Edible Garden AG rporated(EDBL) - 2022 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION This section presents the company's unaudited consolidated financial statements, including balance sheets, statements of operations, cash flows, and stockholders' deficit, along with management's discussion and analysis Item 1. Financial Statements This section presents the unaudited consolidated financial statements, including balance sheets, statements of operations, cash flows, and stockholders' deficit, along with detailed notes explaining the company's financial position, performance, and significant accounting policies for the periods ended June 30, 2022, and December 31, 2021 Consolidated Balance Sheets This section presents the company's financial position, detailing assets, liabilities, and stockholders' equity at specific points in time Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2022 | December 31, 2021 | | :-------------------------------- | :------------ | :------------------ | | Cash | $5,704 | $31 | | Total Current Assets | $6,999 | $1,191 | | Property, equipment, and leasehold improvements, net | $2,220 | $2,573 | | Total Assets | $9,418 | $3,990 | | Total Current Liabilities | $4,481 | $7,089 | | Total Liabilities | $7,870 | $11,097 | | Total Stockholders Equity (Deficit) | $1,548 | $(7,107) | - Total assets significantly increased from $4.0 million at December 31, 2021, to $9.4 million at June 30, 2022, primarily driven by a substantial increase in cash[5] - The company transitioned from a stockholders' deficit of $(7.1 million) at December 31, 2021, to a positive stockholders' equity of $1.5 million at June 30, 2022[7] Consolidated Statements of Operations This section outlines the company's financial performance over specific periods, showing revenues, expenses, and net loss Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $2,985 | $2,777 | $5,722 | $5,260 | | Cost of goods sold | $2,779 | $2,457 | $5,611 | $4,823 | | Gross profit | $206 | $320 | $111 | $437 | | Selling, general and administrative expenses | $2,733 | $1,410 | $4,340 | $2,684 | | Loss from operations | $(2,527) | $(1,090) | $(4,229) | $(2,247) | | Interest expense, net | $(1,234) | $(62) | $(1,737) | $(100) | | Loss from extinguishment of debt | $(826) | $- | $(826) | $- | | NET LOSS | $(4,776) | $(1,152) | $(7,382) | $(2,347) | | Net Income / (Loss) per common share - basic and diluted | $(0.68) | $(0.29) | $(1.22) | $(0.59) | - Net loss significantly increased for both the three-month period (from $(1.15 million) to $(4.78 million)) and six-month period (from $(2.35 million) to $(7.38 million)) ended June 30, 2022, primarily due to higher operating expenses, interest expense, and a loss from extinguishment of debt[9] Consolidated Statements of Cash Flows This section details the cash inflows and outflows from operating, investing, and financing activities over specific periods Consolidated Statements of Cash Flows Highlights (in thousands) | Metric | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :------------------------------------------ | :----------------------------- | :----------------------------- | | Net Cash Provided by / (Used In) Operating Activities | $(5,601) | $(899) | | Net Cash Provided by / (Used In) Investing Activities | $(33) | $(28) | | Net Cash Provided by / (Used In) Financing Activities | $11,307 | $936 | | NET CHANGE IN CASH | $5,673 | $9 | | CASH AT END OF PERIOD | $5,704 | $14 | - Cash provided by financing activities increased significantly to $11.31 million in the six months ended June 30, 2022, primarily due to proceeds from common stock issuance related to the IPO[12] - Net cash used in operating activities increased from $(899 thousand) in 2021 to $(5.60 million) in 2022, indicating higher operational cash burn[12] Consolidated Statements of Stockholders' Deficit This section tracks changes in the company's equity, including common stock, additional paid-in capital, and accumulated deficit Consolidated Statements of Stockholders' Equity (Deficit) Highlights (in thousands, except shares) | Metric | December 31, 2021 | June 30, 2022 | | :----------------------------------- | :------------------ | :------------ | | Common Shares Outstanding | 5,000,000 | 8,654,941 | | Additional Paid-In Capital | $511 | $16,548 | | Accumulated Deficit | $(7,619) | $(15,001) | | Total Stockholders Equity (Deficit) | $(7,107) | $1,548 | - Additional paid-in capital increased substantially from $511 thousand to $16.55 million, primarily due to the issuance of common stock and conversion of debt to common stock[16] - The accumulated deficit worsened from $(7.62 million) to $(15.00 million), reflecting the net losses incurred during the period[16] Notes to Unaudited Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the consolidated financial statements, covering significant accounting policies and specific