| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 6 Months Ended |
| Jun. 30, 2023 |
| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
| Basis of Presentation | The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”). The summary of significant accounting policies presented below is designed to assist in understanding the Company’s financial statements. Such financial statements and accompanying notes are the representations of Company’s management, who is responsible for their integrity and objectivity. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with GAAP for interim financial statements and with the instructions to Form 10-Q and Article 8 of Regulation S-X of the SEC. Accordingly, they do not contain all information and footnotes required by GAAP for annual financial statements. In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements contain all the adjustments necessary (consisting only of normal recurring accruals) to present the financial position of the Company as of June 30, 2023, and the results of operations and cash flows for the periods presented. The results of operations for the three and six months ended June 30, 2023 and 2022, are not necessarily indicative of the operating results for the full fiscal year or any future period, given the recent completion of the Asset Sale. These unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and related notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 filed with the SEC on July 28, 2023 (our “2022 Annual Report”). |
| Principles of Consolidation | The unaudited condensed consolidated financial statements include the accounts of Avenir and its wholly-owned subsidiaries, collectively referred to as (“we”, “us”, “our” or the “Company”). All significant inter-company balances and transactions have been eliminated in consolidation. The development and production of the Company’s branded health, wellness, and beauty products in the wellness industry represents the principal operations of the Company. Business acquisitions are included in the unaudited condensed consolidated financial statements from the date of the acquisition. |
| Going Concern and Management's Liquidity Plans | In accordance with the Financial Accounting Standards Board’s (“FASB”) standard on going concern, Accounting Standard Update, or ASU No. 2014-15, the Company assesses going concern uncertainty in its condensed consolidated financial statements to determine if it has sufficient cash, cash equivalents and working capital on hand, including marketable equity securities, and any available borrowings on loans, to operate for a period of at least one year from the date the consolidated financial statements are issued, which is referred to as the “look-forward period” as defined by ASU No. 2014-15. As part of this assessment, based on conditions that are known and reasonably knowable to the Company, it will consider various scenarios, forecasts, projections, estimates and will make certain key assumptions, including the timing and nature of projected cash expenditures or programs, and its ability to delay or curtail expenditures or programs, if necessary, among other factors. Based on this assessment, as necessary or applicable, the Company makes certain assumptions around implementing curtailments or delays in the nature and timing of programs and expenditures to the extent the Company deems probable those implementations can be achieved and it has the proper authority to execute them within the look-forward period in accordance with ASU No. 2014-15. The accompanying unaudited condensed consolidated financial statements have been prepared on the basis that the Company will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business. Accordingly, the financial statements do not include any adjustments relating to the recoverability and classification of assets and liabilities that might be necessary if the Company is unable to continue as a going concern. As of June 30, 2023, the Company had $175 thousand of cash on hand, had an accumulated deficit of approximately $121.2 million and a working capital deficit of approximately $8.8 million. Our operating activities consume a portion of our cash resources. We anticipate that we will continue to incur operating losses and negative cash flows from operations as we execute our commercialization and development plans and strategic and business development initiatives. In July 2022, Avenir completed the sale of certain pharmaceutical assets pursuant to the asset purchase agreement, see Note 6 – Discontinued Operations, for total consideration received at closing in the amount of $20.0 million, which consisted of (i) the cancellation of indebtedness owed by Avenir to the Buyer in the amount of $4.15 million, (ii) a $2.0 million one-year note payable in the form of a secured promissory note, and (iii) the remainder in cash. The completion of the Asset Sale has had a positive impact on the Company’s liquidity position. However, the Company may need to complete additional equity or debt financings to fully execute its business plans and strategies. We have previously funded our operating losses primarily through the issuance of common stock and/or promissory notes and cash generated from our product sales. We anticipate that we will incur decreased operating losses and negative cash flows from operations as we execute on our commercialization and development plans and strategic and business development initiatives and with the elimination of overhead and operating expenses related to the Company’s pharmaceutical business segment that have been discontinued in connection with the Asset Sale. There can be no assurance however that the Company will be able to raise additional capital when needed, or at terms deemed acceptable, if at all. |
