SportsMap Tech Acquisition (SMAP) - 2025 Q1 - Quarterly Report

FORWARD-LOOKING STATEMENTS Forward-Looking Statements Overview This section outlines the nature and scope of forward-looking statements within the Quarterly Report, emphasizing that they are subject to risks, uncertainties, and assumptions that could cause actual results to differ materially - The report contains forward-looking statements covered by safe harbor provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934[9] - Forward-looking statements are based on current expectations and projections about future events and financial trends[10] - Key risk factors that could cause actual results to differ materially include continued low income, net losses, negative cash flows, failure to manage SaaS expansion, substantial R&D costs, product recalls, subscription cancellations, cost and availability of capital, loss of large customers, and inability to grow sales[10][13] PART I – FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS. This section presents the unaudited condensed consolidated financial statements for MultiSensor AI Holdings, Inc., including balance sheets, statements of operations, changes in shareholders' equity, and cash flows, along with their accompanying notes Condensed Consolidated Balance Sheets The balance sheet shows a slight increase in total assets and shareholders' equity, while total liabilities also increased from December 31, 2024, to March 31, 2025 | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :----------------------------- | :----------------------------- | :----------------------------- | | Cash and cash equivalents | $4,747 | $4,358 | | Total current assets | $11,189 | $10,516 | | Total assets | $16,416 | $15,478 | | Total current liabilities | $3,331 | $3,017 | | Total liabilities | $3,500 | $3,190 | | Total shareholders' equity | $12,916 | $12,288 | Condensed Consolidated Statements of Operations The company reported a significant decrease in net revenue and an increase in net loss for the three months ended March 31, 2025, compared to the same period in 2024 | Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :---------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Revenue, net | $1,170 | $2,275 | | Cost of goods sold | $476 | $1,170 | | Inventory impairment | $0 | $234 | | Selling, general and administrative | $4,139 | $3,163 | | Share-based compensation expense | $907 | $0 | | Operating loss | $(4,617) | $(2,565) | | Net loss | $(4,436) | $(3,922) | | Net loss per share, basic and diluted | $(0.14) | $(0.33) | Condensed Consolidated Statements of Changes in Shareholders' Equity Shareholders' equity increased from January 1, 2025, to March 31, 2025, despite a net loss, primarily due to the issuance of common stock and equity-based compensation transactions | Metric | January 1, 2025 (in thousands) | March 31, 2025 (in thousands) | | :-------------------------------- | :----------------------------- | :---------------------------- | | Common Stock (shares outstanding) | 30,526,052 | 32,957,641 | | Additional Paid-In Capital | $66,911 | $71,975 | | Accumulated Deficit | $(54,626) | $(59,062) | | Total Shareholders' Equity | $12,288 | $12,916 | - Net loss for the period was $(4,436) thousand[22] - Issuance of common stock contributed $4,657 thousand to additional paid-in capital[22] Condensed Consolidated Statements of Cash Flows Cash flows from operating activities were negative, while financing activities provided a significant cash inflow, primarily from equity issuances, resulting in a net increase in cash and cash equivalents | Cash Flow Activity | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :---------------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Net cash provided by (used in) operating activities | $(3,176) | $492 | | Net cash used in investing activities | $(420) | $(571) | | Net cash provided by (used in) financing activities | $3,985 | $(585) | | Net increase/(decrease) in cash | $389 | $(664) | | Cash, cash equivalents, and restricted cash equivalents end of period | $4,897 | $491 | Notes to Condensed Consolidated Financial Statements These notes provide detailed information and explanations for the figures presented in the condensed consolidated financial statements, covering the company's organization, significant accounting policies, revenue breakdown, asset details, debt, equity, and other financial disclosures Note 1 — Organization and Business Operations MultiSensor AI Holdings, Inc. provides turnkey predictive maintenance and process control solutions, integrating imaging and sensing technologies with AI-powered enterprise software - The Company provides turnkey predictive maintenance and process control solutions combining imaging/sensing technologies with AI-powered enterprise software[26] - Solutions leverage data from thermal, visible, acoustic, vibration, and laser sensing devices for real-time condition monitoring[26] - Services include training, calibration, and repair for customers in distribution & logistics, manufacturing, and oil & gas[26] Note 2 — Summary of Significant Accounting Policies This note details the accounting principles used, including GAAP conformity and consolidation, highlighting the company's going concern uncertainty and management's plans to seek additional liquidity - The company has suffered net losses, negative cash flows from operations, and negative net working capital, raising substantial doubt about its ability to continue as a going concern[30] - Management plans to pursue additional liquidity through debt, equity, or equity-like instruments and reduce operating expenses, but these plans are not deemed probable to alleviate going concern doubt[31] - One customer accounted for 20% ($229 thousand) of total net revenue for the three months ended March 31, 2025[34] Note 3 — Revenue Revenue for the three months ended March 31, 2025, decreased significantly compared to the prior year, primarily due to lower hardware sales, though software and services revenue showed growth | Revenue Type | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :------------- | :--------------------------------------------- | :--------------------------------------------- | | Hardware | $753 | $2,022 | | Software | $251 | $200 | | Services | $166 | $53 | | Total revenue | $1,170 | $2,275 | - Contract liabilities (current and non-current) were $293 thousand as of March 31, 2025, down from $566 thousand as of December 31, 2024[38] Note 4— Property, Plant and Equipment Net property, plant, and equipment increased slightly, driven by additions to internal-use software, partially offset by depreciation | Category | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------- | :---------------------------- | :----------------------------- | | Internal-use software | $5,993 | $5,422 | | Property, plant and equipment, gross | $6,371 | $6,056 | | Less: accumulated depreciation | $(2,116) | $(2,093) | | Property, plant and equipment, net | $4,255 | $3,963 | - Depreciation expense was $280 thousand for the three months ended March 31, 2025, compared to $273 thousand for the same period in 2024[39] Note 5 — Other Current Assets Other current assets decreased, primarily due to a reduction in other receivables and prepaid inventory purchases, partially offset by an increase in prepaid expenses | Category | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------- | :---------------------------- | :----------------------------- | | Prepaid expenses | $538 | $158 | | Restricted cash equivalents | $150 | $150 | | Other receivables | $298 | $716 | | Total other current assets | $1,014 | $1,140 | Note 6 — Inventories Total inventories increased, with both current and noncurrent hardware and parts/supplies showing changes, and no inventory impairment was recorded in the current quarter | Category | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :------------------ | :---------------------------- | :----------------------------- | | Inventories, current | $4,580 | $4,180 | | Inventories, noncurrent | $840 | $865 | | Total inventories | $5,420 | $5,045 | - The Company recorded no inventory impairment for the three months ended March 31, 2025, compared to $234 thousand in the prior year period[41] Note 7 — Accrued Expense Total accrued expenses increased, primarily driven by a significant rise in professional fees, while other accrued expenses decreased | Category | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------- | :---------------------------- | :----------------------------- | | Salaries, wages, and payroll taxes payable | $909 | $906 | | Professional fees | $616 | $0 | | Other | $38 | $189 | | Total accrued expense | $1,563 | $1,095 | Note 8 — Debt The company fully repaid or converted all outstanding line of credit, related party promissory notes, and Legacy SMAP promissory notes during or prior to the three months ended March 31, 2025 - The line of credit with First Insurance Funding was fully paid off and closed during the three months ended March 31, 2024[43] - All related party and Legacy SMAP promissory notes were repaid or converted into common stock by March 31, 2025[44][45][46][47] - $4,475 thousand of Financing Notes were converted into shares of Common Stock at $5 per share during the three months ended March 31, 2024[48] Note 9 — Share-Based Compensation The company granted a significant number of restricted stock units (RSUs) during the three months ended March 31, 2025, leading to a substantial increase in share-based compensation expense - No stock option awards were granted, and 28,777 options were forfeited during the three months ended March 31, 2025[49] - 1,600,631 restricted stock units (RSUs) were granted at a weighted average price of $1.70 during the three months ended March 31, 2025[50] - Share-based compensation expense related to RSUs was $827 thousand for the three months ended March 31, 2025, compared to $0 for the same period in 2024[51] Note 10 — Shareholders' Equity The number of common shares issued and outstanding increased significantly, and the company utilized its Equity Line of Credit (ELOC) to raise capital - As of