The following discussion of the financial condition and results of operations of
Charlie's Holdings, Inc. should be read in conjunction with the financial
statements and the notes to those statements appearing elsewhere in this
Quarterly Report on Form 10-Q (this "Report"). Some of the information contained
in this discussion and analysis or set forth elsewhere in this Report, including
information with respect to our plans and strategy for our business, includes
forward-looking statements that involve risks and uncertainties. You should read
the "Risk Factors" section in this Report for a discussion of important factors
that could cause actual results to differ materially from the results described
in or implied by the forward-looking statements contained in the following
discussion and analysis.
As used in this Report, unless otherwise stated or the context otherwise
requires, references to the "Company", "we", "us", "our", or similar references
mean Charlie's Holdings, Inc. (formerly True Drinks Holdings, Inc.), its
subsidiaries and consolidated variable interest entity on a consolidated basis.
References to "Charlie's" and "CCD" refer to Charlie's Chalk Dust, LLC, a
California limited liability company and wholly-owned subsidiary of the Company,
and "Don Polly" refers to Don Polly, LLC, a Nevada limited liability company
that is owned by entities controlled by Brandon and Ryan Stump, the Company's
Chief Executive Officer and Chief Operating Officer, respectively, and a
consolidated variable interest"(VIE")for which the Company is the primary
beneficiary.
Overview
Our objective is to become a significant leader in the rapidly growing, global
e-cigarette segment of the broader nicotine related products industry. Through
Charlie's, we formulate, market and distribute branded e-cigarette liquid for
use in both open and closed e-cigarette and vaping systems. Charlie's products
are mostly produced domestically through contract manufacturers for sale through
select distributors, specialty retailers and third-party online resellers
throughout the United States, as well as more than 80 countries worldwide.
Charlie's primary international markets include the United Kingdom, Italy,
Spain, Belgium, Australia, Sweden and Canada. In June 2019, we launched
distribution, through Don Polly, of certain premium vapor, tincture and topical
wellness products containing hemp-derived cannabidiol ("CBD") and we currently
intend to develop and launch additional products containing hemp-derived CBD in
the future.
Industry Specific Challenges
Beginning in late 2019, our industry experienced significant news stories and
health alerts related to flavored nicotine vaping, leading to some states
banning the sale of flavored nicotine products and causing the Food and Drug
Administration ("FDA") to review its policies on controlling the sale of these
products. Initial research indicated that a vitamin E acetate related compound
could be causing the health-related issues. On November 8, 2019, officials at
the Centers for Disease Control and Prevention ("CDC") reported a breakthrough
in the investigation into the outbreak of vaping-related lung injuries. The
CDC's principal deputy director, Dr. Anne Schuchat, in fact stated that "vitamin
E acetate is a known additive used to dilute liquid in e-cigarettes or vaping
products that contain THC", suggesting the possible culprit for the series of
lung injuries across the U.S. All of Charlie's e-liquid products are tested by
third party laboratories which have confirmed that none of our products contain
any vitamin E acetate orTetrahydrocannabinol ("THC").
However, these developments have had a negative effect on our sales since
mid-September 2019 (see further discussion below) and therefore, in response to
these developments and while government regulators are formulating future
polices, management has adopted the following plan of operation.
First, we plan to increase the sales of our CBD related products, including
topicals and ingestibles. We feel there is a significant upside in the CBD
space, and we have begun to focus on numerous vertical markets for the sale of
our isolate, full and broad-spectrum products. These vertical markets include,
but aren't limited to the medical and wellness markets. We have also dedicated
an internal team as well as additional financial resources to increase
direct-to-consumer e-commerce sales of CBD products.
Secondly, we continue to see a significant opportunity for sales growth in
international markets for our e-liquid and other vapor products. Presently,
approximately 20% of our vapor product sales come from the international market
and we are well positioned to increase those sales in the countries that we
presently sell, and in additional overseas markets, as we have already built an
international distribution platform.
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Most importantly, we feel that the e-liquid and other vapor products will
continue to be a significant growth opportunity, once all the rightful
regulatory changes have been made. We are continuing with our plan to obtain
marketing authorization for certain of our products through the completion of a
Premarket Tobacco Application ("PMTA"), which we submitted in September 2020.