| Reclassifications | Certain reclassifications have been made to prior year’s consolidated financial statements to enhance comparability with the current year’s consolidated financial statements. These reclassifications had no effect on the previously reported net loss. |
| Use of Estimates | The preparation of the accompanying consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reported period. Management bases these estimates and assumptions upon historical experience, existing and known circumstances, authoritative accounting pronouncements, and other factors that management believes to be reasonable. In addition, the Company has considered the potential impact of certain macroeconomic factors, including inflation, rising interest rates, and recessionary pressures, on its business and operations. Although the full impact of these factors are unknown and cannot be reasonably estimated, the Company believes it has made appropriate accounting estimates and assumptions based on the facts and circumstances available as of the reporting date. Significant areas requiring the use of management estimates include, but are not limited to, revenue recognition, the allowance for doubtful accounts, valuation of intangible assets and goodwill, depreciative and amortization useful lives, assumptions used to calculate the fair value of the contingent share consideration, stock based compensation, beneficial conversion features, warrant values, deferred taxes and the assumptions used to calculate derivative liabilities and fair values of the purchase price allocations and convertible promissory notes. Actual results could differ materially from such estimates under different assumptions or circumstances. |
| Cash and Cash Equivalents | The Company considers all highly liquid investments with maturities of three months or less at the time of purchase to be cash equivalents. As of June 30, 2023 and December 31, 2022, the Company had no cash equivalents. The Company maintains its cash and cash equivalents in banks insured by the Federal Deposit Insurance Corporation in accounts that at times may be in excess of the federally insured limit of $250,000 per bank. The Company minimizes this risk by placing its cash deposits with major financial institutions. As of June 30, 2023, the Company did not have cash balances in excess of the federal insurance limit. |
| Investment in Associates | The Company follows Accounting Standards Codification (“ASC”) 325-20, “Cost Method Investments” (“ASC 325-20”), to account for its ownership interest in noncontrolled entities. Under ASC 325-20, equity securities that do not have readily determinable fair values (i.e., non-marketable equity securities) and are not required to be accounted for under the equity method are typically carried at cost (i.e., cost method investments). Investments of this nature are initially recorded at cost. Income is recorded for dividends received that are distributed from net accumulated earnings of the noncontrolled entity subsequent to the date of investment. Dividends received in excess of earnings subsequent to the date of investment are considered a return of investment and are recorded as reductions in the cost of the investment. Investments are written down only when there is clear evidence that a decline in value that is other than temporary has occurred. |
| Accounts Receivable | Accounts receivable are generally unsecured. The Company establishes an allowance for doubtful accounts receivable based on the age of outstanding invoices and management’s evaluation of collectability. Accounts are written off after all reasonable collection efforts have been exhausted and management concludes that the likelihood of collection is remote. Any future recoveries are applied against the allowance for doubtful accounts. |
| Inventory | Inventory is stated at the lower of cost or net realizable value (“NRV”). NRV is the amount by which the estimated selling price of the product exceeds the sum of any additional costs expected to be incurred on the sale of such product in the ordinary course of business. The Company determines the cost of its inventory on a first-in, first-out basis. The Company performs an assessment of the recoverability of capitalized inventory during each reporting period. In order to state the inventory at the lower of cost or NRV, we maintain reserves against individual stocking units. Inventory reserves, once established, are not reversed until the related inventories have been sold or scrapped. If future demand or market conditions are less favorable than our projections, a write-down of inventory may be required, and would be reflected in the cost of product sold in the period the revision is made. |
