Scorpius Holdings(SCPX) - 2025 Q1 - Quarterly Report

FORM 10-Q Filing Information This is a Quarterly Report on Form 10-Q for the period ended March 31, 2025 - Scorpius Holdings, Inc. is a Delaware-incorporated company[2] Registrant Status | Status | Mark | | :---------------------- | :--- | | Large accelerated filer | ☐ | | Accelerated filer | ☐ | | Non-accelerated filer | ☒ | | Smaller reporting company | ☒ | | Emerging growth company | ☐ | - As of August 22, 2025, there were 61,142,712 shares of Common Stock, $0.0002 par value per share, outstanding[4] Table of Contents Forward-Looking Statements The report contains forward-looking statements regarding strategy, future operations, financial position, revenues, costs, prospects, plans, and objectives, identifiable by specific terminology - Actual results may differ materially due to factors such as the ability to raise capital, develop commercial products, reliance on third parties, competitive developments, and regulatory actions, as detailed in the 'Risk Factors' section[11] - The Company undertakes no obligation to revise or update any forward-looking statements, except as required by law[12] Note Regarding Company References This report uses "Scorpius," "the Company," "we," "us," and "our" to refer to Scorpius Holdings, Inc - Throughout this Quarterly Report on Form 10-Q, 'Scorpius', 'the Company,' 'we', 'us', and 'our' refer to Scorpius Holdings, Inc[14] PART I—FINANCIAL INFORMATION ITEM 1. Financial Statements This section presents the unaudited condensed consolidated financial statements for Scorpius Holdings, Inc., including the Balance Sheets, Statements of Operations and Comprehensive Loss, Statements of Stockholders' (Deficit) Equity, and Statements of Cash Flows, along with detailed notes explaining the basis of presentation, significant accounting policies, fair value measurements, debt, equity, revenue, and other financial details for the periods ended March 31, 2025, and December 31, 2024 (or March 31, 2024 for income/cash flow statements) Condensed Consolidated Balance Sheets Key Balance Sheet Data (March 31, 2025 vs. December 31, 2024) | Metric | March 31, 2025 (Unaudited) ($) | December 31, 2024 ($) | | :----------------------------------- | :-------------------------- | :------------------ | | Total Current Assets | $2,040,078 | $3,260,955 | | Total Assets | $23,585,574 | $39,177,719 | | Total Current Liabilities | $23,140,065 | $24,289,095 | | Total Liabilities | $30,148,342 | $37,500,241 | | Total Stockholders' (Deficit) Equity | $(6,562,768) | $1,677,478 | - Total Assets decreased significantly from $39.18 million at December 31, 2024, to $23.59 million at March 31, 2025[18] - Total Stockholders' (Deficit) Equity shifted from a positive $1.68 million to a deficit of ($6.56 million)[18] Condensed Consolidated Statements of Operations and Comprehensive Loss Key Operations Data (Three Months Ended March 31, 2025 vs. 2024) | Metric | March 31, 2025 ($) | March 31, 2024 ($) | | :-------------------------------------------------- | :------------- | :------------- | | Revenue | $212,264 | $3,513,948 | | Total operating expenses | $14,000,824 | $8,835,788 | | Operating loss | $(13,788,560) | $(5,321,840) | | Net loss before income taxes | $(11,288,126) | $(4,657,688) | | Net loss attributable to Scorpius Holdings, Inc. | $(10,714,555) | $(4,417,549) | | Net loss per common share, basic and diluted | $(1.16) | $(31.38) | - Revenue decreased significantly by 94% from $3.51 million in Q1 2024 to $0.21 million in Q1 2025[19] - Operating loss more than doubled, increasing from ($5.32 million) in Q1 2024 to ($13.79 million) in Q1 2025, primarily due to a $5.70 million loss on lease assignment and termination and a $0.70 million loss on disposal of long-lived assets in 2025[19] - Net loss attributable to Scorpius Holdings, Inc. increased by 142% from ($4.42 million) in Q1 2024 to ($10.71 million) in Q1 2025[19] Condensed Consolidated Statements of Stockholders' (Deficit) Equity Stockholders' (Deficit) Equity Summary (March 31, 2025 vs. December 31, 2024) | Metric | Balance at Dec 31, 2024 ($) | Balance at Mar 31, 2025 ($) | | :-------------------------------- | :---------------------- | :---------------------- | | Common Stock | $1,017 | $2,478 | | Additional Paid-In Capital (APIC) | $293,253,163 | $296,310,690 | | Accumulated Deficit | $(287,178,670) | $(297,893,225) | | Total Stockholders' (Deficit) Equity | $1,677,478 | $(6,562,768) | - The Company's total stockholders' equity shifted from a positive $1.68 million at December 31, 2024, to a deficit of ($6.56 million) at March 31, 2025, primarily due to a net loss of ($11.30 million)[20] - Additional Paid-In Capital increased by approximately $3.00 million, driven by partial conversion of secured convertible notes ($2.00 million) and contribution from non-convertible promissory notes ($0.84 million)[20] Condensed Consolidated Statements of Cash Flows Cash Flow Summary (Three Months Ended March 31, 2025 vs. 2024) | Cash Flow Activity | March 31, 2025 ($) | March 31, 2024 ($) | | :------------------------- | :------------- | :------------- | | Operating Activities | $(3,371,660) | $(4,683,878) | | Investing Activities | $17,191 | $2,780,995 | | Financing Activities | $2,515,362 | $3,274,831 | | Net (Decrease) Increase in Cash | $(839,083) | $1,369,919 | | Cash and Cash Equivalents – End of the Period | $188,914 | $1,554,844 | - Net cash used in operating activities decreased from ($4.68 million) in Q1 2024 to ($3.37 million) in Q1 2025, despite a higher net loss, due to increased non-cash expenses like lease assignment/termination losses and changes in fair value estimates[24][152] - Net cash provided by investing activities significantly decreased from $2.78 million in Q1 2024 to $17,191 in Q1 2025, primarily due to a large liquidation of short-term investments and proceeds from intellectual property license sale in the prior year[24][153] - Net cash provided by financing activities decreased by ($0.84 million), from $3.27 million in Q1 2024 to $2.52 million in Q1 2025, mainly due to lower proceeds from common stock issuance in 2025[24][154] Notes to the Condensed Consolidated Financial Statements 1. Basis of Presentation - The unaudited consolidated financial statements are prepared in conformity with U.S. GAAP for interim reporting, condensing or omitting certain annual disclosures per SEC rules[28] - All share amounts and per share data in prior periods have been adjusted for a 1-for-200 reverse stock split on July 17, 2024[29] 2. Summary of Significant Accounting Policies - The Company has an accumulated deficit of ($297.89 million) and a net loss of ($11.29 million) for the three months ended March 31, 2025, raising substantial doubt about its ability to continue as a going concern[30] - The Company is in default on the 2025 Non-Convertible Promissory Notes, Related Party, due to failure to repay amounts when due and failure to pay indebtedness exceeding $150,000 to third parties[30] - Management is exploring multiple financing alternatives, including equity, debt, equipment sale leasebacks, partnerships, and grants, and engaged a third party in February 2025 to explore strategic alternatives[31] - The Company operates as one segment focused on contract development and manufacturing (CDMO), with revenue primarily from process development to CGMP clinical and commercial manufacturing of biologics[44] - The Company abandoned plans for a potential Kansas commercial CDMO facility during Q1 2025, with related land option agreements expiring[36] - The $2.50 million contingent earn-out receivable from Elusys Holdings was settled for $550,000 cash on March 12, 2025, resulting in an ($0.80 million) loss on settlement of related party receivable[39] 3. Fair Value of Financial Instruments - The Company uses a three-tier fair value hierarchy (Level I, II, III) for financial instruments, prioritizing observable market data[49][50][51] - Cash and cash equivalents, accounts payable, and accrued expenses approximate carrying values due to their short-term nature; cash equivalents and short-term investments are classified as Level I[52] Level 3 Fair Value Financial Instruments (March 31, 2025) | Description | Total Level 3 (March 31, 2025) ($) | | :-------------------------------------- | :----------------------------- | | Convertible promissory notes, related party | $12,043,000 | | Non-convertible promissory notes, related party | $1,390,000 | | Warrant liability | $768,000 | - The fair value of related party receivable decreased from $1.10 million at December 31, 2024, to $0 at March 31, 2025, due to settlement[53][54] - The fair value of convertible promissory notes, related party, decreased