Document and Entity Information
Document and Entity Information - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2023 | Mar. 25, 2024 | Jun. 30, 2023 | |
Document Information [Line Items] | |||
Document Type | 10-K | ||
Document Annual Report | true | ||
Document Period End Date | Dec. 31, 2023 | ||
Document Transition Report | false | ||
Entity File Number | 001-41567 | ||
Entity Registrant Name | PROSOMNUS, INC. | ||
Entity Incorporation, State or Country Code | DE | ||
Entity Tax Identification Number | 88-2978216 | ||
Entity Address, Address Line One | 5675 Gibraltar Drive | ||
Entity Address, City or Town | Pleasanton | ||
Entity Address State Or Province | CA | ||
Entity Address, Postal Zip Code | 94588 | ||
City Area Code | 844 | ||
Local Phone Number | 537-5337 | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Interactive Data Current | Yes | ||
Entity Filer Category | Non-accelerated Filer | ||
Entity Small Business | true | ||
Entity Emerging Growth Company | true | ||
Entity Ex Transition Period | false | ||
ICFR Auditor Attestation Flag | false | ||
Document Financial Statement Error Correction [Flag] | false | ||
Entity Shell Company | false | ||
Entity Public Float | $ 25.7 | ||
Entity Common Stock, Shares Outstanding | 17,394,064 | ||
Auditor Name | Marcum llp | ||
Auditor Location | Portland, Maine | ||
Auditor Firm ID | 688 | ||
Entity Central Index Key | 0001934064 | ||
Document Fiscal Year Focus | 2023 | ||
Document Fiscal Period Focus | FY | ||
Current Fiscal Year End Date | --12-31 | ||
Amendment Flag | false | ||
Common Stock | |||
Document Information [Line Items] | |||
Title of 12(b) Security | Common Stock, $0.0001 Par Value per Share | ||
Trading Symbol | OSA | ||
Security Exchange Name | NASDAQ | ||
Warrant | |||
Document Information [Line Items] | |||
Title of 12(b) Security | Warrants, each whole warrant exercisable for one share of Common Stock for $11.50 per share | ||
Trading Symbol | OSAAW | ||
Security Exchange Name | NASDAQ |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Dec. 31, 2023 | Dec. 31, 2022 |
Current assets: | ||
Cash and cash equivalents | $ 6,363 | $ 15,916 |
Restricted cash | 700 | |
Accounts receivable, net | 3,839 | 2,843 |
Inventory | 2,039 | 640 |
Prepaid expenses and other current assets | 1,369 | 1,851 |
Total current assets | 14,310 | 21,250 |
Property and equipment, net | 3,358 | 2,404 |
Finance lease right-of-use assets | 3,265 | 3,650 |
Operating lease right-of-use assets | 5,069 | 5,633 |
Other assets | 285 | 263 |
Total assets | 26,287 | 33,200 |
Current liabilities: | ||
Accounts payable | 4,047 | 2,102 |
Accrued expenses and other current liabilities | 6,756 | 3,706 |
Equipment financing obligation | 57 | 59 |
Finance lease liabilities | 1,052 | 1,009 |
Operating lease liabilities | 304 | 215 |
Senior Convertible Notes at fair value, current portion | 2,125 | |
Total current liabilities | 14,341 | 7,091 |
Equipment financing obligation, net of current portion | 129 | 186 |
Finance lease liabilities, net of current portion | 2,009 | 2,081 |
Operating lease liabilities, net of current portion | 5,221 | 5,526 |
Senior Convertible Notes at fair value, net of current portion | 12,152 | 13,651 |
Subordinated Convertible Notes at fair value | 18,320 | 10,356 |
Earnout and warrant liability | 716 | 14,802 |
Total liabilities | 52,888 | 53,693 |
Commitments and contingencies | ||
Stockholders' deficit: | ||
Common Stock, $0.0001 par value, 150,000,000 and 100,000,000 shares authorized at December 31, 2023 and December 31, 2022, respectively; 17,388,599 and 16,041,464 shares issued and outstanding at December 31, 2023 and December 31, 2022, respectively | 2 | 2 |
Additional paid-in capital | 196,731 | 190,299 |
Accumulated deficit | (234,889) | (210,794) |
Total stockholders' deficit | (38,156) | (20,493) |
Total liabilities, redeemable convertible preferred stock and stockholders' deficit | 26,287 | 33,200 |
Redeemable Convertible Preferred Stock Subjected To Redemption | ||
Current liabilities: | ||
Redeemable Convertible Series A Preferred Stock, $0.0001 par value, stated value $1,000; 25,000 shares designated at December 31, 2023; 9,436 shares issued and outstanding at December 31, 2023; liquidation preference of $14,154 at December 31, 2023; No shares authorized, issued or outstanding at December 31, 2022 | 11,555 | |
Preferred Stock Not Subjected To Redemption | ||
Stockholders' deficit: | ||
Preferred stock, $0.0001 par value, 1,475,000 and 1,000,000 shares authorized at December 31, 2023 and December 31, 2022, respectively; no shares issued or outstanding |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Dec. 31, 2023 | Dec. 31, 2022 |
Redeemable Series A convertible preferred stock, shares outstanding | 9,436 | |
Redeemable Series A convertible preferred stock, liquidation preference | $ 14,200 | |
Preferred stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Preferred stock, shares authorized | 1,500,000 | 1,000,000 |
Common stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 150,000,000 | 100,000,000 |
Common stock, shares issued | 17,388,599 | 16,041,464 |
Common stock, shares outstanding | 17,388,599 | 16,041,464 |
Series A Redeemable Convertible Preferred Stock | ||
Redeemable Series A convertible preferred stock, par value (in dollars per share) | $ 1,000 | $ 10 |
Redeemable Series A convertible preferred stock, shares authorized | 25,000 | 5,945 |
Preferred stock, par value (in dollars per share) | $ 0.0001 | |
Redeemable Convertible Preferred Stock Subjected To Redemption | ||
Redeemable Series A convertible preferred stock, par value (in dollars per share) | 0.0001 | |
Redeemable Series A convertible preferred stock, stated value (in dollars per share) | $ 1,000 | |
Redeemable Series A convertible preferred stock, shares authorized | 25,000 | 0 |
Redeemable Series A convertible preferred stock, shares issued | 9,436 | 0 |
Redeemable Series A convertible preferred stock, shares outstanding | 9,436 | 0 |
Redeemable Series A convertible preferred stock, liquidation preference | $ 14,154 | |
Preferred Stock Not Subjected To Redemption | ||
Preferred stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Preferred stock, shares authorized | 1,475,000 | 1,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock shares outstanding | 0 | 0 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
CONSOLIDATED STATEMENTS OF OPERATIONS | ||
Revenue | $ 27,652 | $ 19,393 |
Operating expenses: | ||
Cost of revenue | 13,641 | 9,127 |
Sales and marketing | 13,085 | 8,865 |
General and administrative | 15,230 | 9,895 |
Research and development | 4,802 | 2,981 |
Total operating expenses | 46,758 | 30,868 |
Net loss from operations | (19,106) | (11,475) |
Other income (expense) | ||
Interest expense, net | (5,382) | (6,120) |
Change in fair value of earnout liability | 12,190 | 9,260 |
Change in fair value of debt | 1,328 | 553 |
Change in fair value of warrant liability | 1,896 | 3,237 |
Loss on debt extinguishment | (10,450) | (2,598) |
Other financing expense | (2,473) | |
Other expense, net | (2,098) | (2) |
Total other income (expense), net | (4,989) | 4,330 |
Net loss and comprehensive loss | $ (24,095) | $ (7,145) |
Net loss per share attributable to common stockholders, basic | $ (1.49) | $ (0.71) |
Net loss per share attributable to common stockholders, diluted | $ (1.49) | $ (0.71) |
Weighted average shares of Common Stock, basic | 16,177 | 10,022 |
Weighted average shares of Common Stock, diluted | 16,177 | 10,022 |
CONSOLIDATED STATEMENTS OF REDE
CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' DEFICIT - USD ($) | Series B redeemable convertible preferred stock Preferred Stock | Series B redeemable convertible preferred stock Warrant Convertible Bridge Notes | Series B redeemable convertible preferred stock | Series A Redeemable Convertible Preferred Stock ProSomnus Common Holders Preferred Stock | Series A Redeemable Convertible Preferred Stock ProSomnus Common Holders | Series A Redeemable Convertible Preferred Stock Preferred Stock | Series A Redeemable Convertible Preferred Stock Common Stock | Series A Redeemable Convertible Preferred Stock Additional Paid-In Capital | Series A Redeemable Convertible Preferred Stock | Warrant Additional Paid-In Capital | Warrant | PIPE Equity Common Stock | PIPE Equity Additional Paid-In Capital | PIPE Equity | PIPE Debt SPA Shares Common Stock | PIPE Debt SPA Shares Additional Paid-In Capital | PIPE Debt SPA Shares | LAAA Founders (Additional Private warrants) Common Stock | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Total |
Beginning balance at Dec. 31, 2021 | $ 12,390,000 | $ 26,245,000 | ||||||||||||||||||||
Beginning balance (in shares) at Dec. 31, 2021 | 7,288,333 | 26,245 | ||||||||||||||||||||
Increase (Decrease) in Temporary Equity | ||||||||||||||||||||||
Issuance of Series Preferred Stocks | $ 580,000 | $ 13,081,000 | $ 13,081,000 | |||||||||||||||||||
Issuance of Series Preferred Stocks (in shares) | 161,112 | 161,112 | 5,945 | 13,081 | ||||||||||||||||||
Merger Recapitalization - Preferred | $ (12,390,000) | $ (26,245,000) | ||||||||||||||||||||
Merger Recapitalization - Preferred (in shares) | (7,449,445) | (45,271) | ||||||||||||||||||||
Beginning balance at Dec. 31, 2021 | $ 3,000 | $ 150,426,000 | $ (203,649,000) | $ (53,220,000) | ||||||||||||||||||
Beginning balance (in shares) at Dec. 31, 2021 | 24,566,386 | |||||||||||||||||||||
Increase (Decrease) in Stockholders' Equity | ||||||||||||||||||||||
Issuance of Common Stock - PIPE Equity | $ 10,250,000 | $ 10,250,000 | $ 479,000 | $ 479,000 | ||||||||||||||||||
Issuance of Common Stock - PIPE Equity (in shares) | 1,830,133 | 326,713 | ||||||||||||||||||||
Merger Recapitalization - Preferred | $ 1,000 | 38,636,000 | 38,637,000 | |||||||||||||||||||
Merger Recapitalization - Preferred (in shares) | 7,208,865 | |||||||||||||||||||||
Merger Recapitalization - Common | $ (2,000) | (2,000) | ||||||||||||||||||||
Merger Recapitalization - Common (in shares) | (21,336,475) | |||||||||||||||||||||
Issuance of Common Stock - services | 7,159,000 | 7,159,000 | ||||||||||||||||||||
Issuance of Common Stock - services (in shares) | 716,223 | |||||||||||||||||||||
Issuance costs - ProSomnus Inc. | (12,641,000) | (12,641,000) | ||||||||||||||||||||
Conversion of Stock (in shares) | 1,054,390 | |||||||||||||||||||||
Issuance of Common Stock (in shares) | 820,722 | |||||||||||||||||||||
Assumption of SPAC Assets and Liabilities | 2,242,000 | 2,242,000 | ||||||||||||||||||||
Earn-out liability | (22,070,000) | (22,070,000) | ||||||||||||||||||||
Vesting of restricted stock awards | 2,157,000 | 2,157,000 | ||||||||||||||||||||
Vesting of restricted stock awards (in shares) | 854,507 | |||||||||||||||||||||
Net Income (Loss) | (7,145,000) | (7,145,000) | ||||||||||||||||||||
Ending balance at Dec. 31, 2022 | $ 2,000 | 190,299,000 | (210,794,000) | $ (20,493,000) | ||||||||||||||||||
Ending balance (in shares) at Dec. 31, 2022 | 16,041,464 | |||||||||||||||||||||
Increase (Decrease) in Temporary Equity | ||||||||||||||||||||||
Issuance of Series Preferred Stocks | $ 12,767,000 | |||||||||||||||||||||
Issuance of Series Preferred Stocks (in shares) | 161,112 | 5,945 | 10,426 | |||||||||||||||||||
Ending balance at Dec. 31, 2023 | $ 11,555,000 | |||||||||||||||||||||
Ending balance (in shares) at Dec. 31, 2023 | 9,436 | 9,436 | ||||||||||||||||||||
Increase (Decrease) in Stockholders' Equity | ||||||||||||||||||||||
Conversion of Subordinated Convertible Notes | 920,000 | $ 920,000 | ||||||||||||||||||||
Conversion of Subordinated Convertible Notes (in shares) | 230,494 | |||||||||||||||||||||
Issuance of stock warrants | $ 3,057,000 | $ 3,057,000 | ||||||||||||||||||||
Issuance of Common Stock - PIPE Equity (in shares) | 1,830,133 | |||||||||||||||||||||
Conversion of Stock | $ (1,212,000) | $ 1,212,000 | $ 1,212,000 | |||||||||||||||||||
Conversion of Stock (in shares) | (990) | |||||||||||||||||||||
Issuance of Common Stock | 136,000 | 136,000 | ||||||||||||||||||||
Issuance of Common Stock (in shares) | 16,166 | |||||||||||||||||||||
Vesting of restricted stock awards | $ 192,500 | |||||||||||||||||||||
Vesting of restricted stock awards (in shares) | 990,000 | |||||||||||||||||||||
Taxes paid related to net share settlement of equity awards | (70,000) | (70,000) | ||||||||||||||||||||
Taxes paid related to net share settlement of equity awards (Shares) | (82,025) | |||||||||||||||||||||
Stock-based compensation expense | 1,177,000 | 1,177,000 | ||||||||||||||||||||
Net Income (Loss) | (24,095,000) | (24,095,000) | ||||||||||||||||||||
Ending balance at Dec. 31, 2023 | $ 2,000 | $ 196,731,000 | $ (234,889,000) | $ (38,156,000) | ||||||||||||||||||
Ending balance (in shares) at Dec. 31, 2023 | 17,388,599 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) shares in Thousands, $ in Thousands | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net loss | $ (24,095) | $ (7,145) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization | 978 | 424 |
Reduction of finance right-of-use asset | 952 | 773 |
Reduction of operating right-of-use asset | 291 | 207 |
Noncash interest | 3,377 | 5,004 |
Allowance for credit losses | 120 | 139 |
Stock-based compensation | 1,177 | 2,157 |
Change in fair value | (12,190) | (9,260) |
Change in fair value of debt | (1,328) | (553) |
Change in fair value | (1,896) | (3,237) |
Loss on debt extinguishment | 10,450 | 2,598 |
Loss on financing transactions | 2,473 | |
Loss on disposal of property and equipment | 117 | |
Right-of-use asset impairment | 273 | |
Shares issued for services received | 136 | |
Other non-cash operating expense | 124 | 2 |
Amortization of debt discount | 1,468 | 145 |
Changes in operating assets and liabilities: | ||
Accounts receivable | (1,116) | (883) |
Inventory | (1,399) | (261) |
Prepaid expenses and other current assets | 482 | (1,745) |
Other assets | (22) | (108) |
Accounts payable | 974 | 1,146 |
Accrued expenses and other current liabilities | 2,743 | 517 |
Operating lease liabilities | (216) | (159) |
Net cash used in operating activities | (16,127) | (10,239) |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Purchases of property and equipment | (1,467) | (1,354) |
Net cash used in investing activities | (1,467) | (1,354) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Proceeds from PIPE Equity Financing | 9,450 | |
Proceeds from SPAC Trust | 4,921 | |
Issuance costs paid in closings | (8,243) | |
Proceeds from Issuance of Convertible Notes | 27,452 | |
Proceeds from line of credit | 24,362 | |
Repayments of line of credit | (24,950) | |
Proceeds from issuance of subordinated notes | 375 | |
Repayments of subordinated notes | (75) | |
Principal payments on finance lease obligations | (1,303) | (1,222) |
Principal payments on equipment financing obligation | (59) | (56) |
Proceeds from issuance of Series A Preferred Stock and warrants | 10,426 | |
Repayments of subordinated loan and security agreement | (10,652) | |
Proceeds from issuance of unsecured subordinated promissory notes | 5,261 | |
Payment of debt financing costs | (253) | |
Repayments of unsecured subordinated promissory notes | (614) | |
Taxes paid related to net share settlement of equity awards | (70) | |
Net cash provided by financing activities | 8,741 | 26,009 |
Net change in cash, cash equivalents, and restricted cash | (8,853) | 14,416 |
Cash, cash equivalents, and restricted cash at beginning of year | 15,916 | 1,500 |
Cash, cash equivalents, and restricted cash at end of year | 7,063 | 15,916 |
Supplemental disclosure of cash flow information: | ||
Cash paid for interest | 1,602 | 1,189 |
Supplemental disclosure of noncash investing and financing activities: | ||
ROU assets obtained in exchange for finance lease obligations | 1,274 | 2,234 |
ROU assets obtained in exchange for operating lease obligations | 5,436 | |
Addition of ROU assets from finance lease modification | 239 | |
Conversion of Subordinated Convertible Notes to Common Stock | 920 | |
Conversion of Series A Preferred Stock to Common Stock | $ 1,212 | |
Conversion of Bridge Notes into Equity | $ 13,081 | |
Issuance of stock for repayment of Subordinated Loan and Security agreement and Bridge Loan (secured subordinated loan) | 800 | |
Issuance of Subordinated Convertible Notes for repayment of Subordinated Loan and Security agreement and Bridge Loan (secured subordinated loan) | $ 2,548 | |
Issuance of Common stock warrants in connection with Senior and Subordinated Convertible Notes | 1,992 | |
Issuance of Common stock in exchange for investment banking services | $ 7,159 |
DESCRIPTION OF THE BUSINESS
DESCRIPTION OF THE BUSINESS | 12 Months Ended |
Dec. 31, 2023 | |
DESCRIPTION OF THE BUSINESS | |
DESCRIPTION OF THE BUSINESS | NOTE 1 — DESCRIPTION OF THE BUSINESS Company Organization ProSomnus, Inc., and its wholly owned subsidiaries, ProSomnus Holdings, Inc. and ProSomnus Sleep Technologies, Inc. (collectively, the “Company”) is an innovative medical technology Company that develops, manufactures, and markets its proprietary line of precision intraoral medical devices for treating and managing patients with obstructive sleep apnea (“OSA”). The Company is located in Pleasanton, California and was incorporated as Delaware Company on May 3, 2022. Its accounting predecessor Company, ProSomnus Sleep Technologies, Inc. was incorporated in Delaware on March 2, 2016. On December 6, 2022, Lakeshore Acquisition I Corp. (“Lakeshore”) consummated a series of transactions that resulted in the combination (the “Business Combination”) of Lakeshore with ProSomnus Holdings, Inc. and its wholly-owned subsidiary, ProSomnus Sleep Technologies, Inc., pursuant to an Agreement and Plan of Merger, dated May 9, 2022. Pursuant to the Merger Agreement, Lakeshore merged with and into ProSomnus Holdings, and changed its name to ProSomnus, Inc. The transaction was accounted for as a reverse recapitalization with ProSomnus Sleep Technologies, Inc. being the accounting acquirer and Lakeshore as the acquired Company for accounting purposes. Accordingly, all historical financial information presented in the consolidated financial statements represents the accounts of ProSomnus Sleep Technologies, Inc. Prior to the Business Combination, Lakeshore’s units, public shares, and public warrants were listed on The Nasdaq Global Market under the symbols “LAAU,” “LAAA,” and “LAAW,” respectively. On December 6, 2022, the Company’s Class A Common Stock and public warrants began trading on Nasdaq, under the symbols “OSA” and “OSAAW,” respectively |
BASIS OF ACCOUNTING AND SIGNIFI
BASIS OF ACCOUNTING AND SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Dec. 31, 2023 | |
BASIS OF ACCOUNTING AND SIGNIFICANT ACCOUNTING POLICIES | |
BASIS OF ACCOUNTING AND SIGNIFICANT ACCOUNTING POLICIES | NOTE 2 — BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying consolidated financial statements were prepared on the accrual basis of accounting in accordance with principles generally accepted in the United States of America (“U.S. GAAP”). Certain prior year balances have been reclassified in order to conform to the current period presentation. These reclassifications had no impact on the Company's previously reported statement of financial condition, operating results or cash flows. Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Liquidity and Management’s Plans The Company has incurred recurring losses from operations and recurring negative cash flows from operating activities. The Company expects operating losses and negative cash flows from operations to continue for the foreseeable future. In accordance with ASU 2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40) (“ASC 205-40”) , the Company has the responsibility to evaluate whether conditions and/or events raise substantial doubt about its ability to meet its future financial obligations as they become due within one year after the date that the financial statements are issued. This evaluation requires management to perform two steps. First, management must evaluate whether there are conditions and events that raise substantial doubt about the entity’s ability to continue as a going concern. Second, if management concludes that substantial doubt is raised, management is required to consider whether it has plans in place to alleviate that doubt. Disclosures in the notes to the consolidated financial statements are required if management concludes that substantial doubt exists or that its plans alleviate the substantial doubt that was raised. The accompanying consolidated financial statements have been prepared in accordance with U.S. GAAP assuming that the Company will continue as a going concern. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result should the Company be unable to continue as a going concern. Management’s Plans Related to Going Concern The Company’s ability to continue as a going concern depends on its ability to execute on its plans to achieve revenue growth forecast, control operating costs, and obtain additional financing. The Company has developed a cash flow breakeven plan pursuant to which the Company expects to maintain positive cash balances and compliance with its debt covenants and commitments. The Company has commenced the implementation of its plan and believes the plan, when fully implemented as planned, will mitigate the liquidity risks identified. However, the Company’s operating plan may change as a result of many factors currently unknown and there can be no assurance that the current operating plan or cash flow break-even plan will be achieved in the time frame anticipated by the Company. Based on current level of expenditures and future cash flow projections, the Company believes having $6.4 million in unrestricted cash and cash equivalents Use of Estimates The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and disclosure of contingent assets and liabilities. Though macroeconomic factors such as inflation, exchange rate fluctuations and concerns about an economic downturn present additional uncertainty, the Company continues to use the best information available to form its critical accounting estimates. Actual results could differ from these estimates, and such differences could materially affect the results of operations reported in future periods. The Company’s significant estimates in these consolidated financial statements relate to the fair values, and the underlying assumptions used to formulate such fair values, of its Series A Preferred Stock, Convertible Notes, earn-out liability, and warrants. Estimates also include the provision for credit losses, warranty and earned discount accruals, measurements of tax assets and liabilities and stock-based compensation. Concentrations, Credit Risk and Market Risk Financial instruments that potentially subject the Company to a concentration of credit risk principally consist of accounts receivable and cash. The Company sells its products to customers primarily in North America and Europe. To reduce credit risk, management performs periodic credit evaluations of its customers’ financial condition. No customers exceeded more than 10% of the Company’s revenue or accounts receivables as of and for the years ended December 31, 2023 and 2022. The Company maintains its cash in bank accounts which, at times, may exceed federally insured limits as guaranteed by the Federal Deposit Insurance Corporation (“FDIC”). As of December 31, 2023 and 2022, the Company had $6.8 million and $15.7 million in excess of the FDIC insured limit, respectively. The Company’s investment policy, which is predicated on capital preservation and liquidity, limits investments to instruments denominated and payable in US dollars. The Company believes its credit risk is mitigated due to the high quality of the banks in which it places its deposits. Historically, the Company has not experienced significant credit losses from financial instruments. Fair Value of Financial Instruments The accounting standard for fair value measurements provides a framework for measuring fair value and requires expanded disclosures regarding fair value measurements. Fair value is defined as the price that would be received for an asset or the exit price that would be paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. This accounting standard establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs, where available. The following summarizes the three levels of inputs that may be used to measure fair value: Level 1 Inputs — Level 2 Inputs — Level 3 Inputs — no 3 Changes in fair value measurements categorized within Level 3 of the fair value hierarchy are analyzed each period based on changes in estimates or assumptions and recorded as appropriate. The carrying amounts of financial instruments such as cash and cash equivalents, restricted cash, accounts receivable, prepaid expenses and other current assets, accounts payable, and accrued expenses approximate the related fair values due to the short-term maturities of these instruments. The carrying value of the Company’s equipment financing obligation is considered to approximate its fair value because the interest rate is comparable to current rates for financing available to the Company. Under the fair value option as prescribed by FASB Accounting Standards Codification (“ASC”) 825, Financial Instruments The following tables provide a summary of the Company’s financial instruments that are measured at fair value on a recurring basis: December 31, 2023 Fair Value Level 1 Level 2 Level 3 Senior Convertible Notes $ 14,277 $ — $ — $ 14,277 Subordinated Convertible Notes 18,320 — — 18,320 Earnout liability 620 — — 620 Warrant liability 96 — — 96 December 31, 2022 Fair Value Level 1 Level 2 Level 3 Senior Convertible Notes $ 13,651 $ — $ — $ 13,651 Subordinated Convertible Notes 10,356 — — 10,356 Earnout liability 12,810 — — 12,810 Warrant liability 1,992 — — 1,992 A financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash and cash equivalents. At December 31, 2023 and 2022, the Company had no cash equivalents. Restricted Cash a letter of credit on hand w ith the Company ' s financial institution as collateral for an office lease Accounts Receivable and Allowance for Credit Losses Accounts receivable are stated at the amount the Company expects to collect. The Company maintains allowances for credit losses for estimated losses resulting from the inability of its customers to make required payments. The Company has not historically assessed finance charges on past due accounts, but retains the right to do so. Receivables are considered past due based on the contractual payment terms. The Company reserves a percentage of trade receivable balance based on collection history and current economic trends that the Company expects will impact the level of credit losses over the life of the receivables. These reserves are re-evaluated on a regular basis and adjusted, as needed. Once a receivable is deemed to be uncollectible, such balance is charged against the reserve. The allowance for credit losses amounted to $0.2 million as of both December 31, 2023 and 2022. Accounts receivable are primarily from customers located in North America and Europe. Inventory Inventory is recorded at the lower of cost or net realizable value under the first-in, first-out method of accounting. Inventories primarily consist of purchased materials. The Company regularly reviews whether the net realizable value of its inventory is lower than its carrying value. If the valuation shows that the net realizable value is lower than the carrying value, the Company takes a charge to cost of revenue and directly reduces the carrying value of the inventory. Indicators that could result in inventory write-downs include damaged or slow-moving materials and supplies. Property and Equipment Property and equipment are stated at cost, less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets. Estimated useful lives are as follows: Manufacturing equipment 3 to 7 years Computers and software 3 years Furniture 7 years Leasehold Improvements Shorter of remaining lease term or estimated useful life Maintenance and repairs are charged to operations as incurred. Impairment of Long-Lived Assets The Company’s long-lived assets primarily include property and equipment and finance and operating right-of-use assets. The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured at the amount by which the carrying amount of the asset exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of carrying amount or the fair value less costs to sell. During 2023, the Company moved to its new headquarters and principal manufacturing facility. Upon moving, the Company expensed a total of $0.3 million relating to the carrying value of the remaining leasehold improvements and amounts due under the remaining lease term of the previous facility. The right-of-use asset and leasehold improvements charge was recorded in other expense, net in the consolidated statements of operations. There were no impairments of long-lived assets for the year ended December 31, 2022. Leases The Company assesses at contract inception whether a contract is, or contains, a lease. Generally, the Company determines that a lease exists when (1) the contract involves the use of a distinct identified asset, (2) the Company obtains the right At the lease commencement date, the Company recognizes a right-of-use (“ROU”) asset and a lease liability for all leases, except short term leases with an original term of twelve months or less. The ROU asset represents the right to use the leased asset for the lease term. The lease liability represents the present value of the lease payments under the lease. The ROU asset is initially measured at cost, which primarily comprises the initial amount of the lease liability, less any lease incentives received. All ROU assets are periodically reviewed for impairment in accordance with standards that apply to long-lived assets. The lease liability is initially measured at the present value of the lease payments, discounted using an estimate of the Company’s incremental borrowing rate for a collateralized loan with the same term as the underlying leases for operating leases and the implied rate in the lease agreement for finance leases. Lease payments included in the measurement of lease liabilities consist of (1) fixed lease payments for the noncancelable lease term, (2) fixed lease payments for optional renewal periods where it is reasonably certain the renewal option will be exercised, and (3) variable lease payments that depend on an underlying index or rate, based on the index or rate in effect at lease commencement. The Company’s real estate operating lease agreement requires variable lease payments that do not depend on an underlying index or rate established at lease commencement. Such payments and changes in payments are recognized in operating expenses when incurred. Lease expense for operating leases consists of the fixed lease payments recognized on a straight-line basis over the lease term plus variable lease payments as incurred. Lease expense for finance leases consists of the amortization of assets obtained under finance leases on a straight-line basis over the lease term and interest expense on the lease liability based on the discount rate at lease commencement. Senior and Subordinated Convertible Notes The Company accounts for its Senior Convertible Notes and Subordinated Convertible Notes (as defined below and collectively the “Convertible Notes”), as derivatives in accordance with, ASC 815, Derivatives and Hedging The Company has analyzed the redemption, conversion, settlement, and other derivative instrument features of its Convertible Notes. ● The Company identified that the (i) redemption features, (ii) Lender’s Optional Conversion feature, (iii) Lender’s Optional Conversion Upon Merger Event feature and (iv) Additional interest rate upon certain events feature meet the definition of a derivative. The Company analyzed the scope exception for all the above features under ASC 815-10-15-74(a). ● Based on the further analysis, the Company identified that the (i) Lender’s Optional Conversion feature, (ii) Lender’s Optional Conversion Upon Merger Event feature and (iii) Additional interest rate upon certain events feature, do not meet the settlement criteria to be considered indexed to equity. The Company concluded that each of these features should be classified as a derivative liability measured at fair value with the changes in Fair Value in the consolidated statements of operations. ● The Company also identified that the redemption features are settled in cash and do not meet the