| Goodwill and intangible assets | Goodwill represents the excess of the purchase price over the fair value of net identifiable assets and liabilities. Goodwill is not amortized but is tested for impairment at least annually, or if circumstances indicate its value may no longer be recoverable. Qualitative factors considered in this assessment include industry and market conditions, overall financial performance, and other relevant events and factors affecting the Company’s business. Based on the qualitative assessment, if it is determined that the fair value of goodwill is more likely than not to be less than its carrying amount, the fair value of a reporting unit will be calculated and compared with its carrying amount and an impairment charge will be recognized for the amount that the carrying value exceeds the fair value. Intangible assets with finite lives, such as patents, web design and trademarks are stated at cost less accumulated amortization. Amortization is calculated using the straight-line method over the estimated useful lives of the assets, which range from two years to twenty years. We review the useful lives and potential impairment of intangible assets whenever events or circumstances suggest that the carrying amount may not be recoverable. |
| Business combinations | The results of businesses acquired in a business combination are included in the unaudited condensed consolidated financial statements from the date of acquisition. Purchase accounting results in assets and liabilities of an acquired business being recorded at their estimated fair values on the acquisition date. Any excess consideration over the value of the assets acquired and liabilities assumed is recognized as goodwill. |
| Impairment of Long-Lived Assets | Long-lived assets include equipment and intangible assets other than those with indefinite lives. We assess the carrying value of our long-lived asset groups when indicators of impairment exist and recognize an impairment loss when the carrying amount of a long-lived asset is not recoverable when compared to undiscounted cash flows expected to result from the use and eventual disposition of the asset. Indicators of impairment include significant underperformance relative to historical or projected future operating results, significant changes in our use of the assets or in our business strategy, loss of or changes in customer relationships and significant negative industry or economic trends. When indications of impairment arise for a particular asset or group of assets, we assess the future recoverability of the carrying value of the asset (or asset group) based on an undiscounted cash flow analysis. If carrying value exceeds projected, net, undiscounted cash flows, an additional analysis is performed to determine the fair value of the asset (or asset group), typically a discounted cashflow analysis, and an impairment charge is recorded for the excess of carrying value over fair value. |
| Contingent consideration liabilities | Certain of the Company’s business acquisitions involve the potential for future payment of consideration to former selling stockholders in amounts determined upon the attainment of revenue and gross margin milestones from product sales. The fair value of such liabilities is determined using unobservable inputs. These inputs include the estimated amount and timing of projected cash flows and the risk-adjusted discount rate used to present value the cash flows. These obligations are referred to as contingent consideration. ASC 805, “Business Combinations,” requires that contingent consideration be estimated and recorded at fair value as of the acquisition date as part of the total consideration transferred. Contingent consideration is an obligation of the acquirer to transfer additional assets or equity interests to the selling stockholders in the future if certain future events occur or conditions are met, such as: (i) the attainment of product development milestones; and/or (ii) the achievement of components of earnings, such as “earn-out” provisions or percentage of future revenue. The fair value of contingent consideration after the acquisition date is reassessed by the Company as changes in circumstances and conditions occur, with the subsequent change in fair value recorded in the consolidated statements of operations. Changes in key assumptions can materially affect the estimated fair value of contingent consideration liabilities and, accordingly, the resulting gain or loss is recorded in its unaudited condensed consolidated financial statements. See Note 18 – Business Combination for additional information. |
| Related Party | Parties are considered to be related to the Company if the parties, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. |
| Revenue Recognition | The Company recognizes revenue in accordance with ASC 606, “Revenue Recognition.” Revenue under Topic 606 are required to be recognized either at a “point in time” or “over time,” depending on the facts and circumstances of the arrangement, and are evaluated using a five-step model. To achieve the core principle of Topic 606, we perform the following steps: · identify the contract(s) with customer; · identify the performance obligations in the contract; · determine the transactions price; · allocate the transactions price to the performance obligations in the contract; and · recognize revenue when (or as) we satisfy a performance obligation. Under Topic 606, the Company recognizes revenue as, or when, we satisfy performance obligations under a contract. We account for a contract when the parties approved the contract and are committed to perform on it, the rights of each party and the payment terms are identified, the contract has commercial substance and it is probable that we will collect substantially all of the consideration. A performance obligation is a promise in a contract to transfer a distinct good or service, or a series of distinct goods or services, to a customer. The transaction price of a contract must be allocated to each performance obligation and recognized as the performance obligation is satisfied. In essence, we recognize revenue when or as control of the promised goods or services transfer to the customer. |
