Nauticus Robotics(KITT)2023-11-14 21:31Revenue and Financial Performance - Total revenue for Q3 2023 decreased by $1.4 million (47%) to $1.6 million compared to $3.0 million in Q3 2022, primarily due to delays in government contract authorizations and completion of several contracts[181] - Total revenue for the three months ended September 30, 2023, was $1.59 million, down from $2.98 million in the same period in 2022[17] - Revenue for the three months ended September 30, 2023, was $1,593,854, a decrease from $2,981,610 in the same period in 2022[69] - Total revenue for the nine months ended September 30, 2023, decreased by $2.7 million (32%) to $5.5 million compared to $8.2 million in 2022, primarily due to delays in government contract authorizations and completion of several contracts[182] - Revenue from Transocean Ltd. for contract services totaled $17,000 and $210,400 for the three months and nine months ended September 30, 2022, respectively, with accounts receivable from Transocean Ltd. at $0 and $21,000 as of September 30, 2023, and December 31, 2022, respectively[155] Costs and Expenses - Cost of revenue for the nine months ended September 30, 2023, decreased by $0.7 million (9%) to $7.5 million compared to $8.2 million in 2022, driven by decreased revenue[184] - General and administrative expenses for Q3 2023 increased by $1.8 million (38%) to $6.7 million, primarily due to sales and marketing expenses, professional fees, and a 22% workforce reduction costing $0.4 million in severance[188] - General and administrative expenses for the three months ended September 30, 2023, were $6.70 million, up from $4.86 million in the same period in 2022[17] - General and administrative expenses for the nine months ended September 30, 2023, increased by $8.7 million (99%) to $17.5 million compared to $8.8 million in 2022, primarily due to increased stock-based compensation, sales and marketing expenses, and professional fees[189] - Research and development expenses for the three months ended September 30, 2023, were $275,154, up from $242,996 in the same period in 2022[17] - Research and development expenses for the three months ended September 30, 2023, increased by $0.1 million (13%) to $0.3 million compared to $0.2 million in 2022, due to achieving technological feasibility in hardware and software development[186] - Depreciation for the nine months ended September 30, 2023, increased by $117 thousand (32%) to $487 thousand compared to $370 thousand in 2022, driven by increased investment in operational assets[185] - The company incurred $12,582,000 in direct and incremental costs associated with the Business Combination and Equity Financing, primarily consisting of investment banking, legal, accounting, and other professional fees[33] - The company's 401(k) plan cost was $103,446 for the three months ended September 30, 2023, compared to $89,854 for the same period in 2022[146] - The company's stock-based compensation expense for the nine months ended September 30, 2023, was $406,679, compared to $624,407 for the same period in 2022[132] - Stock-based compensation expense for the three months ended September 30, 2023, totaled $959,104, including $102,127 for PRSUs and $725,879 for RSUs[145] - The company implemented a workforce reduction of 22% on September 30, 2023, resulting in $0.4 million in severance costs but expected to save $2.7 million over the next twelve months[197] Net Loss and Operating Loss - Operating loss for Q3 2023 increased by $2.2 million (36%) to $8.2 million compared to $6.0 million in Q3 2022[181] - Net loss for Q3 2023 increased by $4.5 million (34%) to $17.7 million compared to $13.2 million in Q3 2022[181] - Net loss for the three months ended September 30, 2023, was $17.68 million, compared to $13.18 million in the same period in 2022[17] - Net loss for the three months ended September 30, 2023, was $17.68 million, compared to $13.18 million in the same period in 2022[156] - The Company reported a net loss of $11,144,012 for the nine months ended September 30, 2023, compared to a net loss of $20,037,455 for the same period in 2022[23] - Basic and diluted loss per share for the three months ended September 30, 2023, was $0.43, compared to $1.10 in the same period in 2022[156] Cash Flow and Liquidity - Cash flows from operating activities for the nine months ended September 30, 2023, were $(16,435,894), compared to $(31,534,544) for the same period in 2022[23] - The company holds $6.8 million in cash and cash equivalents as of September 30, 2023, and implemented a 22% workforce reduction, resulting in $0.4 million in severance costs but expected to save $2.7 