indexed to equity and the equity classification scope exception, thus, they must be bifurcated from the convertible notes and accounted for separately at fair value on a recurring basis reflecting the changes in Fair Value in the consolidated statements of operations. The Company determined the Notes contained multiple embedded derivatives that are required to be bifurcated, two of which are conversion features. As per ASC 815, the fair value election is allowable provided the debt was not issued at a substantial premium. The Company concluded that the Convertible Notes were not issued at a premium and hence the Company elected the fair value option under ASC 815-15-25. The Company elected to record changes in fair value through the consolidated statements of operations as a fair value adjustment of the convertible debt at each reporting period (with the portion of the change that results from a change in the instrument-specific credit risk recorded separately in other comprehensive income, if applicable). The Company has elected to separately present interest expense related to the Convertible Notes within the consolidated statements of operations. Thus, the multiple embedded derivatives do not need to be separately bifurcated and fair valued. The Convertible Notes are reflected at their respective fair values on the consolidated balance sheets. Warrants The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own Common Stock Warranty The Company offers an assurance-type warranty guaranteeing the fit and finish of its intraoral devices for three years from the date of initial sale. The accrual for warranty claims totaled $0.5 million and $0.3 million at December 31, 2023 and 2022, respectively, and these amounts are recorded in accrued expenses on the consolidated balance sheets. The Company recognized the related warranty cost as a reduction in revenue. Revenue Recognition The Company creates customized precision milled intraoral medical devices and recognizes revenue upon meeting the following criteria: ● Identifying the contract with a customer: Customers submit an order in the form of a prescription and oral scan to the Company. ● Identifying the performance obligations within the contract: The sole performance obligation is the delivery of a completed customized intraoral device. ● Determining the transaction price: Prices are determined by standardized pricing sheets and adjusted for discounts, allowances, and remakes. ● Allocating the transaction price to the performance obligations: The full transaction price is allocated to the completed intraoral device as it is the only element in the transaction. ● Recognizing revenue as the performance obligation is satisfied: revenue is recognized upon transfer of control which occurs upon shipment of the product. The Company does not require collateral or any other form of security from customers. Inbound shipping and handling costs related to sales are billed to customers. The Company charges for inbound shipping/handling and the costs are classified as Cost of Revenue. Outbound shipping costs are not billed to customers and are included in sales and marketing expenses. Taxes collected from customers and remitted to governmental authorities are excluded from revenue. Standalone selling price for the various intraoral device models are determined using the Company’s standard pricing sheet. The Company invoices customers upon shipment of the product and invoices are due within 30 days. Amounts that have been invoiced are recorded in accounts receivable and revenue as all revenue recognition criteria have been met. The Company does not have a financing component related to its revenue arrangements. The Company utilizes the practical expedient which permits expensing of costs to obtain a contract when the expected amortization period is one year or less. Accordingly, the Company expenses employee sales commissions when incurred as the period over which the sales commission asset that would have been recognized is less than one year. Cost of Revenue Cost of revenue consists primarily of materials and the costs related to the production of the intra-oral device, including employee compensation, other employee-related expenses and manufacturing overhead costs. Research and Development Research and development costs are charged to operating expense as incurred. Advertising Advertising costs are expensed as incurred and totaled $0.1 million for both the years ended December 31, 2023 and 2022. Stock-Based Compensation The Company measures stock-based awards, including stock options and restricted stock units (RSUs) granted to employees, directors, and non-employee service providers based on the estimated fair values of the awards on the date of the grant. Stock-based compensation expense for awards with service-based vesting is recognized on a straight-line basis over the requisite service period, which is generally the vesting period of such awards, as a component of operating expenses within the consolidated statements of operations. For awards that include performance conditions stock-based compensation expense is recognized on a graded vesting basis over the requisite service period. Compensation expense is not recognized until the performance condition becomes probable. The Company accounts for forfeitures related to awards as they occur. The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model. This valuation model for stock-based compensation expense requires the Company to make assumptions and judgments about the variables used in the calculation including the expected term, the volatility of the Company’s Common Stock, and an assumed risk-free interest rate. As a result, if the Company revises its assumptions and estimates, the Company’s stock-based compensation expense could change. The grant date fair value of RSUs is measured as the fair value per share of the Company’s Common Stock on the date of grant. Income Taxes The Company accounts for income taxes under an asset and liability methodology. Deferred income taxes reflect the impact of temporary differences between assets and liabilities recognized for financial reporting purposes and such amounts recognized for income tax reporting purposes as well as net operating loss carryforwards and tax credit carryforwards. Valuation allowances are provided when necessary to reduce deferred tax assets to an amount that is more likely than not to be realized. In assessing the need for a valuation allowance, the Company considers all available evidence, including past operating results, estimates of future taxable income and the feasibility of tax planning strategies. In the event that the Company changes its determination as to the amount of deferred tax assets that is more likely than not to be realized, the Company will adjust its valuation allowance with a corresponding impact to the provision for income taxes in the period in which such determination is made. The Company follows authoritative guidance regarding uncertain tax positions. The guidance requires that realization of an uncertain income tax position must be more likely than not (i.e., greater than 50% likelihood of receiving a benefit) before it can be recognized in the consolidated financial statements. The guidance further prescribes the benefit to be realized assumes a review by taxing authorities having all relevant information and applying current conventions. The guidance also clarifies the consolidated financial statements classification of tax related penalties and interest and sets forth disclosures regarding unrecognized tax benefits. The Company recognizes potential accrued interest and penalties related to unrecognized tax benefits as income tax expense. Net Loss per Share Attributable to Common Stockholders Basic net loss per share attributable to Common Stockholders is calculated by dividing the net loss attributable to Common Stockholders by the weighted average number of shares of Common Stock outstanding during the period, without consideration for Common Stock equivalents. Diluted net loss per share attributable to Common Stockholders is the same as basic net loss per share attributable to Common Stockholders, since the effects of potentially dilutive securities are antidilutive. Segment Reporting Operating segments are defined as components of an entity for which separate financial information is available and that is regularly reviewed by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources to an individual segment and in assessing performance. The Company’s CODM is its Chief Executive Officer and Chief Financial Officer. The Company has determined that it operates in one operating segment and one reportable segment, as the CODM reviews financial information presented on a consolidated basis for purposes of making operating decisions, allocating resources, and evaluating financial performance. Recently adopted accounting pronouncements During June 2016, the FASB issued ASU 2016-13 - Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments consolidated During August 2020, the FASB issued ASU 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) Derivatives and Hedging- Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity Recent Accounting Pronouncements not Yet Adopted During June 2022, the FASB issued ASU 2022-03, Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions During October 2023, the FASB issued ASU 2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative consolidated During November 2023, the FASB issued ASU 2023-07, Segment Reporting—Improvements to Reportable Segment Disclosures Segment Reporting During December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures |
MERGER AND REVERSE RECAPITALIZA
MERGER AND REVERSE RECAPITALIZATION | 12 Months Ended |
Dec. 31, 2023 | |
MERGER AND REVERSE RECAPITALIZATION | |
MERGER AND REVERSE RECAPITALIZATION | NOTE 3 — MERGER AND REVERSE RECAPITALIZATION Business Combination Transaction On May 9, 2022, Lakeshore and ProSomnus Holdings, Inc. executed the Merger Agreement. Pursuant to the Merger Agreement, the business combination was effected in two steps: (i) upon approval and adoption of the Merger Agreement by the shareholders of Lakeshore, Lakeshore reincorporated to the State of Delaware by merging with and into LAAA Merger Corp., a Delaware corporation and wholly-owned subsidiary of Lakeshore (“ PubCo Reincorporation Merger Merger Sub Acquisition Merger Stockholders’ Representative Business Combination Merger Transaction Legacy ProSomnus On December 6, 2022, Lakeshore consummated a series of transactions that resulted in the combination (the “ Business Combination ProSomnus Holdings Merger Agreement Sponsor Special Meeting Simultaneous with the closing of the Business Combination, the Company also completed a series of private financings, issuing and selling 1,025,000 shares of its Common Stock in a private placement to certain PIPE investors (the “ Equity PIPE Offering Merger Consideration As a result of the Reincorporation Merger and the Business Combination, holders of Lakeshore ordinary shares automatically received Common Stock of the Company, and holders of Lakeshore warrants automatically received warrants of the Company with substantively identical terms. At the Closing of the Business Combination, 1,054,390 ordinary shares of Lakeshore owned by the Sponsor, (“founder shares”), automatically converted into an equal number of shares of the Company Common Stock, and 196,256 Private Placement Warrants held by the Sponsor, each exercisable for one ordinary share of Lakeshore at $11.50 per share, automatically converted into warrants to purchase one share of Surviving Pubco Common Stock at $11.50 per share with substantively identical terms. An aggregate of 4,597,180 warrants were issued to holders of Lakeshore founder shares, and private and public warrant holders, as a result of the Business Combination, see Note 9 – Common Stock Warrants. Additionally, Legacy ProSomnus stockholders (other than holders of ProSomnus Subordinated Debt) are entitled to receive up to 3.0 million Earn-out shares in three tranches: ● the first tranche of 1,000,000 Earn-out shares will be issued when the volume-weighted average price per share of PubCo Common Stock is $12.50 or greater for 20 trading days in any consecutive 30 trading day period commencing 6 months after the Closing and ending at the third anniversary of the Closing; ● the second tranche of 1,000,000 Earn-out shares will be issued when the volume-weighted average price per share of PubCo Common Stock is $15.00 or greater for 20 trading days in any consecutive 30 trading day period commencing 6 months after the Closing and ending at the third anniversary of the Closing; and ● the third tranche of 1,000,000 Earn-out shares will be issued when the volume-weighted average price per share of PubCo Common Stock is $17.50 or greater for 20 trading days in any consecutive 30 trading day period commencing 6 months after the Closing and ending at the third anniversary of the Closing. The Earn-out shares will be allocated among Legacy ProSomnus’s stockholders in proportion to the number of shares issued to them at the closing that continue to be held by them. Concurrently with the execution of the Merger Agreement, in May and September 2022, the Company and certain holders of the Bridge Loans executed a conversion addendum. Upon notice of the Business Combination Agreement, the holders of the Bridge Loans had up to 10 days to elect to convert into Series A Redeemable Convertible Preferred Stock. Immediately prior to the closing of the Business Combination, the Bridge Loans automatically converted into the number of Series A Redeemable Convertible Preferred Stock as equal to the repayment amount of the Bridge Loans divided by the Conversion Price. The Conversion Price is defined as the quotient of the aggregate consideration to be paid to all holders of the Series A Redeemable Convertible Preferred Stock divided by the outstanding number of Series A Redeemable Convertible Preferred Stock, including the shares into which the Bridge Loans convert. Holders of Bridge Loans totaling $2.6 million elected to convert, immediately prior to the Acquisition Merger. The remaining $0.1 million principal amount of the Bridge Loan and accrued and unpaid interest thereon was paid in cash at closing of the Acquisition Merger. In addition, the indebtedness arising under ProSomnus’s loan agreement dated August 9, 2019, by and among ProSomnus Sleep Technologies, Inc. and the lenders signatory thereto, in the aggregate principal amount of $6.5 million (collectively with the Bridge Loan, the “ProSomnus Subordinated Debt”), also converted into shares of ProSomnus Common Stock immediately prior to the Acquisition Merger. On June 29, 2022, Legacy ProSomnus entered into the Second Amendment and Loan Security Agreement (“Second Amendment”) to the subordinated loan and security agreement effective in April 2021. The Second Amendment established a convertible bridge loan advance of up to $2.0 million to ProSomnus from the lender (“Convertible Bridge Loan Advance”). The interest rate of the Convertible Bridge Loan Advance was 14% and the maturity date was the earlier of the date of the bridge loan conversion event or June 29, 2023. The bridge loan conversion event was the termination of the Merger Agreement or the occurrence of any event that would result in the termination of the Merger Agreement as defined in the Merger Agreement. If the bridge loan conversion had not occurred, and the Convertible Bridge Loan Advance was not repaid in full on the maturity date, the default interest would bear additional 6.0% per annum. Interest was to be paid in arrears at December 29, 2022 and at the maturity date. Prepayment of the Convertible Bridge Loan Advance was permitted in increments of $0.1 million at any time, and the prepayment requires the payment of all accrued and unpaid interest as well as a prepayment premium. The prepayment premium was the incremental amount of interest that would have been paid for the term of the convertible bridge advance and had not yet been paid. ProSomnus had received $2.0 million from the Convertible Bridge Loan Advance as of November 30, 2022. On December 2, 2022, the Company entered into a Securities Exchange Agreement with holders of the Subordinated Loan and Security agreement and the holders of Convertible Bridge Loan Advance. The Company also executed a payment arrangement with other debt holders on December 6, 2022. The Company agreed to the following key terms and conditions with the holders under these arrangements. - The Company agreed to exchange an aggregate of $0.8 million of existing debt for Common Stock. An aggregate of 80,000 shares were issued for such debt, along with a bonus of 65,604 shares under this arrangement. - The Company executed on the Subordinated Securities Purchase Agreement dated August 26, 2022, to issue subordinated notes worth $2.5 million pursuant to the terms and conditions of such agreement with the holders. The Company issued 42,464 shares of Common Stock and warrants to purchase 296,456 shares of Common Stock along with this note. - The Company paid off the remaining balance of $9.7 million of the Subordinated Loan and Security Agreement in cash on close of the Merger Transaction. All the warrants issued pursuant to the subordinated loan and security agreements were exercised immediately prior to the Merger Transaction. The Company issued 161,112 shares of Series B redeemable preferred stock to the warrant holders as a cashless exercise. This Series A Redeemable Convertible Preferred Stock was converted to Common Stock on the close of the Merger Transaction. The Company executed on the above terms and conditions on close of the Merger Transaction. The of $2.4 million for Debt-Modifications and Extinguishments. Immediately prior to the closing of the Business Combination, the following transactions occurred: Legacy ProSomnus Series B Convertible Preferred Stock ● 2020 Preferred Series B warrant holders and 2021 Preferred Series B warrant holders exercised their 322,223 warrants, by way of cashless exercise, for 161,112 of Legacy ProSomnus’s Series B convertible preferred stock. Legacy ProSomnus Series A Redeemable Convertible Preferred Stock ● The Subordinated Notes automatically converted into the number of Series A Redeemable Convertible Preferred Stock as equal to the repayment amount of the Bridge Loans divided by the Conversion Price. The Company had issued 10,029 shares of Series A Redeemable Convertible Preferred Stock, which was converted into 1,002,869 shares of Common Stock on the date of the Merger Transaction based on proceeds of $10.0 million; ● Holders of Bridge Loan (Unsecured Subordinated Promissory Notes) elected to convert into Series A Redeemable Preferred Stock. The aggregate amount due, including interest and Bridge Loan Kickers, was $3.1 million, amounting to 3,052 shares of Series A Redeemable Convertible Preferred Stock, this was converted into 305,206 shares of Common Stock; and ● Certain Legacy ProSomnus holders received an aggregate of 5,945 shares of Series A Redeemable Convertible Preferred Stock. Legacy ProSomnus Common Stock ● Options to purchase 600,000 shares of Common C stock immediately vested prior to the closing of Business Combination. (An additional 254,507 vested as per their vesting schedule, prior to consummation of the Business Combination). At the Closing, each issued share of Legacy ProSomnus outstanding immediately prior to the closing, was automatically converted into the right to receive shares of the Company’s Common Stock, at a purchase price of $10.00 as defined in the Merger Agreement. The Company issued an aggregate of 7,208,865 shares of Common Stock for Legacy ProSomnus Preferred stock as below: ● All 7,288,333 shares of Legacy ProSomnus’s outstanding Series B convertible preferred stock and the additional 161,112 Preferred B shares from warrant exercise, totaling 7,449,445 shares; were converted into 2,623,800 shares and 58,000 shares of ProSomnus’s Common Stock, respectively; and ● All 45,270 shares of Legacy ProSomnus Series A Redeemable Convertible Preferred Stock were converted into 4,527,065 shares of ProSomnus’s Common Stock. All 25,420,893 shares of Legacy ProSomnus’s Series A Common Stock, Series B Common Stock and Series C Common Stock were converted into 4,084,418 shares of ProSomnus’s Common Stock. Immediately prior to the Closing of the Business Combination, the Company issued and sold 1,025,000 shares of Common Stock (the “PIPE – Equity Shares”) to the PIPE Investors for gross proceeds of $10.3 million The PIPE – Equity Shares investors also received an additional 805,133 bonus shares; total issuance to PIPE – Equity investors was 1,830,133 shares of the Company. Non-redeeming shareholders of Lakeshore retained an aggregate of 480,637 shares, and the non-redeeming shareholders that entered into agreements with Lakeshore and ProSomnus to not redeem received an aggregate of 340,085 bonus shares; total issuance to these Lakeshore stockholders was 820,722 shares of the Company. ● ● ● In connection with agreements with certain Underwriters, Advisors and Convertible notes placement agents, the Company issued an aggregate of 716,223 shares of Company’s Common Stock in lieu of cash fees of $7.2 million, net of forfeited compensation, at the close of the Merger Transaction. In connection with the Senior and Subordinated Convertible Notes, the Company issued to the holders of Convertible Notes, warrants to purchase an aggregate of 1,914,907 shares of the Company’s Common Stock at an exercise price of $11.50 per share, and issued an aggregate of 326,713 shares of the Company’s Common Stock. The Merger was accounted for as a reverse recapitalization in accordance with U.S. GAAP. This determination was primarily based on Legacy ProSomnus stockholders comprising a relative majority of the voting power of ProSomnus and having the ability to nominate the members of the Board, Legacy ProSomnus’s operations prior to the acquisition comprising the only ongoing operations of ProSomnus, and Legacy ProSomnus’s senior management comprising a majority of the senior management of ProSomnus. Under this method of accounting, while the legal acquirer in the Merger Agreement is Lakeshore, for financial accounting and reporting purposes under U.S. GAAP, ProSomnus is the accounting acquirer and the Business Combination was accounted for as a “reverse recapitalization.” A reverse recapitalization does not result in a new basis of accounting, and the financial statements of the combined entity represent the continuation of the financial statements of ProSomnus Inc. in many respects. Accordingly, for accounting purposes, the financial statements of ProSomnus Inc. represent a continuation of the financial statements of ProSomnus Inc. with the Business Combination treated as the equivalent of ProSomnus Inc. issuing stock for the net assets of Lakeshore, accompanied by a recapitalization. The net assets of Lakeshore were stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Business Combination are presented as those of ProSomnus Inc. In connection with the Merger, the Company raised $45.2 million of proceeds including the contribution of $4.9 million of cash held in Lakeshore’s trust account from its initial public offering, net of redemptions of Lakeshore’s public stockholders of $24.4 million; $10.3 million of gross proceeds in connection with the PIPE Equity financing and $30.0 million in gross proceeds from the Convertible Notes (Senior and Subordinated Convertible Notes) offering. These proceeds were used to pay transaction expenses and other liabilities of Lakeshore, pay certain transaction expenses of ProSomnus, and pay off approximately $11.5 million in debt of ProSomnus at closing, with the remaining being deposited in ProSomnus’ cash account. |
INVENTORY
INVENTORY | 12 Months Ended |
Dec. 31, 2023 | |
INVENTORY | |
INVENTORY | NOTE 4 — INVENTORY Inventory consisted of the following (in thousands): As of December 31, 2023 2022 Raw materials $ 1,967 $ 562 Work-in-process 72 78 $ 2,039 $ 640 The Company did not have any excess or obsolete inventory reserves as of December 31, 2023 and 2022. |
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT | 12 Months Ended |
Dec. 31, 2023 | |
PROPERTY AND EQUIPMENT | |
PROPERTY AND EQUIPMENT | NOTE 5 — PROPERTY AND EQUIPMENT Property and equipment, net consisted of the following (in thousands): As of December 31, 2023 2022 Manufacturing equipment $ 4,042 $ 2,517 Computers and software 1,200 1,608 Leasehold improvements 846 442 Furniture — 27 6,088 4,594 Less: accumulated depreciation (2,730) (2,190) Property and equipment, net $ 3,358 $ 2,404 Depreciation xpense for the |
ACCRUED EXPENSES AND OTHER CURR
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | 12 Months Ended |
Dec. 31, 2023 | |
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | |
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | NOTE 6 — ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES Accrued expenses consisted of the following (in thousands): As of December 31, 2023 2022 Compensation related accruals $ 3,387 $ 2,104 Marketing programs 934 612 Interest 382 110 Warranty 465 269 Professional fees 632 129 Inventory purchases and freight 613 — Other 343 482 $ 6,756 $ 3,706 |
LEASES
LEASES | 12 Months Ended |
Dec. 31, 2023 | |
LEASES | |
LEASES | NOTE 7 —LEASES On May for Company’s The Company provided a $0.3 million security deposit, which is recorded in other assets on the accompanying consolidated balance sheets. The Company's largest investor initially guaranteed $1.7 million for the lease agreement, followed by a rolling one-year guarantee. The Company replaced the guarantee with a letter of credit of $0.7 million secured by a certificate of a deposit for the same amount that is recorded as restricted cash on the accompanying consolidated balance sheet as of December 31, 2023. On February 28, 2023, the Company vacated its previous corporate office premises with a remaining lease term of approximately ten months. Since there was no new cash inflow generated or expected from the sale or sublease of property and leasehold improvements at the location, the Company recorded an impairment loss on the ROU operating lease assets and leasehold improvements of $0.3 million and $0.1 million, respectively. The Company also accrued liabilities of $0.1 million in anticipation of expected common area maintenance payments on the remainder of the lease. The impairment loss and the accrued expenses are reflected as other expense in the consolidated statements of operations. The Company’s finance leases primarily consist of various machinery, equipment, computer-related equipment, and software used in the manufacture of its product. The Company’s finance leases have remaining terms from less than one year to five years . The components of the Company’s lease cost, weighted average lease terms and discount rates are presented in the tables below (in thousands, except lease term and discount rate): Years Ended December 31, 2023 2022 Operating lease expense: Operating lease cost $ 955 $ 325 Finance lease expense: Amortization of assets obtained under finance leases 952 773 Interest on lease liabilities 321 289 Variable lease expense 102 — Total expense $ 2,330 $ 1,387 As of December 31, Operating leases: 2023 2022 Weighted average remaining lease term (in years) 9.0 9.6 Weighted average discount rate 10.00 % 10.31 % Finance leases: Weighted average remaining lease term (in years) 3.0 3.5 Weighted average discount rate 10.21 % 11.17 % Years Ended December 31, 2023 2022 Supplemental cash flow information related to operating leases was as follows (in thousands): Operating cash flows from operating leases $ 558 $ 159 Operating cash flows from finance leases 327 773 ROU assets consisted of the following (in thousands) : As of December 31, 2023 2022 Manufacturing equipment $ 5,237 $ 4,674 Computers and software 700 700 Leasehold improvements 218 218 Total 6,155 5,592 Less accumulated amortization (2,890) (1,942) ROU assets for finance leases 3,265 3,650 ROU assets for operating leases 5,069 5,633 Total ROU assets $ 8,334 $ 9,283 At December 31, 2023, the following table presents maturities of the Company’s finance and operating lease liabilities (in thousands): Year ending December 31, Finance Operating 2024 $ 1,299 $ 836 2025 1,098 861 2026 794 887 2027 304 914 2028 47 941 Thereafter — 4,056 Total minimum lease payments 3,542 8,495 Less amount representing interest (481) (2,970) Present value of minimum lease payments 3,061 5,525 Less current portion (1,052) (304) Lease obligations, less current portion $ 2,009 $ 5,221 |
DEBT
DEBT | 12 Months Ended |
Dec. 31, 2023 | |
DEBT | |