| Sera Labs Revenue | Sera Labs recognizes revenue as, or when, we satisfy performance obligations under a contract. We account for a contract when the parties approved the contract and are committed to perform on it, the rights of each party and the payment terms are identified, the contract has commercial substance and it is probable that we will collect substantially all of the consideration. A performance obligation is a promise in a contract to transfer a distinct good or service, or a series of distinct goods or services, to a customer. The transaction price of a contract must be allocated to each performance obligation and recognized as the performance obligation is satisfied. In essence, we recognize revenue when or as control of the promised goods or services transfer to the customer. Revenue from eCommerce sales, including DTC sales, are recognized upon delivery of merchandise to the customer. We also elected to adopt the practical expedient related to shipping and handling fees which allows us to account for shipping and handling activities that occur after control of the related good transfers as fulfillment activities instead of assessing such activities as performance obligations. Therefore, shipping and handling activities are considered part of the Company’s obligation to transfer the products and therefore are recorded as direct selling expenses, as incurred. Shipping revenue is recorded upon delivery to the customer. |
| Practical Expedients and Exemptions | The Company has elected certain practical expedients and policy elections as permitted under ASC Topic 606 as follows: · the Company adopted the practical expedient related to not adjusting the promised amount of consideration for the effects of a significant financing component if the period between transfer of product and customer payment is expected to be less than one year at the time of contract inception; · the Company made the accounting policy election to exclude any sales and similar taxes from the transaction price; and · the Company adopted the practical expedient not to disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less. |
| Sales Tax | The transaction price is the amount of consideration to which the Company expects to be entitled in exchange for transferring the promised goods or services to a customer, excluding sales taxes. The net amount of sales tax payable to the taxation authority is included in sales tax payable in the unaudited condensed consolidated balance sheets. |
| Sales Returns, Discounts and Warranties | Sales returns, discount and warranties are considered variable consideration under ASC 606. The Company reduces revenue for estimated future returns, discounts and warranties which may occur with distributors and retailers. When evaluating the adequacy of sales returns, discounts and warranties, the Company analyzes the following: historical credit allowances, current sell-through of inventory of the Company’s products, current trends in retail industry, changes in customer demand, acceptance of products, and other related factors. |
| Cost to Obtain a Contract | The Company pays sales commissions to its employees and outside sales representatives for contracts that they obtain relating to the wholesale sales of our products. The Company applies the optional practical expedient to immediately expense costs to obtain a contract if the amortization period of the asset that would have been recognized is one year or less. As such, sales commissions are immediately recognized as an expense and included as part of sales and marketing expenses. |
| Contract Liabilities | Advance payments and billings in excess of revenue recognized represent contract liabilities and are recorded as deferred revenue when customers remit contractual cash payments in advance before satisfying performance obligations under contractual arrangements. Contract liabilities are derecognized when revenue is recognized, and the performance obligation is satisfied. Advance payments and billings in excess of revenue recognized are included in deferred revenue, which is classified as current or noncurrent based on the timing of when the Company expects to recognize revenue. As of June 30, 2023 and December 31, 2022, we had contract liabilities of $388 thousand and $388 thousand, respectively. Contract liabilities is made up of the following as of June 30, 2023 and December 31, 2022 (in thousands): June 30, 2023 December 31, 2022 Customer deposits for commercial products $ 388 $ 388 The following table summarizes the changes in contract liabilities during the six months ended June 30, 2023 and year ended December 31, 2022 (in thousands): Balance at December 31, 2021 $ 293 Additions 26 Customer deposits returned (45 ) Transfers to revenue (84 ) Contract liabilities held for sale but not assumed 198 Balance at December 31, 2022 $ 388 Additions - Customer deposits returned - Transfers to revenue - Balance at June 30, 2023 $ 388 |
| Cost of Revenues | Cost of revenue primarily consists of costs for our products incurred to third-party manufacturers. |
