SEC Form 10-Q filed by Newton Golf Company Inc.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
OR
For the transition period from ___________ to ____________
Commission File Number:
(Exact name of registrant as specified in its charter)
|
(State of incorporation) |
(I.R.S. Employer Identification No.) |
| (Address of principal executive offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
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.
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 such shorter period that the registrant was required to submit such files).
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 | ☐ | |
| ☒ | 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 May 9, 2025, there were shares of common stock outstanding.
TABLE OF CONTENTS
| i |
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS AND INFORMATION
This Quarterly Report contains forward-looking statements that involve risks and uncertainties. These forward-looking statements are not historical facts but rather are plans and predictions based on current expectations, estimates, and projections about our industry, our beliefs, and assumptions.
We use words such as “may,” “will,” “could,” “should,” “anticipate,” “expect,” “intend,” “project,” “plan,” “believe,” “seek,” “assume,” and variations of these words and similar expressions to identify forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties, and other factors, some of which are beyond our control, are difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements. You should not place undue reliance on these forward-looking statements because the matters they describe are subject to certain risks, uncertainties, and assumptions that are difficult to predict. Our forward-looking statements are based on the information currently available to us and speak only as of the date on which they were made. Over time, our actual results, performance, or achievements may differ from those expressed or implied by our forward-looking statements, and such difference might be significant and materially adverse to our security holders. Except as required by law, we undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise. Factors that could materially affect these forward-looking statements and/or predictions include, among other things: (i) the development and protection of our brands and other intellectual property, (ii) the need to raise capital to meet business requirements, (iii) significant fluctuations in marketing expenses, (iv) the ability to achieve and expand significant levels of revenues, or recognize net income, from the sale of our products, (v) management’s ability to attract and maintain qualified personnel necessary for the development and commercialization of its planned products, (vi) the impact of geopolitical risks, including tariffs, on our business, suppliers, consumers, customers, and employees or the overall economy, and (vii) other information that may be detailed from time to time in the Company’s filings with the United States Securities and Exchange Commission (“SEC”). Please consider our forward-looking statements in light of those risks as you read this Quarterly Report.
| ii |
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
NEWTON GOLF COMPANY, INC.
CONDENSED BALANCE SHEETS
(Amounts rounded to nearest thousands, except share amounts)
March 31, 2025 | December 31, 2024 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Inventory, net of reserve for obsolescence of $ | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total Current Assets | ||||||||
| Property and equipment, net | ||||||||
| Right-of-use asset, net | ||||||||
| Software licensing agreement, net | ||||||||
| Deposits | ||||||||
| Total Assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIENCY) | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Lease liability, current | ||||||||
| Software licensing obligation | ||||||||
| Warrant Liability | ||||||||
| Total Current Liabilities | ||||||||
| Software licensing fee obligation, net of current | ||||||||
| Total Liabilities | ||||||||
| Stockholders’ Equity (Deficiency): | ||||||||
| Preferred stock, par value $, shares authorized; shares issued and outstanding, respectively | ||||||||
| Common stock, $ par value, shares authorized, and shares issued and outstanding | ||||||||
| Additional paid-in-capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity (Deficiency) | ( | ) | ||||||
| Total Liabilities and Stockholders’ Equity (Deficiency) | $ | $ | ||||||
The accompanying notes are an integral part of these condensed financial statements.
| F-1 |
NEWTON GOLF COMPANY, INC.
CONDENSED STATEMENTS OF OPERATIONS
For the Three Months Ended March 31, 2025 and 2024
(Unaudited)
Three Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Net Sales | $ | $ | ||||||
| Cost of goods sold | ||||||||
| Gross profit | ||||||||
| Operating expenses: | ||||||||
| Selling, general and administrative expense | ||||||||
| Research and development expense | ||||||||
| Total operating expenses | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Interest income, net | ||||||||
| Change in fair value of warrant liabilities | ||||||||
| Net Loss | $ | ( | ) | $ | ( | ) | ||
| Loss per share – basic and diluted | $ | ) | $ | ) | ||||
| Weighted average number of shares outstanding – basic and diluted | ||||||||
The accompanying notes are an integral part of these financial statements.
| F-2 |
NEWTON GOLF COMPANY, INC.