DEBT | NOTE 8 — DEBT Equipment Financing Obligation At December 31, 2023, the Company’s future principal maturities under the equipment financing obligation are summarized as follows (in thousands) Year ending December 31, Amount 2024 $ 57 2025 64 2026 65 Total principal maturities 186 Less: current portion (57) Equipment financing obligation, net of current portion $ 129 Convertible Debt Agreements Senior Convertible Notes On December 6, 2022, the Company entered into the Indenture for Senior Secured Convertible Notes due December 6, 2025, dated December 6, 2022 by and among the Company, ProSomnus Holdings and ProSomnus Sleep Technologies, as guarantors, and Wilmington Trust, National Association, as trustee and collateral agent (as amended, the “Senior Indenture”), and issued Senior Secured Convertible Notes, due December 6, 2025 (the “Existing Senior Convertible Notes”), with an aggregate principal amount of $17.0 million, pursuant to the senior securities purchase agreement, dated August 26, 2022. In connection with the closing of the offering of the Existing Senior Convertible Notes, the Company issued 36,469 shares of Common Stock and 169,597 warrants (the “Existing Senior Convertible Notes Warrants”) to purchase Common Stock. The Existing Senior Convertible Notes Warrants entitle the note holders to purchase shares of Common Stock, subject to adjustment, at a purchase price per share of $11.50. The debt bears interest at 9% per annum. Interest is payable in cash quarterly. On June 29, 2023, the Company entered into the First Supplemental Indenture, dated as of June 29, 2023, by and among the Company, ProSomnus Holdings and ProSomnus Sleep Technologies, as guarantors, and Wilmington Trust, National Association On September 20, 2023, the Company entered into the Second Supplemental Indenture (the “Second Senior Supplemental Indenture”) to the Senior Indenture, by and among the Company, , as guarantors, and Wilmington Trust, National Association, as trustee and collateral agent. The Second Senior Supplemental Indenture amends the Senior Indenture to, among other things, permit the sale of the securities underlying the convertible debt (the “Securities”) and the Exchanges. Subordinated Convertible Notes On December 6, 2022, the Company entered into that certain Indenture for Subordinated Secured Convertible Notes due April 6, 2026, dated December 6, 2022 by and among the Company, ProSomnus Holdings and ProSomnus Sleep Technologies, as guarantors, and Wilmington Trust, National Association, as trustee and collateral agent (as amended, the “Subordinated Indenture”), and issued the Subordinated Secured Convertible Notes due April 6, 2026 (“Existing Subordinated Convertible Notes” and, together with the Existing Senior Convertible Notes, the “Existing Convertible Notes”), with an aggregate principal amount of approximately $17.5 million, pursuant to the previously disclosed Subordinated Securities Purchase Agreement, dated August 26, 2022. In connection with the closing of the offering, the Company issued 290,244 shares of Common Stock and 1,745,310 warrants (“Subordinated Convertible Notes Warrants” and, together with the Senior Convertible Notes Warrants, the “Convertible Notes Warrants”) to purchase Common Stock to certain Convertible Debt holders. The debt has an interest rate of Prime Rate plus an additional 9% per annum with a term of 3 years. Interest is due quarterly in cash or in kind at the option of the Company. On June 29, 2023, the Company entered into the First Supplemental Indenture, dated as of June 29, 2023, by and among the Company, ProSomnus Holdings and ProSomnus Sleep Technologies, as guarantors, and Wilmington Trust, National Association First Subordinated Supplemental Indenture”) On June 6, 2023, in accordance with the Subordinated Indenture, the conversion rate of the Subordinated Convertible Notes increased from approximately 86.95665 shares of common stock per $1,000 of the sum of the principal amount of the Subordinated Convertible Notes to approximately 192.3808 shares of common stock per $1,000 of the sum of the principal amount of the Subordinated Convertible Notes. On September 8, 2023, the Company issued 230,494 shares of Common Stock in connection with a notice of conversion from a holder of the Company’s Subordinated Convertible Notes, pursuant to which such holder irrevocably exercised its right to convert $1.0 million principal amount. The Company recorded the fair value of the principal amount and accrued interest converted of $0.9 million as Common Stock and additional paid-in capital. On September 20, 2023, the Company entered into the Second Supplemental Indenture (the “Second Subordinated Supplemental Indenture”) to the Subordinated Indenture, pursuant to which the Company issued the Existing Subordinated Convertible Notes. The Second Subordinated Supplemental Indenture amends the Subordinated Indenture to, among other things, permit the sale of the Securities and the Exchanges. On December 6, 2023, in accordance with the Subordinated Indenture, the conversion rate of the Subordinated Convertible Notes increased from approximately 192.3808 shares of common stock per $1,000 of the sum of the principal amount of the Subordinated Convertible Notes to approximately 222.22222 shares of common stock per $1,000 of the sum of the principal amount of the Subordinated Convertible Notes. The Convertible Notes include the following embedded features: Embedded Feature Nature Description Optional redemption – Election of Company Redemption feature (embedded call option) At any time after the later of (i) the eighteen-month anniversary of the initial issue date and (ii) the date that the Senior Debt is no longer outstanding, if the daily volume weighted-average price of the Company’s Common Stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days exceeds $18.00, the Company may redeem a portion of or all of the principal amount (including accrued and unpaid interest), plus any liquidated damages and any other amounts due in respect of the Notes redeemable in cash. Mandatory redemption – Events of Default Redemption feature (embedded contingent call option) The Company is required to prepay all of the outstanding principal balance and accrued and unpaid interest upon bankruptcy-related events of default. Lenders’ Optional redemption – Events of Default Redemption feature (embedded contingent call option) Holders of at least 25% aggregate principal amount of the Notes can require the Company to pay all of the outstanding principal balance and accrued and unpaid interest upon any event of default that is not bankruptcy related. Lender’s Optional Conversion Conversion feature At each Lenders’ option, subject to specific conditions, it may convert all or any portion of its Notes at an initial conversion rate, which is reduced (and only reduced) at various dates and subject to certain adjustments to the conversion rate in the case of specified events. If a note is converted, the Company will adjust the conversion rate to account for any accrued and unpaid interest on such note plus any Make-Whole Amount related to such note. Lenders’ Optional Conversion Upon Merger Event Other feature Upon a merger event, Note holders of each $1,000 principal amount of Notes are entitled to convert such notes plus accrued interest, plus the Make-Whole Amount related to the in kind and amount of reference property that a holder of a number of shares of Common Stock equal to the conversion rate in effect immediately prior to such event would have owned or been entitled to receive upon such event. Additional interest rate upon certain non-credit related events Other feature Upon an event of default, additional interest will be incurred. Additional interest will also be incurred if the Notes are not freely tradeable. Ability to pay interest in kind (PIK Interest)* Other feature The Company has the election to pay interest in cash or in-kind. *The PIK interest feature is only present in the Subordinated Convertible Note, and not available in the Senior Convertible Notes. The Company assessed the embedded features within these Convertible Note and determined the following: o the Optional Redemption feature (1), the Mandatory redemption feature (2) and the Lender’s Optional redemption feature (3) met the definition of a derivative and were not clearly and closely related to the host contract and required separate accounting. Further, the redemption features are settled in cash and would therefore not meet the indexed to equity and equity classification scope exception. Thus, these redemption features were concluded to be embedded derivatives that should be bifurcated from the loan and accounted for separately at fair value on a recurring basis. o The Lender’s Optional Conversion feature (4) and the Lender’s Optional Conversion Upon Merger (5) event features also met the definition of a derivative and were not clearly and closely related to the host contract and required separate accounting. The economic characteristics of the Lender’s Optional Conversion feature (4) and the Make Whole premium on Lenders’ Optional Conversion Upon Merger Event (5) were based on fair value of the underlying shares. The settlement amount of the interest make-whole is not indexed to the issuer’s equity but is based on stated interest cash flows. The Lenders Optional Conversion Upon Merger event feature is contingent on merger event. This exercise contingency is allowable as it is not based on market or an observable index. The Company noted that features (4) and (5) did not meet the indexed to equity and equity classification scope exception. Therefore, these conversion features were concluded to be embedded derivatives that should be bifurcated from the loan and accounted for separately at fair value on a recurring basis through the consolidated statements of operations. o The additional interest rate upon certain non-credit related events (6) are triggered based on timely filing of financial information and the tradability of the Notes, these are not related to the economic characteristics of debt. Therefore, this feature is not clearly and closely related to the debt host. The additional interest payment is settled in cash and hence did not meet the derivative scope exception. However, since the probability of the Convertibles Notes being freely tradeable or Company’s failure to timely file is estimated to be less than 5% , the Company concluded that the fair value of this feature is not material. Thus, even though this additional interest feature was concluded to be an embedded derivatives, it was not fair valued separately. o The ability to pay PIK interest feature is clearly and closely related to the debt, and was not be evaluated separately as a derivative feature. The Company determined the Notes contained multiple embedded derivatives that are required to be bifurcated, two of which are conversion features. As per ASC 815, if there is a conversion feature that is required to be bifurcated, the cash conversion feature and beneficial conversion feature guidance is not applicable to such conversion feature and the fair value election is allowable provided the debt was not issued at a substantial premium. As the proceeds received at issuance from these Convertible Notes do not exceed the principal amount that will be paid at maturing, there is no substantial premium. Further, ASC 815-15-25 provides that if an entity has a hybrid financial instrument that would require bifurcation of embedded derivatives under ASC 815, the entity may irrevocably elect to initially and subsequently measure a hybrid financial instrument in its entirety at fair value with changes in fair value recognized in earnings. The Company elected to measure the Senior and Subordinated Convertible Notes in their entirety at fair value with changes in fair value recognized as non-operating gain or loss in the consolidated statements of operations at each balance sheet date in accordance with ASC 815-15-25. Financing Transaction On September 20, 2023, the Company entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”, and the transactions contemplated by the Securities Purchase Agreement, the “Financing Transaction”) with certain third-party and related party investors (the “Investors”), pursuant to which the Company issued (i) an aggregate of 10,426 shares of the Company’s Series A Preferred Stock, par value $0.0001 per share (the “Series A Preferred Stock”), for an aggregate purchase price of $10.4 million at a per share purchase price of $1,000 , and (ii) (A) with respect to Investors that held the Existing Convertible Notes, new convertible notes on substantially similar terms to such Noteholder Investor’s Existing Convertible Notes other than that such new notes will be convertible into shares of Common Stock, at a conversion price of $1.00 per share subject to the terms and conditions of the applicable new indenture pursuant to which the applicable series of New Notes have been issued by the Company (the “New Notes”), in exchange for such Noteholder Investor’s portion of the principal amount outstanding of the Existing Notes (the “Exchanges”) pursuant to exchange agreements entered into between the Company and each of the Noteholder Investors (together, the “Exchange Agreements”) and/or (B) warrants to purchase shares of Common Stock at an exercise price of $1.00 per share (such warrants, the “Transaction Warrants”) The Investors include certain members of the Company’s Board of Directors and certain executive officers of the Company, as well as affiliates and investment vehicles for such persons that held the Company’s Existing Convertible Notes. Convertible Noteholders representing approximately $3.4 million in principal amount of the Senior Convertible Notes and approximately $12.1 million in principal amount of the Subordinated Convertible Notes participated in the Financing Transaction . The Financing Transaction closed on three dates: September 20, 2023, September 26, 2023, and October 20, 2023. The exchange of the Existing Convertible Notes, including the entrance into the indentures governing the New Notes, occurred on October 11, 2023. In such Exchanges, the Noteholder Investors received a reset of the conversion price of the amount of principal of the existing convertible notes equal to up to 300% of the purchase price paid by such Noteholder Investor to purchase its Series A Preferred Stock. Any proceeds in excess of such amount results in the Noteholder Investors purchasing Transaction Warrants. As a result of the Financing Transaction, during September and October 2023, the Noteholder Investors effectively invested an aggregate of $7.3 million of cash in the Company in exchange for 7,276 shares of Series A Preferred Stock, Transaction Warrants exercisable into an aggregate of 2,304,524 shares of Common Stock, and the repricing of the conversion feature of their Convertible Notes, while the other Investors contributed an aggregate of $3.2 million of cash to the Company in exchange for 3,150 shares of Series A Preferred Stock and Transaction Warrants exercisable into an aggregate of 3,150,000 shares of Common Stock. Prior to the Financing Transaction, the Senior Convertible Notes and Subordinated Convertible Notes had conversion rates of $5.50 and $5.20 per share, respectively. The repricing of the Convertible Notes to $1.00 per share made the conversion features of the Convertible Notes substantive again based on the Company’s stock price as of the Initial Closing. The Company assessed the accounting for the Financing Transaction with the Noteholder Investors and concluded that it does not meet the criteria for a troubled debt restructuring or an induced conversion. The Company next considered if the transaction represents a debt modification or extinguishment and concluded the transaction represents a debt extinguishment in accordance with ASC paragraph 470-50-40-10 as both of the following circumstances apply: a. The transaction resulted in a modification of an embedded conversion option, from which the change in the fair value of the embedded conversion option (calculated as the difference between the fair value of the embedded conversion option immediately before and after the modification or exchange) is at least 10 percent of the carrying amount of the original debt instrument immediately before the modification or exchange. b. The transaction resulted in a modification or an exchange of debt instruments that adds a substantive conversion option. Accordingly, the Company accounted for the transaction as an extinguishment of the original debt and the recognition of new debt, which is initially measured at its fair value. The fair value of the new debt is used to determine the debt extinguishment gain or loss to be recognized. The Company assessed the classification of the Transaction Warrants issued in connection with the Financing Transaction and determined that the Transaction Warrants are equity classified. As discussed in Note 11– Preferred Stock, the Company determined that the Series A Preferred Stock is mezzanine classified and therefore should be initially recognized at fair value. The following table summarizes the computation of the loss on debt extinguishment of $10.5 million recognized during the year ended December 31, 2023 (in thousands): Amount Fair value - Senior Convertible Notes (pre-financing) $ 2,457 Fair value - Subordinated Convertible Notes (pre-financing) 7,617 10,074 Less consideration transferred to Noteholder Investors: Fees paid to Noteholder Investors (63) Fair value of Series A Preferred Stock (8,910) Fair value of warrants (1,292) Fair value of Senior Convertible Notes (post-financing) (3,599) Fair value of Subordinated Convertible Notes (post-financing) (13,936) (27,800) Plus consideration received from Noteholder Investors: Cash 7,276 Loss on Debt Extinguishment: $ (10,450) The fair values of the Series A Preferred Stock and Transaction Warrants were determined by the Company with assistance of a third-party valuation specialist and include Level 3 fair value inputs. The significant assumptions used related to the Series A Preferred Stock include a risky yield (risk-adjusted discount rate) of 42.0%, volatility rate of 65.0%, risk free rate of 5.0%, and an estimated exit date of April 2026. The assumptions used related to the Transaction Warrants include an asset price of $0.97, volatility rate of 65.0%, risk free rate of 4.5%, no dividends, and an expected term of 5.0 With respect to the non-Noteholder Investors, the accounting fair value of the consideration transferred was also deemed to be greater than the proceeds received. The Company determined that based on the participation level by third-party investors, the transaction does not represent a deemed dividend. As such, the Company recognized a financing loss of $2.5 million which is included in the consolidated statements of operations. The financing loss is computed as follows (in thousands): Amount Cash proceeds received $ 3,150 Less: fair value of Series A Preferred Stock (3,857) Less: fair value of warrants (1,766) Other financing expense $ (2,473) The Company incurred $1.5 million of legal and other transaction related costs, of which approximately $0.1 million were deemed to be lender costs and included in the computation of the loss on debt extinguishment. The remaining transaction costs were expensed as other expense in the consolidated statements of operations. Fair Value Election The Company has elected to measure the Convertible Notes, including the New Notes, in their entirety at fair value with changes in fair value recognized as non-operating gain or loss in the consolidated statements of operations (with the portion of the change that results from a change in the instrument-specific credit risk recorded separately in other comprehensive income, if applicable). The estimated fair value of the convertible note payable was determined using a Monte Carlo Simulation method. The Company simulated the stock price using a Geometric Brownian Motion until maturity. For each simulation path the Company calculated the convertible bond value at maturity and then discount that back to the valuation date. Finally, the value of the convertible bond is determined by averaging the discounted cash flows of all the simulated paths. The following assumptions were used as of December 31, 2023 and 2022: Monte Carlo Simulation Assumptions Asset Risky Expected Risk-Free As of December 31, 2023 Price Yield Volatility Interest Rate Senior Convertible Notes $ 0.98 25.00 % 65 % 4.27 % Subordinated Convertible Notes 0.98 34.30 % 55 % 4.17 % Monte Carlo Simulation Assumptions Asset Risky Expected Risk-Free As of December 31, 2022 Price Yield Volatility Interest Rate Senior Convertible Notes $ 5.56 31.80 % 45 % 4.23 % Subordinated Convertible Notes 5.56 41.20 % 45 % 4.19 % The following is a summary of changes in fair values of the Convertible Notes for the years ended December 31, 2023 and 2022 (in thousands): Senior Convertible Notes Subordinated Convertible Notes Beginning fair value, January 1, 2022 $ — $ — Issuance of Convertible Notes 14,536 10,223 Change in fair value of debt (885) 133 Ending fair value, December 31, 2022 13,651 10,356 Paid-in-kind interest — 3,377 Change in fair value of debt (516) (812) Conversion of Subordinated Convertible Notes to Common Stock — (920) Increase in fair value of debt in connection with debt extinguishment transaction 1,142 6,319 Ending fair value, December 31, 2023 $ 14,277 $ 18,320 The Convertible Notes are subject to a minimum revenue, cash, and EBITDA financial covenants. From July 1, 2023, the Convertible Notes require the Company to maintain a minimum cash balance of $4.5 million on the first day of each calendar month. As of March 1, 2024, the Company violated the minimum cash covenant. On March 25, 2024, the lenders agreed to (i) waive the minimum cash covenant for the period commencing on March 1, 2024 through and including June 30, 2024 provided that the Company’s cash balance remains above $2.5 million during such period; and (ii) waive any default under the indentures resulting from any breach by the Company that may have arisen up to March 1, 2024. Subordinated Notes During the year ended December 31, 2022, the Company received advances under unsecured subordinated promissory note agreements for total proceeds of $0.4 million. No issuance costs were incurred in 2022. During 2022, $0.3 million of these advances were made by the Company's stockholders, directors, and employees, while $0.1 million were made by the Company’s customers. On May 4, 2022, the Company’s Board of Directors amended the terms of the unsecured subordinated promissory note agreements to provide for the automatic conversion of the outstanding loan amounts (including principal, interest and prepayment and change of control premiums, as well as a 5% equity incentive to incentivize lenders to agree to the amendment) into shares of Series A Redeemable Convertible Preferred Stock of the Company immediately prior to the closing of the Merger Transaction so that such lenders receive shares of Common Stock at the closing. Noteholders had the option to elect between two forms of the amendments: (i) interest is received as a cash payment (“Cash Notes”) and paid on a quarterly basis. interest is accrued and added to the principal balance (“PIK Notes”) at the commencement of each new calendar year (January 1). Interest expense totaled The Cash and PIK Notes have a prepayment penalty that is calculated on the principal and accrued but unpaid interest. The prepayment penalty rates range between 1% and 3% if prepayment is within 1-3 years from the funding date, and the prepayment rate is 5% upon a change in control event. All note holders elected to convert the bridge loan into Series A Redeemable Convertible Preferred Stock of the Company immediately prior to the closing of the proposed merger. This Series A Redeemable Convertible Preferred Stock was converted to Common Stock of ProSomnus on close of the Merger Transaction. Bridge Loan (Unsecured Subordinated Promissory Notes) During February and March 2022, the Company received proceeds of $3.0 million from unsecured subordinated promissory notes (the “Bridge Loans”). Interest accrues at 15% per annum, and all accrued but unpaid interest is applied and added quarterly to the principal balance (the “Base Amount”). During March 2022, $0.5 million of the Bridge Loans were repaid. The primary stockholder of the Company was the borrower on this Bridge Loan, and a representative of this primary stockholder is a member of the Company’s Board of Directors. During April 2022, the Company received proceeds of $0.2 million from additional Bridge Loans. On May 4, 2022, the Company’s Board of Directors approved a resolution to amend the terms of the Bridge Loans to grant an additional 5% of the Base Amount (the “Bridge Loan Kicker”) to each bridge lender who exercises its option to convert its bridge loan, which Bridge Loan Kicker will be payable in shares of Series A Redeemable Convertible Preferred Stock so that such exercising lenders will receive shares of Common Stock issuable at the closing thereof. During May and June 2022, the Company and certain holders of the Bridge Loans executed a conversion addendum. Upon notice of the Business Combination Agreement, the holders of the Bridge Loans had up to 10 days to elect to convert into Series A Redeemable Convertible Preferred Stock. Immediately prior to the closing of the Business Combination, the Bridge Loans will automatically convert into the number of Series A Redeemable Convertible Preferred Stock as equal to the repayment amount of the Bridge Loans divided by the Conversion Price. The Conversion Price is defined as the quotient of the aggregate consideration to be paid to all holders of the Series A Redeemable Convertible Preferred Stock divided by the outstanding number of Series A Redeemable Convertible Preferred Stock , including the shares into which the Bridge Loans convert. Holders of Bridge Loans totaling $2.6 million who elected to convert into Series A Redeemable Convertible Preferred Stock, received Common Stock of ProSomnus on the close of the Merger Transaction. As of date of conversion, the aggregate amount due, including interest and Bridge Loan Kickers, was $3.1 million, amounting to 305,206 shares of Series A Redeemable Convertible Preferred Stock, this was converted into 3,052 shares of Common Stock. Subordinated Loan and Security Agreement In January 2020, the Company entered into a loan and security agreement with a lender and borrowed $3.8 million. The loan was repayable monthly starting February 2021 at an amount equal to 4% of net revenues of the Company until the Company had paid an amount equal to the return cap of $9.5 million. The return cap was subject to a reduction of 30% if fully repaid within 12 months, 22% if fully repaid within 24 months and 11.85% if fully repaid within 36 months. In April 2021, the Company entered into a second loan and security agreement with the same lender and borrowed $2.0 million. The loan was repayable monthly starting February 2021 at an amount initially equal to 1.0526% of net revenues of the Company and increasing to 2.105% in the second year of the agreement, until the Company has paid an amount equal to the return cap of $3.9 million. The return cap is subject to a reduction of 22% if fully repaid within 12 months and 11.85% if fully repaid within 24 months. The effective interest rates on the subordinated loan and security agreement ranged from 25.8% - 27.2% and 25.8% - 26.2% for the year ended December 31, 2022. During the year ended December 31, 2022, the Company made revenue share payments totaling $1.6 million. The outstanding balances of the subordinated loan and security agreement were paid off as of December 31, 2022. Bridge Loan (Secured subordinated loan) On June 29, 2022, the Company entered into the Second Amendment and Loan Security Agreement (“Second Amendment”) to the subordinated loan and security agreement effective in April 2021. The Second Amendment established a convertible bridge loan advance of up to $2.0 million to the Company from the lender (“Convertible Bridge Loan Advance”). The interest rate of the Convertible Bridge Loan Advance was 14% and the maturity date was the earlier of the date of the bridge loan conversion event or June 29, 2023. The bridge loan conversion event was the termination of the Merger Agreement (see Note 3) or the occurrence of any event that would result in the termination of the Merger Agreement as defined in the Merger Agreement. Interest was due in arrears at December 29, 2022 and at the maturity date. Prepayment of the Convertible Bridge Loan Advance was permitted in increments of $0.1 million at any time, and the prepayment required the payment of all accrued and unpaid interest as well as a prepayment premium. The prepayment premium was the incremental amount of interest that would have been paid for the term of the convertible bridge advance; this amount was paid in full on at the close of the Merger Transaction. The Company recorded the amendment of the subordinated loan and security agreement in accordance with ASC 470-50, Debt-Modifications and Extinguishments , and recorded a loss on extinguishment of debt of $0.2 million in the consolidated statements of operations. Extinguishment of Subordinated Loan and Security Agreement and Bridge Loan (Secured subordinated loan) On December 2, 2022, the Company entered into a Securities Exchange Agreement with holders of the Subordinated Loan and Security agreement and the holders of the Convertible Bridge Loan Advance. The Company also executed a payment arrangement with other debt holders on December 6, 2022. The Company agreed to the following key terms and conditions with the holders under these arrangements. - The Company agreed to exchange an aggregate of $0.8 million of existing debt for Common Stock. An aggregate of 80,000 shares were issued for such debt, along with a bonus of 65,604 shares under this arrangement. - The Company executed on the Subordinated Securities Purchase Agreement dated August 26, 2022, to issue subordinated notes worth $2.5 million pursuant to the terms and conditions of such agreement with the holders. The Company issued 42,464 shares of Common Stock and warrants to purchase 296,456 shares of Common Stock along with this note. - The Company paid off the remaining balance of $9.7 million of the Subordinated Loan and Security Agreement in cash at the close of the Merger Transaction. All the warrants issued pursuant to the subordinated loan and security agreements were exercised immediately prior to the Merger Transaction. The Company issued 161,112 shares of Series B redeemable preferred stock to the warrant holders as a cashless exercise. This Series A Redeemable Convertible Preferred Stock was converted to Common Stock on the close of the Merger Transaction. The Company executed on the above terms and conditions on close of the Merger Transaction. The in the consolidated statements of operations, a of $2.4 million for Debt-Modifications and Extinguishments. |
COMMON STOCK WARRANTS
COMMON STOCK WARRANTS | 12 Months Ended |
Dec. 31, 2023 | |
COMMON STOCK WARRANTS | |
COMMON STOCK WARRANTS | NOTE 9 COMMON STOCK WARRANTS As of December 31, 2023, the Company has 11,966,611 warrants outstanding. An aggregate of 5,454,524 warrants were issued by the Company with issuance of Series A Preferred Stock in September and October 2023 (See Note 11 –Preferred Stock). An aggregate of 1,914,907 warrants were granted by the Company with the issuance of Senior and Subordinated Convertible Notes in December 2022 (See Note 8 – Debt). Additionally, 4,597,180 warrants were issued to holders of Lakeshore founder shares, and private and public warrant holders, as a result of the Business Combination, as summarized below: ● At the Closing of the Business Combination, 196,256 Private Placement Warrants held by the Sponsor, each exercisable for one ordinary share of Lakeshore at $11.50 per share, automatically converted into warrants to purchase one share of ProSomnus Common Stock at $11.50 per share (Private Warrants). ● At the Closing of the Business Combination, 4,100,239 Public Warrants of Lakeshore, originally issued in the initial public offering of Lakeshore, were converted into 4,100,239 warrants to purchase one share of ProSomnus Common Stock at $11.50 per share (Public Warrants). ● Pursuant to Amended and Restated Purchaser Support Agreement dated November 28, 2022 between the Company and Lakeshore, at the closing of the Business Combination, the Company issued an additional 300,685 warrants to purchase ProSomnus Common Stock to founders of Lakeshore at substantively identical terms as the Private Placement warrants and the Public warrants (Additional Private Warrants). The following is a summary of the Company’s liability classified and equity classified warrant activity for the years ended December 31, 2023 and 2022: Outstanding Outstanding Issuance December 31, December 31, Liability Classified Warrants Period 2022 Granted Exercised Cancelled 2023 Expiration Convertible Notes Warrants - Senior Debt Dec-22 169,597 — — — 169,597 Dec-27 Convertible Notes Warrants - Subordinated Debt Dec-22 1,745,310 — — — 1,745,310 Dec-27 1,914,907 — — — 1,914,907 Outstanding Outstanding Issuance December 31, December 31, Equity Classified Warrants Period 2022 Granted Exercised Cancelled 2023 Expiration Private Warrants Dec-22 196,256 — — — 196,256 Dec-27 Additional Private Warrants Dec-22 300,685 — — — 300,685 Dec-27 Public Warrants Dec-22 4,100,239 — — — 4,100,239 Dec-27 Transaction Warrants Sep-Oct -23 — 5,454,524 — — 5,454,524 Sep-28 4,597,180 5,454,524 — — 10,051,704 Outstanding Outstanding Issuance December 31, December 31, Liability Classified Warrants Period 2021 Granted Exercised Cancelled 2022 Expiration Convertible Notes Warrants - Senior Debt Dec-22 — 169,597 — — 169,597 Dec-27 Convertible Notes Warrants - Subordinated Debt Dec-22 — 1,745,310 — — 1,745,310 Dec-27 — 1,914,907 — — 1,914,907 Outstanding Outstanding Issuance December 31, December 31, Equity Classified Warrants Period 2021 Granted Exercised Cancelled 2022 Expiration Private Warrants Dec-22 — 196,256 — — 196,256 Dec-27 Additional Private Warrants Dec-22 — 300,685 — — 300,685 Dec-27 Public Warrants Dec-22 — 4,100,239 — — 4,100,239 Dec-27 2021 preferred Series B warrants Jan-20 111,111 — (111,111) — — Jan-30 2020 preferred Series B warrants Apr-21 211,112 — (211,112) — — Apr-31 322,223 4,597,180 (322,223) — 4,597,180 Warrants Classified as Liabilities Warrants in connection with the Loan and Security Agreement In connection with the Loan and Security Agreement, the Company issued a warrant to the lender for the purchase of 211,112 shares of Series B Redeemable Convertible Preferred Stock, with an exercise price of $1.80 per share (subject to a valuation cap of $150,000,000 in the event of a liquidation) and a term of ten years (“2020 preferred Series B warrants”). The fair value of the warrant at issuance was $228,000. In connection with the second loan and security agreement, the Company issued warrants to the lender for the purchase of 111,111 shares of Series B Redeemable Convertible Preferred Stock, with an exercise price of $1.80 per share (subject to a valuation cap of $150,000,000 in the event of a liquidation) and a term of ten years (“2021 preferred Series B warrants”). The fair value of the warrant at issuance was $143,333. The fair value of warrants was recorded within noncurrent liabilities as a debt discount and a warrant liability, with changes in fair value recognized in the consolidated statements of operations. All of the warrants issued pursuant to these loan and security agreements were exercised immediately prior to the Merger Transaction. The Company issued 161,112 shares of Series B redeemable preferred stock to the warrant holders in a cashless exercise. The Series A Redeemable Convertible Preferred Stock was converted to Common Stock of ProSomnus on close of the Merger Transaction. Convertible Notes Warrants In connection with closing of the Senior Convertible Notes offering, the Company issued 169,597 warrants to purchase Common Stock. These warrants entitle the holders to purchase shares of Common Stock of the Company, subject to adjustment, at a purchase price per share of $11.50 and have a term of five years. Further, in connection with