| Advertising Expense | The Company expenses marketing, promotions and advertising costs as incurred. Such costs are included in selling, general and administrative expense in the accompanying unaudited condensed consolidated statements of operations. The Company recorded advertising costs of $700 thousand and $338 thousand for the three months ended June 30, 2023 and 2022, respectively. The Company recorded advertising costs of $1.5 million and $673 thousand for the six months ended June 30, 2023 and 2022, respectively. |
| Research and Development | Costs incurred in connection with the development of new products and processes are charged to research and development expenses as incurred. Historically, research and development expenses were generally incurred by the former pharmaceutical segment and are presented as part of the loss from disposal group in the unaudited condensed consolidated statements of operations. See Note 6 – Discontinued Operations for additional information. |
| Income Taxes | The Company utilizes FASB ASC 740, “ Income Taxes The Company generated a deferred tax asset through net operating loss carry-forward. However, a valuation allowance of 100% has been established due to the uncertainty of the Company’s realization of the net operating loss carry-forward prior to its expiration. |
| Stock-Based Compensation | Stock-based compensation is accounted for based on the requirements of the Share-Based Payment Topic of ASC 718, “Stock Compensation” (“ASC 718”) which requires recognition in the consolidated financial statements of the cost of employee and director services received in exchange for an award of equity instruments over the period the employee or director is required to perform the services in exchange for the award (presumptively, the vesting period). ASC 718 also requires measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair value of the award. Pursuant to ASC 2018-07 (Topic 718) for share-based payments to employees, consultants and other third-parties, compensation expense is determined at the “measurement date.” The expense is recognized over the vesting period of the award. Until the measurement date is reached, the total amount of compensation expense remains uncertain. The Company initially records compensation expense based on the fair value of the award at the grant date. For awards of restricted stock, the Company determines grant date fair value based on the closing price of the Company’s common stock on the grant date as reported on the over-the-counter market (the “OTC Market”). For awards of stock options, the Company uses the Black-Scholes option valuation model to estimate grant date fair value. Compensation expense is recognized for the portion of the award that is ultimately expected to vest over the period during which the recipient renders the required services to the Company generally using the straight-line single option method. See Note 16 – Stock Incentive Plan for additional information. |
| Fair Value Measurements | The Company follows FASB ASC 820, “Fair Value Measurements and Disclosures” (“ASC 820”), for assets and liabilities measured at fair value on a recurring basis. ASC 820 establishes a common definition for fair value to be applied to existing generally accepted accounting principles that require the use of fair value measurements and establishes a framework for measuring fair value and expands disclosure about such fair value measurements. ASC 820 establishes a single authoritative definition of fair value, sets out a framework for measuring fair value and expands on required disclosures about fair value measurement. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. ASC 820 describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value, which are the following: · Level 1 – Quoted prices in active markets for identical assets and liabilities. · Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted market prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. · Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. When a part of the purchase consideration consists of shares of the Company common stock, the Company calculates the purchase price attributable to those shares, a Level 1 security, by determining the fair value of those shares quoted on the OTC Market as of the acquisition date. The Company recognizes estimated fair values of the tangible assets and identifiable intangible assets acquired, including in-process research and development, and liabilities assumed, including any contingent consideration, as of the acquisition date. Goodwill is recognized as any amount of the fair value of the tangible and identifiable intangible assets acquired and liabilities assumed in excess of the consideration transferred. ASC 805 precludes the recognition of an assembled workforce as an asset, effectively subsuming any assembled workforce value into goodwill. In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible, and also considers counterparty credit risk in its assessment of fair value. At June 30, 2023 and December, 31, 2022, the Company had no financial assets or liabilities recorded at fair value on a recurring basis, except for the Series A and B Notes, for which we elected the fair value option, and the contingent stock consideration. These liabilities are measured at fair value using the period-end quoted market prices of the Company’s common stock as a Level 3 input. The Company also has certain derivative liabilities and contingent consideration liabilities which are carried at fair value based on Level 3 inputs. The carrying amounts of cash equivalents, prepaid expenses and other current assets, accounts