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIENCY)
For the Three Months Ended March 31, 2025 and 2024
(Unaudited)
(Amounts rounded to nearest thousands, except share amounts)
| Common Stock | Additional Paid In | Accumulated | Total Stockholders’ | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Equity (Deficiency) | ||||||||||||||||
| Balance, December 31, 2024 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Vesting of restricted stock | - | |||||||||||||||||||
| Exercise of Warrants | ||||||||||||||||||||
| Net Loss | ( | ) | ( | ) | ||||||||||||||||
| Balance, March 31, 2025 (Unaudited) | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Common Stock | Additional Paid In | Accumulated | Total Stockholders’ | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Equity (Deficiency) | ||||||||||||||||
| Balance, December 31, 2023 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Vesting of restricted stock | - | |||||||||||||||||||
| Net Loss | ( | ) | ( | ) | ||||||||||||||||
| Balance, March 31, 2024 (Unaudited) | $ | $ | $ | ( | ) | $ | ||||||||||||||
The accompanying notes are an integral part of these condensed financial statements.
| F-3 |
NEWTON GOLF COMPANY, INC.
CONDENSED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2025 and 2024
(Unaudited)
(Amounts rounded to nearest thousands)
Three Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Cash Flows from Operating Activities | ||||||||
| Net Loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation | ||||||||
| Amortization of deferred software licensing agreement | ||||||||
| Change in reserve for inventory obsolescence | ( | ) | ||||||
| Vesting of options | ||||||||
| Changes in ROU asset | ||||||||
| Change in fair value of warrant liability | ( | ) | ||||||
| Changes in operating assets and liabilities | ||||||||
| Accounts receivable | ( | ) | ||||||
| Inventory | ( | ) | ( | ) | ||||
| Prepaids and other current assets | ( | ) | ( | ) | ||||
| Accounts payable and accrued expenses | ||||||||
| Lease liability | ( | ) | ( | ) | ||||
| Software licensing obligation | ( | ) | ||||||
| Customer deposits | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash Flows from Investing Activities | ||||||||
| Software licensing agreement | ( | ) | ||||||
| Purchase of property and equipment | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash Flows from Financing Activities | ||||||||
| Deferred software license obligation | ( | ) | ||||||
| Offering costs | ( | ) | ||||||
| Net cash provided by (used in) financing activities | ( | ) | ||||||
| Net decrease in cash | ( | ) | ( | ) | ||||
| Cash and cash equivalents and restricted cash beginning of period | ||||||||
| Cash and cash equivalents and restricted cash end of period | $ | $ | ||||||
| Supplemental disclosures of cash flow information: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for income taxes | $ | $ | ||||||
| Exercise of warrants | $ | |||||||
The accompanying notes are an integral part of these condensed financial statements.
| F-4 |
NEWTON GOLF COMPANY, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
For the Three Months Ended March 31, 2025 and 2024
(Unaudited)
(Amounts rounded to nearest thousands, except share and per share amounts)
NOTE 1 – OPERATIONS AND LIQUIDITY
Newton Golf Company, Inc. (“we,” or the “Company”) was formed in 2018 as Sacks Parente Golf, Inc., a Delaware limited liability company. On March 18, 2025 the Company converted into a Delaware corporation named Newton Golf Company, Inc. Pursuant to our Plan of Conversion, on March 18, 2025, all of the outstanding ownership interests in Sacks Parente Golf, Inc., and rights to receive such interest were converted into and exchanged for shares of capital stock of Newton Golf Company, Inc. The Company retroactively reflected the conversion as of the earliest periods presented herein.
On March 11, 2025, the Company’s Board of Directors approved and, by written consent dated February 26, 2025, the holders of a majority of our common stock approved an amendment to our Certificate of Incorporation to change our name from Sacks Parente Golf, Inc. to Newton Golf Company, Inc. to better reflect its commitment to revolutionizing golf through advanced physics and precision engineering. The change to Newton Golf Company, Inc. became effective on March 17, 2025. All references throughout this filing to Sacks Parente Golf, Inc. have been changed to Newton Golf Company, Inc.
