Summary of Significant Accounting Policies (Policies) |
9 Months Ended |
|---|---|
Sep. 30, 2023 | |
| Accounting Policies [Abstract] | |
| Basis of Presentation | Basis of PresentationThe unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the requirements of the U.S. Securities and Exchange Commission (the “SEC”) for interim financial reporting. Intercompany balances and transactions have been eliminated in consolidation. As permitted under those rules, certain footnotes or other financial information that are normally required by U.S. GAAP can be condensed or omitted. Accordingly, these unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Form 10-K”) and the related notes, which provide a more complete discussion of the Company’s accounting policies and certain other information. The condensed consolidated balance sheet as of December 31, 2022 has been derived from the audited financial statements of the Company. These unaudited condensed consolidated financial statements have been prepared on the same basis as the Company’s annual financial statements and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, which are necessary for the fair statement of the Company’s financial information. These interim results are not necessarily indicative of the results to be expected for the fiscal year ending December 31, 2023, or for any other interim period or for any other future year. |
| Going Concern |
Going Concern, Financial Condition and Liquidity and Capital Resources
The condensed consolidated financial statements are unaudited and have been prepared on the basis of continuity of operations, the realization of assets and satisfaction of liabilities in the ordinary course of business. Since inception, the Company has not achieved profitable operations or generated positive cash flows from operations. The Company’s operating plan may change as a result of many factors currently unknown and there can be no assurance that the current operating plan will be achieved in the time frame anticipated by the Company, and while the Company expects it will need to engage in additional financings to fund its operations in the near-term, it may need to seek such additional funds sooner than planned. If adequate funds are not available to the Company on a timely basis, it may be required to delay, limit, reduce, or terminate certain commercial efforts, or pursue merger or acquisition strategies, all of which could adversely affect the holdings or the rights of the Company’s stockholders. The Company has incurred losses from operations and negative cash flows from operations in every year since inception and expects this to continue for the foreseeable future. As of September 30, 2023, the Company had an accumulated deficit of $296.6 million.
On February 6, 2023, the Company entered into a sales agreement (the “ATM Sales Agreement”) with Needham & Company, LLC (“Needham”), as agent, pursuant to which the Company may offer and sell, from time to time through Needham, shares of its common stock, par value $0.00001 per share. See Note 16. At-the-Market Offering, for further information.
In addition, on August 10, 2023, the Company entered into a securities purchase agreement (the “Securities Purchase Agreement”) with certain affiliated institutional investors (collectively, the “Investor”) pursuant to which the Company agreed to issue and sell, in a registered public offering by the Company directly to the Investor (the “Offering”), up to $105 million aggregate principal amount of the Company’s senior secured convertible notes (the “Notes”). On August 14, 2023, the Company issued $70 million aggregate principal amount of Notes (the “Initial Notes”) to the Investor for approximately $66 million in net proceeds, and used approximately $22 million of the net proceeds to repay in full indebtedness outstanding under its third amended and restated loan and security agreement, as amended (the “Loan Agreement”). The Notes contain customary affirmative and negative covenants (including covenants that limit the Company’s ability to incur debt, make investments, transfer assets, engage in certain transactions with affiliates and merge with other companies, in each case, other than those permitted by the Notes) and events of default. Furthermore, the Company will be required to maintain a minimum of $30 million of unrestricted cash and cash equivalents and to maintain minimum levels of quarterly revenue through the quarter ended June 30, 2026 specified in the Notes. See Note 9. Long-Term Debt, for further information.
As noted above, the Notes require the Company to maintain minimum levels of quarterly revenue through the quarter ended June 30, 2026. As of November 20, 2023, the issuance date of the unaudited condensed consolidated financial statements, the Company was not in compliance with the minimum revenue covenant for the quarter ended September 30, 2023 and, as a result, the Investor has the right to declare the Notes due and payable in cash in an amount equal to the Event of Default Acceleration Amount (as defined in the Notes). In addition, the Company has experienced less revenue growth than expected due to the impact of delayed shipments during the three and nine months ended September 30, 2023. Further, due to the impact of fourth quarter customer order delays and the Company’s bookings to date, the Company expects additional contraction of revenue growth in the near term.
The Company has been negotiating a proposed amendment to the Notes with the Investor, which the Company anticipates completing in November 2023; however, the Company may not be able to obtain a waiver or an amendment on favorable terms or at all. If a waiver or amendment is not agreed to by the Investor, the Company does not have sufficient capital to satisfy the outstanding principal and interest due, and the Investor may foreclose upon the Company’s assets securing the Notes. Accordingly, as the Company was not in compliance with the minimum quarterly revenue covenant and the Notes are now callable by the Investor, the Company believes that there is substantial doubt about its ability to continue as a going concern for the twelve-month period following the issuance date of the unaudited condensed consolidated financial statements.
The Company is undertaking expense reduction and cash savings initiatives as part of a company wide restructuring and strategic realignment plan to help conserve working capital. The expense reduction and cash saving initiatives include streamlining facilities, managing working capital, reducing capital expenditures, and reducing overall selling, general and administrative expenses.
Even if the Company is able to agree an amendment with the Investor, the Company expects that it will need to engage in additional financings to fund its operations in the near-term as well as to respond to business challenges and opportunities. Accordingly, subject to the Company’s compliance with the covenants in the Notes, the Company expects it will need to engage in additional equity or debt financings to secure additional funds.
|
| At-the-Market Offering |
At-the-Market Offering
On February 6, 2023, the Company entered into the ATM Sales Agreement with Needham, as agent, pursuant to which the Company may offer and sell, from time to time through Needham, shares of its common stock pursuant to its universal shelf registration statement (the “Shelf Registration Statement”), which the Company filed with the SEC on November 14, 2022. For the nine-months ended September 30, 2023, the Company has sold $18.4 million of shares, net of issuance costs of $1.2 million. See Note 16. At-the-Market Offering, for further information.
|
| Fair Value of Debt Derivative |
Fair Value of Debt Derivatives
Debt derivative liabilities, related to the Notes, are recorded at fair value on a recurring basis in the condensed consolidated balance sheets, and are categorized in accordance with the fair value hierarchy based upon the level of judgment associated with the inputs used to measure their fair values. Changes to the fair value of the debt derivative liabilities occurring from subsequent remeasurement are recorded as gains or losses in the condensed consolidated statements of operations and comprehensive income (loss). See Note 10. Equity Instruments, for further information.
|
| Convertible Notes |
Convertible Notes
As of September 30, 2023, we carried the Notes at the initially allocated liability value less unamortized debt discount and issuance costs on our condensed consolidated balance sheet. The unamortized debt discount and issuance costs accrete to the carrying amount of the Notes over the term of the agreement using the effective interest rate method and are included in “Interest expense” in the condensed consolidated statements of operations and comprehensive income (loss). See Note 9. Long-Term Debt, for further information.
|
| Recently Issued Accounting Pronouncements | Recently Issued Accounting PronouncementsIn June 2016, the FASB issued ASU 2016-13, “Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“Topic 326”)”, and has since released various amendments including ASU No. 2019-04. The guidance modifies the measurement of expected credit losses on certain financial instruments. This guidance is effective for the Company for the fiscal year beginning after December 15, 2022, and interim periods within those fiscal years. Early adoption is permitted. The Company adopted the new guidance in the first quarter of 2023. The effect on the consolidated financial statements and related disclosures was not material. |