Newton Golf Company, Inc.: Form 10-Q for the period ended Sep 30, 2025
Filed with the SEC on Nov 13, 2025 and accepted by EDGAR at Nov 13, 2025, 21:05 ET.
Management's discussion and analysis
As filed, 34,980 characters, with its headings, lists and tables. Extracted from the main document; charts and exhibits are in the original on sec.gov.
Management’s Discussion and Analysis of Financial Condition and Results of Operations is designed to provide a reader of the financial statements with a narrative report on our financial condition, results of operations, and liquidity. This discussion and analysis should be read in conjunction with the attached unaudited condensed financial statements and notes thereto and our Annual Report on Form 10-K for the year ended December 31, 2024, including the audited financial statements and notes thereto. The following discussion contains forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations, and intentions. Our actual results could differ materially from those discussed in the forward-looking statements. Please also see the cautionary language at the beginning of this Quarterly Report regarding forward-looking statements.
Company Overview
We are a technology-forward golf company, with a growing portfolio of golf products, including putting instruments, golf shafts, golf grips, and other golf related products. In consideration of our growth opportunities in shaft technologies, in April of 2022, we expanded our manufacturing business to include advanced premium golf shafts by opening a new shaft manufacturing facility in St. Joseph, Missouri. It is our intent to manufacture and assemble substantially all products in the United States. We anticipate expansion into golf apparel and other golf related product lines to enhance our growth. Our future expansions may include broadening our offerings through mergers, acquisitions or internal developments of product lines that are complementary to our premium brand.
Nasdaq Notice of Failure to Satisfy a Continued Listing Rule or Standard
As a result of Dottie Pepper’s resignation from our Board of Directors on September 28, 2025, we are no longer in compliance with Nasdaq Listing Rule 5605(b)(1), which requires that a majority of the Board of Directors be comprised of “independent directors,” as that term is defined in Nasdaq Listing Rule 5605(a)(2) (each, an “Independent Director”), and Nasdaq Listing Rule 5605(c)(2), which requires that the audit committee consist of at least three members, each of whom must (i) be an Independent Director, (ii) meet the criteria for independence set forth in Rule 10A-3(b)(1) under the Securities Exchange Act of 1934, as amended, (iii) not have participated in the preparation of our financial statements or of any current subsidiary at any time during the past three years, and (iv) be able to read and understand fundamental financial statements.
Nasdaq Listing Rules 5605(b)(1)(A) and 5605(c)(4) provide a cure period for these deficiencies until the earlier of (i) our next annual stockholders’ meeting or (ii) September 29, 2026; however, if our next annual stockholders’ meeting is held before March 27, 2026, then the cure period will continue through March 27, 2026. We intend to appoint an additional Independent Director to our Board of the Directors and the audit committee prior to the end of the cure period.
Reverse Stock Splits
On July 18, 2024, the Company filed a Certificate of Amendment to amend its Certificate of Incorporation with the Secretary of State of Delaware to affect a reverse stock split of the Company’s common stock at a ratio of 1-for-10 shares (the “First Reverse Stock Split”). The First Reverse Stock Split became effective as of 12:01 a.m. Eastern Time on July 30, 2024 and the Company’s common stock began trading on The Nasdaq Capital Market on a post-split basis under its existing trading symbol. As a result of the First Reverse Stock Split, every ten shares of common stock were automatically combined into one share of common stock. The authorized number of shares of common stock was not affected by the First Reverse Stock Split. No fractional shares were issued in connection with the First Reverse Stock Split, as all fractional shares were rounded up to the next whole share.
On March 4, 2025, the Company filed a Certificate of Amendment to amend its Certificate of Incorporation with the Secretary of State of Delaware to affect a reverse stock split of the Company’s common stock at a ratio of 1-for-30 shares (the “Second Reverse Stock Split,” and together with the First Reverse Stock Split, the “Reverse Stock Splits”). The Second Reverse Stock Split became effective as of 12:01 a.m. Eastern Time on March 17, 2025 and the Company’s common stock began trading on The Nasdaq Capital Market on a post-split basis under its existing trading symbol. As a result of the Second Reverse Stock Split, every 30 shares of common stock were automatically combined into one share of common stock. The authorized number of shares of common stock was not affected by the Second Reverse Stock Split. No fractional shares were issued in connection with the Second Reverse Stock Split, as all fractional shares were rounded up to the next whole share.
