SPRINGBIG HOLDIN(SBIG) - 2024 Q3 - Quarterly Report

Part I – Financial Information Item 1. Financial Statements (Unaudited) The unaudited condensed consolidated financial statements for the period ended September 30, 2024, reflect decreased revenue but a significantly narrowed net loss, driven by reduced operating expenses, alongside an increase in total assets and liabilities Condensed Consolidated Balance Sheets As of September 30, 2024, total assets were $7.48 million, an increase from $5.11 million at year-end 2023, mainly due to a higher operating lease asset, while total liabilities increased to $16.33 million from $13.78 million, driven by new debt and lease obligations, and the stockholders' deficit widened slightly to $8.84 million from $8.67 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2024 (unaudited) | Dec 31, 2023 (audited) | | :--- | :--- | :--- | | Total Current Assets | $4,424 | $4,445 | | Total Assets | $7,482 | $5,105 | | Total Current Liabilities | $13,700 | $13,551 | | Total Liabilities | $16,325 | $13,779 | | Total Stockholders' Deficit | ($8,843) | ($8,674) | Condensed Consolidated Statements of Operations For the third quarter of 2024, revenue decreased to $6.4 million from $6.9 million year-over-year, but the net loss significantly narrowed to $0.55 million from $2.74 million due to a 44% reduction in operating expenses, while for the nine-month period, revenue fell to $19.5 million from $21.3 million, and the net loss improved dramatically to $0.78 million from $7.03 million, aided by a $1.57 million gain on note repurchase Statement of Operations Summary (in thousands) | Metric | Q3 2024 | Q3 2023 | Nine Months 2024 | Nine Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Revenues | $6,425 | $6,888 | $19,511 | $21,259 | | Gross Profit | $4,435 | $5,284 | $13,812 | $16,794 | | Loss from Operations | ($45) | ($2,692) | ($384) | ($6,193) | | Net Loss | ($554) | ($2,742) | ($784) | ($7,032) | | Net Loss per Share | ($0.01) | ($0.07) | ($0.02) | ($0.21) | Condensed Consolidated Statements of Cash Flows For the nine months ended September 30, 2024, net cash used in operating activities was $1.3 million, a significant improvement from $3.5 million used in the prior-year period, with net cash from financing activities at $1.9 million, driven by proceeds from new debt issuance ($8.0 million gross) used to repurchase old debt ($2.9 million) and repay advances, leading to an overall increase in cash and cash equivalents by $516,000 to end the period at $847,000 Cash Flow Summary (Nine Months Ended Sep 30, in thousands) | Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | ($1,334) | ($3,468) | | Net cash used in investing activities | ($64) | ($259) | | Net cash provided by financing activities | $1,914 | $474 | | Net increase/(decrease) in cash | $516 | ($3,253) | | Cash at end of period | $847 | $293 | Notes to the Condensed Consolidated Financial Statements The notes detail going concern uncertainties due to accumulated losses, management's mitigation plans including recent debt restructuring, and significant events such as debt financing, note repurchase gains, and customer/vendor concentration - The company has incurred historical losses resulting in an accumulated deficit of approximately $37.3 million and a working capital deficit of $9.3 million as of September 30, 2024, raising going concern considerations[36] - In January 2024, the company repurchased a senior secured note and associated warrants for $2.9 million, recognizing a $1.6 million gain on the transaction[77] - Subsequent to the quarter end, on November 11, 2024, the company amended its debt agreements, extending the maturity to January 2027 and increasing interest rates on its 12% Secured Term Notes and 8% Secured Convertible Notes to 17% and 13%, respectively[115][116][69] - For the nine months ended September 30, 2024, one customer represented 14% of total revenues, and one vendor represented 86% of cost of goods sold[50][51] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses a Q3 2024 revenue decline due to market conditions and client issues, offset by significant operating expense reductions leading to positive Adjusted EBITDA, and highlights recent debt financing and amendments to secure liquidity Key Operating and Financial Metrics The company's key metrics show a mixed performance, with revenue and retail clients declining year-over-year, but significant profitability improvement as Adjusted EBITDA turned positive for both the third quarter and the first nine months of 2024, despite a decrease in net revenue retention Key Metrics Comparison | Metric | Q3 2024 | Q3 2023 | Nine Months 2024 | Nine Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $6,425K | $6,888K | $19,511K | $21,259K | | Net loss | ($554K) | ($2,742K) | ($784K) | ($7,032K) | | Adjusted EBITDA | $409K | ($882K) | $889K | ($3,370K) | | Number of retail clients | 1,022 | 1,356 | 1,022 | 1,356 | | Net revenue retention | 88% | 93% | 88% | 93% | - Net revenue retention rate, which tracks recurring subscription revenue from existing clients, decreased to 88% for the twelve months ended September 30, 2024, from 93% in the prior year[130] Results of Operations For Q3 2024, revenues fell 