financial items NOTE 1 – ORGANIZATION, NATURE OF BUSINESS, AND BASIS OF PRESENTATION This note details the company's corporate history, including its formation and various stock splits, the specifics of its Initial Public Offering (IPO) on Nasdaq in May 2022, and its core business as a retail seller of hydroponic produce. It also highlights the significant going concern uncertainty - Edible Garden AG Inc. completed its IPO on May 5, 2022, with its stock trading on Nasdaq under the symbol 'EDBL'[22] - The IPO generated total net proceeds of $13.62 million after deducting underwriting discounts and offering expenses[22] - The company's core business is the retail sale of locally grown hydroponic produce, distributed across the Northeast and Midwest to approximately 4,500 supermarket stores[24] - Substantial doubt exists regarding the company's ability to continue as a going concern due to insufficient liquidity to satisfy future financial obligations, despite efforts to minimize capital expenditures and reduce expenses[27] NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This note outlines the key accounting principles and estimates applied in the financial statements, covering areas such as revenue recognition, inventory valuation, depreciation of fixed assets, and income tax provisions. It also clarifies that the company operates as a single reportable segment - Revenue is recognized when control of promised goods or services is transferred to customers, with sales prices generally fixed at the point of sale and no material returns or discounts[37][40] Disaggregated Revenue (in thousands) | Revenue Stream | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--------------- | :----------------------------- | :----------------------------- | | Herbs & Produce | $5,054 | $4,967 | | Vitamins and Supplements | $668 | $293 | | Total | $5,722 | $5,260 | - Inventory is valued at the lower of actual cost (FIFO method) or net realizable value, with periodic reviews for excess, obsolete, or impaired items[31] - The company operates in one reportable operating segment, as management measures profit and loss as a whole and does not maintain discrete financial information for specific segments[47] NOTE 3 – INVENTORY This note provides a detailed breakdown of the company's inventory, categorized into raw materials and work-in-progress, as of June 30, 2022, and December 31, 2021 Inventory Composition (in thousands) | Category | June 30, 2022 | December 31, 2021 | | :--------------- | :------------ | :------------------ | | Raw materials | $103 | $68 | | Work-in-progress | $291 | $292 | | Total inventory | $394 | $360 | - Total inventory increased slightly from $360 thousand at December 31, 2021, to $394 thousand at June 30, 2022, primarily due to an increase in raw materials[49] NOTE 4 – PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS, NET This note details the company's property, equipment, and leasehold improvements, net of accumulated depreciation, for June 30, 2022, and December 31, 2021, showing a decrease in net value Property, Equipment and Leasehold Improvements, Net (in thousands) | Category | June 30, 2022 | December 31, 2021 | | :------------------------------------------ | :------------ | :------------------ | | Subtotal (Cost) | $3,870 | $3,837 | | Less accumulated depreciation | $(1,650) | $(1,264) | | Property, equipment and leasehold improvements, net | $2,220 | $2,573 | - Net property, equipment, and leasehold improvements decreased from $2.57 million to $2.22 million, primarily due to increased accumulated depreciation[50] - Depreciation expense for the six months ended June 30, 2022, was $385,515, up from $359,066 in the prior year period[50] NOTE 5 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES This note provides a breakdown of current liabilities, including accounts payable and various accrued expenses, as of June 30, 2022, and December 31, 2021, indicating a decrease in total current liabilities Accounts Payable and Accrued Expenses (in thousands) | Category | June 30, 2022 | December 31, 2021 | | :------------------------------------ | :------------ | :------------------ | | Accounts payable | $1,465 | $2,270 | | Accrued interest payable | $77 | $117 | | Accrued payroll | $211 | $213 | | Accrued vacation | $103 | $39 | | Current lease liability | $84 | $77 | | Total Accounts Payable and Accrued Expenses | $1,940 | $2,880 | - Total accounts payable and accrued expenses decreased by $940 thousand from December 31, 2021, to June 30, 2022, primarily driven by a reduction in accounts payable[52] NOTE 6 – NOTES PAYABLE This note details the company's various debt instruments, including secured promissory notes, convertible notes from Evergreen, an SBA loan, and related party loans. It highlights significant debt repayments and conversions to common stock following the IPO, and the issuance of a