Accordingly, all share and per share amounts presented herein with respect to common stock have been retroactively adjusted to reflect the Reverse Stock Splits for all periods presented. Proportionate adjustments for the Reverse Stock Splits have been made to the per share exercise price and the number of shares issuable upon the exercise of warrants, the number of shares reserved for issuance under the Company’s equity plans, and all the then outstanding awards under the Company’s equity plans. The Reverse Stock Splits did not change the par value of the common stock or modify any voting rights or other terms of common stock.
Key Factors Affecting Our Performance
Seasonality and General Trends in Golf Participation
Because golf is a seasonal sport, our sales are cyclical and unlikely to remain consistent from quarter to quarter. Further, if golf participation decreases or the number of rounds of golf played decreases generally, for any or no reason, sales of our products may be adversely affected. In the future, the overall dollar volume of the market for golf-related products may not grow or may decline.
Impact of Inflation
Although our products are built in the United States, with limited risk of recent tariffs, recent inflationary trends have led to a moderate increase in some of the component parts used to manufacture our products. To date, we have not passed the increase in cost to our consumers. Continued prolonged periods of inflationary pressure on some or all costs may result in increased costs to produce our products that could have an adverse effect on profits from sales of these products or require us to increase prices for our products that could adversely affect consumer demand for our products.
While we have not had significant other disruptions that materially impacted our financial results, we continue to seek and expand the number of qualified domestic vendors used to source materials.
Business Outlook and Market Positioning
We believe we are entering a period of strong growth potential as the impact of our multi-year investment in sales, marketing, and brand development becomes increasingly evident in our revenue growth. Our recent revenue performance highlights growing consumer awareness of the Newton brand and rising demand for our Motion-based shaft technologies. Momentum on the professional tours continues to build, with more than 60 players now using Newton shafts across the PGA TOUR Champions, LPGA, and Korn Ferry Tours. This expanding presence among elite golfers underscores the performance characteristics of our products and is contributing to broader market interest. With only three commercial shaft families currently in the market, we intend to announce three additional premium shaft products for release next year. Although we are not providing forward-looking guidance, the planned expansion of our shaft lineup provides additional context for investors evaluating the scope of our product roadmap and the broader range of golfers our technology aims to serve.
Our distribution mix is also beginning to evolve in ways that may support long-term growth and improved efficiency. For the nine months ending September 30, 2025, 90% of our net sales were generated through direct-to-consumer channels supported by substantial paid media. In recent quarters, we have seen increased inbound interest from national retailers, professional club fitters, and OEM partners. While these relationships remain in early stages, broader engagement across these channels may diversify our revenue mix, reduce reliance on paid media, and expand access to golfers who rely on traditional retail and fitting environments.
Although our current product mix is concentrated with approximately 98% of sales generated from shafts and 2% from our putter line, we were founded on our patented putter technology. As brand awareness has increased and as potential new sales channels have opened, we believe more golfers may have the opportunity to evaluate our putter products. Recent trends in the putter category, including the commercial success of specialty putter manufacturers such as L.A.B. Golf, demonstrate continued consumer interest in differentiated putting technologies. While we cannot predict how broader market trends will influence demand for our putter products, increased channel access and rising brand visibility may contribute to greater awareness of our putter line over time.
In October, we launched our dedicated Japanese e-commerce site, enabling direct access to Newton products in the world’s second-largest golf market. Japan represents approximately 8.8 million active golfers and one of the highest per-golfer equipment spend levels globally. Early consumer response and engagement from professional club fitters have been strong reflecting initial interest in Newton’s Motion-based shaft technologies within this market.