the closing of Subordinated Convertible notes offering, 1,745,310 warrants to purchase Common Stock to the Convertible Notes holders. These warrants entitle the Holders to purchase shares of Common Stock of the Company, subject to adjustment, at a purchase price per share of $11.50 and have a term of five years. The Convertible Notes Warrants were classified as a derivative liability because the settlement provisions for the warrants contain adjustments to the settlement amount that do not meet the fixed-for-fixed test. Therefore, the Convertible Notes Warrants did not qualify as being indexed to the Company’s own Common Stock and are measured at fair value on a recurring basis. The aggregate fair value of these warrants at issuance was $5.2 million. Estimated Fair Value of Outstanding Warrants Classified as Liabilities The estimated fair value of outstanding warrants classified as liabilities is determined at each consolidated balance sheet date. Any decrease or increase in the estimated fair value of the warrant liability since the most recent consolidated balance sheet date is recorded in the consolidated statements of operations as a change in fair value of warrant liability. The fair value of the outstanding warrants accounted for as liabilities as of December 31, 2023 and 2022, use Level 3 inputs and are calculated using the Black-Scholes option pricing model with the following assumptions (in thousands): Exercise Asset Dividend Expected Risk-Free Expected As of December 31, 2023 Price Price Yield Volatility Interest Rate Life Convertible Notes Warrants $ 11.50 $ 0.98 0 % 65 % 3.90 % 3.93 years Exercise Asset Dividend Expected Risk-Free Expected As of December 31, 2022 Price Price Yield Volatility Interest Rate Life Convertible Notes Warrants $ 11.50 $ 5.56 0 % 40 % 4.00 % 4.93 years The changes in fair value of the outstanding warrants classified as liabilities for the year ended December 31, 2023 and 2022 were as follows (in thousands): Convertible Notes Warrants - Senior Debt Convertible Notes Warrants - Subordinated Debt 2020 preferred Series B warrants Warrant liability, January 1, 2022 $ — $ — $ 562 Fair value of warrants granted 465 4,782 — Fair value of warrants exercised — — (580) Change in fair value (288) (2,967) 18 Warrant liability, December 31, 2022 177 1,815 — Change in fair value (168) (1,728) — Warrant liability, December 31, 2023 $ 9 $ 87 $ — Warrants Classified as Equity Private Warrants, Public Warrants and Additional Private Warrants Certain warrants are classified as equity instruments since they do not meet the characteristics of a liability or a derivative and are recorded at fair value on the date of issuance using the Black-Scholes option pricing model. The fair value as determined at the issuance date is recorded as an issuance cost of the related stock. At the close of Business Combination, the Company issued an aggregate of 4,597,180 warrants to holders of Lakeshore founder shares, and to the private and public warrant holders, as a result of the Reincorporation Merger and the Business Combination agreements. The Public and Private warrants were issued in June 2021, pursuant to the initial public offering of Lakeshore; each warrant was exercisable for one ordinary share of Lakeshore at $11.50 per share. These automatically converted into warrants to purchase one share of ProSomnus Common Stock at $11.50 per share on consummation of the Business Combination with an expiry of 5 years, redeemable at $18.00 per share redemption trigger price. Transaction Warrants On September 20, 2023, the Company entered into a Securities Purchase Agreement with third-party and related party investors. The Company issued Series A Preferred Stock and warrants to purchase Common Stock at an exercise price of $1.00 per share (Transaction Warrants) as part of the Financing Transaction (refer to Note 11 – Preferred Stock). The Company has 5,454,524 Transaction Warrants outstanding as of December 31, 2023, which are exercisable at a price of $1.00 per share of Common Stock, and expire five years from grant date. The likelihood that the holders of the Transaction Warrants will exercise their warrants and the amount of cash proceeds that the Company would receive is dependent upon the market price of the Company’s Common Stock, which was below the exercise price for the Transaction Warrants as of December 31, 2023. ASC 815-10-15-74(a) provides a scope exception from Derivative Accounting Contracts issued or held by that reporting entity that are both: 1. Indexed to its own stock (see Section 815-40-15) 2. Classified in stockholders’ equity in its statement of financial position (see Section 815-40-25). The Company has concluded that the Private Warrants, Public Warrants, Additional Private Warrants, and Transaction Warrants meet the derivative scope exception in 815-10-15-74(a) as they are both indexed to the Company’s own stock, and meet the equity classification conditions within ASC 815-40-25. These warrants have been classified as equity and recorded to additional paid in capital at the grant date fair value on date of issuance. The aggregate fair value of the 4,597,180 Private Warrants, Public Warrants, and Additional Private Warrants at issuance was $0.7 million. The fair value of such warrant was estimated using observable market inputs, the closing price of Lakeshore public warrants was $0.145 as of December 6, 2022. The aggregate fair value of the Transaction Warrants at issuance was $1.3 million. The assumptions used to determine the fair value of the Transaction Warrants included an asset price of $0.97, volatility rate of 65.0%, risk-free rate of 4.5%, no dividends, and an expected term of 5.0 years. |
COMMON STOCK
COMMON STOCK | 12 Months Ended |
Dec. 31, 2023 | |
COMMON STOCK | |
COMMON STOCK | NOTE 10 — COMMON STOCK As of December 31, 2023 and 2022, the Company had 150,000,000 and 100,000,000 shares of Common Stock authorized for issuance, respectively, with par value of $0.0001. The number of authorized shares was increased from 100,000,000 shares to 150,000,000 shares by the Company's stockholders approval on December 6, 2023, through an amendment to the Amended and Restated Certificate of Incorporation. The Company has reserved shares of Common Stock for the following: As of December 31, 2023 2022 2022 Equity Incentive Plan reserve 5,889,525 2,411,283 Reserve for earn-out shares 3,000,000 3,000,000 Reserve for exercise of Public Warrants 4,100,250 4,100,250 Reserve for exercise of Private and Additional Private Warrants 496,941 496,941 Reserve for Transaction Warrants 5,454,524 — Reserve for exercise of SPA warrants 2,262,585 — Reserve for convertible debt 15,766,509 — Employee stock purchase plan 500,000 — Reserve for convertible Series A Preferred Stock 9,436,000 — Total 46,906,334 10,008,474 During December 2023, the Company increased the number of authorized shares under its 2022 Equity Incentive Plan to 6,000,000, of which 5,889,525 shares were still available for future grants at December 31, 2023. |
PREFERRED STOCK
PREFERRED STOCK | 12 Months Ended |
Dec. 31, 2023 | |
PREFERRED STOCK {Abstract] | |
PREFERRED STOCK [Abstract] | NOTE 11 — PREFERRED STOCK The Company has authorized the issuance of 1,500,000 and 1,000,000 shares of preferred stock at a par value of $0.0001 per share as of December 31, 2023 and 2022, respectively. The number of authorized shares increased from 1,000,000 shares to 1,500,000 shares by the Company's stockholders approval on December 6, 2023, through an amendment to the Amended and Restated Certificate of Incorporation. Fiscal 2023 Redeemable Convertible Preferred Stock The Company’s Board of Directors has designated 25,000 shares of preferred stock as Series A Preferred Stock. The Series A Preferred Stock has no maturity and is not subject to any sinking fund or redemption and will remain outstanding indefinitely unless and until converted by the holder or the Company redeems or otherwise repurchases the Series A Preferred Stock. During September 2023, the Company issued 9,526 shares of Series A Preferred Stock and the corresponding Transaction Warrants to the Investors (see Note 8 – Debt) in exchange for total cash proceeds of $9.5 million. In October 2023, the Company issued 900 shares of Series A Preferred Stock and the corresponding Transaction Warrants in exchange for total cash proceeds of $0.9 million. During December 2023, pursuant to the terms of the Certificate of Designation of the Series A Preferred Stock, two investors of the Company, converted an aggregate of 990 Series A Preferred i . Dividends Dividends on each share of Series A Preferred Stock are payable at the rate of 8% (the “Dividend Rate”) of the purchase price of $1,000.00 per share (the “Stated Value”). Dividends are payable semi-annually to holders of record on March 1 and September 1 on March 15 and September 15 of each year, respectively, with the first payment date being March 15, 2024, the dividend for which will reflect the period from closing through March 15, 2024. Dividends are payable in shares of Common Stock (a “PIK Dividend”). The number of dividend shares is equal to the Stated Value of each such share of Series A Preferred Stock multiplied by the dividend rate of 8.0% per annum and divided by $1.00, as adjusted from time to time for any stock split, stock dividend, recapitalization or otherwise, computed on the basis of a 360-day year and twelve 30-day months. Any fractional shares of a PIK Dividend will be rounded to the nearest whole share. All shares of Common Stock issued in payment of a PIK Dividend will be duly authorized, validly issued, fully paid and non-assessable. Dividends will accumulate whether or not the Company has earnings, there are funds legally available for the payment of those dividends and whether or not those dividends are declared by the Company’s Board of Directors. Conversion Features Each share of Series A Preferred Stock is convertible at any time and in the sole discretion of the holder, into shares of Common Stock at a conversion rate of $1.00 per share (the “Conversion Rate”) plus any accrued but unissued PIK Dividends, when converted, subject to certain restrictions on conversion prior to the Company obtaining stockholder approval. If the Company issues or sells Common Stock at a price below the current conversion rate of $1.00 per share, the conversion rate will be adjusted downward immediately following the dilutive issuance. The new conversion rate will be calculated based on a formula that takes into account the previous conversion rate, number of shares outstanding before and after issuance, and the consideration received by the Company in connection with the dilutive issuance. Certain types of agreements to sell Common Stock at market pricing will be evaluated on a quarterly basis or immediately prior to a Liquidation Event for purposes of determining if they collectively constitute a dilutive issuance. The Company can initiate a mandatory conversion at any time when the resale of issued Common Stock is covered under an effective registration statement or can be sold without volume limitations under Rule 144 (or successor rule), as determined by the counsel to the Company. The Series A Preferred Stock will automatically convert into shares of Common Stock at the Conversion Rate, as follows: (i) 50% of the issued and outstanding Series A Preferred Stock will convert into shares of Common Stock if the VWAP trading price for the shares of Common Stock are trading on a national exchange is greater than $4.50 per share for twenty of any thirty consecutive trading days, and (ii) the remaining issued and outstanding Series A Preferred Stock will convert into shares of Common Stock if the VWAP trading price for the shares of Common Stock are trading on a national exchange greater than $6.00 per share for twenty of any thirty consecutive trading days. The Company analyzed the embedded conversion options for derivative accounting consideration under ASC 815-15 “ Derivatives and Hedging Voting Rights Each Series A Preferred Stockholder is entitled to the whole number of votes equal to the number of shares of Common Stock into which such holder’s Series A Preferred Stock would be convertible on the record date for the vote or consent of stockholders at a conversion price of $1.04 per share of Common Stock rounded to the nearest whole share. Liquidation Preferences and Redemption Rights The Series A Preferred Stock has senior ranking over Common Stock of the Company, and junior to the Company’s indebtedness, in each case for purposes of dividends, distributions, and payments in a liquidation event. In the event of a liquidation event, holders of Series A Preferred Stock are entitled to receive in cash out of the assets of the Company legally available, whether from capital or from earnings available for distribution to its stockholders, before any amount shall be paid to the holders of Common Stock, an amount in cash per share of Series A Preferred Stock equal to the greater of: (i) 150% of the Stated Value and The Series A Preferred Stock are redeemable upon the occurrence of any transaction or series of related transactions pursuant to which the Company effects (i) any merger or consolidation of the Company where the Company is not the surviving entity, (ii) any sale of all or substantially all of its assets, or (iii) any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (a “Fundamental Transaction”). In the event of a Fundamental Transaction, holders of Series A Preferred Stock are entitled to receive in cash the greatest of: (i) 150% of the Stated Value, As part of the Company’s analysis of the classification of the Series A Redeemable Convertible Preferred Stock, the Company considered the guidance in ASC 480-10-S99-3A and in particular paragraphs 2 and 3f, which require preferred securities that are redeemable for cash or other assets to be classified outside of permanent equity if they are redeemable upon the occurrence of an event that is not solely within the control of the issuer. Due to the consideration payable upon a Fundamental Transaction and the liquidation preferences of the Series A Preferred Stock providing for payout on the Series A Preferred Stock prior to payment to the Common Stockholders, the Company cannot avail itself of the limited exception of paragraph ASC 480-10-S99-3A-3f. As a result, the Company concluded that the Series A Preferred Stock are subject to ASR 268, Presentation in Financial Statements of “Redeemable Preferred Stocks,” and should be classified outside of permanent equity. Fiscal 2022 Redeemable Convertible Preferred Stock During May and December 2022, the Board approved the issuance of an aggregate of 5,945 shares, respectively, of Series A Redeemable Convertible Preferred Stock to certain employees of the Company for no cash consideration but in exchange for their services as members of the Company’s management. The Company recorded stock compensation expense of $2.1 million related to these awards. The Company determined the grant date fair value of the awards using the valuations prepared by an independent third-party valuation firm, which were approved by the Board or the issuance price of $10 per share at the Business Combination date. (See Note 13 – Stock Compensation). In connection with the Business Combination, the ProSomnus common and Redeemable Convertible Preferred Stockholders received 11,300,000 shares of Surviving Pubco Common Stock as Merger Consideration. As of December 31, 2022, there were no outstanding Series A and B Redeemable Convertible Preferred Stock of the Company. These original holders of such common and redeemable preferred stock also received a contingent right to receive Earn-Out Shares as set forth in the Merger Agreement. See Note 12 – Earn-Out Shares. |
EARN-OUT SHARES
EARN-OUT SHARES | 12 Months Ended |
Dec. 31, 2023 | |
EARN-OUT SHARES | |
EARN-OUT SHARES | NOTE 12 EARN-OUT SHARES In connection with the Business Combination, certain of the Company’s original stockholders are entitled to receive up to 3,000,000 Earn-out shares in three tranches: (1) the first tranche of 1,000,000 Earn-out shares will be issued when the volume-weighted average price per share of PubCo Common Stock is $12.50 or greater for 20 trading days in any consecutive 30 trading day period commencing 6 months after the Closing and ending at the third anniversary of the Closing; · (2) the second tranche of 1,000,000 Earn-out shares will be issued when the volume-weighted average price per share of PubCo Common Stock is $15.00 or greater for 20 trading days in any consecutive 30 trading day period commencing 6 months after the Closing and ending at the third anniversary of the Closing; and · (3) the third tranche of 1,000,000 Earn-out shares will be issued when the volume-weighted average price per share of PubCo Common Stock is $17.50 or greater for 20 trading days in any consecutive 30 trading day period commencing 6 months after the Closing and ending at the third anniversary of the Closing. The Earn-out shares will be allocated among the Company’s stockholders in proportion to the number of shares issued to them at the closing that continue to be held by them. Due to the variability in the number of Earn-out shares at settlement which could change upon a control event, the Earn-out arrangement contains a settlement provision that violates the indexation guidance under ASC 815-40 and liability classification is required. The Company recorded the earnout liability initially at fair value, and subsequently remeasured the liability with changes in fair value recorded in the consolidated statements of operations at each reporting period. The changes in fair value of the earnout liability for the years ended December 31, 2023 and 2022 are as follows (in thousands): Amount Earnout liability, January 1, 2022 $ — Issuance of earnout liability 22,070 Change in fair value (9,260) Earnout liability, December 31, 2022 12,810 Change in fair value (12,190) Earnout liability, December 31, 2023 $ 620 |
STOCK-BASED COMPENSATION
STOCK-BASED COMPENSATION | 12 Months Ended |
Dec. 31, 2023 | |
STOCK-BASED COMPENSATION | |
STOCK-BASED COMPENSATION | NOTE 13 — STOCK-BASED COMPENSATION Of the Company’s 2019 restricted common C shares, 600,000 vested upon consummation of the Business Combination on December 6, 2022. An additional 254,507 vested as per the vesting schedule, prior to the consummation of the Business Combination. There were no outstanding restricted common C shares as of December 31, 2023 and 2022. During May 2023, the Company issued 20,000 shares of Common Stock to a consultant for services received. The fair value of the shares issued of $0.2 million was recognized as general and administrative expense with a corresponding credit to additional paid-in capital. 2022 Equity Incentive Plan In 2022, the Company established the 2022 Equity Incentive Stock Plan (the "2022 Plan"), which authorizes the issuance of incentive and nonqualified stock options and RSUs for the acquisition of shares of the Company's Common Stock, as well as grants of restricted Common Stock units to employees, officers, directors, and consultants of the Company. The 2022 Plan provides that the exercise price of incentive stock options cannot be less than 100% of the fair market value of the Common Stock on the date of the award for participants who own less than 10% of the total combined voting power of stock of the Company, and not less than 110% for participants who own more than 10% of the Company’s voting power. The vesting period for the option is outlined in percentage installments on the grant notice. The option can only be exercised to the extent that it is vested and exercisable. The Grantee has the right to exercise the option until it expires or is terminated, as long as it is vested and exercisable. The stock options generally expire not more than ten years from the date of grant, who own less than 10% of the total combined voting power of stock of the Company and the expiration note more than 5 years from the date of grant, who own more than 10% of the Company’s voting power. There were no awards issued under the 2022 Plan for the year ended December 31, 2022. During the year ended December 31, 2023, the Company granted 1,668,915 options to certain employees and consultants of the Company. As of December 31, 2023, there were 6,000,000 authorized shares and 5,889,525 available for future grants under the 2022 Plan. Stock option activity for the year ended December 31, 2023, was as follows (aggregate intrinsic value in thousands): Weighted-Average Stock-Based Compensation Number of Weighted-Average Remaining Aggregate Options Exercise Price Contractual Term Intrinsic Value Outstanding at January 1, 2023 — $ — Granted 1,668,915 4.70 Exercised — Cancelled (106,418) 5.20 Outstanding at December 31, 2023 1,562,497 $ 4.67 9.2 years $ 35 Exercisable at December 31, 2023 — — — — Vested and expected to vest as of December 31, 2023 1,562,497 $ 4.67 9.2 years $ 35 As of December 31, 2023, unamortized compensation expense related to unvested stock options was $3.2 million, which is expected to be recognized over a weighted average period of 3.11 years. The weighted-average grant date fair value of options granted during the year ended December 31, 2023, was $2.60. The Company estimated the fair value of stock options using the Black-Scholes option pricing model. The fair value of the stock options was estimated using the following weighted average assumptions: December 31, 2023 Dividend yield 0.0% Expected volatility 55.0% Risk-free interest rate 3.6% Expected life 6.2 years Dividend Rate Expected Volatility Risk-Free Interest Rate Expected Term Forfeiture Rate The Company’s 2022 Plan has a “clawback policy” based on which the Company may recover from a participant any compensation received from any stock right (whether or not settled) or cause a participant to forfeit any such stock right in the event that the Company’s clawback policy then in effect is triggered. The Company’s clawback policy is compliant with provisions of applicable law, including the requirements set forth in Listing Rule 5608 of the corporate governance rules of the NASDAQ Stock Market. Restricted Stock Units During October 2023, the Company granted 736,250 Restricted Stock Units (RSUs) to certain employees under the 2022 Plan. Of these RSUs, 543,750 cliff vest on October 15, 2025 RSU activity for the year ended December 31, 2023, was as follows: Number of Weighted-Average Units Exercise Price Unvested at January 1, 2023 — $ — Granted 736,250 0.86 Vested (192,500) 0.86 Forfeited — — Unvested balance at December 31, 2023 543,750 $ 0.86 The Company has recorded stock-based compensation expense for the year ended December 31, 2023, related to the grants of stock option awards to employees and nonemployees in the consolidated statements of operations as follows (in thousands): December 31, 2023 Cost of revenue $ 24 Sales and marketing 128 Research and development 232 General and administrative 793 $ 1,177 During the year ended December 31, 2023, the Company recorded stock-based compensation expense related to the vested RSUs of $0.1 million. As of December 31, 2023, unamortized compensation expense related to unvested RSUs was $0.4 million, which is expected to be recognized over a weighted average period of 1.79 years. The Company did not recognize any tax benefits related to stock-based compensation expense during the years ended December 31, 2023 and 2022. Share-based compensation expense for the year ended December 31, 2022, was $2.2 million relating to restricted common C shares and the issuance of Series A Redeemable Convertible Preferred Stock to certain employees (see Note 11 –Preferred Stock). 2023 Employee Stock Purchase Plan The Company’s Board of Directors previously adopted, and the Company's stockholders approved, the Company’s 2023 Employee Stock Purchase Plan (the “2023 ESPP”). The 2023 ESPP is a broad-based plan that provides employees of the Company and its designated affiliates with the opportunity to become stockholders through periodic payroll deductions that are applied towards the purchase of shares of the Company’s Common Stock at a discount from the then-current market price. Subject to adjustment in the case of certain capitalization events, a total of 500,000 shares of Common Stock were available for purchase at adoption of the 2023 ESPP. The first offering period under the plan commenced on June 15, 2023.There were no shares issued under the plan for the year ended December 31, 2023. As of December 31, 2023, 500,000 shares of Common Stock remained available for issuance under the 2023 ESPP. The Company estimates the fair value of ESPP grants on their grant date using the Black-Scholes option pricing model. The estimated fair value of ESPP grants is amortized on a straight-line basis over the requisite service period of the grants. The Company reviews, and when deemed appropriate, updates the assumptions used on a periodic basis. The Company utilizes its estimated volatility in the Black-Scholes option pricing model to determine the fair value of ESPP grants. ESPP compensation expense for the year ended December 31, 2023, was de minimis. |
INCOME TAXES
INCOME TAXES | 12 Months Ended |
Dec. 31, 2023 | |
INCOME TAXES | |
INCOME TAXES | NOTE 14 — INCOME TAXES The following table presents a reconciliation of the tax expense computed at the statutory federal rate and the tax expenses for the periods presented (in thousands): Years Ended December 31, 2023 2022 Statutory federal income tax rate $ (5,057) $ (1,499) State taxes, net of federal tax benefit (1,114) (1,757) Valuation allowance 8,840 8,167 Change in fair value of warrant liability (398) (678) Change in fair value of debt (799) (2,227) Transaction costs — (528) Stock compensation 16 450 Change in fair value of earnout liability (2,560) (1,942) Excess fair value of refinanced debt 466 — Financing costs 519 — Other permanent differences 87 14 $ — $ — Deferred income taxes reflect the net tax effects of loss and credit carryforwards and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of Company’s deferred tax assets for federal and state income taxes are as follows (in thousands): Years Ended December 31, 2023 2022 Deferred tax assets Net operating losses $ 25,487 $ 17,848 Reserves and accruals 699 619 Debt issuance cost amortization 703 1,184 Debt extinguishment amortization 2,345 646 Debt related warrants 851 1,408 Capitalized research and development 1,224 558 Lease liabilities 1,326 1,541 Stock based compensation 229 — Other deferred tax assets — 1 Gross deferred tax assets 32,864 23,805 Valuation allowance (31,163) (22,022) Net deferred tax assets $ 1,701 $ 1,783 Deferred tax liabilities Depreciation and amortization (485) (271) Right of use assets (1,216) (1,512) Total deferred tax liabilities (1,701) (1,783) Net deferred tax assets (liabilities) $ — $ — Realization of deferred tax assets is dependent upon future pretax earnings, the reversal of temporary differences between book and tax bases of assets and liabilities, and the enacted tax rates in effect in future periods. The Company has recorded a full valuation allowance as of December 31, 2023 and December 31, 2022. The change in the valuation allowance was an increase of $9.1 million and $8.2 million for the years ended December 31, 2023 and 2022, respectively. As of December 31, 2023, the Company had net operating loss carryforwards for federal and state income tax purposes of approximately $99.5 million and $52.9 million, respectively. Of the $99.5 million of net operating loss carryforwards for federal purposes, $69.4 million have an unlimited carry-forward period. The remaining federal carryforwards begin to expire in 2027 while the state carryforwards begin to expire in 2036. The Internal Revenue Code of 1986, as amended, imposes restrictions on the utilization of net operating losses in the event of an “ownership change” of a corporation. Accordingly, a Company’s ability to use net operating losses may be limited as prescribed under Internal Revenue Code Section 382 (“IRC Section 382”). Events which may cause limitations in the amount of the net operating losses that the Company may use in any one year include, but are not limited to, a cumulative ownership change of more than 50% over a three-year period. Utilization of the federal and state net operating losses may be subject to substantial annual limitation due to the ownership change limitations provided by the IRC Section 382 and similar state provisions. A detailed analysis to determine whether an ownership change under Section 382 has not been performed recently to determine if there is any limitation on the utilization of the Company’s net operating losses. The Company performed a Section 382 analysis in 2017 and identified a change in ownership during 2017 and therefore a limitation in the ability to utilize the existing NOLs. The calculated limitation was $44.8 million and the DTA was reduced by the amount of the limitation that the Company will not be able to utilize in future tax periods. An updated Section 382 study has not been completed through December 31, 2023 and there has not been a determination if there is a cumulative ownership change of more than 50% during the most recent three-year period. The effect of a further Section 382 limitation on the provision and this disclosure is immaterial due to the full valuation allowance against all deferred tax assets, including NOLs, as of December 31, 2023. The Company estimates that there will be no material changes in its uncertain tax positions in the next 12 months. In accordance with FASB ASC 740, the Company has adopted the accounting policy that interest and penalties recognized are classified as part of its income taxes. Total interest and penalties recognized in the consolidated statements of operations was zero for both of the years ended December 31, 2023 and 2022. The Company files income tax returns in the US federal and various state with varying statutes of limitations. The Company is generally no longer subject to tax examinations for years prior to 2008 for federal purposes and 2018 for state purposes, except in certain limited circumstances. The Company’s NOL and credit carryforwards from all years may be subject to adjustment for three four |
EMPLOYEE BENEFIT PLAN
EMPLOYEE BENEFIT PLAN | 12 Months Ended |
Dec. 31, 2023 | |
EMPLOYEE BENEFIT PLAN | |
EMPLOYEE BENEFIT PLAN | NOTE 15 — EMPLOYEE BENEFIT PLAN The Company offers a 401(k) plan to employees and has historically matched employee contributions to the plan up to 3% of the employee’s salary. The matching contributions accrued for the years ended December 31, 2023 and 2022 were $0.3 million and $0.1 million, respectively. |
NET LOSS ATTRIBUTABLE TO COMMON
NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS | 12 Months Ended |
Dec. 31, 2023 | |
NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS | |
NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS | NOTE 16 — NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS The following table sets forth the computation of the basic and diluted net loss per share attributable to Common Stockholders during the years ended December 31 (in thousands, except per share amounts): Years Ended December 31, 2023 2022 Numerator: Net loss attributable to Common Stockholders $ (24,095) $ (7,145) Denominator: Weighted-average common shares outstanding 16,177 10,022 Net loss per share attributable to Common Stockholders, basic $ (1.49) $ (0.71) * Basic and diluted weighted-average common shares outstanding for the year ended December 31, 2022, has been computed based on the historical weighted-average common shares outstanding multiplied by the exchange ratio established in the Business Combination. The potential shares of Common Stock that were excluded from the computation of diluted net loss per share attributable to Common Stockholders for the years ended December 31, 2023 and 2022 because including them would have been antidilutive are as follows: Years Ended December 31, 2023 2022 Conversion of Series A Preferred Stock 9,436,000 — Outstanding Options to purchase Common Stock 1,562,497 — RSUs to purchase Common Stock 543,750 — Senior and Subordinated Convertible Notes 20,080,459 3,179,410 Warrants to purchase Common Stock 11,966,611 6,512,087 Total 43,589,317 9,691,497 |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 12 Months Ended |
Dec. 31, 2023 | |
SUBSEQUENT EVENTS | |