million over the next 12 months[36] - The company received $10.4 million in net proceeds from debt issuance during Q3 2023, which, along with cost control measures and potential future funding, is expected to support operations for at least one year[36] - Cash and cash equivalents decreased from $17.79 million in December 2022 to $6.77 million in September 2023[15] - As of September 30, 2023, the company had $6,771,531 in cash and cash equivalents, consisting of money market funds[195] - The Company received proceeds of $4,959,263 from a matured US Treasury Bill on March 14, 2023, recognized in cash flows from investing activities[44] - The company anticipates needing additional capital for business expansion, including acquisitions and capital expenditures, and is considering cost-cutting measures if additional financing is not secured[197] Debt and Financing - The company secured a convertible senior secured term loan agreement providing up to $20.0 million, with $11.6 million already funded[215] - The Convertible Senior Secured Term Loan Agreement includes a 2.5% exit fee or $290,000, with an annual interest rate of 12.50%, payable quarterly starting April 1, 2024[216] - The loan agreement includes a 2.5% original issue discount or $125,000, assumed legal fees of $150,000, deemed interest from convertible debentures of $378,116, and $500,000 held in escrow[216] - The Loans will mature on the earliest of September 17, 2026, or 91 days prior to the maturity of the 5% Original Issue Discount Senior Secured Convertible Debentures dated September 9, 2022[216] - The Company may elect to redeem some or all of the outstanding principal amount of the Loans, paying an Optional Redemption Amount including 100% of the principal, accrued interest, and liquidated damages[217] - The Loans are convertible into shares of Common Stock at a conversion price of $6.00 per share, subject to anti-dilution adjustments[218] - The company's debentures can be converted at 120% of the principal amount, with a conversion price of $15.00 or 2,922,425 shares of common stock, and accrue interest at 5% per annum, maturing on September 9, 2026[82] - The Company issued a $5,000,000 secured promissory note to RCB Equities 1, LLC on July 14, 2023, with a 15% annual interest rate and a $125,000 exit fee[87] - The company entered into a convertible senior secured term loan agreement with an interest rate of 12.50% per annum and a 2.5% exit fee[90] - The company entered into a convertible senior secured term loan agreement on September 18, 2023, with an exercise price reset to $6.00 per share[154] - Total notes payable as of September 30, 2023, were $48,130,320, including $36,530,320 in convertible secured debentures and $11,600,000 in convertible senior secured term loans[80] - The company issued $36,530,320 in convertible secured debentures, with a fair value of $20,949,110 for the associated warrants[81] Assets and Liabilities - Total assets increased from $52.60 million in December 2022 to $56.34 million in September 2023[15] - Total liabilities increased from $52.58 million in December 2022 to $59.01 million in September 2023[15] - Total stockholders' equity (deficit) decreased from $27,819 in December 2022 to $(2.68 million) in September 2023[15] - Total inventories increased to $13.96 million as of September 30, 2023, compared to $6.67 million as of December 31, 2022, driven by a significant rise in work in progress from $5.17 million to $13.02 million[51] - Prepaid expenses totaled $5.13 million as of September 30, 2023, with prepaid material purchases accounting for $2.86 million and prepaid insurance at $1.92 million[75] - Accounts receivable decreased to $997,400 as of September 30, 2023, from $1,622,434 as of December 31, 2022, due to timing of collections[70] - Contract assets decreased by $547,183 to $26,712 as of September 30, 2023, primarily due to timing of billing for revenue recognition[71] - The company's property and equipment, net, increased to $26,275,377 as of September 30, 2023, from $15,167,367 as of December 31, 2022[76] - Accrued liabilities totaled $6,474,818 as of September 30, 2023, up from $3,142,977 as of December 31, 2022[79] - The company's lease arrangements are operating leases, with right-of-use assets and liabilities recognized at the lease commencement date based on the present value of lease payments[94] - Total operating lease expense for the three months ended September 30, 2023, was $266,607, compared to $228,331 for the same period in 2022[98] - Total lease payments as of September 30, 2023, amounted to $4,662,625, with a present value discount of $2,416,801, resulting in