Newton Golf Company, Inc. is 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 its growth opportunities in shaft technologies, in April of 2022, the Company expanded its manufacturing business to include advanced premium golf shafts by opening a new shaft manufacturing facility in St. Joseph, Missouri. It is the Company’s intent to manufacture and assemble substantially all products in the United States. The Company anticipates expansion into golf apparel and other golf-related product lines to enhance its growth. The Company’s future expansions may include broadening its offerings through mergers, acquisitions or internal developments of product lines that are complementary to its premium brand.
The Company currently sells its products through resellers, the Company’s websites, and distributors in the United States, Japan, and South Korea.
Basis of Presentation
The condensed financial statements at March 31, 2025, and for the three months ended March 31, 2025 and 2024, are unaudited. In the opinion of management of the Company, all adjustments, including normal recurring accruals, have been made that are necessary to present fairly the financial position of the Company as of March 31, 2025, and the results of its operations for the three months ended March 31, 2025 and 2024, and its cash flows for the three months ended March 31, 2025 and 2024. Operating results for the interim periods presented are not necessarily indicative of the results to be expected for a full fiscal year. The condensed consolidated balance sheet at December 31, 2024 has been derived from the Company’s audited consolidated financial statements at such date.
The condensed financial statements and related notes have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to such rules and regulations. These condensed consolidated financial statements should be read in conjunction with the financial statements and other information included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024, as filed with the SEC.
Going Concern and Liquidity
The accompanying condensed financial statements have
been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments
in the normal course of business. As reflected in the accompanying condensed financial statements, during the three months ended March
31, 2025, the Company incurred a net loss of $
In addition, the Company’s independent registered public accounting firm, in its report on the Company’s consolidated financial statements for the year ended December 31, 2024, expressed substantial doubt about the Company’s ability to continue as a going concern. These condensed consolidated financial statements do not include any adjustments that might result from this uncertainty.
| F-5 |
At March 31, 2025, the Company had cash and cash equivalents
on hand in the amount of $
The continuation of the Company as a going concern is dependent upon its ability to obtain necessary debt or equity financing to continue operations until it begins generating positive cash flow from operations.
No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing, or cause substantial dilution for our stockholders, in case of equity financing, or grant unfavorable terms in licensing future licensing agreements.
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
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
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.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Those estimates and assumptions include estimates for reserves of uncollectible accounts receivables, assumptions used in valuing inventories at net realizable value, impairment testing of recorded long-term and tangible and intangible assets, the valuation allowance for deferred tax assets, accruals for potential liabilities, assumptions made in valuing warrant liabilities, and assumptions made in valuing stock instruments issued for services.
| F-6 |
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 Financial Accounting Standards Board (“FASB”) in Accounting Standards Codification 480, Distinguishing Liabilities from Equity (“ASC 480”) and Accounting Standards Codification 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.
Revenue Recognition
The Company recognizes revenue in accordance with Accounting Standards Codification 606, Revenue from Contracts with Customers (“ASC 606”). The underlying principle of ASC 606 is to recognize revenue to depict the transfer of goods or services to customers at the amount expected to be collected. ASC 606 creates a five-step model that requires entities to exercise judgment when considering the terms of contract(s), which include (1) identifying the contract or agreement with a customer, (2) identifying our performance obligations in the contract or agreement, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations, and (5) recognizing revenue as each performance obligation is satisfied.
Revenue and costs of sales are recognized when control of the products is transferred to our customer, which generally occurs upon shipment from our facilities. The Company’s performance obligations are satisfied at that time. The Company does not have any significant contracts with customers requiring performance beyond delivery, and contracts with customers contain no incentives or discounts that could cause revenue to be allocated or adjusted over time. Shipping and handling activities are performed before the customer obtains control of the goods and therefore represent a fulfillment activity rather than a promised service to the customer.
All of the Company’s products are offered for sale as finished goods only, and there are no performance obligations required post-shipment for customers to derive the expected value from them.
The Company does not allow for returns, except for damaged products when the damage occurred pre-fulfillment. Damaged product returns have historically been insignificant. Because of this, the stand-alone nature of our products, and our assessment of performance obligations and transaction pricing for our sales contracts, we do not currently maintain a contract asset or liability balance for obligations. We assess our contracts and the reasonableness of our conclusions on a quarterly basis.