SUBSEQUENT EVENTS | NOTE 17 — SUBSEQUENT EVENTS The indentures governing the Company’s Convertible Notes require compliance with certain financial covenants on a monthly and quarterly basis. As of March 1, 2024, the Company was in violation of the minimum cash covenant on the Convertible Notes. On March 25, 2024, the lenders agreed to (i) waive the minimum cash covenant for the period commencing on March 1, 2024 through and including June 30, 2024 provided that the Company’s cash balance remains above $2.5 million during such period; and (ii) waive any default under the indentures resulting from any breach by the Company that may have arisen up to March 1, 2024. |
BASIS OF ACCOUNTING AND SIGNI_2
BASIS OF ACCOUNTING AND SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Dec. 31, 2023 | |
BASIS OF ACCOUNTING AND SIGNIFICANT ACCOUNTING POLICIES | |
Basis of Presentation | Basis of Presentation The accompanying consolidated financial statements were prepared on the accrual basis of accounting in accordance with principles generally accepted in the United States of America (“U.S. GAAP”). Certain prior year balances have been reclassified in order to conform to the current period presentation. These reclassifications had no impact on the Company's previously reported statement of financial condition, operating results or cash flows. |
Principles of Consolidation | Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. |
Liquidity and Management's Plans | Liquidity and Management’s Plans The Company has incurred recurring losses from operations and recurring negative cash flows from operating activities. The Company expects operating losses and negative cash flows from operations to continue for the foreseeable future. In accordance with ASU 2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40) (“ASC 205-40”) , the Company has the responsibility to evaluate whether conditions and/or events raise substantial doubt about its ability to meet its future financial obligations as they become due within one year after the date that the financial statements are issued. This evaluation requires management to perform two steps. First, management must evaluate whether there are conditions and events that raise substantial doubt about the entity’s ability to continue as a going concern. Second, if management concludes that substantial doubt is raised, management is required to consider whether it has plans in place to alleviate that doubt. Disclosures in the notes to the consolidated financial statements are required if management concludes that substantial doubt exists or that its plans alleviate the substantial doubt that was raised. The accompanying consolidated financial statements have been prepared in accordance with U.S. GAAP assuming that the Company will continue as a going concern. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result should the Company be unable to continue as a going concern. Management’s Plans Related to Going Concern The Company’s ability to continue as a going concern depends on its ability to execute on its plans to achieve revenue growth forecast, control operating costs, and obtain additional financing. The Company has developed a cash flow breakeven plan pursuant to which the Company expects to maintain positive cash balances and compliance with its debt covenants and commitments. The Company has commenced the implementation of its plan and believes the plan, when fully implemented as planned, will mitigate the liquidity risks identified. However, the Company’s operating plan may change as a result of many factors currently unknown and there can be no assurance that the current operating plan or cash flow break-even plan will be achieved in the time frame anticipated by the Company. Based on current level of expenditures and future cash flow projections, the Company believes having $6.4 million in unrestricted cash and cash equivalents |
Use of Estimates | Use of Estimates The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and disclosure of contingent assets and liabilities. Though macroeconomic factors such as inflation, exchange rate fluctuations and concerns about an economic downturn present additional uncertainty, the Company continues to use the best information available to form its critical accounting estimates. Actual results could differ from these estimates, and such differences could materially affect the results of operations reported in future periods. The Company’s significant estimates in these consolidated financial statements relate to the fair values, and the underlying assumptions used to formulate such fair values, of its Series A Preferred Stock, Convertible Notes, earn-out liability, and warrants. Estimates also include the provision for credit losses, warranty and earned discount accruals, measurements of tax assets and liabilities and stock-based compensation. |
Concentrations of Credit Risk | Concentrations, Credit Risk and Market Risk Financial instruments that potentially subject the Company to a concentration of credit risk principally consist of accounts receivable and cash. The Company sells its products to customers primarily in North America and Europe. To reduce credit risk, management performs periodic credit evaluations of its customers’ financial condition. No customers exceeded more than 10% of the Company’s revenue or accounts receivables as of and for the years ended December 31, 2023 and 2022. The Company maintains its cash in bank accounts which, at times, may exceed federally insured limits as guaranteed by the Federal Deposit Insurance Corporation (“FDIC”). As of December 31, 2023 and 2022, the Company had $6.8 million and $15.7 million in excess of the FDIC insured limit, respectively. The Company’s investment policy, which is predicated on capital preservation and liquidity, limits investments to instruments denominated and payable in US dollars. The Company believes its credit risk is mitigated due to the high quality of the banks in which it places its deposits. Historically, the Company has not experienced significant credit losses from financial instruments. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The accounting standard for fair value measurements provides a framework for measuring fair value and requires expanded disclosures regarding fair value measurements. Fair value is defined as the price that would be received for an asset or the exit price that would be paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. This accounting standard establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs, where available. The following summarizes the three levels of inputs that may be used to measure fair value: Level 1 Inputs — Level 2 Inputs — Level 3 Inputs — no 3 Changes in fair value measurements categorized within Level 3 of the fair value hierarchy are analyzed each period based on changes in estimates or assumptions and recorded as appropriate. The carrying amounts of financial instruments such as cash and cash equivalents, restricted cash, accounts receivable, prepaid expenses and other current assets, accounts payable, and accrued expenses approximate the related fair values due to the short-term maturities of these instruments. The carrying value of the Company’s equipment financing obligation is considered to approximate its fair value because the interest rate is comparable to current rates for financing available to the Company. Under the fair value option as prescribed by FASB Accounting Standards Codification (“ASC”) 825, Financial Instruments The following tables provide a summary of the Company’s financial instruments that are measured at fair value on a recurring basis: December 31, 2023 Fair Value Level 1 Level 2 Level 3 Senior Convertible Notes $ 14,277 $ — $ — $ 14,277 Subordinated Convertible Notes 18,320 — — 18,320 Earnout liability 620 — — 620 Warrant liability 96 — — 96 December 31, 2022 Fair Value Level 1 Level 2 Level 3 Senior Convertible Notes $ 13,651 $ — $ — $ 13,651 Subordinated Convertible Notes 10,356 — — 10,356 Earnout liability 12,810 — — 12,810 Warrant liability 1,992 — — 1,992 A financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash and cash equivalents. At December 31, 2023 and 2022, the Company had no cash equivalents. Restricted Cash a letter of credit on hand w ith the Company ' s financial institution as collateral for an office lease |
Senior and Subordinated Convertible Notes | Senior and Subordinated Convertible Notes The Company accounts for its Senior Convertible Notes and Subordinated Convertible Notes (as defined below and collectively the “Convertible Notes”), as derivatives in accordance with, ASC 815, Derivatives and Hedging The Company has analyzed the redemption, conversion, settlement, and other derivative instrument features of its Convertible Notes. ● The Company identified that the (i) redemption features, (ii) Lender’s Optional Conversion feature, (iii) Lender’s Optional Conversion Upon Merger Event feature and (iv) Additional interest rate upon certain events feature meet the definition of a derivative. The Company analyzed the scope exception for all the above features under ASC 815-10-15-74(a). ● Based on the further analysis, the Company identified that the (i) Lender’s Optional Conversion feature, (ii) Lender’s Optional Conversion Upon Merger Event feature and (iii) Additional interest rate upon certain events feature, do not meet the settlement criteria to be considered indexed to equity. The Company concluded that each of these features should be classified as a derivative liability measured at fair value with the changes in Fair Value in the consolidated statements of operations. ● The Company also identified that the redemption features are settled in cash and do not meet the indexed to equity and the equity classification scope exception, thus, they must be bifurcated from the convertible notes and accounted for separately at fair value on a recurring basis reflecting the changes in Fair Value in the consolidated statements of operations. The Company determined the Notes contained multiple embedded derivatives that are required to be bifurcated, two of which are conversion features. As per ASC 815, the fair value election is allowable provided the debt was not issued at a substantial premium. The Company concluded that the Convertible Notes were not issued at a premium and hence the Company elected the fair value option under ASC 815-15-25. The Company elected to record changes in fair value through the consolidated statements of operations as a fair value adjustment of the convertible debt at each reporting period (with the portion of the change that results from a change in the instrument-specific credit risk recorded separately in other comprehensive income, if applicable). The Company has elected to separately present interest expense related to the Convertible Notes within the consolidated statements of operations. Thus, the multiple embedded derivatives do not need to be separately bifurcated and fair valued. The Convertible Notes are reflected at their respective fair values on the consolidated balance sheets. |
Accounts Receivable and Allowance for Credit Losses | Accounts Receivable and Allowance for Credit Losses Accounts receivable are stated at the amount the Company expects to collect. The Company maintains allowances for credit losses for estimated losses resulting from the inability of its customers to make required payments. The Company has not historically assessed finance charges on past due accounts, but retains the right to do so. Receivables are considered past due based on the contractual payment terms. The Company reserves a percentage of trade receivable balance based on collection history and current economic trends that the Company expects will impact the level of credit losses over the life of the receivables. These reserves are re-evaluated on a regular basis and adjusted, as needed. Once a receivable is deemed to be uncollectible, such balance is charged against the reserve. The allowance for credit losses amounted to $0.2 million as of both December 31, 2023 and 2022. Accounts receivable are primarily from customers located in North America and Europe. |
Inventory | Inventory Inventory is recorded at the lower of cost or net realizable value under the first-in, first-out method of accounting. Inventories primarily consist of purchased materials. The Company regularly reviews whether the net realizable value of its inventory is lower than its carrying value. If the valuation shows that the net realizable value is lower than the carrying value, the Company takes a charge to cost of revenue and directly reduces the carrying value of the inventory. Indicators that could result in inventory write-downs include damaged or slow-moving materials and supplies. |
Property and Equipment | Property and Equipment Property and equipment are stated at cost, less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets. Estimated useful lives are as follows: Manufacturing equipment 3 to 7 years Computers and software 3 years Furniture 7 years Leasehold Improvements Shorter of remaining lease term or estimated useful life Maintenance and repairs are charged to operations as incurred. |
Long-lived Assets | Impairment of Long-Lived Assets The Company’s long-lived assets primarily include property and equipment and finance and operating right-of-use assets. The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured at the amount by which the carrying amount of the asset exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of carrying amount or the fair value less costs to sell. During 2023, the Company moved to its new headquarters and principal manufacturing facility. Upon moving, the Company expensed a total of $0.3 million relating to the carrying value of the remaining leasehold improvements and amounts due under the remaining lease term of the previous facility. The right-of-use asset and leasehold improvements charge was recorded in other expense, net in the consolidated statements of operations. There were no impairments of long-lived assets for the year ended December 31, 2022. |
Warrants | Warrants The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own Common Stock |
Warranty | Warranty The Company offers an assurance-type warranty guaranteeing the fit and finish of its intraoral devices for three years from the date of initial sale. The accrual for warranty claims totaled $0.5 million and $0.3 million at December 31, 2023 and 2022, respectively, and these amounts are recorded in accrued expenses on the consolidated balance sheets. The Company recognized the related warranty cost as a reduction in revenue. |
Revenue Recognition | Revenue Recognition The Company creates customized precision milled intraoral medical devices and recognizes revenue upon meeting the following criteria: ● Identifying the contract with a customer: Customers submit an order in the form of a prescription and oral scan to the Company. ● Identifying the performance obligations within the contract: The sole performance obligation is the delivery of a completed customized intraoral device. ● Determining the transaction price: Prices are determined by standardized pricing sheets and adjusted for discounts, allowances, and remakes. ● Allocating the transaction price to the performance obligations: The full transaction price is allocated to the completed intraoral device as it is the only element in the transaction. ● Recognizing revenue as the performance obligation is satisfied: revenue is recognized upon transfer of control which occurs upon shipment of the product. The Company does not require collateral or any other form of security from customers. Inbound shipping and handling costs related to sales are billed to customers. The Company charges for inbound shipping/handling and the costs are classified as Cost of Revenue. Outbound shipping costs are not billed to customers and are included in sales and marketing expenses. Taxes collected from customers and remitted to governmental authorities are excluded from revenue. Standalone selling price for the various intraoral device models are determined using the Company’s standard pricing sheet. The Company invoices customers upon shipment of the product and invoices are due within 30 days. Amounts that have been invoiced are recorded in accounts receivable and revenue as all revenue recognition criteria have been met. The Company does not have a financing component related to its revenue arrangements. The Company utilizes the practical expedient which permits expensing of costs to obtain a contract when the expected amortization period is one year or less. Accordingly, the Company expenses employee sales commissions when incurred as the period over which the sales commission asset that would have been recognized is less than one year. |
Cost of Revenue | Cost of Revenue Cost of revenue consists primarily of materials and the costs related to the production of the intra-oral device, including employee compensation, other employee-related expenses and manufacturing overhead costs. |
Research and Development | Research and Development Research and development costs are charged to operating expense as incurred. |
Advertising | Advertising Advertising costs are expensed as incurred and totaled $0.1 million for both the years ended December 31, 2023 and 2022. |
Stock-Based Compensation | Stock-Based Compensation The Company measures stock-based awards, including stock options and restricted stock units (RSUs) granted to employees, directors, and non-employee service providers based on the estimated fair values of the awards on the date of the grant. Stock-based compensation expense for awards with service-based vesting is recognized on a straight-line basis over the requisite service period, which is generally the vesting period of such awards, as a component of operating expenses within the consolidated statements of operations. For awards that include performance conditions stock-based compensation expense is recognized on a graded vesting basis over the requisite service period. Compensation expense is not recognized until the performance condition becomes probable. The Company accounts for forfeitures related to awards as they occur. The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model. This valuation model for stock-based compensation expense requires the Company to make assumptions and judgments about the variables used in the calculation including the expected term, the volatility of the Company’s Common Stock, and an assumed risk-free interest rate. As a result, if the Company revises its assumptions and estimates, the Company’s stock-based compensation expense could change. The grant date fair value of RSUs is measured as the fair value per share of the Company’s Common Stock on the date of grant. |
Leases | Leases The Company assesses at contract inception whether a contract is, or contains, a lease. Generally, the Company determines that a lease exists when (1) the contract involves the use of a distinct identified asset, (2) the Company obtains the right At the lease commencement date, the Company recognizes a right-of-use (“ROU”) asset and a lease liability for all leases, except short term leases with an original term of twelve months or less. The ROU asset represents the right to use the leased asset for the lease term. The lease liability represents the present value of the lease payments under the lease. The ROU asset is initially measured at cost, which primarily comprises the initial amount of the lease liability, less any lease incentives received. All ROU assets are periodically reviewed for impairment in accordance with standards that apply to long-lived assets. The lease liability is initially measured at the present value of the lease payments, discounted using an estimate of the Company’s incremental borrowing rate for a collateralized loan with the same term as the underlying leases for operating leases and the implied rate in the lease agreement for finance leases. Lease payments included in the measurement of lease liabilities consist of (1) fixed lease payments for the noncancelable lease term, (2) fixed lease payments for optional renewal periods where it is reasonably certain the renewal option will be exercised, and (3) variable lease payments that depend on an underlying index or rate, based on the index or rate in effect at lease commencement. The Company’s real estate operating lease agreement requires variable lease payments that do not depend on an underlying index or rate established at lease commencement. Such payments and changes in payments are recognized in operating expenses when incurred. Lease expense for operating leases consists of the fixed lease payments recognized on a straight-line basis over the lease term plus variable lease payments as incurred. Lease expense for finance leases consists of the amortization of assets obtained under finance leases on a straight-line basis over the lease term and interest expense on the lease liability based on the discount rate at lease commencement. |
Income Taxes | Income Taxes The Company accounts for income taxes under an asset and liability methodology. Deferred income taxes reflect the impact of temporary differences between assets and liabilities recognized for financial reporting purposes and such amounts recognized for income tax reporting purposes as well as net operating loss carryforwards and tax credit carryforwards. Valuation allowances are provided when necessary to reduce deferred tax assets to an amount that is more likely than not to be realized. In assessing the need for a valuation allowance, the Company considers all available evidence, including past operating results, estimates of future taxable income and the feasibility of tax planning strategies. In the event that the Company changes its determination as to the amount of deferred tax assets that is more likely than not to be realized, the Company will adjust its valuation allowance with a corresponding impact to the provision for income taxes in the period in which such determination is made. The Company follows authoritative guidance regarding uncertain tax positions. The guidance requires that realization of an uncertain income tax position must be more likely than not (i.e., greater than 50% likelihood of receiving a benefit) before it can be recognized in the consolidated financial statements. The guidance further prescribes the benefit to be realized assumes a review by taxing authorities having all relevant information and applying current conventions. The guidance also clarifies the consolidated financial statements classification of tax related penalties and interest and sets forth disclosures regarding unrecognized tax benefits. The Company recognizes potential accrued interest and penalties related to unrecognized tax benefits as income tax expense. |
Net Loss per Share Attributable to Common Stockholders | Net Loss per Share Attributable to Common Stockholders |
Segment Reporting | Segment Reporting Operating segments are defined as components of an entity for which separate financial information is available and that is regularly reviewed by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources to an individual segment and in assessing performance. The Company’s CODM is its Chief Executive Officer and Chief Financial Officer. The Company has determined that it operates in one operating segment and one reportable segment, as the CODM reviews financial information presented on a consolidated basis for purposes of making operating decisions, allocating resources, and evaluating financial performance. |
Recent Accounting Pronouncements | Recently adopted accounting pronouncements During June 2016, the FASB issued ASU 2016-13 - Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments consolidated During August 2020, the FASB issued ASU 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) Derivatives and Hedging- Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity Recent Accounting Pronouncements not Yet Adopted During June 2022, the FASB issued ASU 2022-03, Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions During October 2023, the FASB issued ASU 2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative consolidated During November 2023, the FASB issued ASU 2023-07, Segment Reporting—Improvements to Reportable Segment Disclosures Segment Reporting During December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures |
BASIS OF ACCOUNTING AND SIGNI_3
BASIS OF ACCOUNTING AND SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
BASIS OF ACCOUNTING AND SIGNIFICANT ACCOUNTING POLICIES | |
Summary of the financial instruments that are measured at fair value on a recurring basis | December 31, 2023 Fair Value Level 1 Level 2 Level 3 Senior Convertible Notes $ 14,277 $ — $ — $ 14,277 Subordinated Convertible Notes 18,320 — — 18,320 Earnout liability 620 — — 620 Warrant liability 96 — — 96 December 31, 2022 Fair Value Level 1 Level 2 Level 3 Senior Convertible Notes $ 13,651 $ — $ — $ 13,651 Subordinated Convertible Notes 10,356 — — 10,356 Earnout liability 12,810 — — 12,810 Warrant liability 1,992 — — 1,992 |
Schedule of estimated useful lives of property and equipment | Manufacturing equipment 3 to 7 years Computers and software 3 years Furniture 7 years Leasehold Improvements Shorter of remaining lease term or estimated useful life |
INVENTORY (Tables)
INVENTORY (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
INVENTORY | |
Schedule of Inventory | As of December 31, 2023 2022 Raw materials $ 1,967 $ 562 Work-in-process 72 78 $ 2,039 $ 640 |
PROPERTY AND EQUIPMENT (Tables)
PROPERTY AND EQUIPMENT (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
PROPERTY AND EQUIPMENT | |
Schedule of Property and equipment | As of December 31, 2023 2022 Manufacturing equipment $ 4,042 $ 2,517 Computers and software 1,200 1,608 Leasehold improvements 846 442 Furniture — 27 6,088 4,594 Less: accumulated depreciation (2,730) (2,190) Property and equipment, net $ 3,358 $ 2,404 |
ACCRUED EXPENSES AND OTHER CU_2
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | |
Schedule of accrued compensation and other accrued expenses | As of December 31, 2023 2022 Compensation related accruals $ 3,387 $ 2,104 Marketing programs 934 612 Interest 382 110 Warranty 465 269 Professional fees 632 129 Inventory purchases and freight 613 — Other 343 482 $ 6,756 $ 3,706 |
LEASES (Tables)
LEASES (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
LEASES | |
Schedule of components of lease cost, weighted average lease terms and discount rates | Years Ended December 31, 2023 2022 Operating lease expense: Operating lease cost $ 955 $ 325 Finance lease expense: Amortization of assets obtained under finance leases 952 773 Interest on lease liabilities 321 289 Variable lease expense 102 — Total expense $ 2,330 $ 1,387 As of December 31, Operating leases: 2023 2022 Weighted average remaining lease term (in years) 9.0 9.6 Weighted average discount rate 10.00 % 10.31 % Finance leases: Weighted average remaining lease term (in years) 3.0 3.5 Weighted average discount rate 10.21 % 11.17 % Years Ended December 31, 2023 2022 Supplemental cash flow information related to operating leases was as follows (in thousands): Operating cash flows from operating leases $ 558 $ 159 Operating cash flows from finance leases 327 773 |
Schedule of right-of-use assets | As of December 31, 2023 2022 Manufacturing equipment $ 5,237 $ 4,674 Computers and software 700 700 Leasehold improvements 218 218 Total 6,155 5,592 Less accumulated amortization (2,890) (1,942) ROU assets for finance leases 3,265 3,650 ROU assets for operating leases 5,069 5,633 Total ROU assets $ 8,334 $ 9,283 |
Schedule of maturities of finance lease liabilities | At December 31, 2023, the following table presents maturities of the Company’s finance and operating lease liabilities (in thousands): Year ending December 31, Finance Operating 2024 $ 1,299 $ 836 2025 1,098 861 2026 794 887 2027 304 914 2028 47 941 Thereafter — 4,056 Total minimum lease payments 3,542 8,495 Less amount representing interest (481) (2,970) Present value of minimum lease payments 3,061 5,525 Less current portion (1,052) (304) Lease obligations, less current portion $ 2,009 $ 5,221 |
Schedule of future minimum rental payments required under operating lease | At December 31, 2023, the following table presents maturities of the Company’s finance and operating lease liabilities (in thousands): Year ending December 31, Finance Operating 2024 $ 1,299 $ 836 2025 1,098 861 2026 794 887 2027 304 914 2028 47 941 Thereafter — 4,056 Total minimum lease payments 3,542 8,495 Less amount representing interest (481) (2,970) Present value of minimum lease payments 3,061 5,525 Less current portion (1,052) (304) Lease obligations, less current portion $ 2,009 $ 5,221 |
DEBT (Tables)
DEBT (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
DEBT | |
Schedule of convertible note | The Convertible Notes include the following embedded features: Embedded Feature Nature Description Optional redemption – Election of Company Redemption feature (embedded call option) At any time after the later of (i) the eighteen-month anniversary of the initial issue date and (ii) the date that the Senior Debt is no longer outstanding, if the daily volume weighted-average price of the Company’s Common Stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days exceeds $18.00, the Company may redeem a portion of or all of the principal amount (including accrued and unpaid interest), plus any liquidated damages and any other amounts due in respect of the Notes redeemable in cash. Mandatory redemption – Events of Default Redemption feature (embedded contingent call option) The Company is required to prepay all of the outstanding principal balance and accrued and unpaid interest upon bankruptcy-related events of default. Lenders’ Optional redemption – Events of Default Redemption feature (embedded contingent call option) Holders of at least 25% aggregate principal amount of the Notes can require the Company to pay all of the outstanding principal balance and accrued and unpaid interest upon any event of default that is not bankruptcy related. Lender’s Optional Conversion Conversion feature At each Lenders’ option, subject to specific conditions, it may convert all or any portion of its Notes at an initial conversion rate, which is reduced (and only reduced) at various dates and subject to certain adjustments to the conversion rate in the case of specified events. If a note is converted, the Company will adjust the conversion rate to account for any accrued and unpaid interest on such note plus any Make-Whole Amount related to such note. Lenders’ Optional Conversion Upon Merger Event Other feature Upon a merger event, Note holders of each $1,000 principal amount of Notes are entitled to convert such notes plus accrued interest, plus the Make-Whole Amount related to the in kind and amount of reference property that a holder of a number of shares of Common Stock equal to the conversion rate in effect immediately prior to such event would have owned or been entitled to receive upon such event. Additional interest rate upon certain non-credit related events Other feature Upon an event of default, additional interest will be incurred. Additional interest will also be incurred if the Notes are not freely tradeable. Ability to pay interest in kind (PIK Interest)* Other feature The Company has the election to pay interest in cash or in-kind. *The PIK interest feature is only present in the Subordinated Convertible Note, and not available in the Senior Convertible Notes. |
Schedule of components of loss on debt extinguishment | The following table summarizes the computation of the loss on debt extinguishment of $10.5 million recognized during the year ended December 31, 2023 (in thousands): Amount Fair value - Senior Convertible Notes (pre-financing) $ 2,457 Fair value - Subordinated Convertible Notes (pre-financing) 7,617 10,074 Less consideration transferred to Noteholder Investors: Fees paid to Noteholder Investors (63) Fair value of Series A Preferred Stock (8,910) Fair value of warrants (1,292) Fair value of Senior Convertible Notes (post-financing) (3,599) Fair value of Subordinated Convertible Notes (post-financing) (13,936) (27,800) Plus consideration received from Noteholder Investors: Cash 7,276 Loss on Debt Extinguishment: $ (10,450) |
Schedule of other financing expense related to financing transaction | Amount Cash proceeds received $ 3,150 Less: fair value of Series A Preferred Stock (3,857) Less: fair value of warrants (1,766) Other financing expense $ (2,473) |