March 31, 2025, there were 32,957,641 shares of common stock issued and outstanding, up from 30,526,052 shares as of December 31, 2024[53] - The company utilized the B. Riley Committed Equity Facility to sell 1,791,732 shares of Common Stock for cash proceeds totaling $4,657 thousand during the three months ended March 31, 2025[56] - An At Market Issuance Sales Agreement was entered into on March 28, 2025, allowing for the sale of up to $8,625 thousand of common stock through B. Riley Securities, though no shares were sold under this agreement during the quarter[57] Note 11 — Earnings per Share Basic and diluted net loss per share improved to $(0.14) for the three months ended March 31, 2025, compared to $(0.33) in the prior year, despite an increased net loss | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :---------------------------------------- | :-------------------------------- | :-------------------------------- | | Basic and Diluted Net loss attributable to common shareholders | $(4,436) | $(3,922) | | Weighted average number of shares, basic and diluted | 32,725,633 | 11,966,928 | | Basic Net loss per share attributable to common shareholders | $(0.14) | $(0.33) | | Diluted Net loss per share attributable to common shareholders | $(0.14) | $(0.33) | - Potential anti-dilutive shares include warrants and RSU awards, which are not included in the diluted EPS calculation due to the net loss[58] Note 12— Related Party Transactions The company leases its corporate office and production facility from a related party, with consistent cash payments for these leases in both periods - Cash payments to a related party for leases were $27 thousand for the three months ended March 31, 2025, and $26 thousand for the same period in 2024[61] Note 13 — Commitment and Contingency The company is not currently involved in any material legal claims or actions that would have a material adverse effect on its financial position, results of operations, or liquidity - As of March 31, 2025, the Company is not involved in any material claims or legal actions[63] Note 14 — Fair value measurements The company's financial instruments approximate fair value due to their short-term nature, and outstanding warrants are classified as Level 3 within the fair value hierarchy - The fair value of the Company's outstanding warrants was $10 thousand as of both March 31, 2025, and December 31, 2024, classified as Level 3[65] | Fair Value Assumption – Warrants | March 31, 2025 | December 31, 2024 | | :------------------------------- | :------------- | :---------------- | | Exercise Price | $11.50 | $11.50 | | Warrant term | 3.72 years | 3.97 years | | Stock Price | $0.93 | $1.84 | | Risk rate | 4.27 % | 4.27 % | | Volatility | 42.26 % | 42.26 % | Note 15 — Income Taxes The company recorded minimal income tax expense for both periods, with negative effective tax rates primarily due to losses and a valuation allowance on deferred tax assets - Income tax expense was $8 thousand for the three months ended March 31, 2025, compared to $31 thousand for the same period in 2024[67] - Effective income tax rates were (0.17)% for Q1 2025 and (0.78)% for Q1 2024, below the U.S. statutory rate of 21%, due to losses and a valuation allowance[68] - An ownership change in 2024 under Internal Revenue Code Section 382 subjects tax attributes, including net operating losses, to an annual limitation[68] Note 16 — Segments and geographical information The company operates as a single reportable segment focused on manufacturing and distributing sensor-based systems, software, and services, with the majority of its assets and revenue derived from the United States - The Company has one reportable and operating segment: manufacturing and distributing sensor-based systems, software, and services[70] - 99% of assets are held within the United States, and revenue is primarily derived from North America[70] | Geographical Revenue | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :------------------- | :--------------------------------------------- | :--------------------------------------------- | | United States | $1,120 | $1,962 | | International | $50 | $313 | | Total revenue, net | $1,170 | $2,275 | ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. This section provides management's perspective on the company's financial performance and condition for the three months ended March 31, 2025, compared to the prior year, covering business overview, recent developments, merger impact, results of operations, liquidity, and capital resources Overview MultiSensor AI Holdings, Inc. focuses on growing its Software as a Service (SaaS) leadership in predictive maintenance, leveraging AI-powered solutions for real-time condition monitoring - The Company provides turn-key predictive maintenance and process control solutions, combining imaging/sensing technologies with AI-powered enterprise software[76] - Active sensors connected to the MSAI Connect platform increased to approximately 550 as of March 31, 2025, a 19% increase quarter-over-quarter and over 500% year-over-year[77] - A