new consolidated secured promissory note to Evergreen Notes Payable (in thousands) | Category | June 30, 2022 | December 31, 2021 | | :-------------------------- | :------------ | :------------------ | | Secured promissory note | $3,783 | $3,783 | | Evergreen private placement | $1,842 | $2,301 | | SBA loan | $150 | $150 | | SAFE agreements | $- | $538 | | Related party loans | $- | $1,888 | | Vehicle loans | $107 | $116 | | Total Gross Debt | $5,882 | $8,776 | | Net Long Term Debt | $3,307 | $3,882 | - Total gross debt decreased from $8.78 million at December 31, 2021, to $5.88 million at June 30, 2022, largely due to repayments and conversions of SAFE agreements and related party loans[53] - Following the IPO, the company repaid Evergreen $1.93 million in principal and $26,881 in accrued interest, incurring a $577,875 prepayment penalty[71][72] - A new amended and restated consolidated secured promissory note of $1.84 million was issued to Evergreen on June 30, 2022, bearing 7.0% interest and maturing March 31, 2023, which resulted in a loss on extinguishment of debt of $826,203[72][74] - Convertible notes held by the CFO and CEO, totaling $1.32 million and $27,821 respectively, were converted into common stock upon the closing of the IPO[178] NOTE 7 – LEASES This note outlines the company's accounting for leases, primarily operating leases, and provides details on lease costs, liabilities, and the weighted-average remaining lease term and discount rate - Total operating lease cost for the six months ended June 30, 2022, was $118,552, with $65,032 attributed to short-term leases[95] Operating Lease Liabilities and Terms (in thousands) | Metric | June 30, 2022 | | :-------------------------------- | :------------ | | Operating lease assets | $167 | | Operating lease liabilities | $167 | | Remaining lease term (years) | 1.8 | | Discount rate | 17.5% | - The company has an ongoing month-to-month short-term lease arrangement with the Predecessor for its flagship facility, with payments of approximately $15,550 per month during 2022[94][110] NOTE 8 – STOCKHOLDERS' EQUITY (DEFICIT) This note details the changes in common stock and warrants outstanding, primarily driven by the Initial Public Offering (IPO) and subsequent issuances for debt conversion and as consideration for the Evergreen note Common Stock and Warrants Outstanding | Metric | June 30, 2022 | December 31, 2021 | | :----------------------------------- | :------------ | :------------------ | | Common Shares Outstanding | 8,654,941 | 5,000,000 | | Shares Issued in Public Offering | 2,930,000 | N/A | | Shares Issued to Evergreen | 280,000 | N/A | | Shares Issued for Debt Conversion | 444,941 | N/A | | Warrants Outstanding | 3,758,961 | 205,750 | | Weighted-Average Exercise Price (Warrants) | $5.04 | $11.18 | - The company issued 2,930,000 shares of common stock in its public offering and 444,941 shares for the conversion of debt principal and accrued interest during the six months ended June 30, 2022[99][101] - Total warrants outstanding increased significantly to 3,758,961 by June 30, 2022, primarily due to the issuance of warrants in the IPO and to Evergreen[102][103] NOTE 9 – COMMITMENTS AND CONTINGENCIES This note discloses an ongoing legal proceeding, a lawsuit filed by Green City Growers Cooperative, and highlights the potential for reputational damage, legal costs, and judgments that could materially affect the company's financial condition - The company is a party to a lawsuit filed on November 29, 2021, by Green City Growers Cooperative, seeking damages for an alleged breach of a supplier agreement[108] - Potential adverse outcomes include reputational damage, legal costs, and settlements or judgments that may exceed existing insurance coverage, which could materially affect the company's business and financial condition[109] NOTE 10 – RELATED PARTY TRANSACTIONS This note refers to disclosures in other notes regarding loan agreements with officers and an ongoing lease arrangement with the Predecessor, indicating the nature of related party dealings - Loan agreements with certain officers are detailed in Note 6, 'Notes Payable'[110] - An ongoing lease arrangement with the Predecessor for land utilized in operations is discussed in Note 7, 'Leases'[110] NOTE 11 – GOING CONCERN This note reiterates the substantial doubt about the company's ability to continue as a going concern, citing significant net losses and insufficient cash from operations, emphasizing the critical need for additional capital to support future operations - The company incurred net losses of $5.5 million for the year ended December 31, 2021, and $7.4 million for the six-month period ended June 30, 2022[112] - At June 30, 2022, the cash balance was $5.7 million, but the company has not generated sufficient cash from operating activities to fund ongoing operations[112] - Substantial