Obtaining a marketing order from the United States Food and Drug Administration
("FDA") would, in our opinion, help to remediate the disruption caused by any
perceived health issues related to vaping, and further position the Company as a
trusted, industry leader. We feel that a significant amount of our competitors
will not have the resources and/or expertise to complete the extensive and
costly PMTA process and that once complete, we will be able to benefit from
being one of only a select group of companies operating in the flavored vapor
products space.
Recent Developments
March 2021 Private Placement
On March 19, 2021, the Company entered into Securities Purchase Agreements by
and between the Company and certain family trusts in which Mr. Brandon Stump,
the Company's Chief Executive Officer, and Mr. Ryan Stump, the Company's Chief
Operating Officer are trustees and beneficiaries (the "Purchase Agreements"),
for the private placement of an aggregate of 351,699,883 shares of its common
stock, par value $0.001 ("Common Stock"), at a purchase price per share of
$0.00853 (the "Private Placement"), which Private Placement was consummated on
March 22, 2021. The Private Placement resulted in gross proceeds to the Company
of approximately $3.0 million. The Private Placement was undertaken pursuant to
Rule 506 promulgated under the Securities Act of 1933, as amended, and was
consummated in a transaction approved by the Company's independent directors in
accordance with Rule 16b-3(d)(1) of the Securities Exchange Act of 1934, as
amended.
Red Beard Holdings, LLC Note Payable
On April 1, 2020, the Company, Charlie's and its VIE, Don Polly, issued a
secured promissory note (the "Red Beard Note") to one of the Company's largest
stockholders, Red Beard Holdings, LLC ("Red Beard") in the principal amount of
$750,000 (the "Principal Amount"), requiring a guaranteed minimum interest
amount of $75,000 ("Minimum Interest"), which Red Beard Note is secured by all
assets of the Company pursuant to the terms of a Security Agreement entered into
by and between the Company and Red Beard (the "Red Beard Note Financing"). Red
Beard Note was subsequently amended on August 27, 2020, September 30, 2020,
October 29, 2020, December 1, 2020, and January 19, 2021, ultimately increasing
Principal Amount to $1,400,000 and Minimum Interest to $150,000.
On March 24, 2021, the Company and Red Beard entered into a Satisfaction and
Release (the "Red Beard Release"), pursuant to which the Company made a payment
to Red Beard in the amount of $1.55 million in exchange for an acknowledgment of
satisfaction and full release of the Company by Red Beard from liability and
obligations arising under the Red Beard Note.
Small Business Administration Loan Programs
On April 30, 2020, Charlie's, a wholly owned subsidiary of the Company, received
approval to enter into a U.S. Small Business Administration ("SBA") Promissory
Note (the " Charlie's PPP Loan") with TBK Bank, SSB (the "SBA Lender"), pursuant
to the Paycheck Protection Program ("PPP") of the Coronavirus Aid, Relief, and
Economic Security Act (the "CARES Act") as administered by the SBA (the "PPP
Loan Agreement").
The Charlie's PPP Loan provides for working capital to CCD in the amount of
$650,761. The Charlie's PPP Loan will mature on April 30, 2022 and will accrue
interest at a rate of 1.00% per annum. Payments of principal and interest will
be deferred for six months from the date of the Charlie's PPP Loan, or until
November 30, 2020. Interest, however, will continue to accrue during this time.
On April 14, 2020, Don Polly also obtained a loan pursuant to the PPP enacted
under the CARES Act (the "Polly PPP Loan" and together with the Charlie's PPP
Loan, the "PPP Loans") from Community Banks of Colorado, a division of NBH Bank
(the "Polly Lender"). The Polly PPP Loan obtained by Don Polly provides for
working capital to Don Polly in the amount of $215,600. The Polly PPP Loan will
mature on April 14, 2022 and will accrue interest at a rate of 1.00% per annum.
Payments of principal and interest will be deferred for six months from the date
of the Polly PPP Loan, or until November 14, 2020. Interest, however, will
continue to accrue during this time.
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The aforementioned PPP Loans were made under the PPP enacted by Congress under
the CARES Act. The CARES Act (including the guidance issued by SBA and U.S.
Department of the Treasury) provides that all or a portion of the PPP Loans may
be forgiven upon request from the respective borrower to the SBA Lender or the
Polly Lender, as the case may be, subject to requirements in the PPP Loans and
under the CARES Act.
On February 19, 2021 Don Polly received notice from the Polly Lender, that the
Polly PPP Loan was fully repaid, and its promissory note was cancelled as a
result of the loan forgiveness process set forth by the U.S. Small Business
Administration. There is no further action required on the part of Don Polly to
satisfy this liability.