from $16.00 million to $12.00 million, while warrant liability decreased from $2.10 million to $0.80 million[53] 4. Prepaid Expenses and Other Current Assets Prepaid Expenses and Other Current Assets (March 31, 2025 vs. December 31, 2024) | Item | March 31, 2025 ($) | December 31, 2024 ($) | | :------------------------------------ | :------------- | :---------------- | | Prepaid manufacturing expense | $175,664 | $184,951 | | Contract assets | $691,888 | $695,041 | | Other prepaid expenses and current assets | $142,436 | $228,704 | | Prepaid software | $157,687 | $237,615 | | Prepaid insurance | $209,802 | $409,347 | | Total | $1,377,477 | $1,755,658 | - Total prepaid expenses and other current assets decreased by approximately $0.38 million (21.5%) from $1.76 million at December 31, 2024, to $1.38 million at March 31, 2025[57] 5. Property and Equipment Property and Equipment, Net (March 31, 2025 vs. December 31, 2024) | Item | March 31, 2025 ($) | December 31, 2024 ($) | | :---------------------- | :------------- | :---------------- | | Lab equipment | $10,856,613 | $13,037,975 | | Leasehold improvements | $1,335,655 | $1,335,655 | | Computers | $528,808 | $688,512 | | Furniture and fixtures | $71,311 | $196,613 | | Construction-in-process | $103,461 | $57,521 | | Total | $12,895,848 | $15,316,276 | | Accumulated depreciation | $(2,395,261) | $(3,000,816) | | Property and equipment, net | $10,500,587 | $12,315,460 | - Net property and equipment decreased by approximately $1.82 million (14.7%) from $12.32 million at December 31, 2024, to $10.50 million at March 31, 2025[59] - The decrease is partly due to a $721,564 loss on sale of certain furniture, fixtures, and equipment[59] 6. Accrued Expenses and Other Liabilities Accrued Expenses and Other Liabilities (March 31, 2025 vs. December 31, 2024) | Item | March 31, 2025 ($) | December 31, 2024 ($) | | :------------------------------------------------ | :------------- | :---------------- | | Accrued marketing expenses | $999,996 | $999,996 | | Accrued preclinical and clinical trial expenses | $364,460 | $364,460 | | Compensation and related benefits | $930,196 | $298,090 | | Other expenses | $209,700 | $268,161 | | Advance payments received from customers for manufacturing materials | $169,758 | $169,758 | | Accrued manufacturing expenses | $9,265 | $59,793 | | Total | $2,683,375 | $2,160,258 | - Total accrued expenses and other liabilities increased by approximately $0.52 million (24.2%) from $2.16 million at December 31, 2024, to $2.68 million at March 31, 2025[60] - The increase was primarily driven by a significant rise in compensation and related benefits from $298,090 to $930,196[60] 7. Debt Debt Summary (March 31, 2025) | Debt Instrument | Face Value ($) | Fair Value ($) | | :-------------------------------------- | :------------ | :------------ | | Restated Elusys Convertible Note | $2,250,000 | $1,380,000 | | 2025 Non-Convertible Promissory Notes, Related Party | $2,200,000 | $1,390,000 | | December 2024 Secured Convertible Notes | $11,656,188 | $10,663,000 | | Total | $16,106,188 | $13,433,000 | - The Company issued 9% senior secured convertible notes (December 2024 Secured Convertible Notes) for an aggregate principal of $13.39 million and warrants, receiving net proceeds of approximately $3.00 million after repurchasing pre-funded warrants and paying off a non-convertible note[62][63] - The December 2024 Secured Convertible Notes mature on December 6, 2027, bear 9% annual interest, and are convertible at the holder's option, with conversion prices adjusted from $0.50 to $0.25 in February 2025, and further to $0.06 (or Market Price) for one investor in May/July 2025[65][67][68] - The Company is in default on the December 2024 Secured Convertible Notes due to failure to satisfy quarterly interest payments as of August 22, 2025, and on the 2025 Non-Convertible Promissory Notes, Related Party, due to failure to repay amounts when due and other indebtedness[65][82][129][134] - During Q1 2025, 6,019,444 shares of common stock were issued from partial conversions of the December 2024 Secured Convertible Notes[76][77] - The Company issued $2.20 million in 2025 Non-Convertible Promissory Notes, Related Party, in Q1 2025, with an $840,000 premium recognized as equity due to the related party nature[78] 8. Stockholders' Equity - As of March 