mark-20230630

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2023

Commission File Number 001-33720

Remark Holdings, Inc.

Delaware

33-1135689

State of Incorporation

IRS Employer Identification Number

800 S. Commerce St.

Las Vegas, NV 89106

Address, including zip code, of principal executive offices

702-701-9514

Registrant’s telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, $0.001 par value per share

MARK

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☑

Smaller reporting company

☑

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

As of August 11, 2023, a total of 18,297,600 shares of our common stock were outstanding.

TABLE OF CONTENTS


PART I
Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets	1
	Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss	2
	Unaudited Condensed Consolidated Statements of Stockholders’ Equity (Deficit)	3
	Unaudited Condensed Consolidated Statements of Cash Flows	4
	Notes to Unaudited Condensed Consolidated Financial Statements	5
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37
Item 4.	Controls and Procedures	37

PART II
Item 1.	Legal Proceedings	38
Item 1A.	Risk Factors	38
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	39
Item 3.	Defaults Upon Senior Securities	39
Item 4.	Mine Safety Disclosures	39
Item 5.	Other Information	39
Item 6.	Exhibits	40
	Signature	41


Table of Contents			i

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

The following information should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q (this “Form 10-Q”) and our audited consolidated financial statements and related notes included in the Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the Securities and Exchange Commission (the “SEC”) on April 17, 2023 (the “2022 Form 10-K”).

In addition to historical information, this Form 10-Q includes “forward-looking statements” about the plans, strategies, objectives, goals or expectations of Remark Holdings, Inc. and subsidiaries (“Remark”, “we”, “us”, “our”). You will find forward-looking statements principally in the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations .” Such forward-looking statements are identifiable by words or phrases indicating that Remark or management “expects,” “anticipates,” “plans,” “believes,” or “estimates,” or that a particular occurrence or event “will,” “may,” “could,” “should,” or “will likely” result, occur or be pursued or “continue” in the future, that the “outlook” or “trend” is toward a particular result or occurrence, that a development is an “opportunity,” “priority,” “strategy,” “focus,” that we are “positioned” for a particular result, or similarly-stated expectations. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this report or such other report, release, presentation, or statement. The forward-looking statements contained in this Form 10-Q are based on the expectations, estimates, projections, beliefs, and assumptions of our management based on information available to management as of the date on which this Form 10-Q was filed with the SEC, or as of the date on which the information incorporated by reference was filed with the SEC, as applicable, all of which are subject to change. Forward-looking statements are subject to risks, uncertainties, and other factors that are difficult to predict and could cause actual results to differ materially from those stated or implied by our forward-looking statements.

In addition to other risks and uncertainties described in connection with the forward-looking statements contained in this report and other periodic reports filed with the SEC, there are many important factors that could cause actual results to differ materially. Such risks and uncertainties include general business conditions, changes in overall economic conditions, our ability to integrate acquired assets, the impact of competition and other factors which are often beyond our control.

This should not be construed as a complete list of all of the economic, competitive, governmental, technological and other factors that could adversely affect our expected consolidated financial position, results of operations or liquidity. Additional risks and uncertainties not currently known to us or that we currently believe are immaterial also may impair our business, operations, liquidity, financial condition and prospects. We undertake no obligation to update or revise our forward-looking statements to reflect developments that occur or information that we obtain after the date of this report.


Table of Contents			ii

PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

REMARK HOLDINGS, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(dollars in thousands, except share and per share amounts)




	June 30, 2023		December 31, 2022
	(Unaudited)
Assets
Cash	$	208	$	52
Trade accounts receivable, net	3,445		3,091
Inventory, net	351		308

Deferred cost of revenue	5,598		7,463
Prepaid expense and other current assets	864		1,374
Total current assets	10,466		12,288
Property and equipment, net	1,422		1,699
Operating lease assets	783		180
Other long-term assets	187		269
Total assets	$	12,858	$	14,436
Liabilities
Accounts payable	$	9,125	$	9,602
Advances from related parties	1,078		1,174
Obligations to issue common stock	5,597		1,892
Accrued expense and other current liabilities	8,189		7,222
Contract liability	420		308
Notes payable	16,480		14,607
Total current liabilities	40,889		34,805

Operating lease liabilities, long-term	398		56


Total liabilities	41,287		34,861

Commitments and contingencies

Stockholders’ Deficit
Preferred stock, $0.001 par value; 1,000,000 shares authorized; zero issued	—		—
Common stock, $0.001 par value; 175,000,000 shares authorized; 16,612,266 and 11,539,564 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively	17		12
Additional paid-in-capital	375,517		368,945
Accumulated other comprehensive loss	(1,404)		(859)
Accumulated deficit	(402,559)		(388,523)
Total stockholders’ deficit	(28,429)		(20,425)
Total liabilities and stockholders’ deficit	$	12,858	$	14,436