Schedule of fair value of convertible notes on issuance | Monte Carlo Simulation Assumptions Asset Risky Expected Risk-Free As of December 31, 2023 Price Yield Volatility Interest Rate Senior Convertible Notes $ 0.98 25.00 % 65 % 4.27 % Subordinated Convertible Notes 0.98 34.30 % 55 % 4.17 % Monte Carlo Simulation Assumptions Asset Risky Expected Risk-Free As of December 31, 2022 Price Yield Volatility Interest Rate Senior Convertible Notes $ 5.56 31.80 % 45 % 4.23 % Subordinated Convertible Notes 5.56 41.20 % 45 % 4.19 % Senior Convertible Notes Subordinated Convertible Notes Beginning fair value, January 1, 2022 $ — $ — Issuance of Convertible Notes 14,536 10,223 Change in fair value of debt (885) 133 Ending fair value, December 31, 2022 13,651 10,356 Paid-in-kind interest — 3,377 Change in fair value of debt (516) (812) Conversion of Subordinated Convertible Notes to Common Stock — (920) Increase in fair value of debt in connection with debt extinguishment transaction 1,142 6,319 Ending fair value, December 31, 2023 $ 14,277 $ 18,320 |
Equipment Financing Obligation | |
DEBT | |
Schedule of payments | Year ending December 31, Amount 2024 $ 57 2025 64 2026 65 Total principal maturities 186 Less: current portion (57) Equipment financing obligation, net of current portion $ 129 |
COMMON STOCK WARRANTS (Tables)
COMMON STOCK WARRANTS (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
COMMON STOCK WARRANTS | |
Schedule of warrant activity | Outstanding Outstanding Issuance December 31, December 31, Liability Classified Warrants Period 2022 Granted Exercised Cancelled 2023 Expiration Convertible Notes Warrants - Senior Debt Dec-22 169,597 — — — 169,597 Dec-27 Convertible Notes Warrants - Subordinated Debt Dec-22 1,745,310 — — — 1,745,310 Dec-27 1,914,907 — — — 1,914,907 Outstanding Outstanding Issuance December 31, December 31, Equity Classified Warrants Period 2022 Granted Exercised Cancelled 2023 Expiration Private Warrants Dec-22 196,256 — — — 196,256 Dec-27 Additional Private Warrants Dec-22 300,685 — — — 300,685 Dec-27 Public Warrants Dec-22 4,100,239 — — — 4,100,239 Dec-27 Transaction Warrants Sep-Oct -23 — 5,454,524 — — 5,454,524 Sep-28 4,597,180 5,454,524 — — 10,051,704 Outstanding Outstanding Issuance December 31, December 31, Liability Classified Warrants Period 2021 Granted Exercised Cancelled 2022 Expiration Convertible Notes Warrants - Senior Debt Dec-22 — 169,597 — — 169,597 Dec-27 Convertible Notes Warrants - Subordinated Debt Dec-22 — 1,745,310 — — 1,745,310 Dec-27 — 1,914,907 — — 1,914,907 Outstanding Outstanding Issuance December 31, December 31, Equity Classified Warrants Period 2021 Granted Exercised Cancelled 2022 Expiration Private Warrants Dec-22 — 196,256 — — 196,256 Dec-27 Additional Private Warrants Dec-22 — 300,685 — — 300,685 Dec-27 Public Warrants Dec-22 — 4,100,239 — — 4,100,239 Dec-27 2021 preferred Series B warrants Jan-20 111,111 — (111,111) — — Jan-30 2020 preferred Series B warrants Apr-21 211,112 — (211,112) — — Apr-31 322,223 4,597,180 (322,223) — 4,597,180 |
Schedule of assumptions for fair value of the outstanding warrants classified as liabilities | Exercise Asset Dividend Expected Risk-Free Expected As of December 31, 2023 Price Price Yield Volatility Interest Rate Life Convertible Notes Warrants $ 11.50 $ 0.98 0 % 65 % 3.90 % 3.93 years Exercise Asset Dividend Expected Risk-Free Expected As of December 31, 2022 Price Price Yield Volatility Interest Rate Life Convertible Notes Warrants $ 11.50 $ 5.56 0 % 40 % 4.00 % 4.93 years |
Schedule of change in fair value of the outstanding warrants classified as liabilities | Convertible Notes Warrants - Senior Debt Convertible Notes Warrants - Subordinated Debt 2020 preferred Series B warrants Warrant liability, January 1, 2022 $ — $ — $ 562 Fair value of warrants granted 465 4,782 — Fair value of warrants exercised — — (580) Change in fair value (288) (2,967) 18 Warrant liability, December 31, 2022 177 1,815 — Change in fair value (168) (1,728) — Warrant liability, December 31, 2023 $ 9 $ 87 $ — |
COMMON STOCK (Tables)
COMMON STOCK (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
COMMON STOCK | |
Schedule of reserved shares of Common Stock | The Company has reserved shares of Common Stock for the following: As of December 31, 2023 2022 2022 Equity Incentive Plan reserve 5,889,525 2,411,283 Reserve for earn-out shares 3,000,000 3,000,000 Reserve for exercise of Public Warrants 4,100,250 4,100,250 Reserve for exercise of Private and Additional Private Warrants 496,941 496,941 Reserve for Transaction Warrants 5,454,524 — Reserve for exercise of SPA warrants 2,262,585 — Reserve for convertible debt 15,766,509 — Employee stock purchase plan 500,000 — Reserve for convertible Series A Preferred Stock 9,436,000 — Total 46,906,334 10,008,474 |
EARN-OUT SHARES (Tables)
EARN-OUT SHARES (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
EARN-OUT SHARES | |
Schedule of changes in fair value of the earnout liability | The changes in fair value of the earnout liability for the years ended December 31, 2023 and 2022 are as follows (in thousands): Amount Earnout liability, January 1, 2022 $ — Issuance of earnout liability 22,070 Change in fair value (9,260) Earnout liability, December 31, 2022 12,810 Change in fair value (12,190) Earnout liability, December 31, 2023 $ 620 |
STOCK-BASED COMPENSATION (Table
STOCK-BASED COMPENSATION (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
STOCK-BASED COMPENSATION | |
Summary of stock option activity | Stock option activity for the year ended December 31, 2023, was as follows (aggregate intrinsic value in thousands): Weighted-Average Stock-Based Compensation Number of Weighted-Average Remaining Aggregate Options Exercise Price Contractual Term Intrinsic Value Outstanding at January 1, 2023 — $ — Granted 1,668,915 4.70 Exercised — Cancelled (106,418) 5.20 Outstanding at December 31, 2023 1,562,497 $ 4.67 9.2 years $ 35 Exercisable at December 31, 2023 — — — — Vested and expected to vest as of December 31, 2023 1,562,497 $ 4.67 9.2 years $ 35 |
Summary of fair value of the stock options weighted average assumptions | December 31, 2023 Dividend yield 0.0% Expected volatility 55.0% Risk-free interest rate 3.6% Expected life 6.2 years |
Summary of stock-based compensation expense | The Company has recorded stock-based compensation expense for the year ended December 31, 2023, related to the grants of stock option awards to employees and nonemployees in the consolidated statements of operations as follows (in thousands): December 31, 2023 Cost of revenue $ 24 Sales and marketing 128 Research and development 232 General and administrative 793 $ 1,177 |
Summary of non-vested restricted common C shares | Number of Weighted-Average Units Exercise Price Unvested at January 1, 2023 — $ — Granted 736,250 0.86 Vested (192,500) 0.86 Forfeited — — Unvested balance at December 31, 2023 543,750 $ 0.86 |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
INCOME TAXES | |
Schedule of reconciliation of the federal income tax rate to the Company's effective tax rate | The following table presents a reconciliation of the tax expense computed at the statutory federal rate and the tax expenses for the periods presented (in thousands): Years Ended December 31, 2023 2022 Statutory federal income tax rate $ (5,057) $ (1,499) State taxes, net of federal tax benefit (1,114) (1,757) Valuation allowance 8,840 8,167 Change in fair value of warrant liability (398) (678) Change in fair value of debt (799) (2,227) Transaction costs — (528) Stock compensation 16 450 Change in fair value of earnout liability (2,560) (1,942) Excess fair value of refinanced debt 466 — Financing costs 519 — Other permanent differences 87 14 $ — $ — |
Schedule of significant components of the Company's net deferred tax assets and liabilities | Years Ended December 31, 2023 2022 Deferred tax assets Net operating losses $ 25,487 $ 17,848 Reserves and accruals 699 619 Debt issuance cost amortization 703 1,184 Debt extinguishment amortization 2,345 646 Debt related warrants 851 1,408 Capitalized research and development 1,224 558 Lease liabilities 1,326 1,541 Stock based compensation 229 — Other deferred tax assets — 1 Gross deferred tax assets 32,864 23,805 Valuation allowance (31,163) (22,022) Net deferred tax assets $ 1,701 $ 1,783 Deferred tax liabilities Depreciation and amortization (485) (271) Right of use assets (1,216) (1,512) Total deferred tax liabilities (1,701) (1,783) Net deferred tax assets (liabilities) $ — $ — |
NET LOSS ATTRIBUTABLE TO COMM_2
NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS | |
Schedule of computation of the basic and diluted net loss per share attributable to common stockholders | The following table sets forth the computation of the basic and diluted net loss per share attributable to Common Stockholders during the years ended December 31 (in thousands, except per share amounts): Years Ended December 31, 2023 2022 Numerator: Net loss attributable to Common Stockholders $ (24,095) $ (7,145) Denominator: Weighted-average common shares outstanding 16,177 10,022 Net loss per share attributable to Common Stockholders, basic $ (1.49) $ (0.71) |
Schedule of potential shares of common stock that were excluded from the computation of diluted net loss per share attributable to common stockholders because including them would have been antidilutive | Years Ended December 31, 2023 2022 Conversion of Series A Preferred Stock 9,436,000 — Outstanding Options to purchase Common Stock 1,562,497 — RSUs to purchase Common Stock 543,750 — Senior and Subordinated Convertible Notes 20,080,459 3,179,410 Warrants to purchase Common Stock 11,966,611 6,512,087 Total 43,589,317 9,691,497 |
BASIS OF ACCOUNTING AND SIGNI_4
BASIS OF ACCOUNTING AND SIGNIFICANT ACCOUNTING POLICIES (Details) | 12 Months Ended | |||
Dec. 31, 2023 USD ($) segment $ / shares | Dec. 31, 2022 USD ($) $ / shares | Mar. 25, 2024 USD ($) | Jul. 01, 2023 USD ($) | |
BASIS OF ACCOUNTING AND SIGNIFICANT ACCOUNTING POLICIES | ||||
Cash and cash equivalents | $ 6,363,000 | $ 15,916,000 | ||
Cash equivalents | 0 | $ 0 | ||
Restricted Cash | $ 700,000 | |||
Compensating cash balance | $ 4,500,000 | |||
Number of customers exceeded 10% of sales / accounts receivable | 0 | 0 | ||
Allowance for doubtful accounts | $ 200,000 | $ 200,000 | ||
Impairment of long lived asset | $ 0 | |||
Common stock, par value (in dollars per share) | $ / shares | $ 0.0001 | $ 0.0001 | ||
Warranty period of the product | 3 years | |||
Accrual for warranty claims | $ 500,000 | $ 300,000 | ||
Invoices customers upon shipment product period | 30 days | |||
Advertising costs | $ 100,000 | 100,000 | ||
Proceeds from convertible debt | $ 27,452,000 | |||
Number of operating segments | segment | 1 | |||
Number of reporting segments | segment | 1 | |||
Subsequent Event [Member] | ||||
BASIS OF ACCOUNTING AND SIGNIFICANT ACCOUNTING POLICIES | ||||
Compensating cash balance | $ 2,500,000 | |||
Lakeshore ("Lakeshore") Acquisition I Corp | ||||
BASIS OF ACCOUNTING AND SIGNIFICANT ACCOUNTING POLICIES | ||||
Transaction expenses | $ 11,500,000 |
BASIS OF ACCOUNTING AND SIGNI_5
BASIS OF ACCOUNTING AND SIGNIFICANT ACCOUNTING POLICIES - Fair value of Financial Instruments (Details) - USD ($) | Dec. 31, 2023 | Dec. 31, 2022 |
BASIS OF ACCOUNTING AND SIGNIFICANT ACCOUNTING POLICIES | ||
Cash, Uninsured Amount | $ 6,800,000 | $ 15,700,000 |
Convertible notes payable | Recurring | ||
BASIS OF ACCOUNTING AND SIGNIFICANT ACCOUNTING POLICIES | ||
Fair value | 14,277 | 13,651 |
Subordinated convertible notes | Recurring | ||
BASIS OF ACCOUNTING AND SIGNIFICANT ACCOUNTING POLICIES | ||
Fair value | 18,320 | 10,356 |
Earn-out liability | Recurring | ||
BASIS OF ACCOUNTING AND SIGNIFICANT ACCOUNTING POLICIES | ||
Fair value | 620 | 12,810 |
Warrant liability | Recurring | ||
BASIS OF ACCOUNTING AND SIGNIFICANT ACCOUNTING POLICIES | ||
Fair value | 96 | 1,992 |
Level 3 | Convertible notes payable | Recurring | ||
BASIS OF ACCOUNTING AND SIGNIFICANT ACCOUNTING POLICIES | ||
Fair value | 14,277 | 13,651 |
Level 3 | Subordinated convertible notes | Recurring | ||
BASIS OF ACCOUNTING AND SIGNIFICANT ACCOUNTING POLICIES | ||
Fair value | 18,320 | 10,356 |
Level 3 | Earn-out liability | Recurring | ||
BASIS OF ACCOUNTING AND SIGNIFICANT ACCOUNTING POLICIES | ||
Fair value | 620 | 12,810 |
Level 3 | Warrant liability | Recurring | ||
BASIS OF ACCOUNTING AND SIGNIFICANT ACCOUNTING POLICIES | ||
Fair value | $ 96 | $ 1,992 |
BASIS OF ACCOUNTING AND SIGNI_6
BASIS OF ACCOUNTING AND SIGNIFICANT ACCOUNTING POLICIES - Property and Equipment (Details) $ in Millions | 12 Months Ended |
Dec. 31, 2023 USD ($) | |
Manufacturing equipment | Minimum | |
BASIS OF ACCOUNTING AND SIGNIFICANT ACCOUNTING POLICIES | |
Estimated useful life of property and equipment | 3 years |
Manufacturing equipment | Maximum | |
BASIS OF ACCOUNTING AND SIGNIFICANT ACCOUNTING POLICIES | |
Estimated useful life of property and equipment | 7 years |
Computers and software | |
BASIS OF ACCOUNTING AND SIGNIFICANT ACCOUNTING POLICIES | |
Estimated useful life of property and equipment | 3 years |
Furniture | |
BASIS OF ACCOUNTING AND SIGNIFICANT ACCOUNTING POLICIES | |
Estimated useful life of property and equipment | 7 years |
Leasehold Improvements | Other Expense [Member] | |
BASIS OF ACCOUNTING AND SIGNIFICANT ACCOUNTING POLICIES | |
Lease, Cost | $ 0.3 |
MERGER AND REVERSE RECAPITALI_2
MERGER AND REVERSE RECAPITALIZATION (Details) - USD ($) $ / shares in Units, $ in Thousands | 12 Months Ended | |||||||
Dec. 06, 2022 | Dec. 05, 2022 | Aug. 26, 2022 | Dec. 31, 2023 | Dec. 31, 2022 | Jun. 29, 2022 | Apr. 30, 2021 | Jan. 31, 2020 | |
MERGER AND REVERSE RECAPITALIZATION | ||||||||
Merger Recapitalization - Preferred | $ 38,637 | |||||||
Merger Recapitalization - Common | $ (2) | |||||||
Issuance of Common Stock | $ 136 | |||||||
Conversion of Stock (in shares) | 1,054,390 | |||||||
Warrants issued | 4,597,180 | |||||||
Earn-out liability | $ (22,070) | |||||||
Assumption of SPAC Assets and Liabilities | $ 2,242 | |||||||
Issuance of Warrants | 1,992,000 | |||||||
Proceeds from Issuance of Convertible Notes | $ 27,452 | |||||||
Proceeds from SPAC Trust | $ 4,921 | |||||||
Common stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 | ||||||
Subordinated Loan and Security Agreement | ||||||||
MERGER AND REVERSE RECAPITALIZATION | ||||||||
Issuance of Common Stock - PIPE Equity (in shares) | 42,464 | |||||||
Debt Instrument, Face Amount | $ 2,500 | |||||||
Class of Warrant or Right, Number of Securities Called by Warrants or Rights | 296,456 | |||||||
First loan and security agreement with a lender | ||||||||
MERGER AND REVERSE RECAPITALIZATION | ||||||||
Debt Instrument, Face Amount | $ 3,800 | |||||||
Second loan and security agreement with a lender | ||||||||
MERGER AND REVERSE RECAPITALIZATION | ||||||||
Debt Instrument, Face Amount | $ 2,000 | |||||||
Convertible Bridge Loan Advance | ||||||||
MERGER AND REVERSE RECAPITALIZATION | ||||||||
Debt Instrument, Face Amount | $ 2,000 | |||||||
Senior Convertible Notes | ||||||||
MERGER AND REVERSE RECAPITALIZATION | ||||||||
Issuance of Common Stock - PIPE Equity (in shares) | 36,469 | |||||||
Debt Instrument, Face Amount | $ 17,000 | $ 17,000 | ||||||
Subordinated Convertible Notes | ||||||||
MERGER AND REVERSE RECAPITALIZATION | ||||||||
Issuance of Common Stock - PIPE Equity (in shares) | 290,244 | |||||||
Debt Instrument, Face Amount | $ 17,500 | $ 17,500 | ||||||
PIPE Equity | ||||||||
MERGER AND REVERSE RECAPITALIZATION | ||||||||
Issuance of Common Stock - PIPE Equity (in shares) | 1,025,000 | 1,830,133 | ||||||
Reserve for exercise of Public Warrants | ||||||||
MERGER AND REVERSE RECAPITALIZATION | ||||||||
Exercise price of warrants | 11.50 | |||||||
Private placement warrants | ||||||||
MERGER AND REVERSE RECAPITALIZATION | ||||||||
Warrants issued | 196,256 | |||||||
Class of Warrant or Right, Number of Securities Called by Warrants or Rights | 1 | |||||||
Exercise price of warrants | $ 11.50 | $ 11.50 | ||||||
Common Stock | ||||||||
MERGER AND REVERSE RECAPITALIZATION | ||||||||
Merger Recapitalization - Preferred | $ 1 | |||||||
Merger Recapitalization - Preferred (in shares) | 7,208,865 | |||||||
Merger Recapitalization - Common | $ (2) | |||||||
Merger Recapitalization - Common (in shares) | (21,336,475) | |||||||
Issuance of Common Stock (in shares) | 16,166 | 820,722 | ||||||
Common Stock | PIPE Equity | ||||||||
MERGER AND REVERSE RECAPITALIZATION | ||||||||
Issuance of Common Stock - PIPE Equity (in shares) | 1,830,133 | |||||||
Common Stock | PIPE Debt SPA Shares | ||||||||
MERGER AND REVERSE RECAPITALIZATION | ||||||||
Issuance of Common Stock - PIPE Equity (in shares) | 326,713 | |||||||
Common Stock | LAAA Founders (Additional Private warrants) | ||||||||
MERGER AND REVERSE RECAPITALIZATION | ||||||||
Conversion of Stock (in shares) | 1,054,390 | |||||||
Additional Paid-In Capital | ||||||||
MERGER AND REVERSE RECAPITALIZATION | ||||||||
Merger Recapitalization - Preferred | $ 38,636 | |||||||
Issuance of Common Stock | $ 136 | |||||||
Earn-out liability | (22,070) | |||||||
Assumption of SPAC Assets and Liabilities | 2,242 | |||||||
Series B redeemable convertible preferred stock | Preferred Stock | ||||||||
MERGER AND REVERSE RECAPITALIZATION | ||||||||
Merger Recapitalization - Preferred | $ (12,390) | |||||||
Merger Recapitalization - Preferred (in shares) | (7,449,445) | |||||||
Series A Redeemable Convertible Preferred Stock | ||||||||
MERGER AND REVERSE RECAPITALIZATION | ||||||||
Conversion of Stock | $ 1,212 | |||||||
Series A Redeemable Convertible Preferred Stock | Preferred Stock | ||||||||
MERGER AND REVERSE RECAPITALIZATION | ||||||||
Merger Recapitalization - Preferred | $ (26,245) | |||||||
Merger Recapitalization - Preferred (in shares) | (45,271) | |||||||
Conversion of Stock (in shares) | (990) | |||||||
Conversion of Stock | $ (1,212) | |||||||
Series A Redeemable Convertible Preferred Stock | Additional Paid-In Capital | ||||||||
MERGER AND REVERSE RECAPITALIZATION | ||||||||
Conversion of Stock | $ 1,212 | |||||||
PubCo Merger | ||||||||
MERGER AND REVERSE RECAPITALIZATION | ||||||||
Issuance of Common Stock - PIPE Equity (in shares) | 1,025,000 | |||||||
Lakeshore ("Lakeshore") Acquisition I Corp | ||||||||
MERGER AND REVERSE RECAPITALIZATION | ||||||||
Issuance of Common Stock - PIPE Equity (in shares) | 820,722 | |||||||
Shares entered into non-redemption agreements (in shares) | 500,000 | |||||||
Stock Repurchased During Period, Shares | 2,380,246 | |||||||
Stock Repurchased During Period, Value | $ 24,400 | $ 24,400 | ||||||
Warrants issued | 4,597,180 | 4,597,180 | ||||||
Business Combination, Consideration Transferred, Liabilities Incurred | $ 11,500 | |||||||
Lakeshore ("Lakeshore") Acquisition I Corp | Private placement warrants | ||||||||
MERGER AND REVERSE RECAPITALIZATION | ||||||||
Exercise price of warrants | $ 11.50 | |||||||
PubCo Merger | ||||||||
MERGER AND REVERSE RECAPITALIZATION | ||||||||
Business Combination, Consideration Transferred | $ 113,000 | |||||||
Issuance of Common Stock (in shares) | 11,300,000 | |||||||
PubCo Merger | Lakeshore ("Lakeshore") Acquisition I Corp | ||||||||
MERGER AND REVERSE RECAPITALIZATION | ||||||||
Business Acquisition, Share Price | $ 10.24 |
MERGER AND REVERSE RECAPITALI_3
MERGER AND REVERSE RECAPITALIZATION - Earnout Shares (Details) $ / shares in Units, $ in Thousands | 12 Months Ended | |||||
Dec. 06, 2022 USD ($) tranche $ / shares shares | Dec. 05, 2022 USD ($) | May 09, 2022 tranche $ / shares shares | Dec. 31, 2023 USD ($) | Dec. 31, 2022 USD ($) | Dec. 31, 2021 USD ($) | |
MERGER AND REVERSE RECAPITALIZATION | ||||||
Amount of loans elected to convert | $ | $ 13,081 | |||||
Share price | $ / shares | $ 0.145 | |||||
Earnout liability | $ | $ 620 | 12,810 | $ 0 | |||
Change in fair value | $ | $ (12,190) | $ (9,260) | ||||
PubCo Merger | ||||||
MERGER AND REVERSE RECAPITALIZATION | ||||||
Maximum number of shares entitled to receive | 3,000,000 | 3,000,000 | ||||
Number of tranches | tranche | 3 | 3 | ||||
Trading period | 20 days | |||||
Consecutive trading period | 30 days | |||||
Term of issuance | 6 months | |||||
ProSomnus Subordinated Debt Conversion [Member] | ||||||
MERGER AND REVERSE RECAPITALIZATION | ||||||
Amount of loans elected to convert | $ | $ 6,500 | |||||
Convertible Bridge Notes | ||||||
MERGER AND REVERSE RECAPITALIZATION | ||||||
Number of days to elect to convert shares | 10 days | |||||
Repayment of debt | $ | $ 100 | |||||
Convertible Bridge Notes | Bridge Loan Debt Conversion [Member] | ||||||
MERGER AND REVERSE RECAPITALIZATION | ||||||
Amount of loans elected to convert | $ | $ 2,600 | |||||
First tranche | PubCo Merger | ||||||
MERGER AND REVERSE RECAPITALIZATION | ||||||
Maximum number of shares entitled to receive | 1,000,000 | |||||
Number of shares issued | 1,000,000 | |||||
Share price | $ / shares | $ 12.50 | $ 12.50 | ||||
Trading period | 20 days | |||||
Consecutive trading period | 30 days | |||||
Term of issuance | 6 months | |||||
Second tranche | PubCo Merger | ||||||
MERGER AND REVERSE RECAPITALIZATION | ||||||
Maximum number of shares entitled to receive | 1,000,000 | |||||
Number of shares issued | 1,000,000 | |||||
Share price | $ / shares | $ 15 | $ 15 | ||||
Trading period | 20 days | |||||
Consecutive trading period | 30 days | |||||
Term of issuance | 6 months | |||||
Third tranche | PubCo Merger | ||||||
MERGER AND REVERSE RECAPITALIZATION | ||||||
Maximum number of shares entitled to receive | 1,000,000 | |||||
Number of shares issued | 1,000,000 | |||||
Share price | $ / shares | $ 17.50 | $ 17.50 | ||||
Trading period | 20 days | |||||
Consecutive trading period | 30 days | |||||
Term of issuance | 6 months |
MERGER AND REVERSE RECAPITALI_4
MERGER AND REVERSE RECAPITALIZATION - Debt Conversions (Details) - USD ($) | 1 Months Ended | 12 Months Ended | |||||||||||||
Sep. 08, 2023 | Jun. 29, 2023 | Dec. 06, 2022 | Dec. 05, 2022 | Dec. 02, 2022 | Aug. 26, 2022 | Jun. 29, 2022 | May 09, 2022 | Oct. 31, 2023 | Sep. 30, 2023 | Nov. 30, 2022 | Dec. 31, 2023 | Dec. 31, 2022 | Apr. 30, 2021 | Jan. 31, 2020 | |
MERGER AND REVERSE RECAPITALIZATION | |||||||||||||||
Amount of loans elected to convert | $ 13,081,000 | ||||||||||||||
Conversion of Subordinated Convertible Notes to Common Stock | $ 920,000 | ||||||||||||||
Repayments of debt | 75,000 | ||||||||||||||
Gain (loss) on extinguishment of debt | (10,450,000) | (2,598,000) | |||||||||||||
PubCo Merger | |||||||||||||||
MERGER AND REVERSE RECAPITALIZATION | |||||||||||||||
Maximum number of shares entitled to receive | 3,000,000 | 3,000,000 | |||||||||||||
ProSomnus Subordinated Debt Conversion [Member] | |||||||||||||||
MERGER AND REVERSE RECAPITALIZATION | |||||||||||||||
Amount of loans elected to convert | $ 6,500,000 | ||||||||||||||
Subordinated Loan and Security Agreement | |||||||||||||||
MERGER AND REVERSE RECAPITALIZATION | |||||||||||||||
Aggregate amount borrowed | $ 2,500,000 | ||||||||||||||
Issuance of Common Stock - PIPE Equity (in shares) | 42,464 | ||||||||||||||
Conversion of Subordinated Convertible Notes to Common Stock | $ 800,000 | $ 800,000 | |||||||||||||
Debt conversion | 80,000 | 80,000 | |||||||||||||
Debt instrument converted bonus | 65,604 | 65,604 | |||||||||||||
Number of common stock shares, called by warrants | 296,456 | ||||||||||||||
Repayments of debt | $ 9,700,000 | $ 9,700,000 | |||||||||||||
Gain (loss) on extinguishment of debt | 2,400,000 | 2,400,000 | |||||||||||||
Subordinated debt | $ 0 | $ 0 | |||||||||||||
First loan and security agreement with a lender | |||||||||||||||
MERGER AND REVERSE RECAPITALIZATION | |||||||||||||||
Aggregate amount borrowed | $ 3,800,000 | ||||||||||||||
Second loan and security agreement with a lender | |||||||||||||||
MERGER AND REVERSE RECAPITALIZATION | |||||||||||||||
Aggregate amount borrowed | $ 2,000,000 | ||||||||||||||
Convertible Bridge Loan Advance | |||||||||||||||
MERGER AND REVERSE RECAPITALIZATION | |||||||||||||||
Aggregate amount borrowed | $ 2,000,000 | ||||||||||||||
Interest rate per annum | 14% | ||||||||||||||
Additional interest rate | 6% | ||||||||||||||
Debt installment payments | $ 100,000 | ||||||||||||||
Proceeds from debt | $ 2,000,000 | ||||||||||||||
Senior Convertible Notes | |||||||||||||||
MERGER AND REVERSE RECAPITALIZATION | |||||||||||||||
Aggregate amount borrowed | $ 17,000,000 | $ 17,000,000 | |||||||||||||
Interest rate per annum | 9% | ||||||||||||||
Debt installment payments | $ 800,000 | ||||||||||||||
Issuance of Common Stock - PIPE Equity (in shares) | 36,469 | ||||||||||||||
Subordinated Convertible Notes | |||||||||||||||
MERGER AND REVERSE RECAPITALIZATION | |||||||||||||||
Aggregate amount borrowed | $ 17,500,000 | $ 17,500,000 | |||||||||||||
Spread on interest rate | 9% | ||||||||||||||
Issuance of Common Stock - PIPE Equity (in shares) | 290,244 | ||||||||||||||
Conversion of Subordinated Convertible Notes to Common Stock | $ 1,000,000 | ||||||||||||||
Debt conversion | 230,494 | ||||||||||||||
Convertible Bridge Notes | |||||||||||||||
MERGER AND REVERSE RECAPITALIZATION | |||||||||||||||
Number of days to elect to convert shares | 10 days | ||||||||||||||
Repayment of debt | $ 100,000 | ||||||||||||||
Convertible Bridge Notes | Bridge Loan Debt Conversion [Member] | |||||||||||||||
MERGER AND REVERSE RECAPITALIZATION | |||||||||||||||
Amount of loans elected to convert | $ 2,600,000 | ||||||||||||||
Convertible Preferred Stock [Member] | |||||||||||||||
MERGER AND REVERSE RECAPITALIZATION | |||||||||||||||
Issuance of Common Stock - PIPE Equity (in shares) | 7,208,865 | ||||||||||||||
Series A Redeemable Convertible Preferred Stock [Member] | |||||||||||||||
MERGER AND REVERSE RECAPITALIZATION | |||||||||||||||
Issuance of Series Preferred Stocks (in shares) | 900 | 9,526 | |||||||||||||
Series B Redeemable Convertible Preferred Stock [Member] | |||||||||||||||
MERGER AND REVERSE RECAPITALIZATION | |||||||||||||||
Issuance of Series Preferred Stocks (in shares) | 10,029 | 161,112 | 161,112 | ||||||||||||
Series B Redeemable Convertible Preferred Stock [Member] | Subordinated Loan and Security Agreement | |||||||||||||||
MERGER AND REVERSE RECAPITALIZATION | |||||||||||||||
Warrants holders cashless price | 161,112 | 161,112 | |||||||||||||
First tranche | PubCo Merger | |||||||||||||||
MERGER AND REVERSE RECAPITALIZATION | |||||||||||||||
Maximum number of shares entitled to receive | 1,000,000 | ||||||||||||||
Second tranche | PubCo Merger | |||||||||||||||
MERGER AND REVERSE RECAPITALIZATION | |||||||||||||||
Maximum number of shares entitled to receive | 1,000,000 | ||||||||||||||
Third tranche | PubCo Merger | |||||||||||||||
MERGER AND REVERSE RECAPITALIZATION | |||||||||||||||
Maximum number of shares entitled to receive | 1,000,000 |
MERGER AND REVERSE RECAPITALI_5
MERGER AND REVERSE RECAPITALIZATION - Transactions prior (Details) - USD ($) | 1 Months Ended | 2 Months Ended | 11 Months Ended | 12 Months Ended | |||||||||||
Dec. 06, 2022 | Dec. 05, 2022 | Dec. 02, 2022 | Aug. 26, 2022 | May 09, 2022 | Dec. 31, 2023 | Oct. 31, 2023 | Sep. 30, 2023 | May 31, 2023 | Jun. 30, 2022 | Dec. 05, 2022 | Dec. 31, 2023 | Dec. 31, 2022 | Apr. 30, 2021 | Jan. 31, 2020 | |
MERGER AND REVERSE RECAPITALIZATION | |||||||||||||||
Proceeds from issue of redeemable convertible preferred stock | $ 10,426,000 | ||||||||||||||
Aggregate amount of Bridge Loan (Unsecured Subordinate Promissory Notes( | $ 920,000 | ||||||||||||||
Common stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 | $ 0.0001 | ||||||||||||
Redeemable Series A convertible preferred stock, shares outstanding | 9,436 | 9,436 | |||||||||||||
Common stock, shares outstanding | 17,388,599 | 17,388,599 | 16,041,464 | ||||||||||||
New issuance shares for bonus shares purpose | 407,173 | 407,173 | |||||||||||||
Issuance of Common Stock - services (in shares) | 20,000 | ||||||||||||||
Common stock in lieu of cash fees | $ 200,000 | $ 7,159,000 | |||||||||||||
Warrants issued | 4,597,180 | ||||||||||||||
Proceeds from Issuance of Convertible Notes | $ 27,452,000 | ||||||||||||||
Subordinated Loan and Security Agreement | |||||||||||||||
MERGER AND REVERSE RECAPITALIZATION | |||||||||||||||
Aggregate amount of Bridge Loan (Unsecured Subordinate Promissory Notes( | $ 800,000 | $ 800,000 | |||||||||||||
Issuance of Common Stock - PIPE Equity (in shares) | 42,464 | ||||||||||||||
Series C common stock | |||||||||||||||
MERGER AND REVERSE RECAPITALIZATION | |||||||||||||||
Options to purchase common stock | 600,000 | ||||||||||||||
Vested | 254,507 | ||||||||||||||
Purchase price | $ 10 | $ 10 | |||||||||||||
Series A, Series B, and Series C common stock | |||||||||||||||
MERGER AND REVERSE RECAPITALIZATION | |||||||||||||||
Conversion of stock | 4,084,418 | ||||||||||||||
Common stock, shares outstanding | 25,420,893 | 25,420,893 | |||||||||||||
Convertible Preferred Stock [Member] | |||||||||||||||
MERGER AND REVERSE RECAPITALIZATION | |||||||||||||||
Issuance of Common Stock - PIPE Equity (in shares) | 7,208,865 | ||||||||||||||
Series A Redeemable Convertible Preferred Stock [Member] | |||||||||||||||
MERGER AND REVERSE RECAPITALIZATION | |||||||||||||||
Issuance of redeemable convertible preferred stock | 900 | 9,526 | |||||||||||||
Proceeds from issue of redeemable convertible preferred stock | $ 900,000 | $ 9,500,000 | |||||||||||||
Convertible preferred stock | 3,052 | ||||||||||||||
Convertible Preferred Stock, shares issued upon conversion | 4,527,065 | 4,527,065 | |||||||||||||
Conversion of stock | 990 | 45,270 | |||||||||||||
Series A Redeemable Convertible Preferred Stock [Member] | The Bridge Loans | |||||||||||||||
MERGER AND REVERSE RECAPITALIZATION | |||||||||||||||
Aggregate amount of Bridge Loan (Unsecured Subordinate Promissory Notes( | $ 3,100,000 | $ 3,100,000 | |||||||||||||
Convertible preferred stock | 3,052 | 3,052 | |||||||||||||
Conversion of stock | 305,206 | 305,206 | |||||||||||||
Series B Redeemable Convertible Preferred Stock [Member] | |||||||||||||||
MERGER AND REVERSE RECAPITALIZATION | |||||||||||||||
Class of Warrant or Right, Exercised | 161,112 | ||||||||||||||
Issuance of redeemable convertible preferred stock | 10,029 | 161,112 | 161,112 | ||||||||||||
Conversion of stock | 7,449,445 | ||||||||||||||
Legacy Series B Convertible Preferred Stock [Member] | |||||||||||||||
MERGER AND REVERSE RECAPITALIZATION | |||||||||||||||
Convertible Preferred Stock, shares issued upon conversion | 2,623,800 | ||||||||||||||
Conversion of stock | 7,288,333 | ||||||||||||||
Lakeshore ("Lakeshore") Acquisition I Corp | |||||||||||||||
MERGER AND REVERSE RECAPITALIZATION | |||||||||||||||
Issuance of Common Stock - PIPE Equity (in shares) | 820,722 | ||||||||||||||
Total bonus shares issued on clos of Merger transaction | 1,145,218 | ||||||||||||||
Number of shares retained | 480,637 | ||||||||||||||
Warrants issued | 4,597,180 | 4,597,180 | |||||||||||||
Goodwill | $ 0 | $ 0 | |||||||||||||
Proceeds from redemptions of Lakeshore's public stockholders | $ 24,400,000 | 24,400,000 | |||||||||||||
Transaction expenses | 11,500,000 | ||||||||||||||
Underwriters, Advisors And Convertible Notes Placement Agents | |||||||||||||||
MERGER AND REVERSE RECAPITALIZATION | |||||||||||||||
Share compensation forfeited in exchange of new issuance of shares | $ 1,600,000 | $ 1,600,000 | |||||||||||||
New issuance shares for bonus shares purpose | 164,010 | 164,010 | |||||||||||||
Issuance of Common Stock - services (in shares) | 716,223 | ||||||||||||||
Common stock in lieu of cash fees | $ 7,200,000 | ||||||||||||||
PubCo Merger | |||||||||||||||
MERGER AND REVERSE RECAPITALIZATION | |||||||||||||||
Issuance of Common Stock - PIPE Equity (in shares) | 1,025,000 | ||||||||||||||
2020 preferred Series B warrants and 2021 preferred Series B warrants | |||||||||||||||
MERGER AND REVERSE RECAPITALIZATION | |||||||||||||||
Class of Warrant or Right, Exercised | 322,223 | ||||||||||||||
2020 preferred Series B warrants | |||||||||||||||
MERGER AND REVERSE RECAPITALIZATION | |||||||||||||||
Class of Warrant or Right, Exercised | (211,112) | ||||||||||||||
Exercise price of warrants | $ 1.80 | ||||||||||||||
2021 preferred Series B warrants | |||||||||||||||
MERGER AND REVERSE RECAPITALIZATION | |||||||||||||||
Class of Warrant or Right, Exercised | (111,111) | ||||||||||||||
Exercise price of warrants | $ 1.80 | ||||||||||||||
ProSomnus Common Holders | Series A Redeemable Convertible Preferred Stock [Member] | |||||||||||||||
MERGER AND REVERSE RECAPITALIZATION | |||||||||||||||
Issuance of redeemable convertible preferred stock | 5,945 | ||||||||||||||
ProSomnus Common Holders | Series B Convertible Preferred Stock [Member] | |||||||||||||||
