for a discussion of a risk concentration regarding our deferred cost of revenue. Cost of Sales and Accounts Payable The various hardware we purchase to fulfill our contracts with customers is not especially unique in nature. Based on our analysis, we believe that should any disruption in our current supply chain occur, a sufficient number of alternative vendors is available to us, at reasonably comparable specifications and price, such that we would not experience a material negative impact on our ability to procure the hardware we need to operate our business. |
REVENUE
REVENUE | 3 Months Ended |
Mar. 31, 2023 | |
Revenue from Contract with Customer [Abstract] | |
REVENUE | NOTE 4. REVENUE We primarily sell AI-based products and services based upon computer vision and other technologies. We do not include disclosures related to remaining performance obligations because substantially all our contracts with customers have an original expected duration of one year or less or, with regard to our stand-ready obligations, the amounts involved are not material. Disaggregation of Revenue The following table presents a disaggregation of our revenue by category of products and services (in thousands): Three Months Ended March 31, 2023 2022 AI-based products and services, including amounts from China Business Partner in 2023 (See Note 15 ) $ 721 $ 4,546 Other 105 121 Revenue $ 826 $ 4,667 The following table presents a disaggregation of our revenue by country (in thousands): Three Months Ended March 31, 2023 2022 China $ 743 $ 4,554 United States 83 113 Revenue $ 826 $ 4,667 Significant Judgments When accounting for revenue we make certain judgments, such as whether we act as a principal or as an agent in transactions or whether our contracts with customers fall within the scope of current GAAP regarding revenue, that affect the determination of the amount and timing of our revenue from contracts with customers. Based on the current facts and circumstances related to our contracts with customers, none of the judgments we make involve an elevated degree of qualitative significance or complexity such that further disclosure is warranted in terms of their potential impact on the amount and timing of our revenue. Contract Assets and Contract Liabilities We do not currently generate material contract assets. During the three months ended March 31, 2023, our contract liability changed only as a result of routine business activity. During the three months ended March 31, 2023 and 2022, the amount of revenue we recognized that was included in the beginning balance of Contract liability was not material. During the three months ended March 31, 2023 and 2022, we did not recognize revenue from performance obligations that were satisfied in previous periods. NOTE 6. DEFERRED COST OF REVENUE Deferred cost of revenue as of March 31, 2023 and December 31, 2022 of $7.5 million and $7.5 million, respectively, represent amounts we have paid in advance to the vendor who provides services to us in relation to various projects in China. Specifically, the deferred cost of revenue balance as of March 31, 2023, a large percentage of which was related to project installations we expected would be provided to us through our China Business Partner (described in more detail in Note 15 ), was paid almost entirely to a single vendor which will be visiting numerous sites across various regions of China to install our software solutions and/or hardware for our customers and perform other services for us pursuant to our customers’ requirements. Because most of the projects for which we have engaged the vendor require purchases of hardware, equipment and/or supplies in advance of site visits, we made the prepayments during 2022 in anticipation of several large batches of project installations. However, the lengthy COVID-19 related lockdowns that occurred in various regions in China prevented us and the vendor from being able to complete as many projects as we originally expected and caused our customers to delay installations. Given that the delays were related to the COVID-19 lockdowns that had ended by December 31, 2022 and were not a result of the vendor’s inability to either perform the services or refund of the amounts we advanced, we believe the balance as of March 31, 2023 will be fully recovered. |
TRADE ACCOUNTS RECEIVABLE
TRADE ACCOUNTS RECEIVABLE | 3 Months Ended |
Mar. 31, 2023 | |
Receivables [Abstract] | |
TRADE ACCOUNTS RECEIVABLE | NOTE 5. TRADE ACCOUNTS RECEIVABLE March 31, 2023 December 31, 2022 Gross accounts receivable balance $ 6,885 $ 7,213 Allowance for bad debt (4,166) (4,122) Accounts receivable, net $ 2,719 $ 3,091 Generally, it is not unusual for Chinese entities to pay their vendors on longer timelines than the timelines typically observed in U.S. commerce. Trade receivables related to our China AI projects at March 31, 2023 and December 31, 2022; including approximately $1.1 million and $1.1 million, respectively, of trade receivables from projects related to work with our China Business Partner (see Note 15 for more information regarding our China Business Partner and related accounting); represented essentially all our gross trade receivables in each such period. Despite the longer collection timelines normally observed with Chinese entities, we have noted that the COVID-19 related lockdowns that persisted in China for most of 2022 have caused further delay in our ability to collect all balances due from some of our customers in China. As a result of our inability to assure collection of all amounts due from such customers within a short period of time, we recorded a reserve for bad debt of approximately $2.8 million as of December 31, 2022 for all accounts receivable from China customers that were more than one year past due. |
DEFERRED COST OF REVENUE
DEFERRED COST OF REVENUE | 3 Months Ended |
Mar. 31, 2023 | |
Revenue from Contract with Customer [Abstract] | |
DEFERRED COST OF REVENUE | NOTE 4. REVENUE We primarily sell AI-based products and services based upon computer vision and other technologies. We do not include disclosures related to remaining performance obligations because substantially all our contracts with customers have an original expected duration of one year or less or, with regard to our stand-ready obligations, the amounts involved are not material. Disaggregation of Revenue The following table presents a disaggregation of our revenue by category of products and services (in thousands): Three Months Ended March 31, 2023 2022 AI-based products and services, including amounts from China Business Partner in 2023 (See Note 15 ) $ 721 $ 4,546 Other 105 121 Revenue $ 826 $ 4,667 The following table presents a disaggregation of our revenue by country (in thousands): Three Months Ended March 31, 2023 2022 China $ 743 $ 4,554 United States 83 113 Revenue $ 826 $ 4,667 Significant Judgments When accounting for revenue we make certain judgments, such as whether we act as a principal or as an agent in transactions or whether our contracts with customers fall within the scope of current GAAP regarding revenue, that affect the determination of the amount and timing of our revenue from contracts with customers. Based on the current facts and circumstances related to our contracts with customers, none of the judgments we make involve an elevated degree of qualitative significance or complexity such that further disclosure is warranted in terms of their potential impact on the amount and timing of our revenue. Contract Assets and Contract Liabilities We do not currently generate material contract assets. During the three months ended March 31, 2023, our contract liability changed only as a result of routine business activity. During the three months ended March 31, 2023 and 2022, the amount of revenue we recognized that was included in the beginning balance of Contract liability was not material. During the three months ended March 31, 2023 and 2022, we did not recognize revenue from performance obligations that were satisfied in previous periods. NOTE 6. DEFERRED COST OF REVENUE Deferred cost of revenue as of March 31, 2023 and December 31, 2022 of $7.5 million and $7.5 million, respectively, represent amounts we have paid in advance to the vendor who provides services to us in relation to various projects in China. Specifically, the deferred cost of revenue balance as of March 31, 2023, a large percentage of which was related to project installations we expected would be provided to us through our China Business Partner (described in more detail in Note 15 ), was paid almost entirely to a single vendor which will be visiting numerous sites across various regions of China to install our software solutions and/or hardware for our customers and perform other services for us pursuant to our customers’ requirements. Because most of the projects for which we have engaged the vendor require purchases of hardware, equipment and/or supplies in advance of site visits, we made the prepayments during 2022 in anticipation of several large batches of project installations. However, the lengthy COVID-19 related lockdowns that occurred in various regions in China prevented us and the vendor from being able to complete as many projects as we originally expected and caused our customers to delay installations. Given that the delays were related to the COVID-19 lockdowns that had ended by December 31, 2022 and were not a result of the vendor’s inability to either perform the services or refund of the amounts we advanced, we believe the balance as of March 31, 2023 will be fully recovered. |
PREPAID EXPENSE AND OTHER CURRE
PREPAID EXPENSE AND OTHER CURRENT ASSETS | 3 Months Ended |
Mar. 31, 2023 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
PREPAID EXPENSE AND OTHER CURRENT ASSETS | NOTE 7. PREPAID EXPENSE AND OTHER CURRENT ASSETS The following table presents the components of prepaid expense and other current assets (in thousands): March 31, 2023 December 31, 2022 Other receivables 10 23 Prepaid expense 1,057 1,144 Deposits 203 201 Other current assets 5 6 Total $ 1,275 $ 1,374 |
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT | 3 Months Ended |
Mar. 31, 2023 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY AND EQUIPMENT | NOTE 8. PROPERTY AND EQUIPMENT Property and equipment consist of the following (in thousands, except estimated lives): Estimated Life March 31, 2023 December 31, 2022 Vehicles 3 $ 153 153 Computers and equipment 3 1,172 $ 1,170 Furniture and fixtures 3 42 42 Software 3 5,168 5,160 Leasehold improvements 3 202 204 Software development in progress 1,199 1,199 Total property, equipment and software $ 7,936 $ 7,928 Less accumulated depreciation (6,276) (6,229) Total property, equipment and software, net $ 1,660 $ 1,699 For the three months ended March 31, 2023 and 2022, depreciation (and amortization of software) expense was de minimis. |
ACCRUED EXPENSE AND OTHER CURRE
ACCRUED EXPENSE AND OTHER CURRENT LIABILITIES | 3 Months Ended |
Mar. 31, 2023 | |
Other Liabilities Disclosure [Abstract] | |
ACCRUED EXPENSE AND OTHER CURRENT LIABILITIES | NOTE 9. ACCRUED EXPENSE AND OTHER CURRENT LIABILITIES The following table presents the components of Accrued expense and other current liabilities (in thousands): March 31, 2023 December 31, 2022 Accrued compensation and benefit-related expense $ 2,007 $ 1,448 Accrued interest 167 769 Other accrued expense 2,430 2,393 Other payables 2,224 2,234 Operating lease liability - current 120 138 China Cash Bonuses (see Note 15 ) 44 32 Other current liabilities 147 208 Total $ 7,139 $ 7,222 |
NOTES PAYABLE
NOTES PAYABLE | 3 Months Ended |
Mar. 31, 2023 | |
Debt Disclosure [Abstract] | |
NOTES PAYABLE | NOTE 10. NOTES PAYABLE The following table presents our notes payable (in thousands) as of: March 31, 2023 December 31, 2022 Principal balance of Original Mudrick Loans $ 16,307 $ 14,418 Other notes payable 181 189 Notes payable, net of unamortized discount and debt issuance cost $ 16,488 $ 14,607 On December 3, 2021, we entered into senior secured loan agreements (the “Original Mudrick Loan Agreements”) with certain of our subsidiaries as guarantors (the “Guarantors”) and certain institutional lenders affiliated with Mudrick Capital Management, LP (collectively, “Mudrick”), pursuant to which Mudrick extended credit to us consisting of term loans in the aggregate principal amount of $30.0 million (the “Original Mudrick Loans”). The Original Mudrick Loans bore interest at 16.5% per annum until the original maturity date of July 31, 2022 and, following an amendment we entered into with Mudrick in August 2022, bore interest at 18.5% per annum. The amendment also extended the maturity date of the Original Mudrick Loans from July 31, 2022 to October 31, 2022. However, we did not make the required repayment of the Original Mudrick Loans by October 31, 2022, which constituted an event of default under the Original Mudrick Loans and triggered an increase in the interest rate under the Original Mudrick Loans to 20.5%. On March 14, 2023, we entered into a Note Purchase Agreement (the “New Mudrick Loan Agreement”) with Mudrick, pursuant to which all of the Original Mudrick Loans were cancelled in exchange for new notes payable to Mudrick (the “New Mudrick Notes”) in the aggregate principal amount of approximately $16.3 million. The principal balance of the New Mudrick Notes included the $14.4 million outstanding balance of the Original Mudrick Loans, plus $1.1 million of accrued interest on the Original Mudrick Loans, plus a fee of approximately $0.8 million payable to Mudrick as consideration for cancelling the Original Mudrick Loans and converting all amounts outstanding thereunder into the New Mudrick Notes. We recorded the $0.8 million as interest expense during the three months ended March 31, 2023. The New Mudrick Notes bear interest at a rate of 20.5% per annum, which shall be payable on the last business day of each month commencing on May 31, 2023. The interest rate will increase by 2% and the principal amount outstanding under the New Mudrick Notes and any unpaid interest thereon may become immediately due and payable upon the occurrence of any event of default under the New Mudrick Loan Agreement. All amounts