large customer in Distribution and Logistics achieved a >4x ROI and <1 year payback, leading to $2.1 million in subscription renewals[78] Recent Developments The company recently entered into an At Market Issuance Sales Agreement to potentially sell up to $8.625 million of common stock through B. Riley Securities - On March 28, 2025, the Company entered into an At Market Issuance Sales Agreement to sell up to $8.625 million of common stock through B. Riley Securities[80] Merger The Business Combination, completed on December 19, 2023, resulted in Legacy ICI becoming a wholly-owned subsidiary of Legacy SMAP (now MultiSensor AI Holdings, Inc.), accounted for as a reverse acquisition - The Business Combination was consummated on December 19, 2023, with Legacy ICI surviving as a wholly-owned subsidiary of Legacy SMAP (now MultiSensor AI Holdings, Inc.)[81] - The Business Combination was accounted for as a reverse acquisition, with Legacy ICI determined to be the accounting acquirer[82] Results of Operations For the three months ended March 31, 2025, revenue decreased by 49% year-over-year, primarily due to lower hardware sales, while operating and net losses increased significantly | Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | Amount Change (in thousands) | % Change | | :---------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :--------------------------- | :------- | | Revenue, net | $1,170 | $2,275 | $(1,105) | (49)% | | Cost of goods sold | $476 | $1,170 | $(694) | (59)% | | Inventory Impairment | $0 | $234 | $(234) | (100)% | | Selling, general and administrative | $4,139 | $3,163 | $976 | 31 % | | Share-based compensation expense | $907 | $0 | $907 | NM | | Operating loss | $(4,617) | $(2,565) | $(2,052) | 80 % | | Net loss | $(4,436) | $(3,922) | $(514) | 13 % | - The decrease in revenue was primarily due to a decrease in sensor hardware sold, while Software and Services revenue grew 26% and 213% respectively[83] - Selling, general and administrative expenses increased by $0.976 million, driven by higher payroll expenses ($0.7 million) and professional fees ($0.6 million)[86] Non-GAAP Financial Measures This section provides a reconciliation of net loss to EBITDA and Adjusted EBITDA, which are non-GAAP measures used by management to assess performance - EBITDA is defined as net (loss) income before interest expense, depreciation, and taxes[92] - Adjusted EBITDA further excludes share-based compensation, inventory impairment, loss on financing transaction, other income, net, and loss (gain) on asset disposal[92] | Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :-------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Net loss | $(4,436) | $(3,922) | | EBITDA | $(4,152) | $(3,614) | | Adjusted EBITDA | $(3,445) | $(2,058) | Liquidity and Capital Resources The company continues to incur losses and has negative net working capital, leading to substantial doubt about its ability to continue as a going concern, necessitating additional capital through equity or debt financings - The Company incurred losses for the three months ended March 31, 2025, and has negative net working capital[96] - There is substantial doubt about the Company's ability to fund planned operations for the next twelve months and to continue as a going concern[98] - The Company utilized its Equity Line of Credit (ELOC) to sell 1,791,732 shares of Common Stock for $4.7 million in cash proceeds during the three months ended March 31, 2025[99] Cash Flows Net cash used in operating activities increased significantly due to decreased customer receipts, while financing activities provided a substantial cash inflow from equity issuances, resulting in a net increase in cash for the period | Cash Flow Activity | Three months ended March 31, 2025 (in thousands) | Three months ended March 31, 2024 (in thousands) | | :---------------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Net cash provided by (used in) operating activities | $(3,176) | $492 | | Net cash used in investing activities | $(420) | $(571) | | Net cash provided by (used in) financing activities | $3,985 | $(585) | | Net increase (decrease) in cash | $389 | $(664) | - The increase in net cash used in operating activities was primarily related to decreased customer receipts[102] - The increase in net cash provided by financing activities is primarily attributable to $4.7 million in proceeds from stock sales[104] Contractual Obligations The company's primary contractual commitments consist of lease obligations for its corporate office and production facility, with a net present value of $0.1 million as of March 31, 2025 - Principal commitments consist of lease obligations for the corporate office and production facility[105] - The net present value of operating lease liabilities was $0.1 million as of March 31, 2025[105] Off-Balance Sheet Arrangements As of March 31, 2025, the company did not have any off-balance sheet arrangements - As of March 31, 2025, the Company did not have any off-balance sheet arrangements[106] Critical Accounting Policies and