MERGER AND REVERSE RECAPITALIZATION | |||||||||||||||
Convertible Preferred Stock, shares issued upon conversion | 58,000 | ||||||||||||||
PIPE Equity | |||||||||||||||
MERGER AND REVERSE RECAPITALIZATION | |||||||||||||||
Issuance of Common Stock - PIPE Equity (in shares) | 1,025,000 | 1,830,133 | |||||||||||||
Gross proceed form issuance of common stock - PIPE Equity | $ 10,250,000 | ||||||||||||||
Total bonus shares issued on clos of Merger transaction | 10,300,000 | ||||||||||||||
PIPE Equity | Lakeshore ("Lakeshore") Acquisition I Corp | |||||||||||||||
MERGER AND REVERSE RECAPITALIZATION | |||||||||||||||
Total bonus shares issued on clos of Merger transaction | 805,133 | ||||||||||||||
Proceeds from PIPE Equity financing | $ 10,300,000 | ||||||||||||||
Senior and subordinated convertible notes warrants | |||||||||||||||
MERGER AND REVERSE RECAPITALIZATION | |||||||||||||||
Issuance of Common Stock - PIPE Equity (in shares) | 326,713 | ||||||||||||||
Warrants issued | 1,914,907 | 1,914,907 | |||||||||||||
Exercise price of warrants | $ 11.50 | $ 11.50 | |||||||||||||
Senior and subordinated convertible notes warrants | Series A Redeemable Convertible Preferred Stock [Member] | |||||||||||||||
MERGER AND REVERSE RECAPITALIZATION | |||||||||||||||
Proceeds from issue of redeemable convertible preferred stock | $ 10,000,000 | ||||||||||||||
Convertible preferred stock | 10,029 | 10,029 | |||||||||||||
Convertible Preferred Stock, shares issued upon conversion | 1,002,869 | ||||||||||||||
Senior and subordinated convertible notes warrants | Lakeshore ("Lakeshore") Acquisition I Corp | |||||||||||||||
MERGER AND REVERSE RECAPITALIZATION | |||||||||||||||
Proceeds from Issuance of Convertible Notes | $ 30,000,000 | ||||||||||||||
PIPE Debt SPA Shares | |||||||||||||||
MERGER AND REVERSE RECAPITALIZATION | |||||||||||||||
Gross proceed form issuance of common stock - PIPE Equity | $ 479,000 | ||||||||||||||
Non redeemable shareholders | |||||||||||||||
MERGER AND REVERSE RECAPITALIZATION | |||||||||||||||
Number of Founder Shares Transferred, Shares | 574,035 | ||||||||||||||
Non redeemable shareholders | Lakeshore ("Lakeshore") Acquisition I Corp | |||||||||||||||
MERGER AND REVERSE RECAPITALIZATION | |||||||||||||||
Total bonus shares issued on clos of Merger transaction | 340,085 | ||||||||||||||
PubCo Merger | |||||||||||||||
MERGER AND REVERSE RECAPITALIZATION | |||||||||||||||
Gross proceeds from merger transaction | $ 45,200,000 | $ 45,200,000 |
INVENTORY (Details)
INVENTORY (Details) - USD ($) $ in Thousands | Dec. 31, 2023 | Dec. 31, 2022 |
INVENTORY | ||
Raw Materials | $ 1,967 | $ 562 |
Work in progress | 72 | 78 |
Inventory net | 2,039 | 640 |
Excess or obsolete inventory reserves | $ 0 | $ 0 |
PROPERTY AND EQUIPMENT (Details
PROPERTY AND EQUIPMENT (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
PROPERTY AND EQUIPMENT | ||
Property and equipment, gross | $ 6,088 | $ 4,594 |
Less accumulated depreciation and amortization | (2,730) | (2,190) |
Total property and equipment, net | 3,358 | 2,404 |
Depreciation expense | 978 | 424 |
Manufacturing equipment | ||
PROPERTY AND EQUIPMENT | ||
Property and equipment, gross | 4,042 | 2,517 |
Computers and software | ||
PROPERTY AND EQUIPMENT | ||
Property and equipment, gross | 1,200 | 1,608 |
Leasehold Improvements | ||
PROPERTY AND EQUIPMENT | ||
Property and equipment, gross | $ 846 | 442 |
Furniture | ||
PROPERTY AND EQUIPMENT | ||
Property and equipment, gross | $ 27 |
ACCRUED EXPENSES AND OTHER CU_3
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES - Components (Details) - USD ($) $ in Thousands | Dec. 31, 2023 | Dec. 31, 2022 |
Accrued compensation | ||
Compensation related accruals | $ 3,387 | $ 2,104 |
Marketing programs | 934 | 612 |
Interest | 382 | 110 |
Warranty | 465 | 269 |
Professional fees | 632 | 129 |
Inventory purchases and freight | 613 | |
Other | 343 | 482 |
Accrued expenses | $ 6,756 | $ 3,706 |
LEASES - General (Details)
LEASES - General (Details) - USD ($) $ in Thousands | 1 Months Ended | 12 Months Ended | |||
Dec. 15, 2022 | May 17, 2022 | Feb. 28, 2023 | Dec. 31, 2023 | Dec. 31, 2022 | |
LEASES | |||||
Operating lease, Remaining term (in months) | 10 months | ||||
Monthly payment | $ 100 | ||||
Impairment loss on the ROU | $ 5,400 | $ 300 | $ 273 | ||
Impairment of leasehold | 100 | ||||
Accrued liabilities | $ 100 | ||||
Security deposit | $ 300 | ||||
Amount of guarantee received | $ 1,700 | ||||
Number of years rolling guarantee received | 1 year | ||||
Letter of credit | $ 700 | ||||
Additional commitments | $ 239 | ||||
Minimum | |||||
LEASES | |||||
Finance lease, Remaining term (in years) | 1 year | ||||
Maximum | |||||
LEASES | |||||
Finance lease, Remaining term (in years) | 5 years | ||||
Lease for corporate headquarters | |||||
LEASES | |||||
Operating lease, Lease term (in years) | 10 years |
LEASES - Components of lease co
LEASES - Components of lease cost, weighted average lease terms and discount rates (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Lease Cost: | ||
Operating lease cost | $ 955 | $ 325 |
Finance lease cost: | ||
Amortization of assets obtained under finance leases | 952 | 773 |
Interest on lease liabilities | 321 | 289 |
Variable lease expense | 102 | |
Total expense | $ 2,330 | $ 1,387 |
Weighted average remaining lease term: | ||
Operating leases | 9 years | 9 years 7 months 6 days |
Finance leases | 3 years | 3 years 6 months |
Weighted average discount rate: | ||
Operating leases | 10% | 10.31% |
Finance leases | 10.21% | 11.17% |
Cash paid for amounts included in the measurement of lease liabilities: | ||
Operating cash flows from operating leases | $ 558 | $ 159 |
Operating cash flows from finance leases | 327 | 773 |
Financing cash flows from finance leases | $ 1,303 | $ 1,222 |
LEASES - Right-of-use assets (D
LEASES - Right-of-use assets (Details) - USD ($) $ in Thousands | Dec. 31, 2023 | Dec. 31, 2022 |
LEASES | ||
Total | $ 6,155 | $ 5,592 |
Less accumulated amortization | (2,890) | (1,942) |
Right-of-use assets for finance leases | $ 3,265 | 3,650 |
Finance Lease, Right-of-Use Asset, Statement of Financial Position [Extensible Enumeration] | Right-of-use assets for finance leases | |
Right-of-use assets for operating leases | $ 5,069 | 5,633 |
Operating Lease, Right-of-Use Asset, Statement of Financial Position [Extensible Enumeration] | Right-of-use assets for operating leases | |
Total right-of-use assets | $ 8,334 | 9,283 |
Manufacturing equipment | ||
LEASES | ||
Total | 5,237 | 4,674 |
Computers and software | ||
LEASES | ||
Total | 700 | 700 |
Leasehold Improvements | ||
LEASES | ||
Total | $ 218 | $ 218 |
LEASES - Maturities of finance
LEASES - Maturities of finance lease liabilities (Details) - USD ($) $ in Thousands | Dec. 31, 2023 | Dec. 31, 2022 |
Years ending December 31 | ||
2024 | $ 1,299 | |
2025 | 1,098 | |
2026 | 794 | |
2027 | 304 | |
2028 | 47 | |
Total minimum lease payments | 3,542 | |
Less amount representing interest | (481) | |
Present value of minimum lease payments | 3,061 | |
Less current portion | (1,052) | $ (1,009) |
Finance lease liabilities, less current portion | $ 2,009 | $ 2,081 |
LEASES - Maturities of operatin
LEASES - Maturities of operating lease liabilities (Details) - USD ($) $ in Thousands | Dec. 31, 2023 | Dec. 31, 2022 |
Year ending December 31 | ||
2024 | $ 836 | |
2025 | 861 | |
2026 | 887 | |
2027 | 914 | |
2028 | 941 | |
Thereafter | 4,056 | |
Total minimum lease payments | 8,495 | |
Less amount representing interest | (2,970) | |
Present value of minimum lease payments | 5,525 | |
Less current portion | (304) | $ (215) |
Operating lease liabilities, less current portion | $ 5,221 | $ 5,526 |
DEBT - Equipment Financing Obli
DEBT - Equipment Financing Obligation (Details) $ in Thousands | Dec. 31, 2023 USD ($) |
Future principal maturities under the equipment financing obligation | |
2024 | $ 57 |
2025 | 64 |
2026 | 65 |
Total principal maturities | 186 |
Less current portion | (57) |
Equipment financing obligation, net of current portion | $ 129 |
DEBT - Convertible debt agreeme
DEBT - Convertible debt agreements (Details) | 1 Months Ended | 2 Months Ended | 12 Months Ended | |||||||||||||||||||
Mar. 25, 2024 USD ($) | Mar. 01, 2024 | Dec. 06, 2023 | Dec. 05, 2023 | Sep. 20, 2023 USD ($) $ / shares shares | Sep. 08, 2023 USD ($) shares | Jun. 29, 2023 USD ($) | Jun. 06, 2023 | Jun. 05, 2023 | Dec. 06, 2022 USD ($) $ / shares shares | Dec. 02, 2022 USD ($) shares | Aug. 26, 2022 USD ($) shares | Jun. 29, 2022 USD ($) | Oct. 31, 2023 USD ($) shares | Sep. 30, 2023 USD ($) shares | Oct. 31, 2023 USD ($) shares | Dec. 31, 2023 USD ($) Y $ / shares D | Dec. 31, 2022 USD ($) $ / shares | Sep. 19, 2023 $ / shares | Jul. 01, 2023 USD ($) | Apr. 30, 2021 USD ($) | Jan. 31, 2020 USD ($) | |
DEBT | ||||||||||||||||||||||
Preferred stock, par value (in dollars per share) | $ / shares | $ 0.0001 | $ 0.0001 | ||||||||||||||||||||
Share price | $ / shares | $ 0.145 | |||||||||||||||||||||
Loss on debt extinguishment | $ (10,450,000) | $ (2,598,000) | ||||||||||||||||||||
Threshold trading days | D | 20 | |||||||||||||||||||||
Threshold consecutive trading days | D | 30 | |||||||||||||||||||||
Convertible stock price trigger | $ / shares | $ 18 | |||||||||||||||||||||
Principal amount | $ 1,000 | |||||||||||||||||||||
Aggregate principal amount | 25% | |||||||||||||||||||||
Conversion of Subordinated Convertible Notes to Common Stock | $ 920,000 | |||||||||||||||||||||
Common stock, par value (in dollars per share) | $ / shares | $ 0.0001 | $ 0.0001 | ||||||||||||||||||||
Proceeds from issue of redeemable convertible preferred stock | $ 10,426,000 | |||||||||||||||||||||
Other financing expense | 2,473,000 | |||||||||||||||||||||
Legal and other related cost | 1,500,000 | |||||||||||||||||||||
Lender cost | $ 100,000 | |||||||||||||||||||||
Compensating cash balance | $ 4,500,000 | |||||||||||||||||||||
Subsequent Event [Member] | ||||||||||||||||||||||
DEBT | ||||||||||||||||||||||
Compensating cash balance | $ 2,500,000 | |||||||||||||||||||||
Debt, covenant description | On March 25, 2024, the lenders agreed to (i) waive the minimum cash covenant for the period commencing on March 1, 2024 through and including June 30, 2024 provided that the Company’s cash balance remains above $2.5 million during such period; and (ii) waive any default under the indentures resulting from any breach by the Company that may have arisen up to March 1, 2024. | |||||||||||||||||||||
Series A Redeemable Convertible Preferred Stock | ||||||||||||||||||||||
DEBT | ||||||||||||||||||||||
Preferred stock, par value (in dollars per share) | $ / shares | $ 0.0001 | |||||||||||||||||||||
Conversion price per share | $ / shares | 1 | |||||||||||||||||||||
Share price | $ / shares | $ 1 | |||||||||||||||||||||
Proceeds from issue of redeemable convertible preferred stock | $ 900,000 | $ 9,500,000 | ||||||||||||||||||||
Issuance of redeemable convertible preferred stock | shares | 900 | 9,526 | ||||||||||||||||||||
Noteholder Investor | Series A Redeemable Convertible Preferred Stock | ||||||||||||||||||||||
DEBT | ||||||||||||||||||||||
Issuance of redeemable convertible preferred stock | shares | 7,276 | |||||||||||||||||||||
Non-Noteholder Investors | Series A Redeemable Convertible Preferred Stock | ||||||||||||||||||||||
DEBT | ||||||||||||||||||||||
Issuance of redeemable convertible preferred stock | shares | 3,150 | |||||||||||||||||||||
Securities Purchase Agreement | ||||||||||||||||||||||
DEBT | ||||||||||||||||||||||
Initial conversion price | $ / shares | $ 1 | |||||||||||||||||||||
Conversion price per share | $ / shares | $ 1 | |||||||||||||||||||||
Exercise price of warrants | $ / shares | $ 1 | |||||||||||||||||||||
Debt instrument purchase price (as percentage) | 300% | |||||||||||||||||||||
Securities Purchase Agreement | Series A Redeemable Convertible Preferred Stock | ||||||||||||||||||||||
DEBT | ||||||||||||||||||||||
Issuance of Common Stock - PIPE Equity | $ 10,400,000 | |||||||||||||||||||||
Issuance of Common Stock - PIPE Equity (in shares) | shares | 10,426 | |||||||||||||||||||||
Preferred stock, par value (in dollars per share) | $ / shares | $ 0.0001 | |||||||||||||||||||||
Shares issued price per share | $ / shares | $ 1,000 | |||||||||||||||||||||
Securities Purchase Agreement | Noteholder Investor | ||||||||||||||||||||||
DEBT | ||||||||||||||||||||||
Number of common stock shares, called by warrants | shares | 2,304,524 | 2,304,524 | ||||||||||||||||||||
Proceeds from issue of redeemable convertible preferred stock | $ 7,300,000 | |||||||||||||||||||||
Securities Purchase Agreement | Non-Noteholder Investors | ||||||||||||||||||||||
DEBT | ||||||||||||||||||||||
Number of common stock shares, called by warrants | shares | 3,150,000 | 3,150,000 | ||||||||||||||||||||
Proceeds from issue of redeemable convertible preferred stock | $ 3,200,000 | $ 3,150,000 | ||||||||||||||||||||
Other financing expense | $ 2,473,000 | |||||||||||||||||||||
Measurement Input, Asset Price [Member] | Senior Convertible Notes warrants | ||||||||||||||||||||||
DEBT | ||||||||||||||||||||||
Warrants measurement input | 0.97 | |||||||||||||||||||||
Measurement Input, Risky Yield [Member] | Series A Redeemable Convertible Preferred Stock | ||||||||||||||||||||||
DEBT | ||||||||||||||||||||||
Equity securities, measurement input | 42 | |||||||||||||||||||||
Expected Volatility | Series A Redeemable Convertible Preferred Stock | ||||||||||||||||||||||
DEBT | ||||||||||||||||||||||
Equity securities, measurement input | 65 | |||||||||||||||||||||
Expected Volatility | Senior Convertible Notes warrants | ||||||||||||||||||||||
DEBT | ||||||||||||||||||||||
Warrants measurement input | 65 | |||||||||||||||||||||
Risk-Free Interest Rate | Series A Redeemable Convertible Preferred Stock | ||||||||||||||||||||||
DEBT | ||||||||||||||||||||||
Equity securities, measurement input | 5 | |||||||||||||||||||||
Risk-Free Interest Rate | Senior Convertible Notes warrants | ||||||||||||||||||||||
DEBT | ||||||||||||||||||||||
Warrants measurement input | 4.5 | |||||||||||||||||||||
Dividend Yield | Senior Convertible Notes warrants | ||||||||||||||||||||||
DEBT | ||||||||||||||||||||||
Warrants measurement input | 0 | |||||||||||||||||||||
Expected Life | ||||||||||||||||||||||
DEBT | ||||||||||||||||||||||
Warrants measurement input | Y | 5 | |||||||||||||||||||||
Term of warrants (in years) | 5 years | |||||||||||||||||||||
Convertible notes | Maximum | ||||||||||||||||||||||
DEBT | ||||||||||||||||||||||
Percent probability of the Convertibles Notes being freely tradeable or Company failure to timely file | 5% | |||||||||||||||||||||
Convertible notes | Minimum | ||||||||||||||||||||||
DEBT | ||||||||||||||||||||||
Maturity | 18 months | |||||||||||||||||||||
Convertible notes | Subsequent Event [Member] | ||||||||||||||||||||||
DEBT | ||||||||||||||||||||||
Compensating cash balance | $ 2,500,000 | |||||||||||||||||||||
Debt, covenant description | On March 25, 2024, the lenders agreed to (i) waive the minimum cash covenant for the period commencing on March 1, 2024 through and including June 30, 2024 provided that the Company’s cash balance remains above $2.5 million during such period; and (ii) waive any default under the indentures resulting from any breach by the Company that may have arisen up to March 1, 2024. | |||||||||||||||||||||
Debt, covenant compliance | As of March 1, 2024, the Company was in violation of the minimum cash covenant on the Convertible Notes. | |||||||||||||||||||||
Senior Convertible Notes | ||||||||||||||||||||||
DEBT | ||||||||||||||||||||||
Equipment financing arrangements to purchase capital equipment | $ 17,000,000 | $ 17,000,000 | ||||||||||||||||||||
Initial conversion price | $ / shares | 5.50 | |||||||||||||||||||||
Issuance of Common Stock - PIPE Equity (in shares) | shares | 36,469 | |||||||||||||||||||||
Interest rate per annum | 9% | |||||||||||||||||||||
Debt installment payments | $ 800,000 | |||||||||||||||||||||
Senior Convertible Notes | Securities Purchase Agreement | ||||||||||||||||||||||
DEBT | ||||||||||||||||||||||
Conversion of Subordinated Convertible Notes to Common Stock | $ 3,400,000 | |||||||||||||||||||||
Senior Convertible Notes | Senior Convertible Notes warrants | ||||||||||||||||||||||
DEBT | ||||||||||||||||||||||
Number of common stock shares, called by warrants | shares | 169,597 | |||||||||||||||||||||
Exercise price of warrants | $ / shares | $ 11.50 | |||||||||||||||||||||
Senior Convertible Notes | Measurement Input, Asset Price [Member] | ||||||||||||||||||||||
DEBT | ||||||||||||||||||||||
Debt instrument, measurement input | $ / shares | 0.98 | 5.56 | ||||||||||||||||||||
Senior Convertible Notes | Measurement Input, Risky Yield [Member] | ||||||||||||||||||||||
DEBT | ||||||||||||||||||||||
Debt instrument, measurement input | 25 | 31.80 | ||||||||||||||||||||
Senior Convertible Notes | Expected Volatility | ||||||||||||||||||||||
DEBT | ||||||||||||||||||||||
Debt instrument, measurement input | 65 | 45 | ||||||||||||||||||||
Senior Convertible Notes | Risk-Free Interest Rate | ||||||||||||||||||||||
DEBT | ||||||||||||||||||||||
Debt instrument, measurement input | 4.27 | 4.23 | ||||||||||||||||||||
Subordinated Convertible Notes | ||||||||||||||||||||||
DEBT | ||||||||||||||||||||||
Equipment financing arrangements to purchase capital equipment | $ 17,500,000 | 17,500,000 | ||||||||||||||||||||
Maturity | 3 years | |||||||||||||||||||||
Initial conversion price | $ / shares | $ 5.20 | |||||||||||||||||||||
Issuance of Common Stock - PIPE Equity (in shares) | shares | 290,244 | |||||||||||||||||||||
Spread on interest rate | 9% | |||||||||||||||||||||
Convertible conversion ratio | 222.22222 | 192.3808 | 192.3808 | 86.95665 | ||||||||||||||||||
Shares issued in debt conversion | shares | 230,494 | |||||||||||||||||||||
Conversion of Subordinated Convertible Notes to Common Stock | $ 1,000,000 | |||||||||||||||||||||
Fair value of debt converted | $ 900,000 | |||||||||||||||||||||
Subordinated Convertible Notes | Securities Purchase Agreement | ||||||||||||||||||||||
DEBT | ||||||||||||||||||||||
Conversion of Subordinated Convertible Notes to Common Stock | $ 12,100,000 | |||||||||||||||||||||
Subordinated Convertible Notes | Senior Convertible Notes warrants | ||||||||||||||||||||||
DEBT | ||||||||||||||||||||||
Number of common stock shares, called by warrants | shares | 1,745,310 | |||||||||||||||||||||
Subordinated Convertible Notes | Measurement Input, Asset Price [Member] | ||||||||||||||||||||||
DEBT | ||||||||||||||||||||||
Debt instrument, measurement input | $ / shares | 0.98 | 5.56 | ||||||||||||||||||||
Subordinated Convertible Notes | Measurement Input, Risky Yield [Member] | ||||||||||||||||||||||
DEBT | ||||||||||||||||||||||
Debt instrument, measurement input | 34.30 | 41.20 | ||||||||||||||||||||
Subordinated Convertible Notes | Expected Volatility | ||||||||||||||||||||||
DEBT | ||||||||||||||||||||||
Debt instrument, measurement input | 55 | 45 | ||||||||||||||||||||
Subordinated Convertible Notes | Risk-Free Interest Rate | ||||||||||||||||||||||
DEBT | ||||||||||||||||||||||
Debt instrument, measurement input | 4.17 | 4.19 | ||||||||||||||||||||
Senior Subordinated Notes [Member] | ||||||||||||||||||||||
DEBT | ||||||||||||||||||||||
Interest rate per annum | 14% | |||||||||||||||||||||
Loss on debt extinguishment | $ 200,000 | |||||||||||||||||||||
Debt installment payments | 100,000 | |||||||||||||||||||||
Senior Subordinated Notes [Member] | Maximum | ||||||||||||||||||||||
DEBT | ||||||||||||||||||||||
Equipment financing arrangements to purchase capital equipment | $ 2,000,000 | |||||||||||||||||||||
Subordinated Loan and Security Agreement | ||||||||||||||||||||||
DEBT | ||||||||||||||||||||||
Equipment financing arrangements to purchase capital equipment | $ 2,500,000 | |||||||||||||||||||||
Number of common stock shares, called by warrants | shares | 296,456 | |||||||||||||||||||||
Issuance of Common Stock - PIPE Equity (in shares) | shares | 42,464 | |||||||||||||||||||||
Subordinated debt | $ 0 | $ 0 | ||||||||||||||||||||
Loss on debt extinguishment | $ 2,400,000 | $ 2,400,000 | ||||||||||||||||||||
Shares issued in debt conversion | shares | 80,000 | 80,000 | ||||||||||||||||||||
Conversion of Subordinated Convertible Notes to Common Stock | $ 800,000 | $ 800,000 | ||||||||||||||||||||
First loan and security agreement with a lender | ||||||||||||||||||||||
DEBT | ||||||||||||||||||||||
Equipment financing arrangements to purchase capital equipment | $ 3,800,000 | |||||||||||||||||||||
Second loan and security agreement with a lender | ||||||||||||||||||||||
DEBT | ||||||||||||||||||||||
Equipment financing arrangements to purchase capital equipment | $ 2,000,000 |
DEBT - Computation of the loss
DEBT - Computation of the loss on debt extinguishment (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
DEBT | ||
Fair value | $ 10,074 | |
Fees paid to Noteholder Investors | (63) | |
Consideration transferred to Noteholder Investors | (27,800) | |
Consideration received from Noteholder Investors | 7,276 | |
Loss on debt extinguishment | (10,450) | $ (2,598) |
Series A convertible preferred stock | ||
DEBT | ||
Consideration transferred to Noteholder Investors | (8,910) | |
Warrant | ||
DEBT | ||
Consideration transferred to Noteholder Investors | (1,292) | |
Senior Convertible Notes | ||
DEBT | ||
Fair value | 2,457 | |
Consideration transferred to Noteholder Investors | (3,599) | |
Subordinated Convertible Notes | ||
DEBT | ||
Fair value | 7,617 | |
Consideration transferred to Noteholder Investors | $ (13,936) |
DEBT - Other Financing Expense
DEBT - Other Financing Expense (Details) - USD ($) $ in Thousands | 2 Months Ended | 12 Months Ended |
Oct. 31, 2023 | Dec. 31, 2023 | |
DEBT | ||
Cash proceeds received | $ 10,426 | |
Other financing expense | (2,473) | |
Securities Purchase Agreement | Non-Noteholder Investors | ||
DEBT | ||
Cash proceeds received | $ 3,200 | 3,150 |
Less fair value of Series A Convertible Preferred Stock | (3,857) | |
Less fair value of warrants | (1,766) | |
Other financing expense | $ (2,473) |
DEBT - Fair Value of Convertibl
DEBT - Fair Value of Convertible Notes (Details) $ in Thousands | 12 Months Ended | |
Dec. 31, 2023 USD ($) $ / shares | Dec. 31, 2022 USD ($) $ / shares | |
Senior Convertible Notes | ||
DEBT | ||
Convertible notes, beginning balance | $ 13,651 | |
Increase in fair value of debt in connection with debt extinguishment transaction | 1,142 | $ 14,536 |
Change in fair value of debt | $ (516) | $ (885) |
Fair Value, Liability, Recurring Basis, Unobservable Input Reconciliation, Gain (Loss), Statement of Income or Comprehensive Income [Extensible Enumeration] | Fair Value Adjustment of Debt | Fair Value Adjustment of Debt |
Convertible notes, ending balance | $ 14,277 | $ 13,651 |
Subordinated Convertible Notes | ||
DEBT | ||
Convertible notes, beginning balance | 10,356 | |
Paid-in-kind interest | 3,377 | |
Conversion of Subordinated Convertible Notes to common stock | (920) | |
Increase in fair value of debt in connection with debt extinguishment transaction | 6,319 | 10,223 |
Change in fair value of debt | (812) | 133 |
Convertible notes, ending balance | $ 18,320 | $ 10,356 |
Measurement Input, Asset Price [Member] | Senior Convertible Notes | ||
DEBT | ||
Debt instrument, measurement input | $ / shares | 0.98 | 5.56 |
Measurement Input, Asset Price [Member] | Subordinated Convertible Notes | ||
DEBT | ||
Debt instrument, measurement input | $ / shares | 0.98 | 5.56 |
Measurement Input, Risky Yield [Member] | Senior Convertible Notes | ||
DEBT | ||
Debt instrument, measurement input | 25 | 31.80 |
Measurement Input, Risky Yield [Member] | Subordinated Convertible Notes | ||
DEBT | ||
Debt instrument, measurement input | 34.30 | 41.20 |
Expected Volatility | Senior Convertible Notes | ||
DEBT | ||
Debt instrument, measurement input | 65 | 45 |
Expected Volatility | Subordinated Convertible Notes | ||
DEBT | ||
Debt instrument, measurement input | 55 | 45 |
Risk-Free Interest Rate | Senior Convertible Notes | ||
DEBT | ||
Debt instrument, measurement input | 4.27 | 4.23 |
Risk-Free Interest Rate | Subordinated Convertible Notes | ||
DEBT | ||
Debt instrument, measurement input | 4.17 | 4.19 |
DEBT - Subordinated Notes (Deta
DEBT - Subordinated Notes (Details) - USD ($) | 12 Months Ended | ||
Dec. 31, 2023 | Dec. 31, 2022 | Jun. 29, 2022 | |
DEBT | |||
Conversion of Subordinated Convertible Notes to Common Stock | $ 920,000 | ||
Prepayment penalty rate upon change in control event | 5% | ||
Unpaid interest at the following rates: | |||
Prepayment penalty rate upon change in control event | 5% | ||
Minimum | |||
Unpaid interest at the following rates: | |||
Prepayment penalty rates | 1% | ||
Maximum | |||
Unpaid interest at the following rates: | |||
Prepayment penalty rates | 3% | ||
Subordinated Notes | |||
DEBT | |||
Gross proceeds | $ 400,000 | ||
Issuance costs | 0 | ||
Interest rate per annum | 14% | ||
Interest expense | 100,000 | ||
Subordinated Notes | Stockholders, directors, and employees | |||
DEBT | |||
Gross proceeds | 300,000 | ||
Subordinated Notes | Customers | |||
DEBT | |||
Gross proceeds | 100,000 | ||
Cash Notes | |||
DEBT | |||
Interest expense | 200,000 | ||
PIK Notes | |||
DEBT | |||
Interest expense | $ 2,300,000 |
DEBT - Unsecured Subordinated P
DEBT - Unsecured Subordinated Promissory Notes (Details) - USD ($) $ in Thousands | 1 Months Ended | 2 Months Ended | 12 Months Ended | ||||||||
Dec. 06, 2022 | Dec. 02, 2022 | May 09, 2022 | May 04, 2022 | Dec. 31, 2023 | Apr. 30, 2022 | Mar. 31, 2022 | Jun. 30, 2022 | Mar. 31, 2022 | Dec. 31, 2023 | Dec. 31, 2022 | |
DEBT | |||||||||||
Repayments of debt | $ 75 | ||||||||||
Conversion of Subordinated Convertible Notes to Common Stock | $ 920 | ||||||||||
Series A Redeemable Convertible Preferred Stock | |||||||||||
DEBT | |||||||||||
Conversion of stock | 990 | 45,270 | |||||||||
Convertible preferred stock | 3,052 | ||||||||||
The Bridge Loans | |||||||||||
DEBT | |||||||||||
Proceeds from debt | $ 200 | $ 3,000 | |||||||||
Interest rate per annum | 15% | 15% | |||||||||
Repayments of debt | $ 500 | ||||||||||
Additional grant of debt (as a percent) | 5% | ||||||||||
The Bridge Loans | Series A Redeemable Convertible Preferred Stock | |||||||||||
DEBT | |||||||||||
Additional grant of debt (as a percent) | 5% | ||||||||||
Debt elected for conversion | $ 2,600 | ||||||||||
Conversion of Subordinated Convertible Notes to Common Stock | $ 3,100 | $ 3,100 | |||||||||
Conversion of stock | 305,206 | 305,206 | |||||||||
Convertible preferred stock | 3,052 | 3,052 | |||||||||
The Bridge Loans | Maximum | |||||||||||
DEBT | |||||||||||
Period to elect for conversion | 10 days | ||||||||||
Subordinated Loan and Security Agreement | |||||||||||
DEBT | |||||||||||
Repayments of debt | $ 9,700 | $ 9,700 | |||||||||
Conversion of Subordinated Convertible Notes to Common Stock | $ 800 | $ 800 |
DEBT - Subordinated Loan and Se
DEBT - Subordinated Loan and Security Agreement (Details) | 1 Months Ended | 12 Months Ended | ||||
Aug. 26, 2022 USD ($) shares | Apr. 30, 2021 USD ($) $ / shares shares | Jan. 31, 2020 USD ($) $ / shares shares | Dec. 31, 2022 USD ($) | Dec. 31, 2023 Y | Dec. 31, 2021 USD ($) | |
2020 preferred Series B warrants | ||||||
DEBT | ||||||
Warrants issued to purchase shares | shares | 211,112 | |||||
Exercise price of warrants | $ / shares | $ 1.80 | |||||
Valuation cap in case of liquidation | $ 150,000,000 | |||||
Term of warrants (in years) | 10 years | |||||
Fair value of the warrant at issuance | $ 228,000 | $ 562,000 | ||||
2021 preferred Series B warrants | ||||||
DEBT | ||||||
Warrants issued to purchase shares | shares | 111,111 | |||||
Exercise price of warrants | $ / shares | $ 1.80 | |||||
Valuation cap in case of liquidation | $ 150,000,000 | |||||
Term of warrants (in years) | 10 years | |||||
Fair value of the warrant at issuance | $ 143,333 | |||||
Expected Life | ||||||
DEBT | ||||||
Term of warrants (in years) | 5 years | |||||
Measurement input | Y | 5 | |||||
Subordinated Loan and Security Agreement | ||||||
DEBT | ||||||
Aggregate amount borrowed | $ 2,500,000 | |||||
Issuance of Common Stock - PIPE Equity (in shares) | shares | 42,464 | |||||
Subordinated Loan and Security Agreement | Minimum | ||||||
DEBT | ||||||
Effective interest rate (in percent) | 25.80% | 25.80% | ||||
Subordinated Loan and Security Agreement | Maximum | ||||||
DEBT | ||||||
Effective interest rate (in percent) | 27.20% | 26.20% | ||||
First loan and security agreement with a lender | ||||||
DEBT | ||||||
Aggregate amount borrowed | $ 3,800,000 | |||||
Monthly loan repayable equal to percentage of net revenues | 4% | |||||
Amount of return cap | $ 9,500,000 | |||||
First loan and security agreement with a lender | If fully repaid with in 12 months | ||||||
DEBT | ||||||
Term of return cap | 12 months | |||||
Return cap (in percent) | 30% | |||||
First loan and security agreement with a lender | If fully repaid with in 24 months | ||||||
DEBT | ||||||
Term of return cap | 24 months | |||||
Return cap (in percent) | 22% | |||||
First loan and security agreement with a lender | If fully repaid with in 36 months | ||||||
DEBT | ||||||
Term of return cap | 36 months | |||||
Return cap (in percent) | 11.85% | |||||
Second loan and security agreement with a lender | ||||||
DEBT | ||||||
Aggregate amount borrowed | $ 2,000,000 | |||||
Monthly loan repayable equal to percentage of net revenues | 1.0526% | |||||
Monthly loan repayable equal to percentage of net revenues ins second year | 2.105% | |||||
Amount of return cap | $ 3,900,000 | |||||
Revenue share payments | $ 1,600,000 | |||||
Second loan and security agreement with a lender | If fully repaid with in 12 months | ||||||
DEBT | ||||||
Term of return cap | 12 months | |||||
Return cap (in percent) | 22% | |||||
Second loan and security agreement with a lender | If fully repaid with in 24 months | ||||||
DEBT | ||||||
Term of return cap | 24 months | |||||
Return cap (in percent) | 11.85% |
DEBT - Secured Subordinated loa
DEBT - Secured Subordinated loan (Details) - USD ($) | 1 Months Ended | 12 Months Ended | |||||||||
Dec. 06, 2022 | Dec. 02, 2022 | Aug. 26, 2022 | Jun. 29, 2022 | May 09, 2022 | Dec. 31, 2023 | Oct. 31, 2023 | Sep. 30, 2023 | Nov. 30, 2022 | Dec. 31, 2023 | Dec. 31, 2022 | |
DEBT | |||||||||||
Conversion of Subordinated Convertible Notes to common stock | $ (920,000) | ||||||||||
Gain (loss) on extinguishment of debt | (10,450,000) | $ (2,598,000) | |||||||||
Outstanding balance of notes | $ 186,000 | 186,000 | |||||||||
Debt issuance costs | $ 253,000 | ||||||||||
Repayments of debt | 75,000 | ||||||||||
Proceeds from convertible debt | $ 27,452,000 | ||||||||||
Reserve for convertible Series A Preferred Stock | |||||||||||
DEBT | |||||||||||
Issuance of Series Preferred Stocks (in shares) | 900 | 9,526 | |||||||||
Conversion of convertible securities | 990,000 | ||||||||||
Series B Redeemable Convertible Preferred Stock | |||||||||||
DEBT | |||||||||||
Issuance of Series Preferred Stocks (in shares) | 10,029 | 161,112 | 161,112 | ||||||||
Conversion of convertible securities | 1,002,869 | ||||||||||
Secured subordinated loan | |||||||||||
DEBT | |||||||||||
Interest rate per annum | 14% | ||||||||||
Debt installment payments | $ 100,000 | ||||||||||
Gain (loss) on extinguishment of debt | 200,000 | ||||||||||
Interest expense | $ 100,000 | ||||||||||
Secured subordinated loan | Maximum | |||||||||||
DEBT | |||||||||||
Equipment financing arrangements to purchase capital equipment | 2,000,000 | ||||||||||
Convertible Bridge Loan Advance | |||||||||||
DEBT | |||||||||||
Equipment financing arrangements to purchase capital equipment | $ 2,000,000 | ||||||||||
Interest rate per annum | 14% | ||||||||||
Additional interest rate | 6% | ||||||||||
Debt installment payments | $ 100,000 | ||||||||||
Proceeds from debt | $ 2,000,000 | ||||||||||
Subordinated Debt | |||||||||||
DEBT | |||||||||||
Equipment financing arrangements to purchase capital equipment | $ 2,500,000 | ||||||||||
Conversion of Subordinated Convertible Notes to common stock | $ (800,000) | $ (800,000) | |||||||||
Gain (loss) on extinguishment of debt | $ 2,400,000 | 2,400,000 | |||||||||
Debt conversion | 80,000 | 80,000 | |||||||||
Debt instrument converted bonus | 65,604 | 65,604 | |||||||||
Number of common stock shares, called by warrants | 296,456 | ||||||||||
Repayments of debt | $ 9,700,000 | $ 9,700,000 | |||||||||
Issuance of Common Stock - PIPE Equity (in shares) | 42,464 | ||||||||||
Subordinated debt | $ 0 | $ 0 | $ 0 | ||||||||