outstanding under the New Mudrick Notes, including all accrued and unpaid interest, will be due and payable in full on October 31, 2023. To secure the payment and performance of the obligations under the Original Mudrick Loan Agreements and the New Mudrick Loan Agreement, we, together with the Guarantors, have granted to TMI Trust Company, as the collateral agent for the benefit of Mudrick, a first priority lien on, and security interest in, all assets of Remark and the Guarantors, subject to certain customary exceptions. In connection with our entry into the Original Mudrick Loan Agreements, we paid Mudrick an upfront fee equal to 5.0% of the amount of the Original Mudrick Loans, which amount was netted against the drawdown of the Original Mudrick Loans. We recorded the upfront fee as a debt discount of $1.5 million, and recorded debt issuance cost totaling $1.1 million. We amortized the discount on the Original Mudrick Loans and the debt issuance cost over the life of the Original Mudrick Loans and, during the year ended December 31, 2022, we amortized $2.2 million of such discount and debt issuance cost. During the year ended December 31, 2022, we repaid $6.2 million of the principal amount of the Original Mudrick Loans in cash and delivered all of our shares in Sharecare, Inc. to Mudrick on July 11, 2022, in partial settlement of the Original Mudrick Loans, resulting in a further repayment of approximately $9.7 million of the principal amount of the Original Mudrick Loans. As of December 31, 2022, the outstanding balance of the Original Mudrick Loans was $14.4 million, and approximately $0.8 million of accrued interest was included in Accrued expense and other current liabilities. During the three months ended March 31, 2023, we accrued approximately $0.6 million additional interest expense on the Original Mudrick Loans, of which $0.3 million was paid during the period. Other Notes Payable The Other notes payable in the table above represent individually immaterial notes payable issued for the purchase of operating assets. Such notes payable bear interest at a weighted-average interest rate of approximately 6.2% and have a weighted-average remaining term of approximately 4.8 years. NOTE 11. TRANSACTIONS WITH IONIC Convertible Debentures On October 6, 2022, we entered into a debenture purchase agreement (the “2022 Debenture Purchase Agreement”) and a purchase agreement (the “ELOC Purchase Agreement”) with Ionic Ventures, LLC (“Ionic”). Pursuant to the 2022 Debenture Purchase Agreement, we issued a convertible subordinated debenture in the original principal amount of approximately $2.8 million (the “2022 Debenture”) to Ionic for a purchase price of $2.5 million. The 2022 Debenture automatically converted into shares of our common stock (the “Settlement Shares”) on November 17, 2022 upon the effectiveness of a registration statement we filed pursuant to a registration rights agreement we entered into with Ionic. Upon issuance of the 2022 Debenture, we initially estimated the obligation to issue common stock at approximately $3.6 million. As of December 31, 2022, we estimated such obligation to have a fair value of $1.9 million, representing an additional 1,720,349 shares to be issued pursuant to the 2022 Debenture. When the measurement period for determining the conversion price of the 2022 Debenture was completed, we determined that the number of conversion shares to be issued to Ionic upon automatic conversion of the 2022 Debenture was 3,129,668 shares of our common stock. As of March 31, 2023, we had issued an aggregate of 2,993,282 shares of common stock upon automatic conversion of the 2022 Debenture (inclusive of 898,854 shares that were issued during 2022), leaving a balance of 136,386 shares that remained to be issued, representing an obligation with a fair value of $0.2 million. On March 14, 2023, we entered into a new debenture purchase agreement (the “2023 Debenture Purchase Agreement”) with Ionic pursuant to which we authorized the issuance and sale of two convertible subordinated debentures in the aggregate principal amount of approximately $2.8 million for an aggregate purchase price of $2.5 million. The first debenture is in the original principal amount of approximately $1.7 million for a purchase price of $1.5 million (the “First 2023 Debenture”), which was issued on March 14, 2023, and the second debenture is in the original principal amount of approximately $1.1 million for a purchase price of $1.0 million (the “Second 2023 Debenture” and collectively with the First Debenture, the “2023 Debentures”), which was issued on April 12, 2023. Upon issuance of the First 2023 Debenture, we initially estimated the obligation to issue common stock at approximately $2.5 million. As of March 31, 2023, the First 2023 Debenture had not been converted into any shares of common stock and we estimated that 2,232,590 shares would be issued upon conversion of the First 2023 Debenture, representing an obligation with a fair value of $3.1 million. The 2023 Debentures accrue interest at a rate of 10% per annum, of which two years of interest is guaranteed and deemed earned in full on the first day following the issuance date. The interest rate on the 2023 Debentures increases to a rate of 15% per annum if the 2023 Debentures are not fully paid, converted or redeemed by the second anniversary of each debenture (each, a “Maturity Date”) or upon the occurrence of certain trigger events, including, but not limited to, the suspension from trading or the delisting of our common stock from Nasdaq for three consecutive trading days. If the 2023 Debentures are not fully paid or converted by their respective Maturity Dates, the original aggregate principal amount of the 2023 Debentures will be deemed to have been approximately $3.3 million from their issuance dates. The 2023 Debentures automatically convert into shares of common stock at the earlier of (i) the effectiveness of the initial registration statement registering the resale of certain Registrable Securities as such term is defined in the Registration Rights Agreement (as defined below) including, without limitation, the shares issuable upon conversion of the 2023 Debentures (the “Conversion Shares”) (such registration statement, the “Resale Registration Statement”), and (ii) 181 days after the issuance date of each 2023 Debenture. The number of shares of common stock issuable upon conversion of each 2023 Debenture shall be determined by dividing the outstanding balance under each 2023 Debenture (including all accrued and unpaid interest and accrued and unpaid late charges, if any) by a conversion price that is the lower of (x) 80% (or 70% if our common stock is not then trading on Nasdaq) of the average of the two lowest VWAPs over a specified measurement period following the conversion date (the “Variable Conversion Price”), and (y) $1.40 (the “Fixed Conversion Price”), subject to full ratchet anti-dilution protection in the event we issue certain equity securities at a price below the then Fixed Conversion Price. The 2023 Debentures are unsecured and expressly junior to any of our existing or future debt obligations. Notwithstanding anything to the contrary, under no circumstances shall the Variable Conversion Price be less than the floor price of $0.20 as specified in the 2023 Debentures. Additionally, in the event of a bankruptcy, we are required to redeem the 2023 Debentures in cash in an amount equal to the then outstanding balance of the 2023 Debentures multiplied by 120%. The 2023 Debentures further provide that we will not effect the conversion of any portion of the 2023 Debentures, and the holder thereof will not have the right to a conversion of any portion of the 2023 Debentures, to the extent that after giving effect to such conversion, the holder together with its affiliates would beneficially own more than 4.99% of the outstanding shares of our common stock immediately after giving effect to such conversion. Furthermore, we may not issue shares of common stock underlying the 2023 Debentures if such issuance would require us to obtain stockholder approval under the Nasdaq rules or until such stockholder approval has been obtained. Concurrently with entering into the 2023 Debenture Purchase Agreement, we also entered into a registration rights agreement with Ionic (the “2023 Registration Rights Agreement”), in which we agreed to file with the SEC one or more registration statements, as necessary, and to the extent permissible and subject to certain exceptions, to register under the Securities Act of 1933, as amended, the resale of the shares of our common stock issuable upon conversion of the 2023 Debentures and the shares of common stock that may be issued to Ionic if we fail to comply with our obligations in the 2023 Registration Rights Agreement. The 2023 Registration Rights Agreement requires that we file, within 15 calendar days after we file our 2022 Form 10-K, a resale registration statement and use commercially reasonable efforts to have such resale registration statement declared effective by the SEC on or before the earlier of (i) 90 days after signing of the 2023 Registration Rights Agreement (or 120 days if such registration statement is subject to full review by the SEC) and (ii) the 2nd business day after we are notified we will not be subject to further SEC review. If we fail to file or have the resale registration statement declared effective by the specified deadlines, then in each instance, we will issue to Ionic 150,000 shares of our common stock within two Equity Line of Credit The ELOC Purchase Agreement, as amended (see below), provides that, upon the terms and subject to the conditions and limitations set forth therein, we have the right to direct Ionic to purchase up to an aggregate of $50.0 million of shares of our common stock over the 36-month term of the ELOC Purchase Agreement. Under the ELOC Purchase Agreement, after the satisfaction of certain commencement conditions, including, without limitation, the effectiveness of a resale registration statement filed with the SEC registering such shares and that the 2022 Debenture shall have been fully converted into shares of common stock or shall otherwise have been fully redeemed and settled in all respects in accordance with the terms of the 2022 Debenture, we have the right to present Ionic with a purchase notice (each, a “Purchase Notice”) directing Ionic to purchase any amount up to $3.0 million of our common stock per trading day, at a per share price equal to 90% (or 80% if our common stock is not then trading on Nasdaq) of the average of the two lowest volume-weighted average prices (“VWAPs”) over a specified measurement period. With each purchase under the ELOC Purchase Agreement, we are required to deliver to Ionic an additional number of shares equal to 2.5% of the number of shares of common stock deliverable upon such purchase. The number of shares that we can issue to Ionic from time to time under the ELOC Purchase Agreement shall be subject to the condition that we will not sell shares to Ionic to the extent that Ionic, together with its affiliates, would beneficially own more than 4.99% of the outstanding shares of our common stock immediately after giving effect to such sale (the “Beneficial Ownership Limitation”). In addition, Ionic will not be required to buy any shares of our common stock pursuant to a Purchase Notice on any trading day on which the closing trade price of our common stock is below $0.20 (as amended by the Letter Agreement, as defined below). We will control the timing and amount of sales of our common stock to Ionic. Ionic has no right to require any sales by us, and is obligated to make purchases from us as directed solely by us in accordance with the ELOC Purchase Agreement. The ELOC Purchase Agreement provides that we will not be required or permitted to issue, and Ionic will not be required to purchase, any shares under the ELOC Purchase Agreement if such issuance would violate Nasdaq rules, and we may, in our sole discretion, determine whether to obtain stockholder approval to issue shares in excess of 19.99% of our outstanding shares of common stock if such issuance would require stockholder approval under Nasdaq rules. Ionic has agreed that neither it nor any of its agents, representatives and affiliates will engage in any direct or indirect short-selling or hedging our common stock during any time prior to the termination of the ELOC Purchase Agreement. The ELOC Purchase Agreement may be terminated by us at any time after commencement, at our discretion; provided, however, that if we sold less than $25.0 million to Ionic (other than as a result of our inability to sell shares to Ionic as a result of the Beneficial Ownership Limitation, our failure to have sufficient shares authorized or our failure to obtain stockholder approval to issue more than 19.99% of our outstanding shares), we will pay to Ionic a termination fee of $0.5 million, which is payable, at our option, in cash or in shares of common stock at a price equal to the closing price on the day immediately preceding the date of receipt of the termination notice. Further, the ELOC Purchase Agreement will automatically terminate on the date that we sell, and Ionic purchases, the full $50.0 million amount under the agreement or, if the full amount has not been purchased, on the expiration of the 36-month term of the ELOC Purchase Agreement. On January 5, 2023, we and Ionic entered into a letter agreement (the “Letter Agreement”) which amended the ELOC Purchase Agreement. Under the Letter Agreement, the parties agreed, among other things, to (i) amend the floor price below which Ionic will not be required to buy any shares of our common stock under the ELOC Purchase Agreement from $0.25 to $0.20, determined on a post-reverse split basis, (ii) amend the per share purchase price for purchases under the ELOC Purchase Agreement to 90% of the average of the two lowest daily VWAPs over a specified measurement period, which will commence at the conclusion of the applicable measurement period related to the 2022 Debenture and (iii) waive certain requirements in the ELOC Purchase Agreement to allow for a one-time $0.5 million