doubt exists regarding the company's ability to continue as a going concern for the next twelve months, necessitating additional funds through public or private financing, collaborative relationships, or other arrangements[112][113][116] NOTE 12 – SUBSEQUENT EVENTS This note states that management has evaluated subsequent events through August 15, 2022, and found no events requiring adjustment to or disclosure in the consolidated financial statements - No subsequent events requiring adjustment or disclosure were identified through August 15, 2022, the date the financial statements were available for issuance[117] 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 results of operations, including an overview of its business, recent developments, critical accounting policies, and a detailed comparison of financial performance for the three and six months ended June 30, 2022 and 2021. It also addresses liquidity, capital resources, and the impact of macroeconomic conditions FORWARD-LOOKING STATEMENTS This section highlights the inherent uncertainties and risks associated with forward-looking statements, cautioning that actual results may differ materially from projections - The report contains forward-looking statements subject to various risks and uncertainties that could cause actual results to differ materially from projections[119] - Key risks include the company's history of losses, ability to continue as a going concern, market competition, customer retention, growth management, impact of COVID-19, and ability to obtain additional financing[120][121] OVERVIEW This section describes the company's core business as a controlled environment agriculture (CEA) farming company, emphasizing its sustainable practices and proprietary technology - Edible Garden is a controlled environment agriculture (CEA) farming company that uses hydroponic and vertical greenhouses to sustainably grow organic herbs and lettuces[123] - The company utilizes proprietary GreenThumb software for greenhouse management, demand planning, sales data monitoring, forecasting, inventory management, and traceability[126] - Sustainability efforts include a 'closed loop' water system, LED lighting, and efficient truck loading to reduce natural resource consumption and carbon footprint[125][129] RECENT DEVELOPMENTS This section outlines key recent events, including the company's Initial Public Offering (IPO), board changes, and significant debt restructuring - The company completed its Initial Public Offering (IPO) on May 9, 2022, selling 2,930,000 units (common stock and warrants) at $5.00 per unit, generating approximately $14.7 million in gross proceeds[132] - In connection with the IPO, the company issued Representative's Warrants to purchase up to 117,200 shares of Common Stock at an exercise price of $6.25 per share[133] - The board of directors saw new appointments (Mathew McConnell, Tracy Nazzaro, Ryan Rogers) and a subsequent resignation (Tracy Nazzaro)[135] - On June 30, 2022, the company issued an amended and restated consolidated secured promissory note to Evergreen Capital Management LLC[136] CRITICAL ACCOUNTING POLICIES This section discusses the accounting policies that require significant management judgment and estimates, such as revenue recognition and income taxes - Critical accounting policies involve significant management judgment and estimates, including revenue recognition, valuation of property, equipment and leasehold improvements, and income taxes[137][138] - The company establishes valuation allowances for deferred tax assets to reduce them to the amount expected to be realized, fully offsetting net operating losses at June 30, 2022, and December 31, 2021[142] RESULTS OF OPERATIONS This section analyzes the company's financial performance, comparing revenues, costs, and net losses for the reported periods COMPARISON OF THE THREE MONTHS ENDED JUNE 30, 2022 AND 2021 For the three months ended June 30, 2022, revenue increased by 7.49% year-over-year, but gross profit declined due to higher costs. Selling, general, and administrative expenses surged by 93.83%, primarily driven by IPO-related bonuses, leading to a significant increase in loss from operations and net loss Financial Performance (Three Months Ended June 30, in thousands) | Metric | 2022 | 2021 | Change ($) | Change (%) | | :----------------------------------- | :--- | :--- | :--------- | :--------- | | Revenue | $2,985 | $2,777 | $208 | 7.49% | | Cost of goods sold | $2,779 | $2,457 | $322 | 13.11% | | Gross profit | $206 | $320 | $(114) | (35.63%) | | Selling, general and administrative expenses | $2,733 | $1,410 | $1,323 | 93.83% | | Loss from operations | $(2,527) | $(1,090) | $(1,437) | 131.83% | | Interest expense, net | $(1,234) | $(62) | $(1,172) | 1890.32% | | Loss from extinguishment of debt | $(826) | $- | $(826) | N/A | | NET LOSS | $(4,776) | $(1,152) | $(3,624) | 