Sacks Parente Golf(SPGC) - 2023 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Condensed Financial Statements The unaudited condensed financial statements for June 30, 2023, show a net loss and stockholders' deficiency, with going concern issues mitigated by a subsequent $11.6 million IPO Condensed Balance Sheets As of June 30, 2023, total assets slightly decreased to $703,000, while total liabilities significantly increased to $3,122,000, worsening the stockholders' deficiency to $(3,019,000) Balance Sheet Comparison (in thousands) | Metric | June 30, 2023 (Unaudited) | December 31, 2022 | | :--- | :--- | :--- | | Total Current Assets | $115,000 | $331,000 | | Total Assets | $703,000 | $710,000 | | Total Current Liabilities | $3,105,000 | $2,166,000 | | Total Liabilities | $3,122,000 | $2,172,000 | | Total Stockholders' Deficiency | $(3,019,000) | $(1,882,000) | - Cash on hand decreased sharply from $147,000 at the end of 2022 to just $9,000 as of June 30, 2023[12] - Accrued payroll to executives was a major liability, increasing from $1,095,000 to $1,748,000 during the first six months of 2023[12] Condensed Statements of Operations For the six months ended June 30, 2023, net sales grew 26% to $137,000, and net loss narrowed to $(1,589,000) from $(2,434,000) year-over-year Three Months Ended June 30, (in thousands, except per share data) | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Net Sales | $47 | $44 | | Gross Profit | $15 | $21 | | Loss from Operations | $(650) | $(1,711) | | Net Loss | $(672) | $(2,290) | | Net Loss per Share | $(0.06) | $(0.21) | Six Months Ended June 30, (in thousands, except per share data) | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Net Sales | $137 | $109 | | Gross Profit | $59 | $66 | | Loss from Operations | $(1,547) | $(1,853) | | Net Loss | $(1,589) | $(2,434) | | Net Loss per Share | $(0.15) | $(0.24) | Condensed Statements of Cash Flows For the six months ended June 30, 2023, operating cash outflow increased to $(313,000), and net cash decreased by $(162,000), ending at $9,000 Cash Flow Summary for Six Months Ended June 30, (in thousands) | Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(313) | $(275) | | Net cash used in investing activities | $(3) | $(35) | | Net cash provided by financing activities | $154 | $526 | | Net (decrease) increase in cash | $(162) | $216 | Notes to Condensed Financial Statements Notes detail operations, liquidity challenges, and accounting policies, with a 'Going Concern' warning mitigated by a subsequent $11.6 million IPO - The financial statements were prepared on a going concern basis, but management concluded there was substantial doubt about the Company's ability to continue as a going concern due to recurring losses and a stockholders' deficit[27] - Subsequent to the quarter end, on August 17, 2023, the company closed its IPO, selling 3,200,000 shares at $4.00 per share for net proceeds of $11,594,000, significantly improving its liquidity position[29][76] Net Sales by Source - Six Months Ended June 30, (in thousands) | Net Sales Source | 2023 Revenue | 2022 Revenue | % Change | | :--- | :--- | :--- | :--- | | Distributors | $67 | $51 | 31% | | Online Sales | $105 | $87 | 21% | | Total Net Sales | $137 | $109 | 26% | - The company's pro forma balance sheet after the IPO shows cash increasing to $8.9 million and total stockholders' equity becoming positive at $8.8 million, after repaying executive payroll, related party loans, and other notes[77][81] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses a 26% net sales increase, declining gross margin, and the resolution of going concern issues through an $11.6 million IPO Results of Operations Net sales rose 26% to $137,000, but gross margin fell to 43%, leading to a narrowed net loss of $1.6 million for the six months ended June 30, 2023 - Net sales for the six months ended June 30, 2023, increased by 26% to $137,000, primarily from first-time sales to a distributor in South Korea, which accounted for 31% of net sales[105] - Gross margin declined to 43% for the first six months of 2023, compared to 61% in the same period of 2022, attributed to changes in inventory reserve and shrinkage[106] - The decrease in net loss for the six months to $1.6 million from $2.4 million was primarily driven by lower stock-based compensation costs, which more than offset the decreased gross profit and increased operating costs[114] Liquidity and Capital Resources Critical liquidity issues as of June 30, 2023, were resolved by an $11.6 million IPO, providing working capital through June 2025 - The company's financial state at June 30, 2023, with a net loss of $1,589,000 and cash of only $9,000, raised substantial doubt about its ability to continue as a going concern[125][126] - The August 2023 IPO raised net proceeds of $11,594,000, which is estimated to provide sufficient working capital through approximately June 2025[127][128] - Following the IPO, all outstanding related party loans and notes payable, totaling $559,000 and $404,000 respectively as of June 30, 2023, were paid in full[120][122][125] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, the company is exempt from providing market risk disclosures - As a smaller reporting company, Sacks Parente Golf, Inc. is not required to provide quantitative and qualitative disclosures about market risk[138] Item 4. Controls and Procedures Management concluded disclosure controls were effective as of June 30, 2023, with no material changes in internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by this report[139] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[140] PART II – OTHER INFORMATION Item 1. Legal Proceedings The company is not involved in any material legal proceedings outside the ordinary course of business - There are no pending or threatened material legal actions, suits, or proceedings against the company or its officers and directors[143] Item 1A. Risk Factors As a smaller reporting company, the company is not required to provide risk factor information in this quarterly report - The company is a smaller reporting company and is not required to provide risk factor disclosures in this report[144] 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 - There were no unregistered sales of equity securities or use of proceeds to report for the period[145]