Macro trends across the golf industry also continue to create a favorable backdrop for performance-driven equipment. According to the National Golf Foundation (“NGF”), the United States has approximately 28 million on-course golfers and 19 million off-course participants, representing sustained participation at or near historic highs. Globally, on-course participation is estimated at approximately 64 million golfers. The over-40 age demographic, which is the Company’s core customer profile, remains the highest-spending segment of the equipment market based on NGF demographic analyses. Third-party research from Grand View Research and Fact.MR estimates the global golf-equipment market at approximately $7 to $9 billion and growing at roughly a 5% compound annual rate through 2030, with the United States accounting for nearly half of global equipment spend.
In addition, golfer engagement channels continue to expand. NGF reports that a growing percentage of committed golfers now utilize professional club fitters, and national fitting networks including Club Champion, GolfTec, 2nd Swing, and True Spec have expanded nationwide, increasing access to environments where golfers evaluate components such as shafts on a performance basis. Off-course golf has also grown significantly, with NGF reporting that off-course participants now nearly equal on-course golfers. Industry researchers, including Golf Datatech, have observed increased adoption of launch monitors and indoor golf simulators across commercial facilities, fitting bays, and home environments. These trends support year-round equipment evaluation, including in colder climates where traditional outdoor golf is seasonal, and may extend the periods during which golfers research, test, and purchase equipment.
Regulatory developments may further contribute to equipment evaluation cycles. The USGA and R&A have adopted updated golf-ball testing standards that become effective in 2028 for professionals and 2030 for amateurs. While the impact on consumer behavior is uncertain, these updates may lead golfers to reassess equipment needs, including shaft performance characteristics aligned with desired launch and distance outcomes.
Altogether, our expanding product-development roadmap, increasing engagement from retailers, professional club fitters, and OEMs, and the supportive participation and technological trends across the golf industry provide a constructive context for evaluating our long-term opportunity. While future performance will depend on our execution across product innovation, marketing, and distribution strategies, we believe we are well positioned within these industry tailwinds and remain focused on leveraging these developments to drive long-term value.
Results of Operations
Three Months Ended September 30, 2025 as Compared to the Three Months Ended September 30, 2024
The following is a comparison of our results of operations for the three months ending September 30, 2025 and 2024 (amounts rounded to the nearest thousand):
| Three Months Ended September 30, 2025 | Three Months Ended September 30, 2024 | Change | |
|---|---|---|---|
| Net Sales | $2,582,000 | $1,211,000 | $1,371,000 |
| Cost of goods sold | 848,000 | 406,000 | 442,000 |
| Gross profit | 1,734,000 | 805,000 | 929,000 |
| Operating expenses: | |||
| Selling, general and administrative | 3,056,000 | 1,694,000 | 1,362,000 |
| Research and development | 182,000 | 201,000 | (19,000) |
| Total operating expenses | 3,238,000 | 1,895,000 | 1,343,000 |
| Loss from operations | (1,504,000) | (1,090,000) | (414,000) |
| Interest income, net | 20,000 | 30,000 | (10,000) |
| Change in fair value of warrant liabilities | (96,000) | - | (96,000) |
| Net Loss | $(1,580,000) | $(1,060,000) | $(520,000) |
Net Sales
Our net sales increased $1,371,000, or 113%, to $2,582,000 during the three months ending September 30, 2025, compared to $1,211,000 during the three months ending September 30, 2024. The increase in net sales was from the continued adoption of our Newton Motion driver shaft product line, our Newton Motion fairway shaft product line in April 2024, and our Newton Fast Motion driver product line in April 2025. For the three months ending September 30, 2025, we generated $2,553,000 of net sales from Newton Motion shafts, and we generated approximately 95% of our net sales through our websites.
Cost of goods sold
Cost of goods sold represents primarily our material, labor, components, and changes in inventory reserves for slow-moving or potentially obsolete products. Our cost of goods sold increased by $442,000, or 109%, to $848,000 for the three months ending September 30, 2025, compared to $406,000 for the three months ending September 30, 2024 due to our increase in net sales. Our gross margin was 67% and 66% for the three months ending September 30, 2025 and 2024, respectively. The increase in gross margin was due to the change in product mix sold, and additional volume lowering our per unit cost as compared to the prior year period.