See Notes to Unaudited Condensed Consolidated Financial Statements


Table of Contents			1

REMARK HOLDINGS, INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

(dollars in thousands, except per share amounts)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Revenue, including amounts from China Business Partner (See Note 15)	$	3,167	$	2,558	$	3,993	$	7,225
Cost and expense
Cost of revenue (excluding depreciation and amortization)	2,511		1,847		2,966		6,117
Sales and marketing	387		188		753		336
Technology and development	567		508		736		963
General and administrative	3,244		3,933		6,077		7,872
Depreciation and amortization	25		37		71		78
Impairments	392		—		392		—

Total cost and expense	7,126		6,513		10,995		15,366
Operating loss	(3,959)		(3,955)		(7,002)		(8,141)
Other income (expense)
Interest expense	(858)		(1,774)		(2,402)		(3,960)
Finance cost related to obligations to issue common stock	(1,050)		—		(4,626)		—

Loss on investment	—		(6,952)		—		(26,008)
Other gain, net	(7)		152		(6)		151
Total other expense, net	(1,915)		(8,574)		(7,034)		(29,817)


Net loss	$	(5,874)	$	(12,529)	$	(14,036)	$	(37,958)
Other comprehensive income
Foreign currency translation adjustments	(227)		(424)		(545)		(422)
Comprehensive loss	$	(6,101)	$	(12,953)	$	(14,581)	$	(38,380)

Weighted-average shares outstanding, basic and diluted	14,132,862		10,515,777		13,819,643		10,515,777


Net loss per share, basic and diluted	$	(0.42)	$	(1.19)	$	(1.02)	$	(3.61)

See Notes to Unaudited Condensed Consolidated Financial Statements


Table of Contents			2			Financial Statement Index

REMARK HOLDINGS, INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

(in thousands, except number of shares)


	Three Months Ended June 30, 2023
	Common Stock Shares	Common Stock Par Value		Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total
Balance at March 31, 2023	13,633,992	$	14	$	372,071	$	(1,177)	$	(396,685)	(25,777)
Net loss	—	—		—		—		(5,874)		(5,874)
Share-based compensation	—	—		12		—		—		12
Common stock issued pursuant to agreements with Ionic (Note 11)	2,978,274	3		3,434		—		—		3,437

Foreign currency translation	—	—		—		(227)		—		(227)
Balance at June 30, 2023	16,612,266	$	17	$	375,517	$	(1,404)	$	(402,559)	$	(28,429)

	Three Months Ended June 30, 2022
	Common Stock Shares	Common Stock Par Value		Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total
Balance at March 31, 2022	10,515,777	$	11	$	364,847	$	(268)	$	(358,469)	$	6,121
Net loss	—	—		—		—		(12,529)		(12,529)
Share-based compensation	—	—		510		—		—		510




Foreign currency translation	—	—		—		(424)		—		(424)

Balance at June 30, 2022	10,515,777	$	11	$	365,357	$	(692)	$	(370,998)	$	(6,322)

	Six Months Ended June 30, 2023
	Common Stock Shares	Common Stock Par Value		Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total
Balance at December 31, 2022	11,539,564	$	12	$	368,945	$	(859)	$	(388,523)	$	(20,425)
Net loss	—	—		—		—		(14,036)		(14,036)
Share-based compensation	—	—		156		—		—		156
Common stock issued pursuant to agreements with Ionic (Note 11)	5,072,702	5		6,416		—		—		6,421

Foreign currency translation	—	—		—		(545)		—		(545)
Balance at June 30, 2023	16,612,266	$	17	$	375,517	$	(1,404)	$	(402,559)	$	(28,429)

	Six Months Ended June 30, 2022
	Common Stock Shares	Common Stock Par Value		Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total
Balance at December 31, 2021	10,515,777	$	11	$	364,333	$	(270)	$	(333,040)	$	31,034
Net loss	—	—		—		—		(37,958)		(37,958)
Share-based compensation	—	—		1,024		—		—		1,024




Foreign currency translation	—	—		—		(422)		—		(422)

Balance at June 30, 2022	10,515,777	$	11	$	365,357	$	(692)	$	(370,998)	$	(6,322)

See Notes to Unaudited Condensed Consolidated Financial Statements


Table of Contents			3			Financial Statement Index

REMARK HOLDINGS, INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Cash Flows

(dollars in thousands)


	Six Months Ended June 30,
	2023		2022
Cash flows from operating activities:
Net loss	$	(14,036)	$	(37,958)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation, amortization and impairments	71		78
Share-based compensation	153		759
Amortization of debt issuance costs and discount	—		1,870
Cost of extending note payable	750		—
Finance cost related to obligations to issue common stock	4,626		—
Accrued interest included in note payable	1,139		—

Loss on investment	—		26,008
Impairment of long-lived assets	392		—
Provision for doubtful accounts	138		—
Other	36		(25)
Changes in operating assets and liabilities:
Accounts receivable	(957)		221
Inventory	(42)		(146)
Deferred cost of revenue	1,865		(4,474)
Prepaid expense and other assets	13		3,873
Operating lease assets	(607)		5
Accounts payable, accrued expense and other liabilities	745		(1,169)
Contract liability	145		(142)
Operating lease liabilities	342

SEC Form 10-Q filed by Remark Holdings Inc.