operating lease liabilities of $2,245,824[101] - The Company entered into a 5-year operating lease for office space in Scotland in July 2023, with a secured borrowing rate of 15% used to determine the present value of lease payments[96] Internal Controls and Financial Reporting - Management is working to remediate a material weakness in internal controls, particularly in accounting for complex transactions, with ongoing efforts to enhance contract review processes and internal communications[206] - The Company identified a material weakness in controls over financial reporting, resulting in the restatement of financial statements as of and for the nine months ended September 30, 2022[204] Stock and Equity - The company's common stock (KITT) and redeemable warrants (KITTW) are listed on the Nasdaq Stock Market LLC, with 50,035,824 shares of common stock outstanding as of November 14, 2023[4] - Former holders of Nauticus Robotics Holdings, Inc. Common Stock are entitled to up to 7,499,993 additional Earnout Shares, which will be released based on specific stock price triggers over a 5-year period[29] - An aggregate of 47,250,771 shares of Common Stock was issued after the Business Combination, including 36,650,778 shares to Nauticus Common Stock holders, 7,499,993 Earnout Shares, and 3,100,000 shares for Equity Financing[28] - The company's warrant liability balance decreased from $32.69 million as of December 31, 2022, to $14.50 million as of September 30, 2023, due to a change in fair value of $18.78 million[162] - The company's public warrants, valued at $1,897,500 as of September 30, 2023, experienced a change in value of $(24,150) for the three months ended September 30, 2023[109] - The fair value of Private Warrants as of September 30, 2023, was $1.64 million, calculated using a Black-Scholes model with a stock price of $1.77 and implied volatility of 67.0%[112] - The company has $7.79 million equity units available for future issuance under the Omnibus Incentive Plan as of September 30, 2023[128] - The company's total unrecognized compensation costs related to stock options as of September 30, 2023, were $948,451, to be recognized over a weighted average period of 1.91 years[132] - The total intrinsic value of all options exercised during the nine months ended September 30, 2023, was $104,985[134] - The company received $338,039 from the exercise of 165,713 Amended SPA Warrants by ATW on June 23, 2023[153] Business Model and Commercialization - Nauticus is commercializing the Nauticus Fleet, consisting of Aquanaut (unmanned underwater vehicle) and Hydronaut (optionally crewed surface vessel), to address markets like oil & gas, offshore renewables, and telecommunications[173] - Aquanaut, a fully electric subsea robot, operates in two modes: excursion (data collection) and intervention (using manipulators for subsea tasks)[174] - The company is in the commercialization phase of Aquanaut and Hydronaut, focusing on manufacturability and scaling production to reduce long-term costs[175] - The company operates under a Robotics as a Service (RaaS) business model, providing ocean robotics products and services to commercial and government customers[26] - The company has no product sales for the three and nine months ended September 30, 2023, and 2022, with revenue primarily generated from technology, engineering services, and products for the offshore industry and governmental entities[45] Taxes and Other Financial Items - The company has no material uncertain tax positions as of September 30, 2023, and December 31, 2022, with recognized income tax positions measured at the largest amount likely to be realized[54] - Foreign currency losses of $83,654 and $56,061 were recorded for the three and nine months ended September 30, 2023, respectively, compared to gains of $206,617 and $207,146 for the same periods in 2022[55] - Capitalized interest totaled $873,816 for the nine months ended September 30, 2023, with $354,162 related to inventory and $519,654 related to property and equipment[61] - Interest expense, net, for the three months ended September 30, 2023, decreased by $0.5 million to $0.9 million compared to $1.4 million in 2022, primarily due to a gain on settlement of liquidated damages[193] - The change in fair value of warrant liabilities for the three months ended September 30, 2023, increased by $2.7 million to $8.7 million compared to $6.0 million in 2022, due to a reset of the warrant price from $20.00 to $6.00[191] Mergers and Acquisitions - The Base Equity Value for the 3DAD Merger is $34 million, with the consideration being 100% equity transaction of Nauticus common stock[164]