Operating expenses
Operating expenses include selling, general and administrative expenses, and research and development costs.
Selling, general and administrative expenses include employee costs, legal and professional fees, sales and marketing expenses, stock-based compensation, public company expenses, rent, depreciation and other general expenses. Our selling, general and administrative expenses increased approximately $1,362,000, or 80% to $3,056,000 during the three months ending September 30, 2025, compared to $1,694,000 during the three months ending September 30, 2024. The increase in selling, general and administrative expense primarily reflects higher sales, marketing, and employee-related costs to support expanding demand and brand-building efforts. The increase also includes additional public-company costs and higher professional service expenses, including consulting and system-integration work related to the optimization of our enterprise systems, such as NetSuite, AfterShip, demand-planning tools, and related connectors intended to improve operational efficiency and support scalability. We also incurred higher professional and advisory fees associated with supporting the Company’s growth initiatives and overall operating infrastructure as compared to the prior-year period.
Research and development costs include employee costs, consultants, licensing fees, and product design and development costs. Research and development expenses decreased $19,000, or 9% to $182,000 during the three months ending September 30, 2025, compared to $201,000 during the three months ending September 30, 2024. These costs reflect ongoing investment in product innovation as we continue to enhance and broaden our technology-driven product portfolio.
Interest income, net
Net interest income for the three months ending September 30, 2025 was $20,000, compared to $30,000 for the three months ending September 30, 2024. The decrease was primarily due to lower interest earned on bank balances during the current period.
Loss from operations
Loss from operations increased to $1.5 million for the three months ending September 30, 2025, compared to $1.1 million for the three months ending September 30, 2024. The increase in our loss from operations was primarily driven by an increase in selling, general, and administrative expenses, partially offset by the increase in gross profit.
Change in Fair Value of Warrant Liability
The change in fair value of warrant liability was due to an increase in the Series A Warrants of $18,000 and Series B Warrants of $78,000, for a total increase in fair value of $96,000.
Net loss
Net loss increased $520,000, or 49% to $1,580,000 during the three months ending September 30, 2025, compared to $1,060,000 for the three months ending September 30, 2024. The increase in our net loss was primarily driven by an increase in selling, general, and administrative expenses, partially offset by an increase in gross profit.
Nine Months Ended September 30, 2025 as Compared to the Nine Months Ended September 30, 2024
The following is a comparison of our results of operations for the nine months ending September 30, 2025 and 2024 (amounts are rounded to the nearest thousand):
| Nine Months Ended September 30, 2025 | Nine Months Ended September 30, 2024 | Change | |
|---|---|---|---|
| Net Sales | $5,860,000 | $2,374,000 | $3,486,000 |
| Cost of goods sold | 1,875,000 | 874,000 | 1,001,000 |
| Gross profit | 3,985,000 | 1,500,000 | 2,485,000 |
| Operating expenses: | |||
| Selling, general and administrative | 8,360,000 | 4,449,000 | 3,911,000 |
| Research and development | 607,000 | 598,000 | 9,000 |
| Total operating expenses | 8,967,000 | 5,047,000 | 3,920,000 |
| Loss from operations | (4,982,000) | (3,547,000) | (1,435,000) |
| Interest income, net | 94,000 | 139,000 | (45,000) |
| Change in fair value of warrant liabilities | 1,263,000 | - | 1,263,000 |
| Net Loss | $(3,625,000) | $(3,408,000) | $(217,000) |
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Net Sales
Our net sales increased $3,486,000, or 147%, to $5,860,000 for the nine months ending September 30, 2025, compared to $2,374,000 for the nine months ending September 30, 2024. The increase in net sales was primarily from the continued adoption of our Newton Motion driver shaft product line in November 2023, our Newton Motion fairway shaft product line in April 2024, and our Newton Fast Motion driver product line in April 2025. We generated $5,754,000 of net sales from Newton Motion shafts, and we generated approximately 93% of our net sales through our websites.