31, 2025, the Company had outstanding common stock warrants to purchase 13,688,001 shares at a weighted average exercise price of $0.77 per share, down from $1.01 per share at December 31, 2024[84] - All 1,285,000 pre-funded warrants outstanding at December 31, 2024, were exercised during Q1 2025, resulting in none outstanding[84] - Stock-based compensation expense decreased from ($0.30 million) in Q1 2024 to ($0.20 million) in Q1 2025[85] - Unrecognized compensation expense related to unvested stock options was ($0.70 million) as of March 31, 2025, expected to be recognized over 0.4 years[85] 9. Revenue Revenue Summary (Three Months Ended March 31, 2025 vs. 2024) | Revenue Type | March 31, 2025 ($) | March 31, 2024 ($) | | :------------- | :------------- | :------------- | | CDMO revenue | $200,752 | $3,505,948 | | Grant revenue | $12,000 | $8,000 | | Total Revenue | $212,752 | $3,513,948 | - CDMO revenue decreased significantly by 94% from $3.51 million in Q1 2024 to $0.20 million in Q1 2025, primarily because the largest customer from Q1 2024 (representing 66% of total revenue) migrated to a larger CDMO[87] - One remaining customer represents 98% of total revenue for Q1 2025[87] - Grant revenue increased from $8,000 in Q1 2024 to $12,000 in Q1 2025[91] 10. Net Loss Per Share Net Loss Per Share (Three Months Ended March 31, 2025 vs. 2024) | Metric | March 31, 2025 ($) | March 31, 2024 ($) | | :-------------------------------------------------- | :------------- | :------------- | | Net loss attributable to Scorpius Holdings, Inc. ($) | $(10,714,555) | $(4,417,549) | | Weighted-average common shares outstanding, basic and diluted (shares) | 9,220,185 | 140,781 | | Net loss per common share, basic and diluted ($) | $(1.16) | $(31.38) | - Net loss per common share improved from ($31.38) in Q1 2024 to ($1.16) in Q1 2025, despite a higher net loss, due to a significant increase in weighted-average common shares outstanding (from 140,781 to 9,220,185)[96] - All common stock options, warrants, and convertible debt were anti-dilutive and excluded from diluted net loss per share calculations for both periods[95] 11. Income Tax - The Company's effective tax rate was 0% for both the three months ended March 31, 2025, and 2024[97] - A full valuation allowance has been recorded against net deferred tax assets in the U.S., Australian, and German operations due to a history of losses and insufficient evidence to record a net deferred tax asset[98] 12. Leases - On March 7, 2025, the Company assigned its lease for former principal offices in Morrisville, North Carolina, incurring a loss on lease assignment of $1.60 million and a loss on sale of furniture, fixtures, and equipment of $721,564[100] - On March 24, 2025, the lease for the principal manufacturing space in San Antonio was terminated due to non-payment of rent, resulting in a loss on lease termination of $4.13 million[102] Lease Costs (Three Months Ended March 31, 2025 vs. 2024) | Lease Cost Type | March 31, 2025 ($) | March 31, 2024 ($) | | :---------------------- | :------------- | :------------- | | Operating lease cost | $224,078 | $332,675 | | Finance lease cost | $739,098 | $824,280 | | Total Lease Cost | $963,176 | $1,156,955 | - The weighted average remaining lease term for operating leases decreased from 6.2 years in 2024 to 3.8 years in 2025, and for finance leases, it increased from 11.2 years to 12.2 years[103] 13. Subsequent Events - As of April 28, 2025, the Company received $1.94 million (net of fees) from investors in a private placement offering for 48,755,000 shares of common stock[105] - On April 21, 2025, NYSE Regulation suspended trading of the Company's common stock and commenced delisting proceedings due to the low selling price, with shares beginning to trade on the OTC Markets Pink Limited exchange on April 22, 2025[107] - The delisting from NYSE American became effective ten days after the Form 25 filing on May 1, 2025, but the Company will remain a reporting entity under the Securities Exchange Act of 1934[108] 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 condition and operational results for the three months ended March 31, 2025, compared to the same period in 2024, covering business overview, recent developments including delisting and lease terminations, critical accounting estimates, detailed analysis of revenue