On March 17, 2021, Don Polly obtained a second draw PPP loan ("Polly PPP Loan
2") under the CARES Act from Polly Lender. The Polly PPP Loan 2 obtained by Don
Polly provides general working capital in the amount of $184,200. The Polly PPP
Loan 2 will mature on March 17, 2026 and will accrue interest at a rate of 1.00%
per annum. Payments of principal and interest will be deferred for six months
from the date of the Polly PPP Loan 2, however interest will continue to accrue
during this time.
On April 28, 2021, Charlie's received notice from SBA Lender that the Charlie's
PPP Loan was fully repaid, and its promissory note was cancelled as a result of
the loan forgiveness process set forth by the U.S. Small Business
Administration. There is no further action required on the part of Charlie's to
satisfy this liability.
On June 24, 2020, SBA authorized (under Section 7(b) of the Small Business Act,
as amended) an Economic Injury Disaster Loan ("EID Loan") to Don Polly in the
amount of $150,000. Installment payments, including principal and interest of
$731 monthly will begin twelve months from date of the EID Loan. The balance of
principal and interest will be payable thirty years from the date of the EID
Loan and interest will accrue at the rate of 3.75% per annum.
PMTA
During the quarter ended September 30, 2020, the United States Food and Drug
Administration's ("FDA") Center for Tobacco Products informed us that our PMTA
has received a valid submission tracking number, passed the FDA's filing review
phase, and recently entered the substantive review phase. To date, Charlie's has
invested over $4.4 million for our initial PMTA submission. We engaged a team of
more than 200 professionals, including doctors, scientists, biostatisticians,
data analysts, and numerous contract research organizations to create our
comprehensive PMTA submission. This news highlights our progress toward
achieving full regulatory compliance and our goal of providing customers with a
trusted product portfolio.
Impact of COVID-19
The outbreak of a novel strain of COVID-19 ("Coronavirus") has had a negative
impact on the global economy and the markets in which we operate. Beginning in
March 2020, the Company transitioned nearly all employees to a remote working
environment for their safety and to protect the integrity of Company operations.
We have updated certain sales, accounting and administrative processes, and
corresponding information technology platforms, in an effort to help facilitate
the virtual work environment in which we now operate. During 2020, we engaged in
periodic, informal testing of our business operations, and we do not believe
that our financial position, work efficiency and overall operational integrity
have been materially affected. However, we recognize that a certain degree of
employee enthusiasm, teamwork, creativity, and support is normally generated by
being present at a physical location, and we believe that prolonged remote
working may have a negative impact over time on our business, and on employee
productivity. Our Denver, CO office and Huntington Beach, CA warehouse locations
have fully returned to on premise status, while our corporate headquarters in
Costa Mesa, CA remains remote for most employees. We will continue to monitor
the COVID-19 situation in all regions we operate and will maintain strict
adherence to local health guidelines and mandates. We may have to take further
actions that we determine are in the best interests of our employees or as
required by federal, state, or local authorities.
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Risks and Uncertainties
The Company operates in an environment that is subject to rapid changes and
developments in laws and regulations that could have a significant impact on the
Company's ability to sell its products. Federal, state, and local governmental
bodies across the United States have indicated that flavored e-cigarette liquid,
vaporization products and certain other consumption accessories may become
subject to new laws and regulations at the federal, state and local levels.
Beginning in September 2019, certain states temporarily banned the sale of
flavored e-cigarettes, and on January 2, 2020, the FDA issued an enforcement
policy effectively banning the sale of flavored cartridge-based e-cigarettes
marketed primarily by large manufacturers without prior authorization from the
FDA. The application of any new laws or regulations that may be adopted in the
future, at a federal, state, or local level, directly or indirectly implicating
flavored e-cigarette liquid and products used for the vaporization of nicotine
could significantly limit the Company's ability to sell such products, result in
additional compliance expenses, and/or require the Company to change its
labeling and/or methods of distribution. Any ban of the sale of flavored
e-cigarettes directly limits the markets in which the Company may sell its
products. In the event the prevalence of such bans and/or changes in laws and
regulations increase across the United States, or internationally, the Company's
business, results of operations and financial condition could be adversely
impacted. In addition, the Company is presently seeking to obtain marketing
authorization for certain of its nicotine-based e-liquid products. Our PMTA
applications were submitted in September 2020 on a timely basis, which if
approved, will allow the Company to continue to sell its products in the United
States. The Company may also require additional financing in the future to
support potential PMTA related expenses and general working capital. There is no
assurance that regulatory approval to sell our products will be granted or that
we can raise the additional financing required, and if not, this could have a
significant impact on our sales.