purchase under the ELOC Purchase Agreement. As partial consideration for the waiver to allow for the $0.5 million purchase by Ionic, we agreed to issue to Ionic that number of shares (the “Letter Agreement Shares”) equal to the difference between (x) the variable conversion price in the 2022 Debenture, and (y) the calculation achieved as a result of the following formula: 80% (or 70% if our common stock is not then trading on Nasdaq) of the lowest VWAP starting on the trading day immediately following the receipt of pre-settlement conversion shares following the date on which the 2022 Debenture automatically converts or other relevant date of determination and ending the later of (a) 10 consecutive trading days after (and not including) the Automatic Conversion Date (as defined in the ELOC Agreement) or such other relevant date of determination and (b) the trading day immediately after shares of our common stock in the aggregate amount of at least $13.9 million shall have traded on Nasdaq. Upon issuance of the purchase notice evidencing the ELOC Advance (defined below), we initially estimated the obligation to issue common stock at approximately $0.2 million. As of March 31, 2023, we had not issued any of our common stock in relation to the Letter Agreement Shares, leaving an estimated 200,715 shares to be issued, representing an obligation with a fair value of $0.3 million. During January 2023, Ionic advanced $1.0 million dollars (the “ELOC Advance”) to us pursuant to the ELOC Agreement, as amended. Upon issuance of the purchase notice evidencing the ELOC Advance, we initially estimated the obligation to issue common stock at approximately $1.3 million. As of March 31, 2023, we had not issued any of our common stock in relation to the First 2023 Debenture, leaving an estimated 1,068,376 shares to be issued, representing an obligation with a fair value of $1.5 million. Accounting for the Debentures and the ELOC Using the guidance in ASC Topic 480, Distinguishing Liabilities from Equity , we evaluated the 2022 Debenture Purchase Agreement and its associated 2022 Debenture, the 2023 Debenture Purchase Agreement and its associated First 2023 Debenture, and the ELOC Purchase Agreement and its associated Letter Agreement and ELOC Advance, and determined that all represented obligations that must or may be settled with a variable number of shares, the monetary value of which was based solely or predominantly on a fixed monetary amount known at inception. Using a Level 3 input, we estimated the number of shares of our common stock that we would have to issue for each obligation and multiplied the estimated number of shares by the closing market price of our common stock on the measurement date to determine the fair value of the obligation. We then recorded the amount of the initial obligation in excess of the purchase price as finance cost. We remeasure each obligation at every balance sheet date until all shares representing the obligation have been issued, with the change in the amount of the obligation being recorded as finance cost. The following table shows the changes in our obligations to issue common stock (dollars in thousands): 2022 Debenture First 2023 Debenture Letter Agreement ELOC Advance Total Obligations to Issue Common Stock Balance at December 31, 2022 $ 1,892 $ — $ — $ — $ 1,892 Establishment of new obligation to issue shares — 2,501 249 1,325 4,075 Issuance of Shares (2,985) — — — (2,985) Change in measurement of liability 1,279 558 26 139 2,002 Balance at March 31, 2023 $ 186 $ 3,059 $ 275 $ 1,464 $ 4,984 Estimated Number of Shares Issuable Balance at December 31, 2022 1,720,349 — — — 1,720,349 Change in estimated number of shares issuable 510,465 — — — 510,465 Establishment of new obligation to issue shares — 2,232,590 200,715 1,068,376 3,501,681 Issuance of Shares (2,094,428) — — — (2,094,428) Balance at March 31, 2023 136,386 2,232,590 200,715 1,068,376 3,638,067 The following table shows the composition of finance cost associated with our obligations to issue common stock (dollars in thousands): 2022 Debenture First 2023 Debenture Letter Agreement ELOC Advance Total Initial obligation in excess of purchase price $ — $ 1,000 $ 249 $ 325 $ 1,574 Change in measurement of liability 1,279 558 26 139 2,002 Total $ 1,279 $ 1,558 $ 275 $ 464 $ 3,576 |
TRANSACTIONS WITH IONIC
TRANSACTIONS WITH IONIC | 3 Months Ended |
Mar. 31, 2023 | |
Debt Disclosure [Abstract] | |
TRANSACTIONS WITH IONIC | NOTE 10. NOTES PAYABLE The following table presents our notes payable (in thousands) as of: March 31, 2023 December 31, 2022 Principal balance of Original Mudrick Loans $ 16,307 $ 14,418 Other notes payable 181 189 Notes payable, net of unamortized discount and debt issuance cost $ 16,488 $ 14,607 On December 3, 2021, we entered into senior secured loan agreements (the “Original Mudrick Loan Agreements”) with certain of our subsidiaries as guarantors (the “Guarantors”) and certain institutional lenders affiliated with Mudrick Capital Management, LP (collectively, “Mudrick”), pursuant to which Mudrick extended credit to us consisting of term loans in the aggregate principal amount of $30.0 million (the “Original Mudrick Loans”). The Original Mudrick Loans bore interest at 16.5% per annum until the original maturity date of July 31, 2022 and, following an amendment we entered into with Mudrick in August 2022, bore interest at 18.5% per annum. The amendment also extended the maturity date of the Original Mudrick Loans from July 31, 2022 to October 31, 2022. However, we did not make the required repayment of the Original Mudrick Loans by October 31, 2022, which constituted an event of default under the Original Mudrick Loans and triggered an increase in the interest rate under the Original Mudrick Loans to 20.5%. On March 14, 2023, we entered into a Note Purchase Agreement (the “New Mudrick Loan Agreement”) with Mudrick, pursuant to which all of the Original Mudrick Loans were cancelled in exchange for new notes payable to Mudrick (the “New Mudrick Notes”) in the aggregate principal amount of approximately $16.3 million. The principal balance of the New Mudrick Notes included the $14.4 million outstanding balance of the Original Mudrick Loans, plus $1.1 million of accrued interest on the Original Mudrick Loans, plus a fee of approximately $0.8 million payable to Mudrick as consideration for cancelling the Original Mudrick Loans and converting all amounts outstanding thereunder into the New Mudrick Notes. We recorded the $0.8 million as interest expense during the three months ended March 31, 2023. The New Mudrick Notes bear interest at a rate of 20.5% per annum, which shall be payable on the last business day of each month commencing on May 31, 2023. The interest rate will increase by 2% and the principal amount outstanding under the New Mudrick Notes and any unpaid interest thereon may become immediately due and payable upon the occurrence of any event of default under the New Mudrick Loan Agreement. All amounts outstanding under the New Mudrick Notes, including all accrued and unpaid interest, will be due and payable in full on October 31, 2023. To secure the payment and performance of the obligations under the Original Mudrick Loan Agreements and the New Mudrick Loan Agreement, we, together with the Guarantors, have granted to TMI Trust Company, as the collateral agent for the benefit of Mudrick, a first priority lien on, and security interest in, all assets of Remark and the Guarantors, subject to certain customary exceptions. In connection with our entry into the Original Mudrick Loan Agreements, we paid Mudrick an upfront fee equal to 5.0% of the amount of the Original Mudrick Loans, which amount was netted against the drawdown of the Original Mudrick Loans. We recorded the upfront fee as a debt discount of $1.5 million, and recorded debt issuance cost totaling $1.1 million. We amortized the discount on the Original Mudrick Loans and the debt issuance cost over the life of the Original Mudrick Loans and, during the year ended December 31, 2022, we amortized $2.2 million of such discount and debt issuance cost. During the year ended December 31, 2022, we repaid $6.2 million of the principal amount of the Original Mudrick Loans in cash and delivered all of our shares in Sharecare, Inc. to Mudrick on July 11, 2022, in partial settlement of the Original Mudrick Loans, resulting in a further repayment of approximately $9.7 million of the principal amount of the Original Mudrick Loans. As of December 31, 2022, the outstanding balance of the Original Mudrick Loans was $14.4 million, and approximately $0.8 million of accrued interest was included in Accrued expense and other current liabilities. During the three months ended March 31, 2023, we accrued approximately $0.6 million additional interest expense on the Original Mudrick Loans, of which $0.3 million was paid during the period. Other Notes Payable The Other notes payable in the table above represent individually immaterial notes payable issued for the purchase of operating assets. Such notes payable bear interest at a weighted-average interest rate of approximately 6.2% and have a weighted-average remaining term of approximately 4.8 years. NOTE 11. TRANSACTIONS WITH IONIC Convertible Debentures On October 6, 2022, we entered into a debenture purchase agreement (the “2022 Debenture Purchase Agreement”) and a purchase agreement (the “ELOC Purchase Agreement”) with Ionic Ventures, LLC (“Ionic”). Pursuant to the 2022 Debenture Purchase Agreement, we issued a convertible subordinated debenture in the original principal amount of approximately $2.8 million (the “2022 Debenture”) to Ionic for a purchase price of $2.5 million. The 2022 Debenture automatically converted into shares of our common stock (the “Settlement Shares”) on November 17, 2022 upon the effectiveness of a registration statement we filed pursuant to a registration rights agreement we entered into with Ionic. Upon issuance of the 2022 Debenture, we initially estimated the obligation to issue common stock at approximately $3.6 million. As of December 31, 2022, we estimated such obligation to have a fair value of $1.9 million, representing an additional 1,720,349 shares to be issued pursuant to the 2022 Debenture. When the measurement period for determining the conversion price of the 2022 Debenture was completed, we determined that the number of conversion shares to be issued to Ionic upon automatic conversion of the 2022 Debenture was 3,129,668 shares of our common stock. As of March 31, 2023, we had issued an aggregate of 2,993,282 shares of common stock upon automatic conversion of the 2022 Debenture (inclusive of 898,854 shares that were issued during 2022), leaving a balance of 136,386 shares that remained to be issued, representing an obligation with a fair value of $0.2 million. On March 14, 2023, we entered into a new debenture purchase agreement (the “2023 Debenture Purchase Agreement”) with Ionic pursuant to which we authorized the issuance and sale of two convertible subordinated debentures in the aggregate principal amount of approximately $2.8 million for an aggregate purchase price of $2.5 million. The first debenture is in the original principal amount of approximately $1.7 million for a purchase price of $1.5 million (the “First 2023 Debenture”), which was issued on March 14, 2023, and the second debenture is in the original principal amount of approximately $1.1 million for a purchase price of $1.0 million (the “Second 2023 Debenture” and collectively with the First Debenture, the “2023 Debentures”), which was issued on April 12, 2023. Upon issuance of the First 2023 Debenture, we initially estimated the obligation to issue common stock at approximately $2.5 million. As of March 31, 2023, the First 2023 Debenture had not been converted into any shares of common stock and we estimated that 2,232,590 shares would be issued upon conversion of the First 2023 Debenture, representing an obligation with a fair value of $3.1 million. The 2023 Debentures accrue interest at a rate of 10% per annum, of which two years of interest is guaranteed and deemed earned in full on the first day following the issuance date. The interest rate on the 2023 Debentures increases to a rate of 15% per annum if the 2023 Debentures are not fully paid, converted or redeemed by the second anniversary of each debenture (each, a “Maturity Date”) or upon the occurrence of certain trigger events, including, but not limited to, the suspension from trading or the delisting of our common stock from Nasdaq for three consecutive trading days. If the 2023 Debentures are not fully paid or converted by their respective Maturity Dates, the original aggregate principal amount of the 2023 Debentures will be deemed to have been approximately $3.3 million from their issuance dates. The 2023 Debentures automatically convert into shares of common stock at the earlier of (i) the effectiveness of the initial registration statement registering the resale of certain Registrable Securities as such term is defined in the Registration Rights Agreement (as defined below) including, without limitation, the shares issuable upon conversion of the 2023 Debentures (the “Conversion Shares”) (such registration statement, the “Resale Registration Statement”), and (ii) 181 days after the issuance date of each 2023 Debenture. The number of shares of common stock issuable upon conversion of each 2023 Debenture shall be determined by dividing the outstanding balance under each 2023 Debenture (including all accrued and unpaid interest and accrued and unpaid late charges, if any) by a conversion price that is the lower of (x) 80% (or 70% if our common stock is not then trading on Nasdaq) of the average of the two lowest VWAPs over a specified measurement period following the conversion date (the “Variable Conversion Price”), and (y) $1.40 (the “Fixed Conversion Price”), subject to full ratchet anti-dilution protection in the event we issue certain equity securities at a price below the then Fixed Conversion Price. The 2023 Debentures are unsecured and expressly junior to any of our existing or future debt obligations. Notwithstanding anything to the contrary, under no circumstances shall the Variable