Edible Garden AG rporated(EDBL) - 2023 Q1 - Quarterly Report

PART I — FINANCIAL INFORMATION Item 1. Financial Statements The company reported a wider net loss on lower revenue, but a public offering significantly improved its financial position Condensed Consolidated Balance Sheets The balance sheet shows improved liquidity and a shift from a stockholder deficit to equity due to a recent capital raise Key Financial Metrics | Financial Metric | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | Change | | :--- | :--- | :--- | :--- | | Cash | $3,948 | $110 | +$3,838 | | Total Current Assets | $6,019 | $1,863 | +$4,156 | | Total Assets | $11,276 | $6,965 | +$4,311 | | Total Current Liabilities | $2,648 | $4,829 | -$2,181 | | Total Liabilities | $6,981 | $9,145 | -$2,164 | | Total Stockholders' Equity (Deficit) | $4,295 | $(2,180) | +$6,475 | Condensed Consolidated Statements of Operations Revenue declined while operating expenses increased, resulting in a larger net loss compared to the prior-year period Quarterly Operational Performance | Metric (in thousands, except per-share data) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Revenue | $2,455 | $2,737 | | Gross Profit | $(24) | $(95) | | Selling, general and administrative expenses | $2,691 | $2,008 | | Loss from operations | $(2,715) | $(2,103) | | NET LOSS | $(2,879) | $(2,606) | | Net Loss per common share - basic and diluted | $(2.21) | $(15.40) | - The net loss per share improved significantly from $(15.40) to $(2.21) year-over-year, primarily due to a substantial increase in the weighted-average number of common shares outstanding following recent stock issuances[13] Condensed Consolidated Statements of Stockholders' Equity (Deficit) A public offering drove a significant increase in stockholders' equity, offsetting the quarterly net loss - A public offering in Q1 2023 resulted in the issuance of 1,619,000 shares of common stock, generating $9.26 million in additional paid-in capital, net of expenses[15] - The number of outstanding common shares increased from 362,716 at December 31, 2022, to 1,989,645 at March 31, 2023[15] Condensed Consolidated Statements of Cash Flows Financing activities from a public offering funded cash outflows from operations and investments, boosting cash reserves Quarterly Cash Flow Summary | Cash Flow Activity (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | $(3,319) | $(1,279) | | Net Cash Used in Investing Activities | $(361) | $(19) | | Net Cash Provided by Financing Activities | $7,518 | $1,285 | | Net Change in Cash | $3,838 | $(13) | | Cash at End of Period | $3,948 | $18 | Notes to Unaudited Condensed Consolidated Financial Statements Notes highlight substantial going concern doubt, significant customer concentration, and details of a recent public offering - Management has substantial doubt about the company's ability to continue as a going concern due to recurring net losses and its dependency on raising additional capital[30][94][98] - The company faces significant customer concentration risk, with three customers accounting for approximately 69% of total revenue in Q1 2023 and 80% of gross outstanding trade receivables[35] - In February 2023, the company completed a public offering, raising approximately $10.2 million in gross proceeds by issuing 1,619,000 shares of common stock and warrants[71] - The company settled two legal matters during the quarter: one with Green City Growers for $120,000 and another with a former officer for $235,000[89][90] Revenue by Segment | Revenue Stream (in thousands) | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Herbs & Produce | $1,832 | $2,410 | | Vitamins and Supplements | $623 | $327 | | Total | $2,455 | $2,737 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses a revenue decline in core business, rising SG&A costs, and improved liquidity from a recent offering - Revenue decreased 10.3% YoY, driven by a $578 thousand (24%) decrease in the herbs and produce business, while the vitamins and supplements segment grew by $296 thousand (90.5%)[123] - SG&A expenses increased by $684 thousand (34%) YoY, primarily due to costs related to the new Grand Rapids facility ($217k) and increased public company costs ($418k)[127] - Gross margin improved from -3.47% in Q1 2022 to -0.98% in Q1 2023, which management attributes to the impact of price increases[126] - The company raised approximately $10.2 million in gross proceeds from a public offering in February 2023, which management believes is sufficient to fund operations through December 2023[136][137] - Management reiterates that there is substantial doubt about the company's ability to continue as a going concern due to its history of significant losses and reliance on external financing[132][133] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company is exempt from market risk disclosure requirements as a smaller reporting company - As a smaller reporting company, Edible Garden is not required to provide quantitative and qualitative disclosures about market risk[143] Item 4. Controls and Procedures Management concluded that disclosure controls were ineffective due to material weaknesses in internal financial reporting - Management concluded that as of March 31, 2023, the company's disclosure controls and procedures were ineffective[144] - The ineffectiveness is due to material weaknesses in internal control, including a lack of adequate segregation of duties because of the small size of the finance department[145] PART II — OTHER INFORMATION Item 1. Legal Proceedings The company settled and dismissed two separate legal claims during the first quarter of 2023 - The company settled a lawsuit with Green City Growers Cooperative concerning an alleged breach of a supplier agreement for an aggregate payment of $120,000[148][149] - A breach of contract claim filed by a former officer was settled for an aggregate payment of $235,000 and dismissed in February 2023[150] Item 6. Exhibits This section lists all exhibits filed with the report, including agreements, warrants, and officer certifications - The report lists exhibits filed, including the Underwriting Agreement from the February 2, 2023 public offering, forms of warrants, and required officer certifications[151]