The following table presents our net sales by revenue source, and the period-over-period percentage change, for the period presented:
Three Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Net Sales Source | Revenue | Revenue | ||||||
| Online sales | $ | $ | ||||||
| Distributors and wholesalers | ||||||||
| Net Sales | $ | $ | ||||||
The following table presents our net sales by product lines for the period presented:
Three Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Net Sales by Product Line | Revenue | Revenue | ||||||
| Newton Shafts | $ | $ | ||||||
| Putters | ||||||||
| Net Sales | $ | $ | ||||||
| F-7 |
Basic earnings (loss) per share is computed by dividing the net income (loss) applicable to common stockholders by the weighted average number of shares of common stock outstanding during the year. Diluted earnings (loss) per share is computed by dividing the net income (loss) applicable to common stockholders by the weighted average number of common shares outstanding plus the number of additional common shares that would have been outstanding if all dilutive potential common shares had been issued, using the treasury stock method. Potential common shares are excluded from the computation when their effect is antidilutive.
For the three months ended March 31, 2025 and 2024, the calculations of basic and diluted loss per share are the same because potential dilutive securities would have had an anti-dilutive effect. The potentially dilutive securities consisted of the following:
| March 31, 2025 | March 31, 2024 | |||||||
| Stock Options | $ | |||||||
| Series A Warrants | ||||||||
| Series B Warrants | ||||||||
| Total | $ | |||||||
Advertising Costs
Advertising costs are expensed as incurred and are
included in selling, general and administrative expense. Advertising costs aggregated $
Research and Development
Research and development expenses consist primarily
of personnel costs, prototype expenses, and consulting services associated with research and development equipment. Research and development
costs are expensed as incurred. Research and development costs were $
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 Accounting Standards Codification 718, Compensation-Stock Compensation (“ASC 718”), 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 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, it estimates its expected stock volatility based on the historical volatility of a publicly traded set of peer companies within the consumer products industry with characteristics similar to the Company. 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.
| F-8 |
Fair Value of Financial Instruments
The Company uses various inputs in determining the fair value of its financial assets and liabilities and measures these assets on a recurring basis. Financial assets recorded at fair value are categorized by the level of subjectivity associated with the inputs used to measure their fair value. Accounting Standards Codification Section 820 defines the following levels of subjectivity associated with the inputs:
Level 1—Quoted prices in active markets for identical assets or liabilities.
Level 2—Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly.
Level 3—Unobservable inputs based on the Company’s assumptions.
The carrying amounts of financial assets and liabilities, such as cash, accounts receivable, inventory, accounts payable, and other payables, approximate their fair values because of the short maturity of these instruments. The carrying values of long-term financing obligations approximate their fair values because interest rates on these obligations are based on prevailing market interest rates.
Concentrations of Risk
Cash Balances. The Company’s cash balances
on deposits with banks are guaranteed by the Federal Deposit Insurance Corporation (FDIC) up to $
Accounts Receivable. At March 31, 2025, two customers accounted for more than
Net sales. During the
three months ended March 31, 2025, no customers exceeded 10% of net sales. During the three months ended March 31, 2025,
During the three months ended March 31, 2024, no customers exceeded 10%
of net sales. During the three months ended March 31, 2024, greater than
Segments
Under Accounting Standards Codification 280, Segment Reporting (“ASC 280”), operating segments are defined as components of an enterprise where discrete financial information is available that is evaluated regularly by the chief operating decision maker (“CODM”), in deciding how to allocate resources and in assessing performance. The Company has one component. Therefore, the Company’s Chief Executive Officer, who is also the CODM, makes decisions and manages the Company’s operations as a single operating segment for the manufacture and distribution of its products.
| F-9 |
Recent Accounting Pronouncements
Announced and Adopted
In November 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosure, which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expense categories that are regularly provided to the CODM and included in each reported measure of a segment’s profit or loss. The update also requires all annual disclosures about a reportable segment’s profit or loss and assets to be provided in interim periods and for entities with a single reportable segment to provide all the disclosures required by ASC 280, including the significant segment expense disclosures. This standard became effective for the Company on January 1, 2024. The adoption of ASU 2023-7 did not have a material impact on the Company’s results of operations, financial position or cash flows.