Conversion Price be less than the floor price of $0.20 as specified in the 2023 Debentures. Additionally, in the event of a bankruptcy, we are required to redeem the 2023 Debentures in cash in an amount equal to the then outstanding balance of the 2023 Debentures multiplied by 120%. The 2023 Debentures further provide that we will not effect the conversion of any portion of the 2023 Debentures, and the holder thereof will not have the right to a conversion of any portion of the 2023 Debentures, to the extent that after giving effect to such conversion, the holder together with its affiliates would beneficially own more than 4.99% of the outstanding shares of our common stock immediately after giving effect to such conversion. Furthermore, we may not issue shares of common stock underlying the 2023 Debentures if such issuance would require us to obtain stockholder approval under the Nasdaq rules or until such stockholder approval has been obtained. Concurrently with entering into the 2023 Debenture Purchase Agreement, we also entered into a registration rights agreement with Ionic (the “2023 Registration Rights Agreement”), in which we agreed to file with the SEC one or more registration statements, as necessary, and to the extent permissible and subject to certain exceptions, to register under the Securities Act of 1933, as amended, the resale of the shares of our common stock issuable upon conversion of the 2023 Debentures and the shares of common stock that may be issued to Ionic if we fail to comply with our obligations in the 2023 Registration Rights Agreement. The 2023 Registration Rights Agreement requires that we file, within 15 calendar days after we file our 2022 Form 10-K, a resale registration statement and use commercially reasonable efforts to have such resale registration statement declared effective by the SEC on or before the earlier of (i) 90 days after signing of the 2023 Registration Rights Agreement (or 120 days if such registration statement is subject to full review by the SEC) and (ii) the 2nd business day after we are notified we will not be subject to further SEC review. If we fail to file or have the resale registration statement declared effective by the specified deadlines, then in each instance, we will issue to Ionic 150,000 shares of our common stock within two Equity Line of Credit The ELOC Purchase Agreement, as amended (see below), provides that, upon the terms and subject to the conditions and limitations set forth therein, we have the right to direct Ionic to purchase up to an aggregate of $50.0 million of shares of our common stock over the 36-month term of the ELOC Purchase Agreement. Under the ELOC Purchase Agreement, after the satisfaction of certain commencement conditions, including, without limitation, the effectiveness of a resale registration statement filed with the SEC registering such shares and that the 2022 Debenture shall have been fully converted into shares of common stock or shall otherwise have been fully redeemed and settled in all respects in accordance with the terms of the 2022 Debenture, we have the right to present Ionic with a purchase notice (each, a “Purchase Notice”) directing Ionic to purchase any amount up to $3.0 million of our common stock per trading day, at a per share price equal to 90% (or 80% if our common stock is not then trading on Nasdaq) of the average of the two lowest volume-weighted average prices (“VWAPs”) over a specified measurement period. With each purchase under the ELOC Purchase Agreement, we are required to deliver to Ionic an additional number of shares equal to 2.5% of the number of shares of common stock deliverable upon such purchase. The number of shares that we can issue to Ionic from time to time under the ELOC Purchase Agreement shall be subject to the condition that we will not sell shares to Ionic to the extent that Ionic, together with its affiliates, would beneficially own more than 4.99% of the outstanding shares of our common stock immediately after giving effect to such sale (the “Beneficial Ownership Limitation”). In addition, Ionic will not be required to buy any shares of our common stock pursuant to a Purchase Notice on any trading day on which the closing trade price of our common stock is below $0.20 (as amended by the Letter Agreement, as defined below). We will control the timing and amount of sales of our common stock to Ionic. Ionic has no right to require any sales by us, and is obligated to make purchases from us as directed solely by us in accordance with the ELOC Purchase Agreement. The ELOC Purchase Agreement provides that we will not be required or permitted to issue, and Ionic will not be required to purchase, any shares under the ELOC Purchase Agreement if such issuance would violate Nasdaq rules, and we may, in our sole discretion, determine whether to obtain stockholder approval to issue shares in excess of 19.99% of our outstanding shares of common stock if such issuance would require stockholder approval under Nasdaq rules. Ionic has agreed that neither it nor any of its agents, representatives and affiliates will engage in any direct or indirect short-selling or hedging our common stock during any time prior to the termination of the ELOC Purchase Agreement. The ELOC Purchase Agreement may be terminated by us at any time after commencement, at our discretion; provided, however, that if we sold less than $25.0 million to Ionic (other than as a result of our inability to sell shares to Ionic as a result of the Beneficial Ownership Limitation, our failure to have sufficient shares authorized or our failure to obtain stockholder approval to issue more than 19.99% of our outstanding shares), we will pay to Ionic a termination fee of $0.5 million, which is payable, at our option, in cash or in shares of common stock at a price equal to the closing price on the day immediately preceding the date of receipt of the termination notice. Further, the ELOC Purchase Agreement will automatically terminate on the date that we sell, and Ionic purchases, the full $50.0 million amount under the agreement or, if the full amount has not been purchased, on the expiration of the 36-month term of the ELOC Purchase Agreement. On January 5, 2023, we and Ionic entered into a letter agreement (the “Letter Agreement”) which amended the ELOC Purchase Agreement. Under the Letter Agreement, the parties agreed, among other things, to (i) amend the floor price below which Ionic will not be required to buy any shares of our common stock under the ELOC Purchase Agreement from $0.25 to $0.20, determined on a post-reverse split basis, (ii) amend the per share purchase price for purchases under the ELOC Purchase Agreement to 90% of the average of the two lowest daily VWAPs over a specified measurement period, which will commence at the conclusion of the applicable measurement period related to the 2022 Debenture and (iii) waive certain requirements in the ELOC Purchase Agreement to allow for a one-time $0.5 million purchase under the ELOC Purchase Agreement. As partial consideration for the waiver to allow for the $0.5 million purchase by Ionic, we agreed to issue to Ionic that number of shares (the “Letter Agreement Shares”) equal to the difference between (x) the variable conversion price in the 2022 Debenture, and (y) the calculation achieved as a result of the following formula: 80% (or 70% if our common stock is not then trading on Nasdaq) of the lowest VWAP starting on the trading day immediately following the receipt of pre-settlement conversion shares following the date on which the 2022 Debenture automatically converts or other relevant date of determination and ending the later of (a) 10 consecutive trading days after (and not including) the Automatic Conversion Date (as defined in the ELOC Agreement) or such other relevant date of determination and (b) the trading day immediately after shares of our common stock in the aggregate amount of at least $13.9 million shall have traded on Nasdaq. Upon issuance of the purchase notice evidencing the ELOC Advance (defined below), we initially estimated the obligation to issue common stock at approximately $0.2 million. As of March 31, 2023, we had not issued any of our common stock in relation to the Letter Agreement Shares, leaving an estimated 200,715 shares to be issued, representing an obligation with a fair value of $0.3 million. During January 2023, Ionic advanced $1.0 million dollars (the “ELOC Advance”) to us pursuant to the ELOC Agreement, as amended. Upon issuance of the purchase notice evidencing the ELOC Advance, we initially estimated the obligation to issue common stock at approximately $1.3 million. As of March 31, 2023, we had not issued any of our common stock in relation to the First 2023 Debenture, leaving an estimated 1,068,376 shares to be issued, representing an obligation with a fair value of $1.5 million. Accounting for the Debentures and the ELOC Using the guidance in ASC Topic 480, Distinguishing Liabilities from Equity , we evaluated the 2022 Debenture Purchase Agreement and its associated 2022 Debenture, the 2023 Debenture Purchase Agreement and its associated First 2023 Debenture, and the ELOC Purchase Agreement and its associated Letter Agreement and ELOC Advance, and determined that all represented obligations that must or may be settled with a variable number of shares, the monetary value of which was based solely or predominantly on a fixed monetary amount known at inception. Using a Level 3 input, we estimated the number of shares of our common stock that we would have to issue for each obligation and multiplied the estimated number of shares by the closing market price of our common stock on the measurement date to determine the fair value of the obligation. We then recorded the amount of the initial obligation in excess of the purchase price as finance cost. We remeasure each obligation at every balance sheet date until all shares representing the obligation have been issued, with the change in the amount of the obligation being recorded as finance cost. The following table shows the changes in our obligations to issue common stock (dollars in thousands): 2022 Debenture First 2023 Debenture Letter Agreement ELOC Advance Total Obligations to Issue Common Stock Balance at December 31, 2022 $ 1,892 $ — $ — $ — $ 1,892 Establishment of new obligation to issue shares — 2,501 249 1,325 4,075 Issuance of Shares (2,985) — — — (2,985) Change in measurement of liability 1,279 558 26 139 2,002 Balance at March 31, 2023 $ 186 $ 3,059 $ 275 $ 1,464 $ 4,984 Estimated Number of Shares Issuable Balance at December 31, 2022 1,720,349 — — — 1,720,349 Change in estimated number of shares issuable 510,465 — — — 510,465 Establishment of new obligation to issue shares — 2,232,590 200,715 1,068,376 3,501,681 Issuance of Shares (2,094,428) — — — (2,094,428) Balance at March 31, 2023 136,386 2,232,590 200,715 1,068,376 3,638,067 The following table shows the composition of finance cost associated with our obligations to issue common stock (dollars in thousands): 2022 Debenture First 2023 Debenture Letter Agreement ELOC Advance Total Initial obligation in excess of purchase price $ — $ 1,000 $ 249 $ 325 $ 1,574 Change in measurement of liability 1,279 558 26 139 2,002 Total $ 1,279 $ 1,558 $ 275 $ 464 $ 3,576 |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 3 Months Ended |
Mar. 31, 2023 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | NOTE 12. COMMITMENTS AND CONTINGENCIES At March 31, 2023, we had no material commitments outside the normal course of business. Contingencies As of March 31, 2023, we were neither a defendant in any material pending legal proceeding nor are we aware of any material threatened claims against us and, therefore, we have not accrued any contingent liabilities. Registration Rights Agreement On September 27, 2021, we entered into a securities purchase agreement (the “Armistice Purchase Agreement”) with Armistice Capital Master Fund Ltd. (“Armistice Capital”) pursuant to which we issued shares of our common stock together with warrants to purchase our common stock, subject to certain customary anti-dilution adjustments (the “Armistice Warrants”). In connection with our entry into the Armistice Purchase Agreement, we also entered into a registration rights agreement with Armistice Capital, pursuant to which we were obligated to file one or more registration statements, as necessary, to register under the Securities Act of 1933, as amended, the resale of the shares we issued to Armistice Capital and the shares underlying the Armistice Warrants (collectively, the “Armistice Registrable Securities”) and to obtain effectiveness of such registration statement no later than 90 days following September 27, 2021. The registration rights agreement provided that if we failed to satisfy our obligation to timely obtain effectiveness, we would incur a penalty of as much as $1.0 million. The registration statement to register the resale of the Armistice Registrable Securities was declared effective on October 31, 2022. We had accrued the maximum penalty and, as of December 31, 2022, paid $0.2 million of such amount, resulting in an unpaid amount of $0.8 million included in other accrued expense during the three months ended March 31, 2023. |
STOCKHOLDERS' EQUITY (DEFICIT)
STOCKHOLDERS' EQUITY (DEFICIT) | 3 Months Ended |
Mar. 31, 2023 | |
Stockholders' Equity Note [Abstract] | |