On March 11, 2020, the World Health Organization designated the ongoing and
evolving COVID-19 outbreak as a pandemic. The outbreak has caused substantial
disruption in international and U.S. economies and markets as it continues to
spread. The outbreak is having a temporary adverse impact on our industry as
well as our business, with regards to certain supply chain disruptions and sales
volume. While the disruption from COVID-19 is currently expected to be
temporary, there is uncertainty around the duration.
Basis of Presentation
The unaudited interim condensed consolidated financial statements have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission (the "SEC"). Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles in the United States ("U.S. GAAP") have been omitted
pursuant to such SEC rules and regulations; nevertheless, the Company believes
that the disclosures are adequate to make the information presented in this
Quarterly Report on Form 10-Q (this "Report") not misleading.
Amounts related to disclosure of December 31, 2020 balances within the interim
condensed consolidated financial statements were derived from audited financial
statements and notes thereto included in the Company's Form 10-K for the year
ended December 31, 2020, filed with the SEC on April 5, 2021. The operating
results of Don Polly are also included.
Current Operating Trends and Financial Highlights
Management currently considers the following events, trends and uncertainties to
be important in understanding the Company's results of operations and financial
condition for the most recent calendar quarter and full year:
Regarding results from operations for the quarter ended March 31, 2021, we
generated revenue of approximately $4,361,000, as compared to revenue
of $4,405,000 for the three months ended March 31, 2020. This $44,000 decrease
in revenue was due primarily to a $327,000 decrease in sales of our CBD based
products, but was offset by a $283,000 increase in sales of nicotine-based
e-liquid products.
We generated a net loss for the three months ended March 31, 2021 of
approximately $20,137,000, as compared to net loss of approximately $3,916,000
for the three months ended March 31, 2020. The net loss for the three months
ended March 31, 2021 includes non-cash stock-based compensation expense of
approximately $359,000 and a non-cash loss in fair value of derivative
liabilities of $20,102,000.
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A review of the three month period ended March 31, 2021 follows:
For the three months ended
March 31, Change
2021 2020 Amount Percentage
($ in thousands)
Revenues:
Product revenue, net $4,361 $4,405 $(44) -1.0%
Total revenues 4,361 4,405 (44) -1.0%
Operating costs and expenses:
Cost of goods sold - product revenue 1,943 1,963 (20) -1.0%
General and administrative 2,218 4,151 (1,933) -46.6%
Sales and marketing 420 419 1 0.2%
Research and development 9 2,223 (2,214) -99.6%
Total operating costs and expenses 4,590 8,756 (4,166) -47.6%
Loss from operations (229) (4,351) 4,122 -94.7%
Other income (expense):
Interest expense (28) - (28) 100%
Change in fair value of derivative liabilities (20,102) 430 (20,532) -4774.9%
Gain on debt extinguishment 217 - 217 100%
Other income 5 5 - 0.0%
Total other income (expense) (19,908) 435 (20,343) -4676.6%
Net loss $(20,137) $(3,916) $(16,221) 414.2%
Results of Operations for the Three Months Ended March 31, 2021 Compared to the
Three Months Ended March 31, 2020
Revenue
Revenue for the three months ended March 31, 2021 decreased approximately
$44,000 or 1%, to approximately $4,361,000, as compared to approximately
$4,405,000 for same period in 2020 due to a $283,000 increase in sales of our
nicotine-based e-liquid products and a $327,000 decrease in sales of our CBD
wellness products. The increase in our nicotine-based e-liquid sales is directly
related to the launch of our Pachamama Disposable product line, which offers
users a variety of flavors containing tobacco-free nicotine in a compact,
disposable format. However, uncertainty surrounding the FDA's application review
timeline, following the PMTA submission deadline, as well as the addition of
vapor products to the Prevent All Cigarette Trafficking Act ("PACT Act") have
affected buying patterns in the domestic vape market as customers reduce
inventories of non-PMTA submitted products and adjust their business models to
suit recent changes in regulation. Beginning in late February 2020, sales of our
CBD wellness products began to experience a decrease as the effects of the
global COVID-19 pandemic caused disruptions in the global economy and altered
buying patterns for certain consumer discretionary goods. We have begun to
streamline our CBD wellness product offering and narrow our sales and marketing
focus, targeting our highest value customer types with the most desired product
offerings.