Cost of goods sold
Cost of goods sold represents primarily our material, labor, components, and changes in inventory reserves for slow-moving or potentially obsolete products. Our cost of goods sold increased by $1,001,000, or 115% to $1,875,000 for the nine months ending September 30, 2025, compared to $874,000 for the nine months ending September 30, 2024, primarily due to our increase in net sales. Our gross margin was 68% and 63% for the nine months ending September 30, 2025 and 2024, respectively. The increase in gross margin was primarily due to the change in product mix sold and additional volume lowering our per unit cost as compared to the prior year period
Operating expenses
Operating expenses include selling, general and administrative expenses, and research and development costs.
Selling, general and administrative expenses include employee costs, legal and professional fees, sales and marketing expenses, stock-based compensation, public company expenses, rent, depreciation and other general expenses. Our selling, general and administrative expenses increased $3,911,000, or 88%, to $8,360,000 for the nine months ending September 30, 2025, compared to $4,449,000 for the nine months ending September 30, 2024. The increase in selling, general and administrative expense primarily reflects higher sales, marketing, and employee-related costs to support expanding demand and brand-building efforts. The period also reflects higher public-company operating costs, including legal expenses related to the special stockholder meeting and Series B Warrant exercises, increased accounting and audit fees associated with warrant valuation and accounting requirements, transfer agent costs in connection with the exercise of Series B Warrants, and proxy solicitation costs associated with the special stockholder meeting. In addition, the increase includes professional service costs associated with our enterprise systems, including NetSuite, AfterShip, demand-planning tools, and related connectors intended to improve operational efficiency and support scalability.
Research and development costs include employee costs, consultants, licensing fees, and product design and development costs. Research and development expenses increased $9,000 to $607,000, or 2% during the nine months ending September 30, 2025, compared to $598,000 during the nine months ending September 30, 2024. These costs reflect ongoing investment in product innovation as we continue to enhance and broaden our technology-driven product portfolio.
Loss from operations
Loss from operations increased $1,435,000, or 40%, to $4,982,000 for the nine months ending September 30, 2025, compared to $3,547,000 for the nine months ending September 30, 2024. The increase in our loss from operations was primarily driven by the increase in selling, general, and administrative expenses, partially offset by the increase in gross profit.
Interest income, net
Net interest income for the nine months ending September 30, 2025 was $94,000, compared to $139,000 for the nine months ending September 30,2024. The decrease was primarily due to lower interest earned on bank balances during the current period.
Change in Fair Value of Warrant Liability
The change in fair value of warrant liability was due to a reduction in the fair value of the Series A Warrants of $1,399,000, partially offset by an increase in the fair value of the remaining Series B Warrants of $136,000, for a total decrease in fair value of $1,263,000.
Net loss
Net loss increased $217,000 to $3,625,000, or 6% for the nine months ending September 30, 2025, compared to a $3,408,000 net loss for the nine months ending September 30, 2024. The increase in net loss was primarily due to an increase in selling, general, and administrative expenses, partially offset by an increase in gross profit.
Liquidity and Capital Resources
The following table summarizes our cash flows for the periods indicated (amounts are rounded to nearest thousands):
| Net cash provided by (used in): | Nine Months Ended September 30, 2025 | 2024 |
|---|---|---|
| Operating activities | $(4,101,000) | $(3,431,000) |
| Investing activities | (384,000) | (463,000) |
| Financing activities | (616,000) | (131,000) |
| Net decrease in cash | $(5,101,000) | $(4,025,000) |
Operating Activities
Net cash used in operating activities for the nine months ending September 30, 2025 totaled $4,101,000, compared to net cash used in operating activities for the nine months ending September 30, 2024 of $3,431,000. The increase in net cash used in operations was primarily attributable to higher legal, accounting, and professional service expenses associated with a special stockholder meeting and the Series B Warrant exercises, as well as increased public company compliance costs, partially offset by higher gross margin during the period.