314.58% | - Selling, general and administrative expenses increased by $1.323 million, or 93.83%, primarily due to $1 million in transaction bonuses paid to the CEO and CFO upon IPO completion, wage increases, and higher accounting and insurance costs[149] - Gross profit declined by $114 thousand, or 4.11% of sales, due to increased packaging costs (inflation), higher labor costs (COVID-19), and increased costs from contract farmers[148] COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 2022 AND 2021 For the six months ended June 30, 2022, revenue grew by 8.78% year-over-year, but gross profit significantly decreased. Selling, general, and administrative expenses rose by 61.70%, driven by IPO-related bonuses and increased natural gas costs, resulting in a substantial increase in loss from operations and net loss Financial Performance (Six Months Ended June 30, in thousands) | Metric | 2022 | 2021 | Change ($) | Change (%) | | :----------------------------------- | :--- | :--- | :--------- | :--------- | | Revenue | $5,722 | $5,260 | $462 | 8.78% | | Cost of goods sold | $5,611 | $4,823 | $788 | 16.34% | | Gross profit | $111 | $437 | $(326) | (74.60%) | | Selling, general and administrative expenses | $4,340 | $2,684 | $1,656 | 61.70% | | Loss from operations | $(4,229) | $(2,247) | $(1,982) | 88.21% | | Interest expense, net | $(1,737) | $(100) | $(1,637) | 1637.00% | | Loss from extinguishment of debt | $(826) | $- | $(826) | N/A | | Other income / (loss) | $(590) | $- | $(590) | N/A | | NET LOSS | $(7,382) | $(2,347) | $(5,035) | 214.53% | - Selling, general and administrative expenses increased by $1.656 million, or 61.70%, primarily due to $1.189 million in compensation (including IPO bonuses), a $186 thousand increase in natural gas expense, and higher accounting and insurance costs[161] - Gross profit declined by $326 thousand, or 6.20% of sales, with margins dropping from 8.31% to 1.94%, due to increased packaging, labor (COVID-19), and contract farmer costs[160] - Other income / (loss) for the six months ended June 30, 2022, was $(590 thousand), including $189 thousand from warrant revaluation and $401 thousand from a leak-out provision on convertible debt[168] LIQUIDITY AND CAPITAL RESOURCES This section assesses the company's ability to meet its short-term and long-term financial obligations, discussing cash on hand, debt, and capital-raising efforts Going Concern Considerations The company's financial statements are prepared on a going concern basis, but significant net losses and expected increases in expenses raise substantial doubt about its ability to continue operations for the next twelve months without additional financing - The company incurred net losses of $7.382 million for the six months ended June 30, 2022, and $2.347 million for the year ended December 31, 2021[171] - Operating losses are expected to continue or increase due to anticipated increases in sales and marketing, operational, and general and administrative costs[171] - Substantial doubt exists regarding the company's ability to continue as a going concern, and failure to raise additional capital could lead to scaling back or ceasing operations[172][173] Liquidity This section details the company's cash position and its ability to fund operations and capital expenditures, noting potential challenges in accessing credit Liquidity Position (in thousands) | Metric | June 30, 2022 | December 31, 2021 | | :-------------------------- | :------------ | :------------------ | | Cash and cash equivalents | $5,700 | $31 | | Total debt outstanding | $5,850 | $8,090 | - The company believes its current cash on hand and cash flows will be adequate for operational and business needs in the next twelve months, but long-term needs may require additional debt or equity financing[176] - There is a risk that the company may not be able to access credit markets on commercially acceptable terms or at all for additional funds[176] Capital Resources This section details the capital raised through the IPO, including the net proceeds and their allocation towards debt repayments, conversions of SAFEs and convertible notes, and the subsequent issuance of a new consolidated secured promissory note to Evergreen - The IPO generated total net proceeds of $13.62 million after deducting underwriting discounts and offering expenses[177] - Proceeds were used to repay Evergreen ($2.53 million), convert SAFEs into common stock (153,996 shares) and cash ($5,790), repay the CFO ($785,597), and convert CFO/CEO convertible notes into common stock (284,930 and 6,015 shares, respectively)[178] - A new $1.84 million consolidated secured promissory note was issued to Evergreen on June 30, 2022, with a 7.0% interest rate and a maturity date of March 31, 2023[179][180] Cash Flows This section summarizes the company's cash flow activities for the six months ended