and expenses, and a discussion of liquidity and capital resources, highlighting significant financial challenges and going concern uncertainty Overview - Scorpius Bio provides process development and biomanufacturing services, focusing on cell- and gene-based therapies and large molecule biologics using American-made equipment and materials[111] - The lease for the San Antonio manufacturing facility was terminated in March 2025 due to non-payment of rent, and the Company is working to mitigate the impact[112] - The Company engaged Alliance Global Partners in February 2025 to explore strategic alternatives to maximize shareholder value[114] Recent Developments - The Company's common stock was delisted from NYSE American on April 21, 2025, due to low selling price and failure to timely file its 2024 Annual Report, and now trades on the OTC Markets Pink Limited exchange[115][117][118] - Two directors, Tan Sze Thuan and John Prendergast, Ph.D., resigned from the Board in June and May 2025, respectively[119][120] - A 1-for-200 reverse stock split was effected on July 17, 2024, with all share and per share data retroactively adjusted[121] - The lease for the former principal offices in Morrisville, North Carolina, was assigned on March 7, 2025, resulting in a $1.60 million loss on lease assignment and a $0.70 million loss on sale of equipment[122] - The $2.50 million related party receivable from Elusys Holdings was settled for $550,000 cash on March 12, 2025[123] - The lease for the principal manufacturing space in San Antonio was terminated on March 24, 2025, due to non-payment of rent, leading to a $4.10 million loss on lease termination[124] - The conversion price for December 2024 Secured Convertible Notes was adjusted multiple times, reaching $0.06 (or Market Price) for one institutional investor by July 2025[126] - The Company is in default on the December 2024 Secured Convertible Notes due to missed quarterly interest payments and on the 2025 Non-Convertible Promissory Notes, Related Party, due to failure to repay amounts when due and other indebtedness[129][134] Critical Accounting Estimates - The Company's critical accounting estimates remain unchanged from those summarized in its 2024 Annual Report, involving significant judgments and estimates affecting reported financial amounts[136] Results of Operations Key Financial Performance (Three Months Ended March 31, 2025 vs. 2024) | Metric | March 31, 2025 ($) | March 31, 2024 ($) | Change (YoY) ($) | | :------------------------------------------ | :------------- | :------------- | :----------- | | Revenues | $0.2 million | $3.5 million | $(3.3) million | | Cost of revenues | $0.4 million | $0.9 million | $(0.5) million | | Research and development expense | $3.2 million | $3.9 million | $(0.7) million | | Selling, general and administrative expense | $4.0 million | $5.0 million | $(1.0) million | | Total non-operating income (expense) | $2.5 million | $0.7 million | $1.8 million | | Loss on lease assignment and termination | $5.7 million | $0 | $5.7 million | | Loss on settlement of related party receivable | $0.8 million | $0 | $0.8 million | - Revenue decreased by ($3.30 million), primarily due to the largest customer migrating to a larger CDMO in 2024[137] - Cost of revenues decreased by ($0.50 million), mainly due to lower production levels[138] - Research and development expense decreased by ($0.70 million), while selling, general and administrative expenses decreased by ($1.00 million) due to cost-cutting measures[139][140] - Total non-operating income increased by $1.80 million, but this includes significant losses from lease assignment and termination ($5.70 million) and settlement of related party receivable ($0.80 million) in 2025[143] Liquidity and Capital Resources Cash and Cash Equivalents & Short-term Investments | Date | Amount ($) | | :---------------- | :------------- | | March 31, 2025 | $0.2 million | | August 22, 2025 | $0.3 million | - The Company has an accumulated deficit of ($297.89 million) as of March 31, 2025, and has incurred recurring losses and negative cash flows from operations since inception[145] - Current cash is anticipated to fund operations only through August 2025, raising substantial doubt about the Company's ability to continue as a going concern[147][155][159] - The Company is exploring multiple financing