Investing Activities
Net cash used in investing activities for the nine months ending September 30, 2025 totaled $384,000 for the purchase of property and equipment. Net cash used in investing activities for the nine months ending September 30, 2024 totaled $463,000, and was for the purchase of software licensing and property and equipment.
Financing Activities
Net cash used in financing activities for the nine months ending September 30, 2025 totaled $616,000, and consisted of a stock repurchase of $500,000, deferred offering costs of $35,000 related to the Company’s ATM filing, and repayment of a software licensing obligation of $32,000. Net cash provided by financing activities for the nine months ending September 30, 2024 totaled $131,000 and related to repayment of a software licensing obligation.
Going Concern and Liquidity
The accompanying condensed financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and the settlement of liabilities in the normal course of business. As reflected in these condensed financial statements, during the nine months ending September 30, 2025, the Company incurred a net loss of $3,625,000 and used cash in operations of $4,101,000. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that these condensed financial statements are issued. The condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.
As of September 30, 2025, the Company had cash and cash equivalents of $2,549,000 and expects its available cash to fund operations for at least the next five months.
The Company’s ability to continue as a going concern is dependent upon obtaining additional debt or equity financing to fund operations until positive cash flow can be generated. No assurance can be given that the Company will be able to secure such financing, or, if available, that it will be on terms acceptable to the Company. Any debt financing may impose restrictive covenants on operations, while equity financing may result in significant dilution to stockholders. Strategic or licensing arrangements, if pursued, may also include terms that are unfavorable to the Company.
On October 24, 2024, we entered into the ATM Offering Agreement, as sales agent, permitting the Company to offer and sell, from time to time, shares of its common stock having an aggregate offering price of up to $10.0 million pursuant to our effective shelf registration statement on Form S-3. The ATM provides a potential source of liquidity; however, the amount of capital we can raise under the program will depend on market conditions and investor demand.
Off-Balance Sheet Arrangements
At September 30, 2025 and December 31, 2024, the Company did not have any transactions, obligations or relationships that could be considered off-balance sheet arrangements.
Critical Accounting Policies and Estimates
Our discussion and analysis of our results of operations, financial condition and liquidity are based upon our condensed financial statements, which have been prepared and audited in accordance with GAAP. The preparation of these condensed financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, stockholders’ equity, revenues and expenses, as well as related disclosures of contingent assets and liabilities. We base our estimates on historical experience and various other assumptions that management believes to be reasonable under the circumstances. Actual results may materially differ from these estimates under different assumptions or conditions. On an ongoing basis, we review our estimates to ensure that the estimates appropriately reflect changes in our business and new information as it becomes available.
Management believes the critical accounting estimates discussed below affect its more significant estimates and assumptions used in the preparation of its condensed financial statements.
Revenue Recognition
We account for revenue recognition in accordance with Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers.
The amount of revenue we recognize is based on the amount of consideration we expect to receive from customers. The amount of consideration is the sales price adjusted for estimates of variable consideration, including sales returns, discounts and allowances as well as sales programs, sales promotions and price concessions that we offer, as described further below. These estimates are based on amounts earned or expected to be claimed by customers on the related sales, and are therefore recorded to the respective net sales, trade accounts receivable, and sales program liability accounts.
We may offer short-term sales program incentives, which include sell-through promotions and price concessions or price reductions. Sell-through promotions are generally offered throughout a product’s life cycle, which varies from two to three years but could be shorter or longer. Price concessions or price reductions are generally offered at the end of the product’s life cycle. The estimated variable consideration related to these potential programs will be based on a rate that includes historical and forecasted data. We may record a reduction to net sales using this rate at the time of the sale. We will monitor this rate against actual results and forecasted estimates and adjusts the rate as necessary in order to reflect the amount of consideration we expect to receive from our customers.