Announced But Not Yet Adopted
In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. The guidance in ASU 2024-03 requires public business entities to disclose in the notes to the financial statements, among other things, specific information about certain costs and expenses including purchases of inventory; employee compensation; and depreciation and amortization expense for each caption on the income statement where such expenses are included. The update is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted, and the amendments may be applied prospectively to reporting periods after the effective date or retrospectively to all periods presented in the financial statements. We are currently evaluating the provisions of this guidance and assessing the potential impact on our financial statement disclosures.
Other recent accounting pronouncements issued by the FASB, its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the SEC did not or are not expected by management to have a material impact on the Company’s present or future financial statements.
NOTE 3 – INVENTORY
Inventory is valued at the lower of costs (first in, first out) or net realizable value, and net of reserves is comprised of the following:
March 31, 2025 | December 31, 2024 | |||||||
| Raw materials, net | $ | $ | ||||||
| Finished goods, net | ||||||||
| Total | $ | $ | ||||||
At March 31, 2025 and December 31, 2024, inventory presented above is net
of a reserve for slow moving and potentially obsolete inventory of $
NOTE 4 – PROPERTY AND EQUIPMENT
Property and equipment are comprised of the following:
March 31, 2025 | December 31, 2024 | |||||||
| Machinery and Equipment | $ | $ | ||||||
| Leasehold Improvements | ||||||||
| Automobile | ||||||||
| Accumulated depreciation | ( | ) | ( | ) | ||||
| Property and equipment, net | $ | $ | ||||||
Depreciation expenses are included in selling, general
and administrative expenses in the accompanying condensed statements of operations. For the three months ended March 31, 2025 and 2024,
depreciation expenses were $
| F-10 |
NOTE 5 – SOFTWARE LICENSING OBLIGATION
In October 2023, the Company entered into a software
licensing agreement with Oracle America, Inc (“Oracle”) for its NetSuite Enterprise Resource Planning (“ERP”)
software (“NetSuite”). The Company agreed to license NetSuite for 36 months and utilize Oracle’s professional services
to assist in the implementation of NetSuite. The cost of the license fee was $
The Company initially recorded the $
During the year ended December 31, 2024, the Company
made payments of $
Future payments under the software license obligation are as follows:
| Years Ending December 31, | Amount | |||
| 2025 - remaining | $ | |||
| 2026 | ||||
| Total payments | ||||
| Less: Current portion | ( | ) | ||
| Non-current portion | $ | |||
NOTE 6 – LEASE LIABILITIES
The Company determines whether a contract is, or contains, a lease at inception. Right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset during the lease term, and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at lease commencement based upon the estimated present value of unpaid lease payments over the lease term. The Company leases its office and warehouse locations, and certain warehouse equipment. Leases with an initial term of 12 months or less are not included on the condensed balance sheets.
On April 1, 2022, the Company entered a facility lease
for a
The Company’s ROU
asset balance was $
The Company’s lease
liability balance was $
During the three months ended March 31, 2025 and 2024,
lease costs totaled approximately $
As of March 31, 2025, the weighted average remaining
lease terms for operating lease is
| F-11 |
NOTE 7 – STOCKHOLDERS’ EQUITY (DEFICIT)
Equity Incentive Plans
Summary of Options
| Weighted | ||||||||
| Number of | Average | |||||||
| Options | Exercise Price | |||||||
| Balance outstanding, December 31, 2024 | $ | |||||||
| Options granted | ||||||||
| Options forfeited | ||||||||
| Balance outstanding, March 31, 2025 | $ | |||||||
| Balance exercisable, March 31, 2025 | $ | |||||||
| Outstanding | Exercisable | |||||||||||||||||||||
| Weighted | Weighted | |||||||||||||||||||||
| Exercise Price | Life | Average | Average | |||||||||||||||||||
| Per Share | Shares | (Years) | Exercise Price | Shares | Exercise Price | |||||||||||||||||
| $ | $ | $ | ||||||||||||||||||||
| $ | ||||||||||||||||||||||
| $ | ||||||||||||||||||||||
| $ | $ | |||||||||||||||||||||
| $ | $ | |||||||||||||||||||||
On January 1, 2024, the Company’s Board of Directors appointed Jane Casanta to the Company’s Board of Directors. The Board granted Ms. Casanta options to purchase shares of common stock under the Company’s 2024 Equity Incentive Plan, at an exercise price of $ per common share, vesting over a thirty-six () month period, and an expiration period of . The grant of options was for board service to be rendered for the year ended December 31, 2024. The total fair value of these options at grant date was approximately $, which was determined using a Black-Scholes-Merton option pricing model with the following weighted average assumptions: fair value of our stock price of $ per share, the expected term of , volatility of %, dividend rate of %, and a risk-free interest rate of %.