payable, accrued expenses and other current liabilities approximate fair values because of the short-term nature of these items. The fair value of contingent stock consideration is evaluated each reporting period using projected financial information, discount rates, and key inputs. Projected contingent payment amounts are discounted back to the current period using a discount rate. Financial information is based on the Company’s most recent internal forecasts. Changes in projected financial information, the Company’s stock price, discount rate and time for settlement of milestones and earnouts may result in higher or lower fair value measurements. Increases (decreases) in any of those inputs in isolation may result in a significantly lower (higher) fair value measurement. For the period from the date of acquisition to June 30, 2023, the Company’s stock price, volatility percentage and the weighted average present value probability of each the various estimates of milestones, earn-out amounts and achievements being accomplished resulted in a decrease of the fair value of the contingent stock consideration. In determining the fair value, the Company evaluated each of the target threshold scenarios as to the potential earn-out payment at each level based on the estimated net sales and gross profit. If the expected gross profit considered in the scenario with the lowest gross profit is less than $6.0 million during the Clawback Period, the value of the stock earn-out payment would be $6.0. However, if the expected gross profit during the Clawback Period was at least $8.0 million (and the net sales target is achieved), the value of the stock earn-out payment would be approximately $712 thousand. The Company has elected the fair value option to account for the Series A and B Notes that were issued on October 30, 2020 and records this at fair value with changes in fair value recorded in the condensed consolidated statements of operations. As a result of applying the fair value option, direct costs and fees related to the Series A and B Notes are recognized in earnings as incurred and not deferred. As of June 30, 2023, the Company has valued the Series A and B Notes giving consideration to the terms under the existing default. The following table summarizes fair value measurements by level at June 30, 2023 for assets and liabilities measured at fair value on a recurring basis (in thousands): Total Level 1 Level 2 Level 3 Fair value of contingent stock consideration $ 552 $ - $ - $ 552 Fair value of Series A Note $ 4,088 $ - $ - $ 4,088 Fair value of Series B Note $ 3,113 $ - $ - $ 3,113 The following table summarizes fair value measurements by level at December 31, 2022 for assets and liabilities measured at fair value on a recurring basis (in thousands): Total Level 1 Level 2 Level 3 Fair value of contingent stock consideration $ 860 $ - $ - $ 860 Fair value of Series A Note $ 5,221 $ - $ - $ 5,221 Fair value of Series B Note $ 3,959 $ - $ - $ 3,959 The following table summarizes the changes in Level 3 financial instruments during the six months ended June 30, 2023 (in thousands): Fair value of Series A and B Notes at December 31, 2022 $ 9,180 Change in fair value of Series A Note (1,133 ) Change in fair value of Series B Note (846 ) Fair value of Series A and B Notes at June 30, 2023 $ 7,201 Financial instruments measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Series A and B Notes are measured at fair value using the Monte Carlo simulation valuation methodology. A summary of the weighted average (in aggregate) significant unobservable inputs used in measuring the Series A and B Notes that are categorized within Level 3 of the fair value hierarchy is as follows: Date of valuation June 30, 2023 December 31, 2022 Stock price $ 0.25 $ 0.25 Conversion price $ 1.32 $ 1.32 Term (in years) – Series A Note 0.0 0.0 Term (in years) – Series B Note 0.0 0.0 Volatility – Series A Note 71.0 % 85.0 % Volatility – Series B Note 71.0 % 85.0 % Risk-free interest rate – Series A Note 5.30 % 4.60 % Risk-free interest rate – Series B Note 5.30 % 4.60 % Interest rate 18.0 % 18.0 % |
| Series A and B Notes | The Company elected the fair value option to record its Series A and B Notes, which were issued in October 2020. The fair value of the Series A and B Notes is classified within Level 3 of the fair value hierarchy because the fair values were estimated utilizing a Monte Carlo simulation model. Accordingly, the Series A and B Notes are marked-to-market at each reporting date with the change in fair value reported as a gain (loss) in the unaudited condensed consolidated statement of operations. All issuance costs related to the notes were expensed as incurred in the unaudited condensed consolidated statement of operations. See Note 14 – Convertible Promissory Notes and Fair Value of Convertible Promissory Notes for additional information. |