STOCKHOLDERS' EQUITY (DEFICIT) | NOTE 13. STOCKHOLDERS' EQUITY (DEFICIT) Warrants The following table summarizes information related to our equity-classified stock warrant issuances as of and for the dates and periods noted: Shares Weighted Average Exercise Price Per Share Weighted-Average Remaining Contractual Term Aggregate Intrinsic Value (in thousands) Outstanding at December 31, 2022 1,011,441 $ 40.10 3.7 $ — Granted — — Exercised — — Forfeited, cancelled or expired — — Outstanding at March 31, 2023 1,011,441 $ 40.10 3.4 $ — Share-Based Compensation We are authorized to issue equity-based awards under our 2014 Incentive Plan, our 2017 Incentive Plan and our 2022 Incentive Plan, each of which our stockholders have approved. We also award cash bonuses (“China Cash Bonuses”) to our employees in China, which grants are not subject to a formal incentive plan and which can only be settled in cash. We grant such awards to attract, retain and motivate eligible officers, directors, employees and consultants. Under each of the plans, we have granted shares of restricted stock and options to purchase common stock to our officers and employees with exercise prices equal to or greater than the fair value of the underlying shares on the grant date. Stock options and China Cash Bonuses generally expire 10 years from the grant date. All forms of equity awards and China Cash Bonuses vest upon the passage of time, the attainment of performance criteria, or both. When participants exercise stock options, we issue any shares of our common stock resulting from such exercise from new authorized and unallocated shares available at the time of exercise. The following table summarizes activity under our equity incentive plans related to equity-classified stock option grants as of and for the dates and periods noted: Shares Weighted Average Exercise Price Per Share Weighted-Average Remaining Contractual Term Aggregate Intrinsic Value (in thousands) Outstanding at December 31, 2022 1,626,631 $ 30.31 5.5 $ 1 Granted — — Exercised — — Forfeited, cancelled or expired (285) 12.50 Outstanding at March 31, 2023 1,626,346 $ 30.31 5.2 $ 12 Exercisable at December 31, 2022 1,549,681 31.41 5.3 $ 1 Exercisable at March 31, 2023 1,589,946 30.96 5.1 $ 6 The following table summarizes activity related to our liability-classified China Cash Bonuses as of and for the dates and periods noted: Shares Weighted Average Exercise Price Per Share Weighted-Average Remaining Contractual Term Aggregate Intrinsic Value (in thousands) Outstanding at December 31, 2022 71,450 $ 35.99 6.1 $ — Granted — — Exercised — — Forfeited, cancelled or expired — — Outstanding at March 31, 2023 71,450 $ 35.99 5.9 $ — Exercisable at December 31, 2022 68,450 36.97 6.1 $ — Exercisable at March 31, 2023 71,450 35.99 5.9 $ — The following table presents the change in the liability associated with our China Cash Bonuses included in Accrued expense and other current liabilities (in thousands): Three Months Ended March 31, Year Ended December 31, 2023 2022 Balance at beginning of period $ 32 $ 439 Share-based compensation expense related to China Cash Bonuses 12 (407) Balance at end of period $ 44 $ 32 The following table presents a breakdown of share-based compensation cost included in operating expense (in thousands): Three Months Ended March 31, 2023 2022 Stock options $ 143 $ 514 China Cash Bonuses 12 (85) Total $ 155 $ 429 We record share-based compensation expense in the books of the subsidiary that incurs the expense, while for equity-classified stock options we record the change in additional paid-in capital on the corporate entity because the corporate entity’s equity underlies such stock options. The following table presents information regarding unrecognized share-based compensation cost associated with stock options and China Cash Bonuses: March 31, 2023 Unrecognized share-based compensation cost for non-vested awards (in thousands): Stock options 55 China Cash Bonuses — Weighted-average years over which unrecognized share-based compensation expense will be recognized: Stock options 1.9 China Cash Bonuses 0 |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 3 Months Ended |
Mar. 31, 2023 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | NOTE 14. RELATED PARTY TRANSACTIONS As of March 31, 2023, we owed approximately $1.2 million to members of management representing various operating expense payments made on our behalf. |
CHINA BUSINESS PARTNER
CHINA BUSINESS PARTNER | 3 Months Ended |
Mar. 31, 2023 | |
Business Combination and Asset Acquisition [Abstract] | |
CHINA BUSINESS PARTNER | NOTE 15. CHINA BUSINESS PARTNER We interact with an unrelated entity (the “China Business Partner”) in more than one capacity. Firstly, since 2020, we have been working with the China Business Partner to earn revenue by obtaining business from some of the largest companies in China. Secondly, our artificial intelligence business in the U.S. has purchased substantially all of its inventory from a subsidiary of the China Business Partner which manufactures certain equipment to our specifications; though, during the three months ended March 31, 2023, we did not make any such purchases. In addition, a member of our senior leadership team maintains a role in the senior management structure of the China Business Partner. During the three months ended March 31, 2023 and 2022, we recognized approximately $0.1 million and $2.2 million, respectively, of revenue from the relationship with the China Business Partner. At March 31, 2023 and December 31, 2022, in addition to the outstanding accounts receivable balances from the China Business Partner described in Note 5 , we had outstanding accounts payable to the China Business Partner of $0.7 million and $0.7 million, respectively. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 3 Months Ended |
Mar. 31, 2023 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | NOTE 16. SUBSEQUENT EVENTS Ionic Transactions On May 4, 2023, we issued 136,386 shares to Ionic in final settlement of our obligation to issue shares under the 2022 Debenture and 200,715 shares in final settlement of our obligation to issue the Letter Agreement Shares. On May 5, 2023, we issued 378,965 shares to Ionic in partial settlement of our obligation to issue shares related to the ELOC Advance. Failure to Maintain Continued Listing Standards On April 27, 2023, we received a written notice from the Nasdaq Listing Qualifications Department notifying us that, pursuant to Nasdaq Listing Rule 5550(b)(3), we are required to maintain a minimum of $500,000 in net income from continuing operations in the most recently completed fiscal year, or two of the last three fiscal years (the “Net Income Standard”). Since our 2022 Form 10-K reported net loss from continuing operations, and as of April 25, 2023, we did not meet the alternative continued listing standards (collectively, with the Net Income Standard, the “Continued Listing Standards”) under Nasdaq Listing Rule 5550(b) of a minimum stockholders' equity of $2.5 million or minimum market value of listed securities of $35 million, we no longer comply with the Continued Listing Standards. In accordance with Nasdaq Listing Rule 5810(c)(2)(A), we have 45 calendar days, or until June 12, 2023, to submit a plan to regain compliance with the Continued Listing Standards (the “Cure Period”). If the Nasdaq Listing Qualifications Department accepts our plan, they can grant us an extension of up to 180 calendar days from April 27, 2023 to evidence compliance. If the Nasdaq Listing Qualifications Department does not accept our plan, we can appeal such decision to the Nasdaq Hearings Panel. Our common stock will continue to be listed and traded on Nasdaq during the Cure Period, subject to our compliance with the other continued listing requirements of Nasdaq. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 3 Months Ended |
Mar. 31, 2023 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation We prepared the accompanying unaudited Condensed Consolidated Balance Sheet as of March 31, 2023, with the audited Consolidated Balance Sheet amounts as of December 31, 2022 presented for comparative purposes, and the related unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss, the Condensed Consolidated Statements of Cash Flows and the Condensed Consolidated Statements of Stockholders’ Deficit in accordance with the instructions for Form 10-Q. In compliance with those instructions, we have omitted certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with U.S. GAAP, though management believes the disclosures made herein are sufficient to ensure that the information presented is not misleading. Our results of operations and our cash flows as of the end of the interim periods reported herein do not necessarily indicate the results we may experience for the remainder of the year or for any other future period. Management believes that we have included all adjustments (including those of a normal, recurring nature) considered necessary to fairly present our unaudited Condensed Consolidated Balance Sheet and our unaudited Condensed Consolidated Statement of Stockholders’ Deficit, each as of March 31, 2023, as well as our unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss and Condensed Consolidated Statements of Cash Flows for all periods presented. You should read our unaudited condensed consolidated interim financial statements and footnotes in conjunction with our |
Consolidation | Consolidation We include all of our subsidiaries in our condensed consolidated financial statements, eliminating all significant intercompany balances and transactions during consolidation. |
Use of Estimates | Use of Estimates We prepare our consolidated financial statements in conformity with GAAP. While preparing our financial statements, we make estimates and assumptions that affect amounts reported and disclosed in the consolidated financial statements and accompanying notes. Accordingly, actual results could differ from those estimates. On an ongoing basis, we evaluate our estimates, including those related to accounts receivable, deferred cost of revenue, share-based compensation, deferred income taxes, and inventory reserve, among other items. The impact of the COVID-19 pandemic continues to unfold. As a result, many of our estimates and assumptions required increased judgment and carry a higher degree of variability and volatility. As events continue to evolve and additional information becomes available, our estimates may change materially in future periods. |
Cash | Cash Our cash consists of funds held in bank accounts. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants (an exit price). When reporting the fair values of our financial instruments, we prioritize those fair value measurements into one of three levels based on the nature of the inputs, as follows: Level 1: Valuations based on quoted prices in active markets for identical assets and liabilities; Level 2: Valuations based on observable inputs that do not meet the criteria for Level 1, including quoted prices in inactive markets and observable market data for similar, but not identical instruments; and Level 3: Valuations based on unobservable inputs, which are based upon the best available information when external market data is limited or unavailable. The fair value hierarchy requires us to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. For some products or in certain market conditions, observable inputs may not be available. We believe the reported carrying amounts for cash, marketable securities, receivables, prepaids and other current assets, accounts payable, accrued expense and other current liabilities, and short-term debt approximate their fair values because of the short-term nature of these financial instruments. |
Foreign Currency Translation | Foreign Currency Translation We report all currency amounts in USD. Our overseas subsidiaries, however, maintain their books and records in their functional currencies, which are GBP in the United Kingdom (“U.K.”) and RMB in China. In general, when consolidating our subsidiaries with non-USD functional currencies, we translate the amounts of assets and liabilities into USD using the exchange rate on the balance sheet date, and the amounts of revenue and expense are translated at the average exchange rate prevailing during the period. The gains and losses resulting from translation of financial statement amounts into USD are recorded as a separate component of accumulated other comprehensive loss within stockholders’ deficit. |
Revenue Recognition | Revenue Recognition AI-Based Products We generate revenue by developing AI-based products, including fully-integrated AI solutions which combine our proprietary technology with third-party hardware and software products to meet end-user specifications. Under one type of contract for our AI-based products, we provide a single, continuous service to clients who control the assets as we create them. Accordingly, we recognize the revenue over the period of time during which we provide the service. Under another type of contract, we have performance obligations to provide fully-integrated AI solutions to our customer and we recognize revenue at the point in time when each performance obligation is completed and delivered to, tested by and accepted by our customer. We recognize revenue when we transfer control of the promised goods or services to our customers, and we recognize an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services. If there is uncertainty related to the timing of collections from our customer, which may be the case if our customer is not the ultimate end user of our goods, we consider this to be uncertainty of the customer’s ability and intention to pay us when consideration is due. Accordingly, we recognize revenue only when we have transferred control of the goods or services and collectability of consideration from the customer is probable. When customers pay us prior to when we satisfy our obligation to transfer control of promised goods or services, we record the amount that reflects the consideration to which we expect to be entitled as a contract liability until such time as we satisfy our performance obligation. For contracts under which we have not yet completed the performance obligation, deferred costs are recorded for any amounts incurred in advance of the performance obligation. For our contracts with customers, we generally extend short-term credit policies to our customers, typically up to one year for large-scale projects. We record the incremental costs of obtaining contracts as an expense when incurred. We offer extended warranties on our products for periods of one Other We generate revenue from other sources, such as from advertising and marketing services. We recognize the revenue from these contracts at the point in time when we transfer control of the good sold to the customer or when we deliver the promised promotional materials or media content. Substantially all of our contracts with customers that generate Other revenue are completed within one year or less. |