We also may record an estimate for anticipated returns as a reduction of sales and cost of sales, and accounts receivable in the period that the related sales are recorded. The cost recovery of inventory associated with this reserve will be accounted for in other current assets. Sales returns will be estimated based upon historical returns, current economic trends, changes in customer demands and sell-through of products. We also may offer certain customers sales programs that would allow for specific returns. We may record a return reserve for anticipated returns related to these sales programs at the time of the sale based on the terms of the sales program.
Stock-Based Compensation
The Company periodically issues stock options to employees and non-employees in non-capital raising transactions for services and for financing costs. The Company accounts for such grants issued and vesting based on ASC 718, Compensation-Stock Compensation, whereby the value of the award is measured on the date of grant and recognized for employees as compensation expense on a straight-line basis over the vesting period. The Company recognizes the fair value of stock-based compensation within its condensed statements of operations with classification depending on the nature of the services rendered.
The fair value of each option or warrant grant is estimated using the Black-Scholes option-pricing model. The Company was a private company through August 14, 2023, and lacks company-specific historical and implied volatility information. Therefore, through December 31, 2024 it estimated its expected stock volatility based on the greater of the historical volatility of a publicly traded set of peer companies within the consumer products industry with characteristics similar to the Company or the Company’s volatility since going public. Beginning on January 1, 2025, the Company began to use its own historical volatility.
The expected term of the Company’s stock options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options. The expected term of stock options granted to non-employees is equal to the contractual term of the option award. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. The expected dividend yield is zero, based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future.
The Company accounts for common stock warrants as either equity-classified or liability-classified instruments based on an assessment of the specific terms of the warrants and the guidance provided by the Financial Accounting Standards Board in ASC 480, *Distinguishing Liabilities from Equity (“*ASC 480”) and ASC 815, *Derivatives and Hedging (“*ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own stock and whether the holders of the warrants could potentially require net cash settlement in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
Warrant Liabilities
The Company accounts for common stock warrants as either equity-classified or liability-classified instruments based on an assessment of the specific terms of the warrants and the guidance provided by the FASB in ASC 480 and ASC 815. The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own stock and whether the holders of the warrants could potentially require net cash settlement in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
Recently Issued Accounting Pronouncements
See Note 2 of the Notes to Condensed Financial Statements for a discussion of recent accounting pronouncements.
Controls and procedures
As filed, 5,175 characters, with its headings, lists and tables. Extracted from the main document; charts and exhibits are in the original on sec.gov.
Evaluation of Disclosure Controls and Procedures
Our Chief Executive Officer and Chief Financial Officer, after evaluating the effectiveness of our “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this Quarterly Report on Form 10-Q (the “Evaluation Date”), concluded that as of the Evaluation Date, our disclosure controls and procedures were not effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms because of the material weaknesses in internal control over financing reporting disclosed below.
Material Weakness in Internal Control over Financial Reporting
We have identified material weaknesses in our internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. The following material weaknesses were identified: (i) the Company had inadequate segregation of duties consistent with control objectives; (ii) an insufficient number of personnel with an appropriate level of U.S. GAAP knowledge and experience, and (iii) ineffective controls over its financial statement close and reporting process. Specifically, the Company lacked sufficient preparation and review procedures for disclosures accompanying the financial statements and did not provide reasonable assurance that accounts were complete and accurate and agreed to detailed support and that reconciliations of accounts were properly performed, reviewed and approved.
We are actively working to remediate the deficiencies and material weaknesses, including leadership changes made during 2025. The Chief Financial Officer hired in January 2025 departed in June 2025, at which time a new Chief Financial Officer joined the Company. We also terminated our former Accounting Controller in August 2025 and are in the process of onboarding a new Accounting Controller. In July 2025, we hired a top 10 audit and accounting firm to assess our internal control environment, with a focus on access controls, order-to-cash processes, inventory management, return processing, and NetSuite optimization. Based on their assessment, we retained the firm under defined statements of work to implement improvements designed to strengthen the reliability, efficiency, and compliance of our financial reporting framework.