| Contingencies | We are exposed to claims and litigation arising in the ordinary course of business and use various methods to resolve these matters in a manner that we believe serves the best interest of our stockholders and other constituents. When a loss is probable, we record an accrual based on the reasonably estimable loss or range of loss. When no point of loss is more likely than another, we record the lowest amount in the estimated range of loss and, if material, disclose the estimated range of loss. We do not record liabilities for reasonably possible loss contingencies, but do disclose a range of reasonably possible losses if they are material and we are able to estimate such a range. If we cannot provide a range of reasonably possible losses, we explain the factors that prevent us from determining such a range. Historically, adjustments to our estimates have not been material. We believe the recorded reserves in our unaudited condensed consolidated financial statements are adequate in light of the probable and estimable liabilities. We do not believe that any of these identified claims or litigation will be material to our results of operations, cash flows, or financial condition. Gain contingencies are recorded when the ultimate resolution of the contingency is resolved. |
| Net Loss per Common Share | Basic net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period, excluding any unvested restricted stock awards. Diluted net loss per share is computed by dividing net loss by the weighted average common shares outstanding during the period plus dilutive securities or other contracts to issue common stock as if these securities were exercised or converted to common stock. Diluted net loss per share includes the effect of common stock equivalents (stock options, unvested restricted stock, and warrants) when, under either the treasury or if-converted method, such inclusion in the computation would be dilutive. Net loss is adjusted for the dilutive effect of the change in fair value liability for price adjustable warrants, if applicable. The following table sets forth the computation of basic and diluted net loss per share for the three months ended (in thousands, except per share data): For the Three Months Ended For the Six Months Ended (Dollars in thousands) June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022 Loss from continuing operations $ (987 ) $ (6,931 ) $ (1,196 ) $ (8,487 ) Loss from disposal group - (2,688 ) - (6,283 ) Net loss $ (987 ) $ (9,619 ) $ (1,196 ) $ (14,770 ) Weighted average outstanding shares of common stock 71,479,697 69,870,087 71,455,716 69,362,563 Common stock and common stock equivalents 71,479,697 69,870,087 71,455,716 69,362,563 Basic and diluted loss per share: Continuing operations $ (0.01 ) $ (0.10 ) $ (0.02 ) $ (0.12 ) Disposal group $ - $ (0.04 ) $ - $ (0.09 ) The following number of shares have been excluded from diluted net income (loss) per share since such inclusion would be anti-dilutive: Six months ended June 30, 2023 2022 Vested stock options from the Company’s 2017 Equity Incentive Plan 1,297,491 3,864,446 Warrants 312,500 615,530 Shares to be issued upon conversion of convertible payable 609,925 436,027 Total 2,219,916 4,916,003 In connection with the Sera Labs Merger, Sera Labs security holders are entitled to receive up to 5,988,024 shares of the Company’s common stock (the “Clawback Shares”) based on the achievement of certain sales and gross margin milestones. Due to the uncertainty of the number of Clawback Shares to be issued, these Clawback Shares were not included in the table above. The Series A and B Notes (other than restricted amounts under a Series B Note) are convertible, at the option of the Investor, into shares of Common Stock at a conversion price of $1.32 per share. The conversion price is subject to full ratchet antidilution protection upon any transaction in which the Company is deemed to have granted, issued or sold, any shares of Common Stock. If the Company enters into any agreement to issue any variable rate securities, other than a bona fide at-the-market offering or equity line of credit, the Investor has the additional right to substitute such variable price (or formula) for the conversion price. If an Event of Default has occurred under the Convertible Notes, the Investor may elect to alternatively convert the Convertible Notes at the redemption premium described therein. Due to the uncertainty of the number of shares to be issued, the shares to be issued from the conversion of the Series A and B Notes were also not included in the table above. |
| Segment Reporting | The Company uses the “management approach” to identify its reportable segments. The management approach designates the internal organization used by management for making operating decisions and assessing performance as the basis for identifying the Company’s reportable segments. Using the management approach, the Company determined that it does not have reportable segments. |
| Accounting standards adopted in 2023 | In September 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses, with additional updates and amendments being issued in 2018, 2019, 2020 and 2022 (collectively, “ASC 326”). The new standard updates the impairment model for financial assets measured at amortized cost, known as the Current Expected Credit Loss (“CECL”) model. For trade and other receivables, held-to-maturity debt securities, loans, and other instruments, entities are required to use a new forward-looking “expected loss” model that generally results in the earlier recognition of an allowance for credit losses. The Company adopted ASC 326 on January 1, 2023. The adoption of this standard did not have a material impact to the Company. |
| Recent Accounting Pronouncements Not Yet Adopted | The Company’s management reviewed all recently issued accounting standard updates (“ASU’s”) not yet adopted by the Company and does not believe the future adoptions of any such ASU’s may be expected to cause a material impact on the Company’s condensed consolidated financial condition or the results of its operations. |