Inventory | InventoryWe use the first-in first-out method to determine the cost of our inventory, then we report inventory at the lower of cost or net realizable value. We regularly review our inventory quantities on hand and record a provision for excess and obsolete inventory based primarily on our estimated sales forecasts. |
Refundable Tax Credits | Refundable Tax CreditsWe charge the cost of our research and development efforts to operations as incurred. Our subsidiary in the United Kingdom is entitled to receive certain government assistance in the form of refundable research and development tax credits from taxation authorities, based on qualifying expenditures incurred during the fiscal year. The refundable credits are not dependent on our ongoing tax status or tax position and accordingly are not considered part of income taxes. We record refundable tax credits as a reduction of technology and development expense when we can reasonably estimate the amount and it is more likely than not that such amount will be received. |
Internal Use Software | Internal Use Software We acquire or develop applications and other software that help us meet our internal needs with respect to operating our business. For such projects, planning cost and other costs related to the preliminary project stage, as well as costs incurred for post-implementation activities, are expensed as incurred. We capitalize costs incurred during the application development phase only when we believe it is probable the development will result in new or additional functionality. The types of costs capitalized during the application development phase include fees incurred with third parties for consulting, programming and other development activities performed to complete the software. We amortize our internal use software on a straight-line basis over an estimated useful life of three years. If we identify any internal use software to be abandoned, the cost less the accumulated amortization, if any, is recorded as amortization expense. Once we have fully amortized internal use software costs that we capitalized, we remove such amounts from their respective accounts. |
Net Income (Loss) per Share | Net Income (Loss) per Share We calculate basic net income (loss) per share using the weighted-average number of common stock shares outstanding during the period. For the calculation of diluted net income (loss) per share, we give effect to all the shares of common stock that were outstanding during the period plus the number of additional common shares that would have been outstanding if all dilutive potential common shares had been issued, using the treasury stock method. Potential common shares are excluded from the computation when their effect is anti-dilutive. Dilutive potential shares of common stock consist of incremental shares of common stock issuable upon exercise of stock options and warrants. |
Segments | Segments Existing GAAP, which establishes a management approach to segment reporting, defines operating segments as components of an entity about which separate, discrete financial information is available for evaluation by the chief operating decision maker. We have identified our Chief Executive Officer as our chief operating decision maker, who reviews operating results to make decisions about allocating resources and assessing performance based upon only one operating segment. |
Recently Issued Accounting Pronouncements | Recently Issued Accounting Pronouncements In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-06 (“ASU 2020-06”), Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity . The ASU will simplify the accounting for convertible instruments by reducing the number of accounting models for convertible debt instruments and convertible preferred stock. Limiting the accounting models will result in fewer embedded conversion features being separately recognized from the host contract as compared with current GAAP. Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting and (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital. The ASU also amends the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. With regard to our financial reporting, ASU 2020-06 will be effective January 1, 2024, and early adoption is permitted, but no earlier than January 1, 2021, including interim periods within that year. We are currently evaluating what effect(s) the adoption of ASU 2020-06 may have on our consolidated financial statements, but we do not believe the impact of the ASU will be material to our financial position, results of operations and cash flows. The effect will largely depend on the composition and terms of the financial instruments at the time of adoption. We have reviewed all accounting pronouncements recently issued by the FASB and the SEC. The authoritative pronouncements that we have already adopted did not have a material effect on our financial condition, results of operations, cash flows or reporting thereof, and except as otherwise noted above, we do not believe that any of the authoritative pronouncements that we have not yet adopted will have a material effect upon our financial condition, results of operations, cash flows or reporting thereof. |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 3 Months Ended |
Mar. 31, 2023 | |
Accounting Policies [Abstract] | |
Schedule of Cash and Cash Equivalents | The following table, reported in USD, disaggregates our cash balances by currency denomination (in thousands): March 31, 2023 December 31, 2022 Cash denominated in: USD $ 238 $ 11 RMB 66 19 GBP 5 17 HKD 55 5 Total cash $ 364 $ 52 |
Schedule of Exchange Rates | We used the exchange rates in the following table to translate amounts denominated in non-USD currencies as of and for the periods noted: 2023 2022 Exchange rates at March 31st: GBP:USD 1.237 1.313 RMB:USD 0.146 0.158 HKD:USD 0.127 0.128 Average exchange rate during the three months ended March 31st: RMB:USD 0.146 0.158 GBP:USD 1.214 1.317 |
REVENUE (Tables)
REVENUE (Tables) | 3 Months Ended |
Mar. 31, 2023 | |
Revenue from Contract with Customer [Abstract] | |
Schedule of Disaggregation of Revenue by Major Category | The following table presents a disaggregation of our revenue by category of products and services (in thousands): Three Months Ended March 31, 2023 2022 AI-based products and services, including amounts from China Business Partner in 2023 (See Note 15 ) $ 721 $ 4,546 Other 105 121 Revenue $ 826 $ 4,667 |
Schedule of Disaggregation of Revenue by Country | The following table presents a disaggregation of our revenue by country (in thousands): Three Months Ended March 31, 2023 2022 China $ 743 $ 4,554 United States 83 113 Revenue $ 826 $ 4,667 |
TRADE ACCOUNTS RECEIVABLE (Tabl
TRADE ACCOUNTS RECEIVABLE (Tables) | 3 Months Ended |
Mar. 31, 2023 | |
Receivables [Abstract] | |
Schedule of Components of Prepaid Expense and Other Current Assets | March 31, 2023 December 31, 2022 Gross accounts receivable balance $ 6,885 $ 7,213 Allowance for bad debt (4,166) (4,122) Accounts receivable, net $ 2,719 $ 3,091 |
PREPAID EXPENSE AND OTHER CUR_2
PREPAID EXPENSE AND OTHER CURRENT ASSETS (Tables) | 3 Months Ended |
Mar. 31, 2023 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Schedule of Prepaid Expense and Other Current Assets | The following table presents the components of prepaid expense and other current assets (in thousands): March 31, 2023 December 31, 2022 Other receivables 10 23 Prepaid expense 1,057 1,144 Deposits 203 201 Other current assets 5 6 Total $ 1,275 $ 1,374 |
PROPERTY AND EQUIPMENT (Tables)
PROPERTY AND EQUIPMENT (Tables) | 3 Months Ended |
Mar. 31, 2023 | |
Property, Plant and Equipment [Abstract] | |
Schedule of Property and Equipment | Property and equipment consist of the following (in thousands, except estimated lives): Estimated Life March 31, 2023 December 31, 2022 Vehicles 3 $ 153 153 Computers and equipment 3 1,172 $ 1,170 Furniture and fixtures 3 42 42 Software 3 5,168 5,160 Leasehold improvements 3 202 204 Software development in progress 1,199 1,199 Total property, equipment and software $ 7,936 $ 7,928 Less accumulated depreciation (6,276) (6,229) Total property, equipment and software, net $ 1,660 $ 1,699 |
ACCRUED EXPENSE AND OTHER CUR_2
ACCRUED EXPENSE AND OTHER CURRENT LIABILITIES (Tables) | 3 Months Ended |
Mar. 31, 2023 | |
Other Liabilities Disclosure [Abstract] | |
Schedule of Accrued Expense and Other Current Liabilities | The following table presents the components of Accrued expense and other current liabilities (in thousands): March 31, 2023 December 31, 2022 Accrued compensation and benefit-related expense $ 2,007 $ 1,448 Accrued interest 167 769 Other accrued expense 2,430 2,393 Other payables 2,224 2,234 Operating lease liability - current 120 138 China Cash Bonuses (see Note 15 ) 44 32 Other current liabilities 147 208 Total $ 7,139 $ 7,222 |
NOTES PAYABLE (Tables)
NOTES PAYABLE (Tables) | 3 Months Ended |
Mar. 31, 2023 | |
Debt Disclosure [Abstract] | |
Schedule of Notes Payable | The following table presents our notes payable (in thousands) as of: March 31, 2023 December 31, 2022 Principal balance of Original Mudrick Loans $ 16,307 $ 14,418 Other notes payable 181 189 Notes payable, net of unamortized discount and debt issuance cost $ 16,488 $ 14,607 |
TRANSACTIONS WITH IONIC (Tables
TRANSACTIONS WITH IONIC (Tables) | 3 Months Ended |
Mar. 31, 2023 | |
Debt Disclosure [Abstract] | |
Schedule of Activity Related to All Obligations to Issue Shares | The following table shows the changes in our obligations to issue common stock (dollars in thousands): 2022 Debenture First 2023 Debenture Letter Agreement ELOC Advance Total Obligations to Issue Common Stock Balance at December 31, 2022 $ 1,892 $ — $ — $ — $ 1,892 Establishment of new obligation to issue shares — 2,501 249 1,325 4,075 Issuance of Shares (2,985) — — — (2,985) Change in measurement of liability 1,279 558 26 139 2,002 Balance at March 31, 2023 $ 186 $ 3,059 $ 275 $ 1,464 $ 4,984 Estimated Number of Shares Issuable Balance at December 31, 2022 1,720,349 — — — 1,720,349 Change in estimated number of shares issuable 510,465 — — — 510,465 Establishment of new obligation to issue shares — 2,232,590 200,715 1,068,376 3,501,681 Issuance of Shares (2,094,428) — — — (2,094,428) Balance at March 31, 2023 136,386 2,232,590 200,715 1,068,376 3,638,067 The following table shows the composition of finance cost associated with our obligations to issue common stock (dollars in thousands): 2022 Debenture First 2023 Debenture Letter Agreement ELOC Advance Total Initial obligation in excess of purchase price $ — $ 1,000 $ 249 $ 325 $ 1,574 Change in measurement of liability 1,279 558 26 139 2,002 Total $ 1,279 $ 1,558 $ 275 $ 464 $ 3,576 |
STOCKHOLDERS' EQUITY (DEFICIT)
STOCKHOLDERS' EQUITY (DEFICIT) (Tables) | 3 Months Ended |
Mar. 31, 2023 | |
Stockholders' Equity Note [Abstract] | |
Schedule of Share-based Payment Arrangement, Activity | The following table summarizes information related to our equity-classified stock warrant issuances as of and for the dates and periods noted: Shares Weighted Average Exercise Price Per Share Weighted-Average Remaining Contractual Term Aggregate Intrinsic Value (in thousands) Outstanding at December 31, 2022 1,011,441 $ 40.10 3.7 $ — Granted — — Exercised — — Forfeited, cancelled or expired — — Outstanding at March 31, 2023 1,011,441 $ 40.10 3.4 $ — |
Schedule of Stock Option Activity Under Equity Incentive Plans | The following table summarizes activity under our equity incentive plans related to equity-classified stock option grants as of and for the dates and periods noted: Shares Weighted Average Exercise Price Per Share Weighted-Average Remaining Contractual Term Aggregate Intrinsic Value (in thousands) Outstanding at December 31, 2022 1,626,631 $ 30.31 5.5 $ 1 Granted — — Exercised — — Forfeited, cancelled or expired (285) 12.50 Outstanding at March 31, 2023 1,626,346 $ 30.31 5.2 $ 12 Exercisable at December 31, 2022 1,549,681 31.41 5.3 $ 1 Exercisable at March 31, 2023 1,589,946 30.96 5.1 $ 6 The following table summarizes activity related to our liability-classified China Cash Bonuses as of and for the dates and periods noted: Shares Weighted Average Exercise Price Per Share Weighted-Average Remaining Contractual Term Aggregate Intrinsic Value (in thousands) Outstanding at December 31, 2022 71,450 $ 35.99 6.1 $ — Granted — — Exercised — — Forfeited, cancelled or expired — — Outstanding at March 31, 2023 71,450 $ 35.99 5.9 $ — Exercisable at December 31, 2022 68,450 36.97 6.1 $ — Exercisable at March 31, 2023 71,450 35.99 5.9 $ — |
Schedule of Change in Liability Balance Associated with China Cash Bonuses | The following table presents the change in the liability associated with our China Cash Bonuses included in Accrued expense and other current liabilities (in thousands): Three Months Ended March 31, Year Ended December 31, 2023 2022 Balance at beginning of period $ 32 $ 439 Share-based compensation expense related to China Cash Bonuses 12 (407) Balance at end of period $ 44 $ 32 |
Schedule of Share-based Payment Arrangement, Expensed and Capitalized, Amount | The following table presents a breakdown of share-based compensation cost included in operating expense (in thousands): Three Months Ended March 31, 2023 2022 Stock options $ 143 $ 514 China Cash Bonuses 12 (85) Total $ 155 $ 429 |
Summary of Unrecognized Share-based Compensation Cost | The following table presents information regarding unrecognized share-based compensation cost associated with stock options and China Cash Bonuses: March 31, 2023 Unrecognized share-based compensation cost for non-vested awards (in thousands): Stock options 55 China Cash Bonuses — Weighted-average years over which unrecognized share-based compensation expense will be recognized: Stock options 1.9 China Cash Bonuses 0 |
ORGANIZATION AND BUSINESS (Deta
ORGANIZATION AND BUSINESS (Details) - USD ($) $ in Thousands | 3 Months Ended | |||
Mar. 31, 2023 | Dec. 31, 2022 | Mar. 31, 2022 | Dec. 31, 2021 | |
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items] | ||||
Stockholders' equity | $ 25,777 | $ 20,425 | $ (6,121) | $ (31,034) |