alternatives, including equity, debt, equipment sale leasebacks, partnerships, and grants, but there is no assurance of success[148][157][158] - The ability to raise capital through securities sales is limited by the inability to use a Form S-3 registration statement until November 2026 (or later) due to late filings, and existing debt holders have a right to 25% of future financing proceeds[157][178] - If additional capital is not secured, the Company may be forced to delay, reduce, or terminate operations, sell assets, cease operations, or reorganize[148][157] ITEM 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Scorpius 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 disclosures about market risk[160] ITEM 4. Controls and Procedures This section details the evaluation of the Company's disclosure controls and procedures and internal control over financial reporting. Management concluded that disclosure controls were not effective as of March 31, 2025, due to several material weaknesses, including ineffective IT general controls, issues with income tax accounting, inadequate management review controls, and deficiencies in revenue recognition and impairment identification. The Company is committed to remediating these weaknesses Evaluation of Disclosure Controls and Procedures - As of March 31, 2025, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were not effective due to un-remediated material weaknesses in internal control over financial reporting[164] Material Weaknesses in Internal Control Over Financial Reporting - Identified material weaknesses include ineffective information technology general controls (user access, segregation of duties), inadequate design and implementation of controls for income tax accounting, ineffective management review controls (precision, evidence), ineffective controls over process development revenue recognition (labor hours, standalone selling price), and ineffective controls over identifying and recording impairments of long-lived assets[167][186] Remediation of Material Weaknesses - Remediation efforts include evaluating and implementing enhanced process controls for user access management and segregation of duties, expanding documentation for user access and system controls, enhancing management review controls, and improving controls over income tax and revenue accounting[166] - Despite material weaknesses, management concluded that the consolidated financial statements present fairly the financial position, results of operations, and cash flows in conformity with GAAP[169] Changes in Internal Control over Financial Reporting - Other than the planned remediation activities, there were no changes in internal control over financial reporting during the fiscal quarter ended March 31, 2025, that materially affected or are reasonably likely to materially affect internal control over financial reporting[170] PART II—OTHER INFORMATION ITEM 1. Legal Proceedings The Company is not currently a party to any legal proceedings that would individually or collectively have a material adverse effect on its business, operating results, financial condition, or cash flows, though litigation can still have an adverse impact - The Company is not currently involved in any legal proceedings that would have a material adverse effect on its business[172] ITEM 1A. Risk Factors This section updates the risk factors, emphasizing the Company's inability to generate significant revenue, its substantial accumulated deficit, and the critical need for additional capital to continue operations beyond August 2025. It highlights the going concern uncertainty, material weaknesses in internal controls, restrictive covenants in debt agreements, and the potential loss of pledged assets due to defaults, as well as the challenges in attracting a strategic alternative Revenue Generation and Profitability - The Company has not generated significant revenue from its current business and does not anticipate significant CDMO revenue for several years, having incurred net losses every year since inception, with a ($11.29 million) net loss for Q1 2025 and an accumulated deficit of ($297.89 million)[174][177][181][182] - Achieving profitability depends on successfully scaling as a CDMO, market acceptance, and capacity to develop and sell services, with no assurance of sufficient revenue to