Work also have begun on implementing and documenting policies, procedures, and internal controls. We have begun strengthening our internal control environment through a collaborative process workflow and expect to take additional actions to remediate the deficiencies and address material weaknesses. In addition, as we continue to evaluate, remediate and improve our internal control over financial reporting, executive management may elect to implement additional measures to address control deficiencies or may determine that the remediation efforts described above require modification. Executive management, in consultation with our Audit Committee, will continue to assess the control environment and the Company’s remediation efforts to address the underlying material weaknesses.
We are unable, at this time, to estimate how long it will take to complete the remediation of our material weaknesses, and our efforts may not be successful.
Changes in Internal Control over Financial Reporting
Other than as described above, there were no changes to our internal control over financial reporting during the quarter ended September 30, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations on Effectiveness of Controls
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. These include the fact that human judgment in decision-making can be faulty and that breakdowns in internal control can occur because of human failures such as simple errors or mistakes or intentional circumvention of the established process. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of the inherent limitations of internal control, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting.
Risk factors
As filed, 485 characters, with its headings, lists and tables. Extracted from the main document; charts and exhibits are in the original on sec.gov.
There have been no material changes from our risk factors as previously reported in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2024. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also harm our business. All forward-looking statements in this document are based on information available to us as of the date hereof, and we assume no obligations to update any such forward-looking statements.
Figures reported in this filing
Standardized line items from the XBRL in this filing, for the period ended 2025-09-30. Comparative periods it repeats are left out.
| Line item | Period | Value | XBRL concept |
|---|---|---|---|
| Revenue | 3 months2025-07-01 to 2025-09-30 | $2.6m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months2025-01-01 to 2025-09-30 | $5.9m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months2025-07-01 to 2025-09-30 | $848.0k | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 9 months2025-01-01 to 2025-09-30 | $1.9m | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months2025-07-01 to 2025-09-30 | $1.7m | us-gaap:GrossProfit |
| Gross profit | 9 months2025-01-01 to 2025-09-30 | $4.0m | us-gaap:GrossProfit |
| Research and development | 3 months2025-07-01 to 2025-09-30 | $182.0k | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 9 months2025-01-01 to 2025-09-30 | $607.0k | us-gaap:ResearchAndDevelopmentExpense |
| Selling, general and administrative | 3 months2025-07-01 to 2025-09-30 | $3.1m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months2025-01-01 to 2025-09-30 | $8.4m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months2025-07-01 to 2025-09-30 | −$1.5m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months2025-01-01 to 2025-09-30 | −$5.0m | us-gaap:OperatingIncomeLoss |
| Net income | 3 months2025-07-01 to 2025-09-30 | −$1.6m | us-gaap:NetIncomeLoss |
| Net income | 9 months2025-01-01 to 2025-09-30 | −$3.6m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months2025-07-01 to 2025-09-30 | −$0.34 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months2025-01-01 to 2025-09-30 | −$1.07 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months2025-07-01 to 2025-09-30 | −$0.34 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months2025-01-01 to 2025-09-30 | −$1.07 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months2025-07-01 to 2025-09-30 | 4,602,070 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months2025-01-01 to 2025-09-30 | 3,395,389 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months2025-01-01 to 2025-09-30 | −$4.1m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months2025-01-01 to 2025-09-30 | $384.0k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Share repurchases | 9 months2025-01-01 to 2025-09-30 | $500.0k | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | At period end2025-09-30 | $2.5m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | At period end2025-09-30 | $4.2m | us-gaap:AssetsCurrent |
| Total assets | At period end2025-09-30 | $5.3m | us-gaap:Assets |
| Current liabilities | At period end2025-09-30 | $2.1m | us-gaap:LiabilitiesCurrent |
| Total liabilities | At period end2025-09-30 | $2.2m | us-gaap:Liabilities |
| Shareholders' equity | At period end2025-09-30 | $3.1m | us-gaap:StockholdersEquity |
Source: SEC EDGAR, the filing index for accession 0001493152-25-022293. Last ingested by Listed: Oct 24, 2026, 15:16 ET. Listed shows no prices and gives no investment advice.