Net cash used in operating activities | 2,100 | |||
Cash and cash equivalents | $ 364 | $ 52 | ||
WFOE | ||||
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items] | ||||
Ownership percentage by parent | 100% |
SUMMARY OF SIGNIFICANT ACCOUN_4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Cash and cash equivalents (Details) - USD ($) $ in Thousands | Mar. 31, 2023 | Dec. 31, 2022 |
Financial Statement Line Items with Differences in Reported Amount and Reporting Currency Denominated Amounts [Line Items] | ||
Total cash | $ 364 | $ 52 |
USD | ||
Financial Statement Line Items with Differences in Reported Amount and Reporting Currency Denominated Amounts [Line Items] | ||
Total cash | 238 | 11 |
RMB | ||
Financial Statement Line Items with Differences in Reported Amount and Reporting Currency Denominated Amounts [Line Items] | ||
Total cash | 66 | 19 |
GBP | ||
Financial Statement Line Items with Differences in Reported Amount and Reporting Currency Denominated Amounts [Line Items] | ||
Total cash | 5 | 17 |
HKD | ||
Financial Statement Line Items with Differences in Reported Amount and Reporting Currency Denominated Amounts [Line Items] | ||
Total cash | $ 55 | $ 5 |
SUMMARY OF SIGNIFICANT ACCOUN_5
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Foreign Currency Translation (Details) | Mar. 31, 2023 | Mar. 31, 2022 |
GBP | ||
Financial Statement Line Items with Differences in Reported Amount and Reporting Currency Denominated Amounts [Line Items] | ||
Foreign currency exchange rate | 1.237 | 1.313 |
GBP | Weighted Average | ||
Financial Statement Line Items with Differences in Reported Amount and Reporting Currency Denominated Amounts [Line Items] | ||
Foreign currency exchange rate | 1.214 | 1.317 |
RMB | ||
Financial Statement Line Items with Differences in Reported Amount and Reporting Currency Denominated Amounts [Line Items] | ||
Foreign currency exchange rate | 0.146 | 0.158 |
RMB | Weighted Average | ||
Financial Statement Line Items with Differences in Reported Amount and Reporting Currency Denominated Amounts [Line Items] | ||
Foreign currency exchange rate | 0.146 | 0.158 |
HKD | ||
Financial Statement Line Items with Differences in Reported Amount and Reporting Currency Denominated Amounts [Line Items] | ||
Foreign currency exchange rate | 0.127 | 0.128 |
SUMMARY OF SIGNIFICANT ACCOUN_6
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Narrative (Details) $ in Millions | 3 Months Ended | |
Mar. 31, 2023 USD ($) segment shares | Dec. 31, 2022 USD ($) shares | |
Disaggregation of Revenue [Line Items] | ||
Term of contract | 1 year | |
Reserve for inventory | $ | $ 2.2 | $ 2.2 |
Tax credit | $ | $ 0.5 | |
Number of operating segments | segment | 1 | |
Stock options | ||
Disaggregation of Revenue [Line Items] | ||
Shares of common stock outstanding (in shares) | shares | 1,626,346 | 1,626,631 |
Warrant | ||
Disaggregation of Revenue [Line Items] | ||
Anti-dilutive securities (in shares) | shares | 1,011,440 | |
Software | ||
Disaggregation of Revenue [Line Items] | ||
Estimate useful life (in years) | 3 years | |
Other | ||
Disaggregation of Revenue [Line Items] | ||
Performance period (or less) | 1 year | |
Minimum | ||
Disaggregation of Revenue [Line Items] | ||
Extended warranty period | 1 year | |
Maximum | ||
Disaggregation of Revenue [Line Items] | ||
Extended warranty period | 3 years |
CONCENTRATION OF RISK (Details)
CONCENTRATION OF RISK (Details) - Customer Concentration Risk | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | Dec. 31, 2022 | |
Customer A | Revenue | |||
Concentration Risk [Line Items] | |||
Concentration risk, percentage | 50% | 48% | |
Customer A | Gross Accounts Receivable | |||
Concentration Risk [Line Items] | |||
Concentration risk, percentage | 26% | 23% | |
Customer B | Revenue | |||
Concentration Risk [Line Items] | |||
Concentration risk, percentage | 46% | ||
Customer B | Gross Accounts Receivable | |||
Concentration Risk [Line Items] | |||
Concentration risk, percentage | 11% | 16% | |
Customer C | Gross Accounts Receivable | |||
Concentration Risk [Line Items] | |||
Concentration risk, percentage | 11% | 10% | |
Customer D | Gross Accounts Receivable | |||
Concentration Risk [Line Items] | |||
Concentration risk, percentage | 10% |
REVENUE - Disaggregated by Majo
REVENUE - Disaggregated by Major Category (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | |
Disaggregation of Revenue [Line Items] | ||
Revenue | $ 826 | $ 4,667 |
AI-based products and services, including amounts from China Business Partner in 2023 (See Note 15) | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 721 | 4,546 |
Other | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | $ 105 | $ 121 |
REVENUE - Disaggregation by Cou
REVENUE - Disaggregation by Country (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | |
Disaggregation of Revenue [Line Items] | ||
Revenue | $ 826 | $ 4,667 |
China | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 743 | 4,554 |
United States | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | $ 83 | $ 113 |
REVENUE - Narrative (Details)
REVENUE - Narrative (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | |
Revenue from Contract with Customer [Abstract] | ||
Revenue recognized on liability balances | $ 0 | $ 0 |
Revenue recognized from performance obligations satisfied in previous periods | $ 0 | $ 0 |
TRADE ACCOUNTS RECEIVABLE (Deta
TRADE ACCOUNTS RECEIVABLE (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | Dec. 31, 2022 | |
Accounts, Notes, Loans and Financing Receivable [Line Items] | |||
Gross accounts receivable balance | $ 6,885 | $ 7,213 | |
Allowance for bad debt | (4,166) | (4,122) | |
Accounts receivable, net | 2,719 | 3,091 | |
Provision for doubtful accounts | 6 | $ 0 | |
China | |||
Accounts, Notes, Loans and Financing Receivable [Line Items] | |||
Provision for doubtful accounts | $ 2,800 | ||
Period past due | 1 year | ||
China | AI-based Products | |||
Accounts, Notes, Loans and Financing Receivable [Line Items] | |||
Trade receivables | $ 1,100 | $ 1,100 |
DEFERRED COST OF REVENUE (Detai
DEFERRED COST OF REVENUE (Details) - USD ($) $ in Thousands | Mar. 31, 2023 | Dec. 31, 2022 |
Revenue from Contract with Customer [Abstract] | ||
Deferred cost of revenue | $ 7,485 | $ 7,463 |
PREPAID EXPENSE AND OTHER CUR_3
PREPAID EXPENSE AND OTHER CURRENT ASSETS (Details) - USD ($) $ in Thousands | Mar. 31, 2023 | Dec. 31, 2022 |
Prepaid Expense and Other Current Assets | ||
Other receivables | $ 10 | $ 23 |
Prepaid expense | 1,057 | 1,144 |
Deposits | 203 | 201 |
Other current assets | 5 | 6 |
Total | $ 1,275 | $ 1,374 |
PROPERTY AND EQUIPMENT (Details
PROPERTY AND EQUIPMENT (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2023 | Dec. 31, 2022 | |
Property, Plant and Equipment [Line Items] | ||
Total property, equipment and software | $ 7,936 | $ 7,928 |
Less accumulated depreciation | (6,276) | (6,229) |
Total property, equipment and software, net | $ 1,660 | 1,699 |
Vehicles | ||
Property, Plant and Equipment [Line Items] | ||
Estimated Life (Years) | 3 years | |
Total property, equipment and software | $ 153 | 153 |
Computers and equipment | ||
Property, Plant and Equipment [Line Items] | ||
Estimated Life (Years) | 3 years | |
Total property, equipment and software | $ 1,172 | 1,170 |
Furniture and fixtures | ||
Property, Plant and Equipment [Line Items] | ||
Estimated Life (Years) | 3 years | |
Total property, equipment and software | $ 42 | 42 |
Software | ||
Property, Plant and Equipment [Line Items] | ||
Estimated Life (Years) | 3 years | |
Total property, equipment and software | $ 5,168 | 5,160 |
Leasehold improvements | ||
Property, Plant and Equipment [Line Items] | ||
Estimated Life (Years) | 3 years | |
Total property, equipment and software | $ 202 | 204 |
Software development in progress | ||
Property, Plant and Equipment [Line Items] | ||
Total property, equipment and software | $ 1,199 | $ 1,199 |
ACCRUED EXPENSE AND OTHER CUR_3
ACCRUED EXPENSE AND OTHER CURRENT LIABILITIES (Details) - USD ($) $ in Thousands | Mar. 31, 2023 | Dec. 31, 2022 |
Other Liabilities Disclosure [Abstract] | ||
Accrued compensation and benefit-related expense | $ 2,007 | $ 1,448 |
Accrued interest | 167 | 769 |
Other accrued expense | 2,430 | 2,393 |
Other payables | 2,224 | 2,234 |
Operating lease liability - current | 120 | 138 |
China Cash Bonuses (see Note 15) | 44 | 32 |
Other current liabilities | 147 | 208 |
Total | $ 7,139 | $ 7,222 |
NOTES PAYABLE - Schedule of Not
NOTES PAYABLE - Schedule of Notes Payable (Details) - USD ($) $ in Thousands | Mar. 31, 2023 | Mar. 14, 2023 | Dec. 31, 2022 | Jul. 11, 2022 |
Short-term Debt [Line Items] | ||||
Other notes payable | $ 181 | $ 189 | ||
Notes payable, net of unamortized discount and debt issuance cost | 16,488 | 14,607 | ||
Principal balance of Original Mudrick Loans | ||||
Short-term Debt [Line Items] | ||||
Principal balance of Original Mudrick Loans | $ 9,700 | |||
Principal balance of Original Mudrick Loans | Notes Payable | ||||
Short-term Debt [Line Items] | ||||
Principal balance of Original Mudrick Loans | $ 16,307 | $ 14,400 | $ 14,418 |
NOTES PAYABLE - Narrative (Deta
NOTES PAYABLE - Narrative (Details) - USD ($) | 3 Months Ended | 12 Months Ended | ||||||
Mar. 14, 2023 | Oct. 31, 2022 | Mar. 31, 2023 | Mar. 31, 2022 | Dec. 31, 2022 | Aug. 31, 2022 | Jul. 11, 2022 | Dec. 03, 2021 | |
Debt Instrument [Line Items] | ||||||||
Interest expense | $ 1,544,000 | $ 2,186,000 | ||||||
Short-term Note Payable to Private Lender | ||||||||
Debt Instrument [Line Items] | ||||||||
Note repayment of debt | $ 6,200,000 | |||||||
Debt, weighted average interest rate | 6.20% | |||||||
Debt instrument, weighted average remaining term | 4 years 9 months 18 days | |||||||
Principal balance of Original Mudrick Loans | ||||||||
Debt Instrument [Line Items] | ||||||||
Principal balance of Original Mudrick Loans | $ 9,700,000 | |||||||
Principal balance of Original Mudrick Loans | Short-term Note Payable to Private Lender | ||||||||
Debt Instrument [Line Items] | ||||||||
Principal balance of Original Mudrick Loans | $ 14,400,000 | $ 16,307,000 | 14,418,000 | |||||
Accrued interest on loan | 600,000 | |||||||
Interest expense | 300,000 | |||||||
Principal balance of Original Mudrick Loans | Short-term Note Payable to Private Lender | Accrued Expense and Other Current Liabilities | ||||||||
Debt Instrument [Line Items] | ||||||||
Accrued interest on loan | 800,000 | |||||||
Principal balance of Original Mudrick Loans | Loans Payable | ||||||||
Debt Instrument [Line Items] | ||||||||
Principal balance of Original Mudrick Loans | $ 30,000,000 | |||||||
Debt interest rate percentage | 20.50% | 18.50% | 16.50% | |||||
Increase, interest rate | 2% | 20.50% | ||||||
Upfront fee (in percent) | 5% | |||||||
Debt instrument, unamortized discount | $ 1,500,000 | |||||||
Additional closing cost | $ 1,100,000 | |||||||
Amortization of debt issuance costs and discount | $ 2,200,000 | |||||||
New Mudrick Note Purchase Agreement | Mudrick Lenders | ||||||||
Debt Instrument [Line Items] | ||||||||
Principal balance of Original Mudrick Loans | $ 16,300,000 | |||||||
Accrued interest on loan | 1,100,000 | |||||||
Interest expense | $ 800,000 | $ 800,000 |
TRANSACTIONS WITH IONIC - Narra
TRANSACTIONS WITH IONIC - Narrative (Details) | 3 Months Ended | 12 Months Ended | |||||
Mar. 14, 2023 USD ($) day debenture price $ / shares shares | Jan. 05, 2023 USD ($) day $ / shares | Nov. 07, 2022 | Oct. 06, 2022 USD ($) $ / shares shares | Mar. 31, 2023 USD ($) shares | Dec. 31, 2022 USD ($) shares | Jan. 31, 2023 USD ($) | |
Debt Instrument [Line Items] | |||||||
Additional shares to issue (in shares) | shares | 3,638,067 | 1,720,349 | |||||
Common stock issuance upon note payable conversion (in shares) | shares | 2,094,428 | ||||||
Obligations to issue common stock | $ 4,984,000 | $ 1,892,000 | |||||
Ionic | |||||||
Debt Instrument [Line Items] | |||||||
Settlement shares (in shares) | shares | 3,129,668 | 898,854 | |||||
Common stock issuance upon note payable conversion (in shares) | shares | 2,993,282 | ||||||
Settlement shares yet to be issued (in share) | shares | 136,386 | ||||||
Ionic | ELOC Advance | |||||||
Debt Instrument [Line Items] | |||||||
Sale of stock, amount authorized in transaction | $ 50,000,000 | ||||||
Stock purchase obligation, period of purchase | 36 months | ||||||
Cash received on sale of shares | $ 3,000,000 | ||||||
Sale of stock, additional number of shares issued in percentage | 2.50% | ||||||
Required minimum closing trading price (in usd per share) | $ / shares | $ 0.20 | ||||||
Stockholder approval, outstanding percentage of common stock percentage | 19.99% | ||||||
Payable termination fee | $ 500,000 | ||||||
Ionic | ELOC Advance | Maximum | |||||||
Debt Instrument [Line Items] | |||||||
Sale of stock, purchase price, percentage | 90% | ||||||
Ionic | ELOC Advance | Minimum | |||||||
Debt Instrument [Line Items] | |||||||
Sale of stock, amount authorized in transaction | $ 25,000,000 | ||||||
Sale of stock, purchase price, percentage | 80% | ||||||
Letter Agreement | |||||||
Debt Instrument [Line Items] | |||||||
Additional shares to issue (in shares) | shares | 200,715 | 0 | |||||
Common stock issuance upon note payable conversion (in shares) | shares | 0 | ||||||
Obligations to issue common stock | $ 200,000 | $ 275,000 | $ 0 | ||||
Letter Agreement | Ionic | |||||||
Debt Instrument [Line Items] | |||||||
Initial liability amount | $ 3,600,000 | ||||||
Letter Agreement | Ionic | ELOC Advance | |||||||
Debt Instrument [Line Items] | |||||||
Shares required to issue(in shares) | shares | 150,000 | ||||||
Shares required to issue, period | 2 days | ||||||
Liquidated damages percentage | 2% | ||||||
Liquidated damages period | 30 days | ||||||
Letter Agreement | Ionic | ELOC Advance | Maximum | |||||||
Debt Instrument [Line Items] | |||||||
Effective declaration period | 120 days | ||||||
Letter Agreement | Ionic | ELOC Advance | Minimum | |||||||
Debt Instrument [Line Items] | |||||||
Filing period | day | 15 | ||||||
Effective declaration period | 90 days | ||||||
Letter Agreement | Ionic | Convertible Subordinated Debt | |||||||
Debt Instrument [Line Items] | |||||||