7% year-over-year to $6.4 million, and gross profit decreased 16% to $4.4 million, but total operating expenses were slashed by 44% to $4.5 million, resulting in a near break-even loss from operations of $45,000, a significant improvement from a $2.7 million loss in Q3 2023, with similar trends observed for the nine-month period Comparison of Three Months Ended September 30 (in thousands) | Item | 2024 | 2023 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | $6,425 | $6,888 | ($463) | (7)% | | Gross Profit | $4,435 | $5,284 | ($849) | (16)% | | Total Operating Expenses | $4,480 | $7,976 | ($3,496) | (44)% | | Loss from Operations | ($45) | ($2,692) | $2,647 | 80% | - The decline in Q3 2024 revenue was impacted by the company ceasing to provide platform access to delinquent clients and a 27% YoY decline in excess use revenue[150] - For the nine months ended Sep 30, 2024, a gain on note repurchase of $1.57 million significantly contributed to reducing the net loss[161][169] Liquidity & Capital Resources The company managed its liquidity through a combination of debt financing and operational cost-cutting, raising $8.0 million in new debt in January 2024 and subsequently amending its debt terms in November 2024 to extend maturity to 2027, which management believes secures liquidity for at least the next twelve months, despite a working capital deficit of $9.3 million as of September 30, 2024 - In January 2024, the company raised $6.4 million through 8% Convertible Notes and $1.6 million through 12% Term Notes, with net proceeds of $7.2 million after expenses[176] - On November 11, 2024, the company amended its debt, extending the maturity to January 23, 2027, increasing interest rates, and adjusting the minimum cash balance covenant to apply only at month-end starting February 2025[178][179] Working Capital Summary (in thousands) | Item | Sep 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $847 | $331 | | Working capital | ($9,276) | ($9,106) | Item 3. Quantitative and Qualitative Disclosures About Market Risk The company states its exposure to market risks, including interest rate fluctuations, inflation, and foreign exchange rates, is not material, with interest rate risk minimal due to the short-term nature of cash equivalents, no significant impact from inflation, and foreign exchange risk mitigated by matching local currency revenues and expenses in Canadian operations - The company does not believe that inflation has had a material effect on its business, financial condition, or results of operations[205] - Foreign exchange rate risk from Canadian operations is considered immaterial as Canadian income and expenses are matched in the local currency[206] Item 4. Controls and Procedures As of September 30, 2024, the company's CEO and CFO concluded that its disclosure controls and procedures were not effective, based on previously identified material weaknesses in internal control over financial reporting, with no material changes to internal controls reported during the quarter - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were not effective as of September 30, 2024[208] - No changes in internal control over financial reporting occurred during the nine months ended September 30, 2024, that materially affected, or are reasonably likely to materially affect, the company's internal control[209] Part II – Other Information Item 1. Legal Proceedings The company is periodically involved in litigation incidental to its business, and management believes that the outcomes of current legal matters will not have a significant adverse effect on the company's financial condition or results of operations - The company is involved in litigation from time to time but management believes the outcome will not have a significant adverse effect on its financial position, results of operations or cash flows[95][211] Item 1A. Risk Factors This section directs investors to the more detailed discussion of risk factors in the company's Annual Report on Form 10-K for the year ended December 31, 2023, for a comprehensive understanding of the risks associated with the business - The company refers to the 'Risk Factors' section in its Annual Report on Form 10-K for the year ended December 31, 2023, for a detailed description of business risks[212] Item 5. Other Information The company reports a significant subsequent event: on November 11, 2024, it amended the terms of its 12% Secured Term Notes and 8% Secured Convertible Notes, including extending the maturity date to January 23, 2027, increasing the interest rates, and modifying the minimum cash balance covenant - On November 11, 2024, the company amended its secured debt agreements, extending the maturity date to January 23, 2027, and increasing interest rates[215] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including amendments to the Senior Secured Term and Convertible Promissory Notes, certifications by the CEO and CFO as required by the Sarbanes-Oxley Act, and the interactive data files (XBRL) - The report includes as exhibits the First Amendments to the Senior Secured Term and Convertible Promissory Notes, along with CEO and CFO certifications under Sections 302 and 906 of the Sarbanes-Oxley Act[217]