June 30, 2022 and 2021, highlighting a significant increase in cash provided by financing activities due to the IPO, which offset increased cash used in operating activities - Cash used in operating activities increased to $5.60 million for the six months ended June 30, 2022, primarily due to the timing of vendor payments and increased executive and director compensation[184] - Cash provided by financing activities significantly increased to $11.31 million for the six months ended June 30, 2022, driven by the completion of the IPO[185] Impact of COVID-19 and Macroeconomic Conditions This section discusses the ongoing and potential future impacts of the COVID-19 pandemic and broader macroeconomic conditions, such as the Russian invasion of Ukraine, on the company's business, including supply chain disruptions, increased commodity costs, and workforce challenges - The COVID-19 pandemic and macroeconomic conditions have led to volatile supply and demand, disrupted global supply chains, and increased costs for certain commodities like natural gas[186] - Workforce disruptions related to COVID-19 pose a significant risk to maintaining operations and could adversely affect financial results[187] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Edible Garden AG Incorporated is exempt from providing quantitative and qualitative disclosures about market risk - The company is a smaller reporting company and is not required to provide information on quantitative and qualitative disclosures about market risk[188] Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were not effective as of June 30, 2022, due to material weaknesses in internal control over financial reporting, specifically a lack of adequate segregation of duties within the finance department - Disclosure controls and procedures were not effective as of June 30, 2022[189] - A material weakness was identified due to the limited number of employees in the finance department, leading to inadequate segregation of duties in the financial statement preparation process[190] PART II - OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, exhibits, and official signatures, providing additional context beyond the financial statements Item 1. Legal Proceedings This section refers to Note 9 for details on legal proceedings, stating that management does not believe any other pending or threatened proceedings would have a material adverse effect on the company's business, results of operations, or financial condition - The company is involved in various legal proceedings in the ordinary course of business, with specific details on a material action provided in Note 9[195] Item 1A. Risk Factors This section refers to the IPO prospectus for a comprehensive discussion of risk factors and highlights new risks related to non-compliance with Nasdaq continued listing requirements, specifically concerning board independence and stockholders' equity, which could lead to delisting - The company received notice from Nasdaq on August 1, 2022, for non-compliance with listing rules 5605(b)(1) (majority independent directors) and 5605(c)(2) (audit committee composition) due to a director resignation[198] - As of June 30, 2022, stockholders' equity was below $1.5 million, and the company did not meet Nasdaq's net income or market value standards for continued listing, posing a risk of delisting[199] - Failure to regain compliance with Nasdaq listing standards could result in delisting, negatively impacting the market price and liquidity of the company's securities and its ability to raise capital[199] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the gross and net proceeds from the company's IPO, the expenses incurred, and confirms that there has been no material change in the planned use of proceeds as described in the prospectus - The IPO generated approximately $14.7 million in gross proceeds from the sale of 2,930,000 units and 439,500 additional warrants[200] - Offering expenses totaled $1.44 million, resulting in net proceeds of $13.21 million[201] - There has been no material change in the planned use of proceeds as described in the prospectus dated May 5, 2022[201] Item 6. Exhibits This section lists all exhibits filed as part of the Form 10-Q, including key agreements, warrants, and certifications - Exhibits include the Underwriting Agreement, forms of Warrants, Warrant Agency Agreement, Amended and Restated Consolidated Secured Promissory Note, Letter Agreement, and various certifications (31.1, 31.2, 32, 101, 104)[205] Signatures This section contains the official signatures of the company's principal executive and financial officers, certifying the accuracy of the report - The report is signed by James E. Kras, Chief Executive Officer and President, and Michael James, Chief Financial Officer, Treasurer and Secretary[208][209] - The report was dated August 15, 2022[209]