Subordinated Debt | Series B Redeemable Convertible Preferred Stock | |||||||||||
DEBT | |||||||||||
Warrants holders cashless price | 161,112 | 161,112 |
COMMON STOCK WARRANTS (Details)
COMMON STOCK WARRANTS (Details) - $ / shares | 2 Months Ended | 12 Months Ended | |||||
Dec. 06, 2022 | Nov. 28, 2022 | Oct. 31, 2023 | Dec. 31, 2023 | Dec. 31, 2022 | Sep. 20, 2023 | Jun. 30, 2021 | |
COMMON STOCK WARRANTS | |||||||
Warrant outstanding | 11,966,611 | ||||||
Warrants issued | 4,597,180 | ||||||
Lakeshore ("Lakeshore") Acquisition I Corp | |||||||
COMMON STOCK WARRANTS | |||||||
Warrants issued | 4,597,180 | 4,597,180 | |||||
Number of shares issuable per warrant | 4,597,180 | 1 | |||||
Senior and subordinated convertible notes warrants | |||||||
COMMON STOCK WARRANTS | |||||||
Warrants issued | 1,914,907 | 1,914,907 | |||||
Exercise price of warrants | $ 11.50 | ||||||
Private placement warrants | |||||||
COMMON STOCK WARRANTS | |||||||
Warrants issued | 196,256 | ||||||
Number of shares issuable per warrant | 1 | ||||||
Exercise price of warrants | $ 11.50 | $ 11.50 | |||||
Private placement warrants | Lakeshore ("Lakeshore") Acquisition I Corp | |||||||
COMMON STOCK WARRANTS | |||||||
Warrant outstanding | 196,256 | ||||||
Number of shares issuable per warrant | 1 | ||||||
Exercise price of warrants | $ 11.50 | ||||||
Transaction Warrants | |||||||
COMMON STOCK WARRANTS | |||||||
Warrant outstanding | 5,454,524 | ||||||
Warrants issued | 5,454,524 | ||||||
Exercise price of warrants | $ 1 | $ 1 | |||||
Term of warrants (in years) | 5 years | ||||||
Public warrants | |||||||
COMMON STOCK WARRANTS | |||||||
Warrant outstanding | 4,100,239 | ||||||
Number of shares issuable per warrant | 1 | ||||||
Exercise price of warrants | $ 11.50 | ||||||
Public warrants | Lakeshore ("Lakeshore") Acquisition I Corp | |||||||
COMMON STOCK WARRANTS | |||||||
Warrant outstanding | 4,100,239 | ||||||
Additional Private Placement Warrants | Lakeshore ("Lakeshore") Acquisition I Corp | |||||||
COMMON STOCK WARRANTS | |||||||
Warrants issued | 300,685 |
COMMON STOCK WARRANTS - Warrant
COMMON STOCK WARRANTS - Warrant Activity (Details) - shares | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
COMMON STOCK WARRANTS | ||
Warrants Outstanding | 11,966,611 | |
Liability Classified Warrants | ||
COMMON STOCK WARRANTS | ||
Warrants Outstanding | 1,914,907 | |
Warrants, Granted | 1,914,907 | |
Warrants Outstanding | 1,914,907 | 1,914,907 |
Convertible Notes Warrants - Senior Debt | ||
COMMON STOCK WARRANTS | ||
Warrants Outstanding | 169,597 | |
Warrants, Granted | 169,597 | |
Warrants Outstanding | 169,597 | 169,597 |
Convertible Notes Warrants - Subordinated Debt | ||
COMMON STOCK WARRANTS | ||
Warrants Outstanding | 1,745,310 | |
Warrants, Granted | 1,745,310 | |
Warrants Outstanding | 1,745,310 | 1,745,310 |
Equity Classified Warrants | ||
COMMON STOCK WARRANTS | ||
Warrants Outstanding | 4,597,180 | 322,223 |
Warrants, Granted | 5,454,524 | 4,597,180 |
Warrants, Exercised | (322,223) | |
Warrants Outstanding | 10,051,704 | 4,597,180 |
Private Warrants | ||
COMMON STOCK WARRANTS | ||
Warrants Outstanding | 196,256 | |
Warrants, Granted | 196,256 | |
Warrants Outstanding | 196,256 | 196,256 |
Additional Private Warrants | ||
COMMON STOCK WARRANTS | ||
Warrants Outstanding | 300,685 | |
Warrants, Granted | 300,685 | |
Warrants Outstanding | 300,685 | 300,685 |
Public Warrants | ||
COMMON STOCK WARRANTS | ||
Warrants Outstanding | 4,100,239 | |
Warrants, Granted | 4,100,239 | |
Warrants Outstanding | 4,100,239 | 4,100,239 |
Transaction Warrants | ||
COMMON STOCK WARRANTS | ||
Warrants, Granted | 5,454,524 | |
Warrants Outstanding | 5,454,524 | |
2021 preferred Series B warrants | ||
COMMON STOCK WARRANTS | ||
Warrants Outstanding | 111,111 | |
Warrants, Exercised | (111,111) | |
2020 preferred Series B warrants | ||
COMMON STOCK WARRANTS | ||
Warrants Outstanding | 211,112 | |
Warrants, Exercised | (211,112) |
COMMON STOCK WARRANTS - Loan an
COMMON STOCK WARRANTS - Loan and Security Agreement (Details) - USD ($) | 12 Months Ended | |||||
May 09, 2022 | Dec. 31, 2023 | Dec. 31, 2022 | Dec. 31, 2021 | Apr. 30, 2021 | Jan. 31, 2020 | |
COMMON STOCK WARRANTS | ||||||
Warrant outstanding | 11,966,611 | |||||
Series B Redeemable Convertible Preferred Stock | ||||||
COMMON STOCK WARRANTS | ||||||
Issuance of Series Preferred Stocks (in shares) | 10,029 | 161,112 | 161,112 | |||
2020 preferred Series B warrants and 2021 preferred Series B warrants | ||||||
COMMON STOCK WARRANTS | ||||||
Warrant outstanding | 0 | |||||
2020 preferred Series B warrants | ||||||
COMMON STOCK WARRANTS | ||||||
Warrants issued to purchase shares | 211,112 | |||||
Exercise price of warrants | $ 1.80 | |||||
Valuation cap in case of liquidation | $ 150,000,000 | |||||
Term of warrants (in years) | 10 years | |||||
Fair value of the warrant at issuance | $ 562,000 | $ 228,000 | ||||
Warrant outstanding | 211,112 | |||||
2021 preferred Series B warrants | ||||||
COMMON STOCK WARRANTS | ||||||
Warrants issued to purchase shares | 111,111 | |||||
Exercise price of warrants | $ 1.80 | |||||
Valuation cap in case of liquidation | $ 150,000,000 | |||||
Term of warrants (in years) | 10 years | |||||
Fair value of the warrant at issuance | $ 143,333 | |||||
Warrant outstanding | 111,111 |
COMMON STOCK WARRANTS - Convert
COMMON STOCK WARRANTS - Convertible Notes Warrants (Details) - USD ($) $ / shares in Units, $ in Millions | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2023 | |
COMMON STOCK WARRANTS | ||
Warrants issued | 4,597,180 | |
Expected Life | ||
COMMON STOCK WARRANTS | ||
Term of warrants (in years) | 5 years | |
Convertible Notes Warrants - Senior Debt | ||
COMMON STOCK WARRANTS | ||
Warrants issued | 169,597 | |
Exercise price of warrants | $ 11.50 | |
Term of warrants (in years) | 5 years | |
Convertible Notes Warrants - Subordinated Debt | ||
COMMON STOCK WARRANTS | ||
Warrants issued | 1,745,310 | |
Exercise price of warrants | $ 11.50 | |
Term of warrants (in years) | 5 years | |
Convertible Notes Warrants | ||
COMMON STOCK WARRANTS | ||
Exercise price of warrants | $ 11.50 | $ 11.50 |
Fair value of warrants | $ 5.2 |
COMMON STOCK WARRANTS - Black-S
COMMON STOCK WARRANTS - Black-Scholes Option Pricing Assumptions (Details) | Dec. 31, 2023 Y $ / shares | Dec. 31, 2022 Y $ / shares | Apr. 30, 2021 $ / shares | Jan. 31, 2020 $ / shares |
Expected Life | ||||
COMMON STOCK WARRANTS | ||||
Measurement input | Y | 5 | |||
Convertible Notes Warrants - Senior Debt | ||||
COMMON STOCK WARRANTS | ||||
Exercise Price | $ 11.50 | |||
Convertible Notes Warrants - Subordinated Debt | ||||
COMMON STOCK WARRANTS | ||||
Exercise Price | 11.50 | |||
Convertible Notes Warrants | ||||
COMMON STOCK WARRANTS | ||||
Exercise Price | $ 11.50 | $ 11.50 | ||
Convertible Notes Warrants | Asset Price | ||||
COMMON STOCK WARRANTS | ||||
Measurement input | 0.98 | 5.56 | ||
Convertible Notes Warrants | Dividend Yield | ||||
COMMON STOCK WARRANTS | ||||
Measurement input | 0 | 0 | ||
Convertible Notes Warrants | Expected Volatility | ||||
COMMON STOCK WARRANTS | ||||
Measurement input | 0.65 | 0.40 | ||
Convertible Notes Warrants | Risk-Free Interest Rate | ||||
COMMON STOCK WARRANTS | ||||
Measurement input | 0.0390 | 0.0400 | ||
Convertible Notes Warrants | Expected Life | ||||
COMMON STOCK WARRANTS | ||||
Measurement input | Y | 3.93 | 4.93 | ||
2020 preferred Series B warrants | ||||
COMMON STOCK WARRANTS | ||||
Exercise Price | $ 1.80 | |||
2021 preferred Series B warrants | ||||
COMMON STOCK WARRANTS | ||||
Exercise Price | $ 1.80 |
COMMON STOCK WARRANTS - Fair Va
COMMON STOCK WARRANTS - Fair Value of Outstanding Warrants (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Change in fair value of the outstanding warrants classified as liabilities | ||
Change in fair value | $ (1,896) | $ (3,237) |
Convertible Notes Warrants - Senior Debt | ||
Change in fair value of the outstanding warrants classified as liabilities | ||
Warrant liability, beginning | 177 | |
Fair value of warrants granted | 465 | |
Change in fair value | (168) | (288) |
Warrant liability, ending | 9 | 177 |
Convertible Notes Warrants - Subordinated Debt | ||
Change in fair value of the outstanding warrants classified as liabilities | ||
Warrant liability, beginning | 1,815 | |
Fair value of warrants granted | 4,782 | |
Change in fair value | (1,728) | (2,967) |
Warrant liability, ending | $ 87 | 1,815 |
2020 preferred Series B warrants | ||
Change in fair value of the outstanding warrants classified as liabilities | ||
Warrant liability, beginning | 562 | |
Fair value of warrants exercised | (580) | |
Change in fair value | $ 18 |
COMMON STOCK WARRANTS - Private
COMMON STOCK WARRANTS - Private warrants, Public warrants, Additional Private warrants and Transaction warrants (Details) $ / shares in Units, $ in Millions | 2 Months Ended | 12 Months Ended | ||||
Dec. 06, 2022 $ / shares shares | Oct. 31, 2023 shares | Dec. 31, 2022 USD ($) $ / shares shares | Dec. 31, 2023 USD ($) Y $ / shares shares | Sep. 20, 2023 $ / shares | Jun. 30, 2021 $ / shares shares | |
COMMON STOCK WARRANTS | ||||||
Warrants issued | 4,597,180 | |||||
Share price | $ / shares | $ 0.145 | |||||
Warrant outstanding | 11,966,611 | |||||
Fair value of class of warrant or right | $ | $ 0.7 | |||||
Expected term | ||||||
COMMON STOCK WARRANTS | ||||||
Term of warrants (in years) | 5 years | |||||
Warrants measurement input | Y | 5 | |||||
Public and Private Placement Warrants | ||||||
COMMON STOCK WARRANTS | ||||||
Number of shares issuable per warrant | 1 | |||||
Share price | $ / shares | $ 11.50 | |||||
Term of warrants (in years) | 5 years | |||||
Warrant convertible in stock redeemable, stock price trigger | $ / shares | $ 18 | |||||
Transaction Warrants | ||||||
COMMON STOCK WARRANTS | ||||||
Warrants issued | 5,454,524 | |||||
Term of warrants (in years) | 5 years | |||||
Exercise price of warrants | $ / shares | $ 1 | $ 1 | ||||
Warrant outstanding | 5,454,524 | |||||
Fair value of the warrant at issuance | $ | $ 1.3 | |||||
Transaction Warrants | Asset Price | ||||||
COMMON STOCK WARRANTS | ||||||
Warrants measurement input | $ / shares | 0.97 | |||||
Transaction Warrants | Volatility Rate | ||||||
COMMON STOCK WARRANTS | ||||||
Warrants measurement input | 0.650 | |||||
Transaction Warrants | Risk-Free Interest Rate | ||||||
COMMON STOCK WARRANTS | ||||||
Warrants measurement input | 0.045 | |||||
Transaction Warrants | Dividend | ||||||
COMMON STOCK WARRANTS | ||||||
Warrants measurement input | 0 | |||||
Lakeshore ("Lakeshore") Acquisition I Corp | ||||||
COMMON STOCK WARRANTS | ||||||
Warrants issued | 4,597,180 | 4,597,180 | ||||
Number of shares issuable per warrant | 4,597,180 | 1 | ||||
Share price | $ / shares | $ 11.50 |
COMMON STOCK - Schedule of comm
COMMON STOCK - Schedule of common stock (Details) - shares | Dec. 31, 2023 | Jun. 15, 2023 | Dec. 31, 2022 |
Class of Stock [Line Items] | |||
Total | 46,906,334 | 10,008,474 | |
Reserve for convertible Series A Preferred Stock | |||
Class of Stock [Line Items] | |||
Total | 9,436,000 | ||
Reserve for exercise of Public Warrants | |||
Class of Stock [Line Items] | |||
Total | 4,100,250 | 4,100,250 | |
Reserve for exercise of Private and Additional Private Warrants | |||
Class of Stock [Line Items] | |||
Total | 496,941 | 496,941 | |
Reserve for Transaction Warrants | |||
Class of Stock [Line Items] | |||
Total | 5,454,524 | ||
Reserve for exercise of SPA warrants | |||
Class of Stock [Line Items] | |||
Total | 2,262,585 | ||
Reserve for convertible debt | |||
Class of Stock [Line Items] | |||
Total | 15,766,509 | ||
Reserve for earn-out shares | |||
Class of Stock [Line Items] | |||
Total | 3,000,000 | 3,000,000 | |
2022 Equity Incentive Plan reserve | |||
Class of Stock [Line Items] | |||
Total | 5,889,525 | 2,411,283 | |
Employee stock purchase plan | |||
Class of Stock [Line Items] | |||
Total | 500,000 | 500,000 |
COMMON STOCK (Details)
COMMON STOCK (Details) - $ / shares | Dec. 31, 2023 | Dec. 06, 2023 | Dec. 05, 2023 | Dec. 31, 2022 |
Class of Stock [Line Items] | ||||
Common stock, shares authorized | 150,000,000 | 150,000,000 | 100,000,000 | 100,000,000 |
Par value per share | $ 0.0001 | $ 0.0001 | ||
Common Stock | ||||
Class of Stock [Line Items] | ||||
Common stock, shares authorized | 150,000,000 | |||
2022 Equity Incentive Plan reserve | ||||
Class of Stock [Line Items] | ||||
Number of shares authorized | 6,000,000 | |||
Number of shares available for grant | 5,889,525 |
PREFERRED STOCK (Details)
PREFERRED STOCK (Details) $ / shares in Units, $ in Thousands | 1 Months Ended | 12 Months Ended | ||||||||
Dec. 31, 2023 USD ($) $ / shares shares | Oct. 31, 2023 USD ($) shares | Sep. 30, 2023 USD ($) shares | Dec. 31, 2022 USD ($) $ / shares shares | May 31, 2022 USD ($) $ / shares shares | Dec. 31, 2023 USD ($) D $ / shares shares | Dec. 31, 2022 USD ($) $ / shares shares | Dec. 06, 2023 shares | Dec. 05, 2023 shares | Dec. 06, 2022 $ / shares | |
Temporary Equity [Line Items] | ||||||||||
Preferred stock, shares authorized | shares | 1,500,000 | 1,000,000 | 1,500,000 | 1,000,000 | 1,500,000 | 1,000,000 | ||||
Preferred stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 | $ 0.0001 | $ 0.0001 | ||||||
Proceeds from issue of redeemable convertible preferred stock | $ | $ 10,426 | |||||||||
Conversion of Series A Preferred Stock to Common Stock | $ | $ 1,212 | |||||||||
Shares outstanding | shares | 9,436 | 9,436 | ||||||||
Liquidation amount | $ | $ 14,200 | $ 14,200 | ||||||||
Stock-based compensation | $ | $ 1,177 | $ 2,157 | ||||||||
Share Price | $ 0.145 | |||||||||
Series A Redeemable Convertible Preferred Stock | ||||||||||
Temporary Equity [Line Items] | ||||||||||
Preferred stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 | ||||||||
Shares Authorized | shares | 25,000 | 5,945 | 5,945 | 25,000 | 5,945 | |||||
Convertible preferred stock dividend rate | 8% | |||||||||
Issuance of redeemable convertible preferred stock | shares | 900 | 9,526 | ||||||||
Proceeds from issue of redeemable convertible preferred stock | $ | $ 900 | $ 9,500 | ||||||||
Conversion of stock | shares | 990 | 45,270 | ||||||||
Conversion of convertible securities | shares | 990,000 | |||||||||
Conversion of Series A Preferred Stock to Common Stock | $ | $ 1,200 | |||||||||
Gain/Loss on conversion of shares | $ | $ 0 | |||||||||
Stock-based compensation | $ | $ 2,100 | $ 2,100 | ||||||||
Redeemable Series A convertible preferred stock, par value (in dollars per share) | $ 1,000 | $ 10 | $ 10 | $ 1,000 | $ 10 | |||||
Share Price | 1 | 1 | ||||||||
Conversion rate | 1 | $ 1 | ||||||||
Percentage of shares to be automatically converted | 50% | |||||||||
Trading days | D | 30 | |||||||||
Consecutive trading days | D | 30 | |||||||||
Voting right conversion price | $ 1.04 | |||||||||
Liquidation preference percentage | 150% | |||||||||
Series A Redeemable Convertible Preferred Stock | Price greater than $4.50 per share | ||||||||||
Temporary Equity [Line Items] | ||||||||||
Stock price | 4.50 | $ 4.50 | ||||||||
Series A Redeemable Convertible Preferred Stock | Price greater than $6 per share | ||||||||||
Temporary Equity [Line Items] | ||||||||||
Stock price | $ 6 | $ 6 | ||||||||
Series A and B Redeemable Convertible Preferred Stock | ||||||||||
Temporary Equity [Line Items] | ||||||||||
Preferred stock shares outstanding | shares | 0 | 0 |
EARN-OUT SHARES (Details)
EARN-OUT SHARES (Details) | Dec. 06, 2022 tranche $ / shares shares | May 09, 2022 tranche $ / shares shares |
Common Stock | ||
Share price | $ / shares | $ 0.145 | |
PubCo Merger | ||
Common Stock | ||
Maximum number of shares entitled to receive | 3,000,000 | 3,000,000 |
Number of tranches | tranche | 3 | 3 |
Trading period | 20 days | |
Consecutive trading period | 30 days | |
Term of issuance | 6 months | |
First tranche | PubCo Merger | ||
Common Stock | ||
Maximum number of shares entitled to receive | 1,000,000 | |
Number of shares issued | 1,000,000 | |
Share price | $ / shares | $ 12.50 | $ 12.50 |
Trading period | 20 days | |
Consecutive trading period | 30 days | |
Term of issuance | 6 months | |
Second tranche | PubCo Merger | ||
Common Stock | ||
Maximum number of shares entitled to receive | 1,000,000 | |
Number of shares issued | 1,000,000 | |
Share price | $ / shares | $ 15 | $ 15 |
Trading period | 20 days | |
Consecutive trading period | 30 days | |
Term of issuance | 6 months | |
Third tranche | PubCo Merger | ||
Common Stock | ||
Maximum number of shares entitled to receive | 1,000,000 | |
Number of shares issued | 1,000,000 | |
Share price | $ / shares | $ 17.50 | $ 17.50 |
Trading period | 20 days | |
Consecutive trading period | 30 days | |
Term of issuance | 6 months |
EARN-OUT SHARES - Schedule of c
EARN-OUT SHARES - Schedule of changes in fair value of the earnout liability (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
EARN-OUT SHARES | ||
Earning liability beginning balance | $ 12,810 | $ 0 |
Issuance of earnout liability | 22,070 | |
Change in fair value | (12,190) | (9,260) |
Earnout liability, ending balance | $ 620 | $ 12,810 |
STOCK-BASED COMPENSATION (Detai
STOCK-BASED COMPENSATION (Details) - USD ($) $ in Thousands | 1 Months Ended | 12 Months Ended | |||
Dec. 06, 2022 | May 31, 2023 | Dec. 31, 2023 | Dec. 31, 2022 | Oct. 15, 2023 | |
SHARE BASED PAYMENTS | |||||
Stock-based compensation expense | $ 1,177 | ||||
Tax benefits related to stock-based compensation expense | $ 0 | $ 0 | |||
Issuance of Common Stock - services (in shares) | 20,000 | ||||
Issuance of Common Stock - services | $ 200 | $ 7,159 | |||
2022 Equity Incentive Plan reserve | |||||
SHARE BASED PAYMENTS | |||||
Stock options offered (in shares) | 1,668,915 | 0 | |||
Number of shares authorized | 6,000,000 | ||||
Number of shares available for grant | 5,889,525 | ||||
2022 Equity Incentive Plan reserve | More than 10% voting power | |||||
SHARE BASED PAYMENTS | |||||
Percent of exercise price of stock options | 110% | ||||
2022 Equity Incentive Plan reserve | More than 10% voting power | Maximum | |||||
SHARE BASED PAYMENTS | |||||
Expiration period of stock options | 5 years | ||||
2022 Equity Incentive Plan reserve | Less than 10% voting power | |||||
SHARE BASED PAYMENTS | |||||
Percent of exercise price of stock options | 100% | ||||
2022 Equity Incentive Plan reserve | Less than 10% voting power | Maximum | |||||
SHARE BASED PAYMENTS | |||||
Expiration period of stock options | 10 years | ||||
Restricted common C shares | |||||
SHARE BASED PAYMENTS | |||||
Stock options offered (in shares) | 1,668,915 | ||||
2019 restricted common C shares | |||||
SHARE BASED PAYMENTS | |||||
Vested | 254,507 | ||||
Number of shares vesting upon change in control transactions | 600,000 | ||||
Unvested restricted stock outstanding | 0 | 0 | |||
Restricted stock units | |||||
SHARE BASED PAYMENTS | |||||
Vesting period | 2 years | ||||
Vested | 192,500 | ||||
Unvested restricted stock outstanding | 543,750 | 543,750 | |||
Number of shares granted, period of cliff after vesting | 60 days |
STOCK-BASED COMPENSATION - 2022
STOCK-BASED COMPENSATION - 2022 Equity Incentive Plan (Details) $ / shares in Units, $ in Thousands | 12 Months Ended |
Dec. 31, 2023 USD ($) $ / shares shares | |
Weighted average Remaining Contractual Life and intrinsic value | |
Weighted-average remaining life, Options outstanding | 9 years 2 months 12 days |
Weighted-average remaining life, Option exercisable, end of period | 0 years |
Weighted-average remaining life, Options vested and expected to vest, end of period | 9 years 2 months 12 days |
Intrinsic value, Options outstanding, end of period | $ | $ 35 |
Intrinsic value, Options vested and expected to vest, end of period | $ | 35 |
Unamortized compensation expense | $ | $ 3,200 |
Unrecognized compensation expense recognized over a weighted-average period | 3 years 1 month 9 days |
Weighted-average grant date fair value of options granted | $ 2.60 |
Restricted common C shares | |
Number of Options Outstanding | |
Granted (in shares) | shares | 1,668,915 |
Cancelled (in shares) | shares | 106,418 |
Options outstanding, end of period (in shares) | shares | 1,562,497 |
Vested and expected to vest, end of period (in shares) | shares | 1,562,497 |
Weighted-average Exercise Price | |
Granted (in dollars per share) | $ 4.70 |
Cancelled (in dollars per share) | 5.20 |
Options outstanding, end of period (in dollars per share) | 4.67 |
Options vested and expected to vest, end of period (in dollars per share) | $ 4.67 |
STOCK-BASED COMPENSATION - Fair
STOCK-BASED COMPENSATION - Fair value of the stock options weighted average assumptions (Details) | 12 Months Ended |
Dec. 31, 2023 $ / shares | |
Share-Based Compensation Arrangement by Share-Based Payment Award, Fair Value Assumptions and Methodology [Abstract] | |
Dividend yield | 0% |
Expected volatility | 55% |
Risk-free interest rate | 3.60% |
Expected life | 6 years 2 months 12 days |
Common stock dividends paid | $ 0 |
Common stock dividends declared | $ 0 |
STOCK-BASED COMPENSATION - Stoc
STOCK-BASED COMPENSATION - Stock-based compensation expense (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Share-Based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||
Stock-based compensation expense | $ 1,177 | $ 2,200 |
Unamortized compensation expense | $ 3,200 | |
Unrecognized compensation expense recognized over a weighted-average period | 3 years 1 month 9 days | |
Restricted stock units | ||
Share-Based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||
Stock-based compensation expense | $ 100 | |
Unamortized compensation expense | $ 400 | |
Unrecognized compensation expense recognized over a weighted-average period | 1 year 9 months 14 days | |
Cost of revenue | ||
Share-Based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||
Stock-based compensation expense | $ 24 | |
Sales and marketing | ||
Share-Based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||
Stock-based compensation expense | 128 | |
Research and development | ||
Share-Based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||
Stock-based compensation expense | 232 | |
General and administrative | ||
Share-Based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||
Stock-based compensation expense | $ 793 |
STOCK-BASED COMPENSATION - Non-
STOCK-BASED COMPENSATION - Non-vested restricted stock units (Details) - $ / shares | 1 Months Ended | 12 Months Ended | |
Oct. 31, 2023 | Dec. 31, 2023 | Oct. 15, 2023 | |
Weighted-Average Grant Date Fair Value Per Share | |||
Unrecognized compensation expense related to unvested restricted common C shares recognized over a weighted-average period | 3 years 1 month 9 days | ||
Restricted stock units | |||
Restricted common C shares | |||
Granted | 736,250 | 736,250 | |
Vested | (192,500) | ||
Outstanding at the end | 543,750 | ||
Weighted-Average Grant Date Fair Value Per Share | |||
Granted (in dollars per share) | $ 0.86 | ||
Vested (in dollars per share) | 0.86 | ||
Outstanding at the end (in dollars per share) | $ 0.86 | ||
Unrecognized compensation expense related to unvested restricted common C shares recognized over a weighted-average period | 1 year 9 months 14 days | ||
Unvested restricted stock outstanding | 543,750 | 543,750 |
STOCK-BASED COMPENSATION - 2023
STOCK-BASED COMPENSATION - 2023 Employee Stock Purchase Plan (Details) - shares | 12 Months Ended | ||
Dec. 31, 2023 | Jun. 15, 2023 | Dec. 31, 2022 | |
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||
Number of shares available for purchase | 46,906,334 | 10,008,474 | |
Number of shares issued | 0 | ||
2023 ESPP | |||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||
Number of shares available for purchase | 500,000 | 500,000 |
INCOME TAXES - Continuing opera
INCOME TAXES - Continuing operations (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
INCOME TAXES | ||
Statutory federal income tax rate | $ (5,057) | $ (1,499) |
State taxes, net of federal tax benefit | (1,114) | (1,757) |
Valuation allowance | 8,840 | 8,167 |
Change in fair value of warrant liability | (398) | (678) |
Change in fair value of debt | (799) | (2,227) |
Transaction costs | (528) | |
Stock compensation | 16 | 450 |
Change in fair value of earnout liability | (2,560) | (1,942) |
Excess fair value of refinanced deb | 466 | |
Financing costs | 519 | |
Other permanent differences | 87 | 14 |
Total | $ 0 | $ 0 |
INCOME TAXES - Deferred tax ass
INCOME TAXES - Deferred tax assets and liabilities (Details) - USD ($) $ in Thousands | Dec. 31, 2023 | Dec. 31, 2022 |
Deferred tax assets | ||
Net operating losses | $ 25,487 | $ 17,848 |
Reserves and accruals | 699 | 619 |
Debt issuance cost amortization | 703 | 1,184 |
Debt extinguishment amortization | 2,345 | 646 |
Debt related warrants | 851 | 1,408 |
Capitalized research and development | 1,224 | 558 |
Lease liabilities | 1,326 | 1,541 |
Stock based compensation | 229 | |
Other deferred tax assets | 1 | |
Total deferred tax assets | 32,864 | 23,805 |
Deferred tax liabilities | ||
Depreciation and amortization | (485) | (271) |
Right of use assets | (1,216) | (1,512) |
Total deferred tax liabilities | (1,701) | (1,783) |
Net deferred tax assets | 0 | 0 |
Valuation allowance | (31,163) | (22,022) |
Net deferred tax asset | $ 1,701 | $ 1,783 |
INCOME TAXES - Additional infor
INCOME TAXES - Additional information (Details) - USD ($) | 12 Months Ended | ||
Dec. 31, 2023 | Dec. 31, 2022 | Dec. 31, 2017 | |
Operating loss carryforwards | |||
Income taxes, domestic component | $ 24,100,000 | $ 7,100,000 | |
Operating loss carryforwards with ultimate carry forward period | 69,400,000 | ||
Increase in valuation allowance | 9,100,000 | 8,200,000 | |
Interest and penalties | $ 0 | 0 | |
Minimum | |||
Operating loss carryforwards | |||
NOL and Credit carryforwards adjustment period | 3 years | ||
Maximum | |||
Operating loss carryforwards | |||
Operating loss carryforwards | $ 44,800,000 | ||
NOL and Credit carryforwards adjustment period | 4 years | ||
Federal | |||
Operating loss carryforwards | |||
Operating loss carryforwards | $ 99,500,000 | $ 99,500,000 | |
State | |||
Operating loss carryforwards | |||
Operating loss carryforwards | $ 52,900,000 |
EMPLOYEE BENEFIT PLAN (Details)
EMPLOYEE BENEFIT PLAN (Details) - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
EMPLOYEE BENEFIT PLAN | ||
Employee contribution to the plan (Percentage) | 3% | |
401k matching contributions | $ 0.3 | $ 0.1 |
NET LOSS ATTRIBUTABLE TO COMM_3
NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS (Details) - USD ($) $ / shares in Units, $ in Thousands | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Numerator: | ||
Net loss attributable to Common Stockholders | $ (24,095) | $ (7,145) |
Denominator: | ||
Weighted-average common shares outstanding, basic | 16,177,000 | 10,022,000 |
Weighted average shares of Common Stock, diluted | 16,177,000 | 10,022,000 |
Net loss per share attributable to Common Stockholders, basic | $ (1.49) | $ (0.71) |
Net loss per share attributable to Common Stockholders, diluted | $ (1.49) | $ (0.71) |
Shares excluded from diluted earnings per share due to their anti-dilutive effect | 43,589,317 | 9,691,497 |
NET LOSS ATTRIBUTABLE TO COMM_4
NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS - Potential Shares of Common Stock Excluded From The Computation Of Diluted Net Loss Per Share (Details) - USD ($) $ in Thousands | 1 Months Ended | 2 Months Ended | 12 Months Ended | ||
Oct. 31, 2023 | Sep. 30, 2023 | Oct. 31, 2023 | Dec. 31, 2023 | Dec. 31, 2022 | |
Antidilutive securities | |||||
Potential shares of common stock that were excluded from the computation of diluted net loss per share attributable to common stockholders because including them would have been antidilutive | 43,589,317 | 9,691,497 | |||
Proceeds from issue of redeemable convertible preferred stock | $ 10,426 | ||||
Series A Redeemable Convertible Preferred Stock | |||||
Antidilutive securities | |||||
Issuance of redeemable convertible preferred stock | 900 | 9,526 | |||
Proceeds from issue of redeemable convertible preferred stock | $ 900 | $ 9,500 | |||
Noteholder Investor | Securities Purchase Agreement | |||||
Antidilutive securities | |||||
Number of common stock shares, called by warrants | 2,304,524 | 2,304,524 | |||
Proceeds from issue of redeemable convertible preferred stock | $ 7,300 | ||||
Noteholder Investor | Series A Redeemable Convertible Preferred Stock | |||||
Antidilutive securities | |||||
Issuance of redeemable convertible preferred stock | 7,276 | ||||
Conversion of Series A Preferred Stock | |||||
Antidilutive securities | |||||
Potential shares of common stock that were excluded from the computation of diluted net loss per share attributable to common stockholders because including them would have been antidilutive | 9,436,000 | ||||
Outstanding Options to purchase Common Stock | |||||
Antidilutive securities | |||||
Potential shares of common stock that were excluded from the computation of diluted net loss per share attributable to common stockholders because including them would have been antidilutive | 1,562,497 | ||||
RSUs to purchase Common Stock | |||||
Antidilutive securities | |||||
Potential shares of common stock that were excluded from the computation of diluted net loss per share attributable to common stockholders because including them would have been antidilutive | 543,750 | ||||
Senior and Subordinated Convertible Notes | |||||
Antidilutive securities | |||||
Potential shares of common stock that were excluded from the computation of diluted net loss per share attributable to common stockholders because including them would have been antidilutive | 20,080,459 | 3,179,410 | |||
Warrants to purchase Common Stock | |||||
Antidilutive securities | |||||
Potential shares of common stock that were excluded from the computation of diluted net loss per share attributable to common stockholders because including them would have been antidilutive | 11,966,611 | 6,512,087 |
SUBSEQUENT EVENTS (Details)
SUBSEQUENT EVENTS (Details) - USD ($) $ / shares in Units, $ in Millions | 12 Months Ended | ||||||
Mar. 25, 2024 | Mar. 15, 2024 | Mar. 01, 2024 | Dec. 31, 2023 | Jul. 01, 2023 | Dec. 31, 2022 | May 31, 2022 | |
Subsequent Event [Line Items] | |||||||
Preferred stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 | |||||
Compensating cash balance | $ 4.5 | ||||||
Subsequent Event [Member] | |||||||
Subsequent Event [Line Items] | |||||||
Compensating cash balance | $ 2.5 | ||||||
Debt, covenant description | On March 25, 2024, the lenders agreed to (i) waive the minimum cash covenant for the period commencing on March 1, 2024 through and including June 30, 2024 provided that the Company’s cash balance remains above $2.5 million during such period; and (ii) waive any default under the indentures resulting from any breach by the Company that may have arisen up to March 1, 2024. | ||||||
Subsequent Event [Member] | Convertible notes | |||||||
Subsequent Event [Line Items] | |||||||
Compensating cash balance | $ 2.5 | ||||||
Debt, covenant description | On March 25, 2024, the lenders agreed to (i) waive the minimum cash covenant for the period commencing on March 1, 2024 through and including June 30, 2024 provided that the Company’s cash balance remains above $2.5 million during such period; and (ii) waive any default under the indentures resulting from any breach by the Company that may have arisen up to March 1, 2024. | ||||||
Debt, covenant compliance | As of March 1, 2024, the Company was in violation of the minimum cash covenant on the Convertible Notes. | ||||||
Series A Redeemable Convertible Preferred Stock | |||||||
Subsequent Event [Line Items] | |||||||
Redeemable Series A convertible preferred stock, par value (in dollars per share) | 1,000 | $ 10 | $ 10 | ||||
Preferred stock, par value (in dollars per share) | $ 0.0001 | ||||||
Convertible preferred stock dividend rate | 8% | ||||||
Series A Redeemable Convertible Preferred Stock | Subsequent Event [Member] | |||||||
Subsequent Event [Line Items] | |||||||
Dividends payable, date of record | Mar. 01, 2024 | ||||||
Dividends payable, date to be paid | Mar. 15, 2024 | ||||||
Convertible preferred stock dividend rate | 8% |
Pay vs Performance Disclosure
Pay vs Performance Disclosure - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Pay vs Performance Disclosure | ||
Net Income (Loss) | $ (24,095) | $ (7,145) |
Insider Trading Arrangements
Insider Trading Arrangements | 3 Months Ended |
Dec. 31, 2023 | |
Trading Arrangements, by Individual | |
Rule 10b5-1 Arrangement Adopted | false |
Non-Rule 10b5-1 Arrangement Adopted | false |
Rule 10b5-1 Arrangement Terminated | false |
Non-Rule 10b5-1 Arrangement Terminated | false |