Estimates There have been no significant and material changes in the company's Critical Accounting Policies and Estimates since its 2024 Annual Report - No significant and material changes in Critical Accounting Policies and Estimates since the 2024 Annual Report[107] Recently Issued Accounting Standards The company refers to Note 2 of its annual consolidated financial statements in the 2024 Annual Report for its assessment of recently issued and adopted accounting standards - Refer to Note 2 of the 2024 Annual Report for assessment of recently issued and adopted accounting standards[108] Emerging Growth Company and Smaller Reporting Company Status The company is an emerging growth company and a smaller reporting company, which allows it to take advantage of certain reduced disclosure obligations, having opted out of the extended transition period for new accounting standards - The Company is an emerging growth company under the JOBS Act[109] - The Company has elected to opt out of the extended transition period for complying with new or revised financial accounting standards[110] - The Company is also a 'smaller reporting company' and can take advantage of certain reduced disclosure obligations[111] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. As a smaller reporting company, MultiSensor AI Holdings, Inc. is not required to provide quantitative and qualitative disclosures about market risk - The Company is a smaller reporting company and is not required to provide information under this item[112] ITEM 4. CONTROLS AND PROCEDURES. This section details management's evaluation of the company's disclosure controls and procedures, concluding their effectiveness as of March 31, 2025, with no material changes in internal control over financial reporting during the quarter Limitations on Effectiveness of Controls and Procedures Management acknowledges that disclosure controls and procedures, regardless of design, can only provide reasonable assurance of achieving control objectives, and judgment is applied in evaluating benefits versus costs - Controls and procedures can provide only reasonable assurance of achieving desired control objectives[113] - Management applies judgment in evaluating the benefits of controls relative to their costs[114] Evaluation of Disclosure Controls and Procedures Based on the evaluation by the CEO and CFO, the company's disclosure controls and procedures were concluded to be effective as of March 31, 2025 - The Company's disclosure controls and procedures were effective as of March 31, 2025[115] Changes in internal control over financial reporting There were no changes in the company's internal control over financial reporting during the quarter ended March 31, 2025, that materially affected or are reasonably likely to materially affect it - No material changes in internal control over financial reporting during the quarter ended March 31, 2025[116] PART II – OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The company is not currently a party to any legal actions or claims that, if determined adversely, would have a material adverse effect on its business, financial condition, or results of operations - The Company is not currently a party to any material legal claims or actions[119] ITEM 1A. RISK FACTORS There have been no material changes in the company's risk factors since its 2024 Annual Report on Form 10-K - No material changes in risk factors since the 2024 Annual Report on Form 10-K[120] ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS There were no unregistered sales of equity securities or use of proceeds to report for the period - None[121] ITEM 3. DEFAULTS UPON SENIOR SECURITIES There were no defaults upon senior securities to report for the period - None[122] ITEM 4. MINE SAFETY DISCLOSURES This item is not applicable to the company - Not Applicable[123] ITEM 5. OTHER INFORMATION No director or officer adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement during the three months ended March 31, 2025 - No director or officer adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement during the three months ended March 31, 2025[124] ITEM 6. EXHIBITS This section lists the exhibits filed as part of the Quarterly Report on Form 10-Q, including business combination agreements, corporate documents, employment agreements, sales agreements, and certifications - The report includes exhibits such as Business Combination Agreements, Amended and Restated Certificate of Incorporation, Bylaws, Employment Agreements, At Market Issuance Sales Agreement, and various certifications[128] SIGNATURES Signatures of Authorized Officers The report is duly signed on behalf of MultiSensor AI Holdings, Inc. by its Interim Chief Executive Officer, Interim President and Director, Stuart V. Flavin III, and its Chief Financial Officer, Robert Nadolny, on May 13, 2025 - The report was signed by Stuart V. Flavin III, Interim Chief Executive Officer, Interim President and Director, and Robert Nadolny, Chief Financial Officer[131] - The signing date for the report was May 13, 2025[131]