Cost of Revenue
Cost of revenue, which consists of direct costs of materials, direct labor,
third party subcontractor services, and other overhead costs decreased
approximately $20,000, or 1%, to approximately $1,943,000, or 44.6% of revenue,
for the three months ended March 31, 2021, as compared to approximately
$1,963,000, or 44.6% of revenue, for the same period in 2020. This cost, as a
percent of revenue, remained unchanged due to a favorable mix of higher margin
sales for both Charlie's and Don Polly, but was marginally offset by a higher
provision for obsolescence.
General and Administrative Expenses
For the three months ended March 31, 2021, total general and administrative
expense decreased approximately $1,948,000 to $2,203,000 as compared to
approximately $4,151,000 for the same period in 2020. This decrease is comprised
of reductions of approximately $1,494,000 of non-cash, stock-based compensation,
$262,000 in non-commission-based salary and benefits as well as $98,000 in other
general and administrative expenses. The reduction in non-cash, stock-based
compensation is primarily due to the forfeiture of stock awards by Brandon Stump
and Ryan Stump pursuant to the adoption of the Amended Employment Agreements
entered into February 12, 2020. The $262,000 decrease of non-commission-based
salary and benefits, and the $98,000 decrease of other general administrative
expenses were the result of headcount reduction, compensation adjustments and
overall cost-cutting measures.
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Sales and Marketing Expense
For the three months ended March 31, 2021, total sales and marketing expense
increased approximately $16,000, or 3.8%, to approximately $435,000 as compared
to approximately $419,000 for the same period in 2020, which was primarily due
to slightly lower commissions paid for reduced sales, but was offset by
increased spending on several marketing programs in support of customer
retention and product launches.
Research and Development Expense
For the three months ended March 31, 2021, total research and development
expense decreased approximately $2,214,000, to approximately $9,000 as compared
to $2,223,000 for the same period in 2020, which was primarily due to reduced
costs associated with our PMTA registrations.
Loss from Operations
We had operating losses of approximately $229,000 for the three months ended
March 31, 2021, due primarily to a $327,000 decrease in sales for our CBD
products. We incurred certain general and administrative expenses that
contributed to the loss from operations including a $359,000 of expenses related
to non-cash, stock-based compensation. Net loss is determined by adjusting loss
from operations by the following items:
?
Change in Fair Value of Derivative Liabilities. For the three months ended March
31, 2021 and 2020, the loss and gain in fair value of derivative liabilities was
$20,102,000 and $430,000 respectively. The derivative liability is associated
with the issuance of the Investor Warrants and the Placement Agent Warrants (as
defined in Note 3 of this Report) in connection with the Share Exchange. The
loss for the quarter ended March 31, 2021 reflects the effect of the significant
increase in stock price as of March 31, 2021 compared to December 31, 2020.
During the quarter ended March 31, 2021, we experienced a substantial increase
in trading volume for our stock, which may persist in the future. Due to the
limited supply of shares freely trading, this could cause price volatility and
therefore, considerable fluctuations in the value of our warrant derivative
liability in the future. We had 4,033,769,341 warrants outstanding as of March
31, 2021.
?
Interest Expense.For the three months ended March 31, 2021 and 2020, we recorded
interest expense related to notes payable of $28,000 and $0, respectively.
?
Other Income. For the three months ended March 31, 2021 and 2020, we recorded
other income of $222,000 and $5,000, respectively. The increase was primarily
related to a debt extinguishment gain of $217,000, including principal and
accrued interest, related to the forgiveness of the Don Polly PPP Loan.
Net Loss
For the three months ended March 31, 2021, we had a net loss of $20,137,000 as
compared to net loss of $3,916,000 for the same period in 2020.
Effects of Inflation
Inflation has not had a material impact on our business.
Liquidity and Capital Resources
As of March 31, 2021, we had negative working capital of approximately
$22,716,000, which consisted of current assets of approximately $6,481,000 and
current liabilities of approximately $29,197,000. This compares to negative
working capital of approximately $6,020,000 at December 31, 2020. The current
liabilities, as presented in the condensed consolidated balance sheet at March
31, 2021 included elsewhere in this Report primarily include approximately
$2,187,000 of accounts payable and accrued expenses, approximately $442,000 of
deferred revenue associated with product shipped but not yet received by
customers, approximately $462,000 of lease liabilities, dividends payable of
$1,560,000 and $24,546,000 of derivative liability associated with the Investor
Warrants and Placement Agent Warrants (the derivative liability of $24,546,000
is included in determining the negative working capital of $22,716,000 but is
not expected to use any cash to ultimately satisfy the liability). In addition,
the effect of the COVID-19 pandemic may have a negative impact on our liquidity
and capital reserves.