Original principal amount | $ 2,800,000 | 2,800,000 | |||||
Repurchase amount | $ 2,500,000 | $ 2,500,000 | |||||
Beneficial ownership limitation percentage | 4.99% | ||||||
Conversion price (in usd per share) | $ / shares | $ 1.40 | ||||||
Suspension from trading or delisting, trading days | day | 3 | ||||||
Number of debentures | debenture | 2 | ||||||
Debt interest rate percentage | 10% | ||||||
Interest guaranteed period | 2 years | ||||||
Increase, interest rate | 15% | ||||||
Covenant, conversion period | 181 days | ||||||
Number of volume-weighted average prices | price | 2 | ||||||
Conversion percentage, bankruptcy multiplier | 120% | ||||||
Letter Agreement | Ionic | Convertible Subordinated Debt | Debt Instrument, Redemption, Period One | |||||||
Debt Instrument [Line Items] | |||||||
Original principal amount | $ 3,300,000 | ||||||
Letter Agreement | Ionic | Convertible Subordinated Debt | Maximum | |||||||
Debt Instrument [Line Items] | |||||||
Debt conversion percentage | 80% | ||||||
Letter Agreement | Ionic | Convertible Subordinated Debt | Minimum | |||||||
Debt Instrument [Line Items] | |||||||
Conversion price (in usd per share) | $ / shares | $ 0.20 | ||||||
Debt conversion percentage | 70% | ||||||
Debenture Purchase Agreement Amendment | Ionic | Convertible Subordinated Debt | |||||||
Debt Instrument [Line Items] | |||||||
Beneficial ownership limitation percentage | 4.99% | ||||||
Letter Agreement With Ionic | Ionic | ELOC Advance | |||||||
Debt Instrument [Line Items] | |||||||
Cash received on sale of shares | $ 500,000 | ||||||
Suspension from trading or delisting, trading days | day | 10 | ||||||
Minimum trading amount | $ 13,900,000 | ||||||
Letter Agreement With Ionic | Ionic | ELOC Advance | Maximum | |||||||
Debt Instrument [Line Items] | |||||||
Conversion price (in usd per share) | $ / shares | $ 0.25 | ||||||
Debt conversion percentage | 80% | ||||||
Letter Agreement With Ionic | Ionic | ELOC Advance | Minimum | |||||||
Debt Instrument [Line Items] | |||||||
Debt conversion percentage | 70% | ||||||
ELOC Advances | Ionic | |||||||
Debt Instrument [Line Items] | |||||||
Original principal amount | $ 1,000,000 | ||||||
First Debenture Purchase Agreement | Ionic | Convertible Subordinated Debt | First Debenture | |||||||
Debt Instrument [Line Items] | |||||||
Original principal amount | $ 1,700,000 | ||||||
Repurchase amount | 1,500,000 | ||||||
Second Debenture Purchase Agreement | Ionic | Convertible Subordinated Debt | Second Debenture | |||||||
Debt Instrument [Line Items] | |||||||
Original principal amount | 1,100,000 | ||||||
Repurchase amount | 1,000,000 | ||||||
ELOC Advance | |||||||
Debt Instrument [Line Items] | |||||||
Additional shares to issue (in shares) | shares | 1,068,376 | 0 | |||||
Common stock issuance upon note payable conversion (in shares) | shares | 0 | ||||||
Obligations to issue common stock | $ 1,464,000 | $ 0 | $ 1,300,000 | ||||
First 2023 Debenture | |||||||
Debt Instrument [Line Items] | |||||||
Additional shares to issue (in shares) | shares | 2,232,590 | 0 | |||||
Common stock issuance upon note payable conversion (in shares) | shares | 0 | ||||||
Obligations to issue common stock | $ 2,500,000 | $ 3,059,000 | $ 0 | ||||
2022 Debenture | |||||||
Debt Instrument [Line Items] | |||||||
Additional shares to issue (in shares) | shares | 136,386 | 1,720,349 | |||||
Common stock issuance upon note payable conversion (in shares) | shares | 2,094,428 | ||||||
Obligations to issue common stock | $ 186,000 | $ 1,892,000 |
TRANSACTIONS WITH IONIC - Activ
TRANSACTIONS WITH IONIC - Activity Related to All Obligations to Issue Shares (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | |
Obligations to Issue Common Stock | ||
Balance at December 31, 2022 | $ 1,892 | |
Establishment of new obligation to issue shares | 4,075 | |
Issuance of Shares | (2,985) | |
Change in measurement of liability | 2,002 | |
Balance at March 31, 2023 | $ 4,984 | |
Estimated Number of Shares Issuable | ||
Estimated Number of Shares Issuable, Beginning (in shares) | 1,720,349 | |
Change in estimated number of shares issuable (in shares) | 510,465 | |
Establishment of new obligation to issue shares (in shares) | 3,501,681 | |
Issuance of Shares (in shares) | (2,094,428) | |
Estimated Number of Shares Issuable, Ending (in shares) | 3,638,067 | |
Initial obligation in excess of purchase price | $ 1,574 | |
Change in measurement of liability | 2,002 | |
Total | 3,576 | $ 0 |
2022 Debenture | ||
Obligations to Issue Common Stock | ||
Balance at December 31, 2022 | 1,892 | |
Establishment of new obligation to issue shares | 0 | |
Issuance of Shares | (2,985) | |
Change in measurement of liability | 1,279 | |
Balance at March 31, 2023 | $ 186 | |
Estimated Number of Shares Issuable | ||
Estimated Number of Shares Issuable, Beginning (in shares) | 1,720,349 | |
Change in estimated number of shares issuable (in shares) | 510,465 | |
Establishment of new obligation to issue shares (in shares) | 0 | |
Issuance of Shares (in shares) | (2,094,428) | |
Estimated Number of Shares Issuable, Ending (in shares) | 136,386 | |
Initial obligation in excess of purchase price | $ 0 | |
Change in measurement of liability | 1,279 | |
Total | 1,279 | |
First 2023 Debenture | ||
Obligations to Issue Common Stock | ||
Balance at December 31, 2022 | 0 | |
Establishment of new obligation to issue shares | 2,501 | |
Issuance of Shares | 0 | |
Change in measurement of liability | 558 | |
Balance at March 31, 2023 | $ 3,059 | |
Estimated Number of Shares Issuable | ||
Estimated Number of Shares Issuable, Beginning (in shares) | 0 | |
Change in estimated number of shares issuable (in shares) | 0 | |
Establishment of new obligation to issue shares (in shares) | 2,232,590 | |
Issuance of Shares (in shares) | 0 | |
Estimated Number of Shares Issuable, Ending (in shares) | 2,232,590 | |
Initial obligation in excess of purchase price | $ 1,000 | |
Change in measurement of liability | 558 | |
Total | 1,558 | |
Letter Agreement | ||
Obligations to Issue Common Stock | ||
Balance at December 31, 2022 | 0 | |
Establishment of new obligation to issue shares | 249 | |
Issuance of Shares | 0 | |
Change in measurement of liability | 26 | |
Balance at March 31, 2023 | $ 275 | |
Estimated Number of Shares Issuable | ||
Estimated Number of Shares Issuable, Beginning (in shares) | 0 | |
Change in estimated number of shares issuable (in shares) | 0 | |
Establishment of new obligation to issue shares (in shares) | 200,715 | |
Issuance of Shares (in shares) | 0 | |
Estimated Number of Shares Issuable, Ending (in shares) | 200,715 | |
Initial obligation in excess of purchase price | $ 249 | |
Change in measurement of liability | 26 | |
Total | 275 | |
ELOC Advance | ||
Obligations to Issue Common Stock | ||
Balance at December 31, 2022 | 0 | |
Establishment of new obligation to issue shares | 1,325 | |
Issuance of Shares | 0 | |
Change in measurement of liability | 139 | |
Balance at March 31, 2023 | $ 1,464 | |
Estimated Number of Shares Issuable | ||
Estimated Number of Shares Issuable, Beginning (in shares) | 0 | |
Change in estimated number of shares issuable (in shares) | 0 | |
Establishment of new obligation to issue shares (in shares) | 1,068,376 | |
Issuance of Shares (in shares) | 0 | |
Estimated Number of Shares Issuable, Ending (in shares) | 1,068,376 | |
Initial obligation in excess of purchase price | $ 325 | |
Change in measurement of liability | 139 | |
Total | $ 464 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Details) - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2022 | Mar. 31, 2023 | |
Commitments and Contingencies Disclosure [Abstract] | ||
Accrued penalty | $ 1 | |
Payment of registration rights agreement penalty | $ 0.2 | |
Unpaid amount included in other accrued expense | $ 0.8 |
STOCKHOLDERS' EQUITY (DEFICIT_2
STOCKHOLDERS' EQUITY (DEFICIT) - Equity Stock Warrant Issuances (Details) - Warrant - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended |
Mar. 31, 2023 | Dec. 31, 2022 | |
Shares | ||
Outstanding at beginning of period (in share) | 1,011,441 | |
Granted (in shares) | 0 | |
Exercised (in shares) | 0 | |
Forfeited, cancelled or expired (in shares) | 0 | |
Outstanding at end of period (in shares) | 1,011,441 | 1,011,441 |
Weighted Average Exercise Price Per Share | ||
Outstanding at beginning of period (in dollars per share) | $ 40.10 | |
Granted (in dollars per share) | 0 | |
Exercised (in dollars per share) | 0 | |
Forfeited, cancelled or expired (in dollars per share) | 0 | |
Outstanding at end of period (in dollars per share) | $ 40.10 | $ 40.10 |
Weighted-Average Remaining Contractual Term | ||
Outstanding (term) | 3 years 4 months 24 days | 3 years 8 months 12 days |
Aggregate Intrinsic Value (in thousands) | ||
Outstanding | $ 0 | $ 0 |
STOCKHOLDERS' EQUITY (DEFICIT_3
STOCKHOLDERS' EQUITY (DEFICIT) - Narrative (Details) | 3 Months Ended |
Mar. 31, 2023 | |
Stock options | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Option award expiration period | 10 years |
STOCKHOLDERS' EQUITY (DEFICIT_4
STOCKHOLDERS' EQUITY (DEFICIT) - Stock Options Activity (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended |
Mar. 31, 2023 | Dec. 31, 2022 | |
Stock options | ||
Shares | ||
Outstanding at beginning of period (in shares) | 1,626,631 | |
Granted (in shares) | 0 | |
Exercised (in shares) | 0 | |
Forfeited, cancelled or expired (in shares) | (285) | |
Outstanding at end of period (in shares) | 1,626,346 | 1,626,631 |
Options exercisable (in shares) | 1,589,946 | 1,549,681 |
Weighted Average Exercise Price Per Share | ||
Outstanding at beginning of period (in dollars per share) | $ 30.31 | |
Granted (in dollars per share) | 0 | |
Exercised (in dollars per share) | 0 | |
Forfeited, cancelled or expired (in dollars per share) | 12.50 | |
Outstanding at end of period (in dollars per share) | 30.31 | $ 30.31 |
Options exercisable (in dollars per share) | $ 30.96 | $ 31.41 |
Weighted-Average Remaining Contractual Term | ||
Outstanding (term) | 5 years 2 months 12 days | 5 years 6 months |
Options exercisable (term) | 5 years 1 month 6 days | 5 years 3 months 18 days |
Aggregate Intrinsic Value (in thousands) | ||
Outstanding | $ 12 | $ 1 |
Options exercisable | $ 6 | $ 1 |
China Cash Bonuses | ||
Shares | ||
Outstanding at beginning of period (in shares) | 71,450 | |
Granted (in shares) | 0 | |
Exercised (in shares) | 0 | |
Forfeited, cancelled or expired (in shares) | 0 | |
Outstanding at end of period (in shares) | 71,450 | 71,450 |
Options exercisable (in shares) | 71,450 | 68,450 |
Weighted Average Exercise Price Per Share | ||
Outstanding at beginning of period (in dollars per share) | $ 35.99 | |
Granted (in dollars per share) | 0 | |
Exercised (in dollars per share) | 0 | |
Forfeited, cancelled or expired (in dollars per share) | 0 | |
Outstanding at end of period (in dollars per share) | 35.99 | $ 35.99 |
Options exercisable (in dollars per share) | $ 35.99 | $ 36.97 |
Weighted-Average Remaining Contractual Term | ||
Outstanding (term) | 5 years 10 months 24 days | 6 years 1 month 6 days |
Options exercisable (term) | 5 years 10 months 24 days | 6 years 1 month 6 days |
Aggregate Intrinsic Value (in thousands) | ||
Outstanding | $ 0 | $ 0 |
Options exercisable | $ 0 | $ 0 |
STOCKHOLDERS' EQUITY (DEFICIT_5
STOCKHOLDERS' EQUITY (DEFICIT) - Liability Activity (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | Dec. 31, 2022 | |
Share-based Payment Award Liability [Roll Forward] | |||
Balance at beginning of period | $ 32 | ||
Share-based compensation expense related to China Cash Bonuses | 155 | $ 429 | |
Balance at end of period | 44 | $ 32 | |
China Cash Bonuses | |||
Share-based Payment Award Liability [Roll Forward] | |||
Balance at beginning of period | 32 | 439 | 439 |
Share-based compensation expense related to China Cash Bonuses | 12 | $ (85) | (407) |
Balance at end of period | $ 44 | $ 32 |
STOCKHOLDERS' EQUITY (DEFICIT_6
STOCKHOLDERS' EQUITY (DEFICIT) - Compensation Expense (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | Dec. 31, 2022 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Share-based compensation expense | $ 155 | $ 429 | |
Stock options | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Share-based compensation expense | 143 | 514 | |
China Cash Bonuses | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Share-based compensation expense | $ 12 | $ (85) | $ (407) |
STOCKHOLDERS' EQUITY (DEFICIT_7
STOCKHOLDERS' EQUITY (DEFICIT) - Unrecognized Compensation Cost (Details) $ in Thousands | 3 Months Ended |
Mar. 31, 2023 USD ($) | |
Stock options | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Unrecognized share-based compensation cost for non-vested awards | $ 55 |
Weighted-average years over which unrecognized share-based compensation expense will be recognized | 1 year 10 months 24 days |
China Cash Bonuses | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Unrecognized share-based compensation cost for non-vested awards | $ 0 |
Weighted-average years over which unrecognized share-based compensation expense will be recognized | 0 years |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details) $ in Millions | Mar. 31, 2023 USD ($) |
Management | Advances To Senior Management For Operating Expenses | |
Related Party Transaction [Line Items] | |
Receivable from China Business Partner (See Note 15) | $ 1.2 |
CHINA BUSINESS PARTNER (Details
CHINA BUSINESS PARTNER (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2023 | Mar. 31, 2022 | Dec. 31, 2022 | |
Trade accounts receivable, net | $ 2,719 | $ 3,091 | |
China Branding Group Limited | |||
Revenues | 100 | $ 2,200 | |
China Branding Group Limited | VIE | |||
Trade accounts receivable, net | $ 700 | $ 700 |
SUBSEQUENT EVENTS (Details)
SUBSEQUENT EVENTS (Details) - Subsequent Event - Ionic - shares | May 05, 2023 | May 04, 2023 |
Final Settlement, 2022 Debenture | ||
Subsequent Event [Line Items] | ||
Number of shares issued in transaction (in shares) | 136,386 | |
Final Settlement, Letter Agreement Shares | ||
Subsequent Event [Line Items] | ||
Number of shares issued in transaction (in shares) | 200,715 | |
Partial Settlement, ELOC Advances | ||
Subsequent Event [Line Items] | ||
Number of shares issued in transaction (in shares) | 378,965 |