cover facility expenses[182] - The Company expects continued operating losses and negative cash flows, requiring significant revenue generation or additional financing to achieve and maintain profitability[183][184] Need for Additional Capital and Going Concern - Operating activities used ($3.37 million) in cash during Q1 2025, and cash and short-term investments were ($0.21 million) as of March 31, 2025, and ($0.30 million) as of August 22, 2025[175][144] - Current cash is only sufficient to fund operations through August 2025, necessitating additional financing, which may not be available on acceptable terms or at all[178] - The Company's financial statements are prepared under a going concern assumption, but significant losses and increasing expenses raise substantial doubt about its ability to continue as a going concern for one year after financial statements are issued[179] - Raising capital through equity will dilute existing stockholders, and debt financing may involve restrictive covenants. The delisting from NYSE American limits financing options[178][179] Material Weaknesses in Internal Control - The Company has identified material weaknesses in internal control over financial reporting, including ineffective IT general controls, issues with income tax accounting, inadequate management review controls, and deficiencies in revenue recognition and impairment identification[186] - These weaknesses led management to conclude that internal control over financial reporting and disclosure controls were ineffective for the year ended December 31, 2024, and the quarter ended March 31, 2025[186] - Failure to remediate these weaknesses or maintain effective controls could harm operating results, cause reporting failures, lead to restatements, and negatively impact stock price and investor confidence[188][189] Covenants in Convertible and Non-Convertible Notes - The December 2024 Secured Convertible Notes and 2025 Non-Convertible Promissory Notes, Related Party, contain covenants restricting new indebtedness and requiring a net monthly cash burn of not more than $1.80 million (decreasing over time)[190] - The Company is not in compliance with these restrictive covenants as of the filing date, and non-compliance could result in a declaration of default, materially harming business operations[190] Secured Convertible Notes and Pledged Assets - The December 2024 Secured Convertible Notes are secured by substantially all of the Company's and its domestic subsidiaries' assets[191] - The Company has failed to make the first three quarterly interest payments on the December 2024 Secured Convertible Notes as of August 22, 2025[191] - A payment default or any other default on these secured notes could lead to foreclosure on pledged assets or require redemption of the notes, severely disrupting business operations[192] Strategic Alternatives - The Company engaged Alliance Global Partners to explore strategic alternatives, but there is no assurance that this process will result in any transaction or strategic change[193] ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities during the quarter ended March 31, 2025, that had not been previously disclosed - No unregistered sales of equity securities occurred during Q1 2025 that were not previously disclosed[194] ITEM 3. Defaults Upon Senior Securities This item is not applicable to the Company for the reporting period - This item is not applicable[195] ITEM 4. Mine Safety Disclosures This item is not applicable to the Company for the reporting period - This item is not applicable[196] ITEM 5. Other Information No director or officer adopted or terminated a Rule 10b5-1 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 or non-Rule 10b5-1 trading arrangement during Q1 2025[197] ITEM 6. Exhibits This section lists all exhibits filed as part of this Quarterly Report on Form 10-Q, including various certificates of incorporation amendments, bylaws, promissory notes, lease agreements, and certifications - The Exhibit Index lists various corporate documents, including amendments to the Certificate of Incorporation, Bylaws, Promissory Notes, Lease Agreements, and certifications[199][200][201][202][203] SIGNATURES - The report is signed by Jeffrey A. Wolf, Chairman and Chief Executive Officer, and William Ostrander, Chief Financial Officer, on August 22, 2025[208]