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Our cash and cash equivalents balance at March 31, 2021 was approximately
$3,455,000.
For the three months ended March 31, 2021, net cash provided by operating
activities was approximately $268,000, resulting from a net loss of $20,137,000,
partially offset by $359,000 of share-based compensation, $20,102,000 of change
in fair value of derivative liabilities and $10,000 changes in our operating
assets and liabilities.
For the three months ended March 31, 2021, we used cash for investment
activities of approximately $19,000 as compared to $43,000 for the same period
in 2020. The cash used for investment activities is primarily for the on-going
development and configuration of enterprise resource planning software during
the three months ended March 31, 2021.
For the three months ended March 31, 2021 we generated approximately $1,784,000
cash from financing activities as compared to $0 for the same period in 2020. In
the 2021 period, we generated cash from financing activities from the Polly PPP
Loan 2 (as defined in Note 8 of Item 1, Part 1 of this Report) and the Private
Placement (as defined in Note 10 of Item 1, Part 1 of this Report).
Going Concern Uncertainty Regarding the Legal and Regulatory Environment,
Liquidity and Management's plan of operation.
Our financial statements have been prepared assuming that the Company will
continue as a going concern, which contemplates the realization of assets and
satisfaction of liabilities in the normal course of business. The Company
operates in a rapidly changing legal and regulatory environment; new laws and
regulations or changes to existing laws and regulations could significantly
limit the Company's ability to sell its products, and/or result in additional
costs. Additionally, the Company was required to apply for FDA approval to
continue selling and marketing its products used for the vaporization of
nicotine in the United States. There is significant cost associated with the
application process and there can be no assurance the FDA will approve the
application(s). In addition, the recent outbreak of COVID-19 in March 2020 has
had a negative impact on the global economy and markets which has negatively
impacted the Company's supply chain and sales. For the three months ended March
31, 2021, the Company has incurred losses from operations of $229,000 and a
consolidated net loss of approximately $20,137,000 and the Company has a
stockholders' deficit of $22,684,000 as of March 31, 2021. These factors raise
substantial doubt about the Company's ability to continue as a going concern.
The financial statements do not include any adjustments to the carrying amount
and classification of recorded assets and liabilities should the Company be
unable to continue operations.
Our plans and growth depend on our ability to increase revenues and continue our
business development efforts, including the expenditure of approximately
$4,400,000 to date, to complete our PMTA registration process. On March 23,
2021, we closed a $3 million capital raise through the private sale of
351,669,883 shares of our common stock to the Company's founders Brandon Stump
and Ryan Stump (see Recent Developments). We intend to use the proceeds to fund
future growth, increase working capital, retire outstanding debt, and for other
general corporate purposes. If in the future our plans or assumptions change or
prove to be inaccurate, or there is a significant change in the regulatory
environment or the recent outbreak of COVID-19 continues to impact the global
economy, we will need to raise additional funds through public or private debt
or equity offerings, financings, corporate collaborations, or other means. There
can be no assurance that such financing will be available on acceptable terms,
or at all, and there can be no assurance that any such arrangement, if required
or otherwise sought, would be available on terms deemed to be commercially
acceptable and in our best interests.
Off-Balance Sheet Arrangements
The Company has no off-balance sheet arrangements other than operating lease
commitments.
Critical Accounting Policies
The condensed consolidated financial statements are prepared in conformity with
U.S. GAAP, which require the use of estimates, judgments and assumptions that
affect the reported amounts of assets and liabilities, the disclosure of
contingent liabilities at the date of the financial statements, and the reported
amounts of expense in the periods presented. We believe that the accounting
estimates employed are appropriate and resulting balances are reasonable;
however, due to inherent uncertainties in making estimates, actual results could
differ from the original estimates, requiring adjustments to these balances in
future periods. The critical accounting estimates that affect the consolidated
financial statements and the judgments and assumptions used are consistent with
those described under Part II, Item 7 of our Annual Report on Form 10-K for the
year ended December 31, 2020.
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