| F-12 |
On July 18, 2024 (the “Meeting Date”), the Compensation Committee of the Board of Directors of the Company discussed the appointment of Gregor Campbell as the Company’s permanent Executive Chairman retroactive to July 1, 2024 (the “Appointment Date”). The appointment was not effective until the Company received from all directors a counterpart copy of the resolutions regarding the details of his compensation agreement, the last of which was received on July 26, 2024. On the Meeting Date, he was also granted an option (the “Option”) to purchase shares of the Company’s common stock at an exercise price of $ per share which was the closing price on the Nasdaq Stock Market on the Meeting Date. The Option terminates on the earlier of from the Meeting Date or nine months from Mr. Campbell’s separation date from the Company and vests monthly over months commencing on the Meeting Date. The total fair value of the Option at grant date was $, which was determined using a Black-Scholes-Merton option pricing model with the following weighted average assumptions: fair value of our stock price of $ per share, the expected term of , volatility of %, dividend rate of %, and a risk-free interest rate of %.
On December 20, 2024, the Company’s Board of Directors granted themselves aggregate options to purchase shares of common stock under the Company’s 2022 Equity Incentive Plan, at an exercise price of $ per common share, vesting over a thirty-six () month period, and an expiration period of . The grant of options was for board service for the years ended 2024 and 2025. The total fair value of these options at grant date was approximately $, which was determined using a Black-Scholes-Merton option pricing model with the following weighted average assumptions: fair value of our stock price of $ per share, the expected term of , volatility of %, dividend rate of %, and a risk-free interest rate of %.
On December 20, 2024, the Company’s Board of Directors also granted Angelo Papadourakis and Megan Kelly aggregate options to purchase shares of common stock at an exercise price of $ per common share, vesting over a thirty-six () month period. The total fair value of these options at grant date was approximately $, which was determined using a Black-Scholes-Merton option pricing model with the following weighted average assumptions: fair value of our stock price of $ per share, the expected term of , volatility of %, dividend rate of %, and a risk-free interest rate of %.
On December 20, 2024, the Company’s Board of Directors also granted Shigeyuki Okabe and Doug Barron aggregate options to purchase shares of common stock at an exercise price of $ per common share, vesting over a twenty-four () month period. The total fair value of these options at grant date was approximately $, which was determined using a Black-Scholes-Merton option pricing model with the following weighted average assumptions: fair value of our stock price of $ per share, the expected term of , volatility of %, dividend rate of %, and a risk-free interest rate of %.
On December 20, 2024, the Company’s Board of Directors also granted Jeff Opheim options to purchase shares of common stock at an exercise price of $ per common share, vesting in one-year. The total fair value of these options at grant date was approximately $, which was determined using a Black-Scholes-Merton option pricing model with the following weighted average assumptions: fair value of our stock price of $ per share, the expected term of , volatility of %, dividend rate of %, and a risk-free interest rate of %.
During the three months ended March 31, 2025 and 2024, the Company recognized approximately $ and $ of compensation expense, respectively, relating to vested stock options. As of March 31, 2025, the aggregate amount of unvested compensation related to stock options was approximately $ which will be recognized as an expense as the
As of March 31, 2025, the outstanding and exercisable options had intrinsic value. The aggregate intrinsic value was calculated as the difference between the estimated market value of $ per share as of March 31, 2025, and the exercise price of the outstanding options.
| F-13 |
NOTE 8 – WARRANTS CLASSIFIED AS LIABILITY
Summary of Warrants
| Series A | Series B | |||||||
| Warrants | Warrants | |||||||
| Warrants outstanding, December 31, 2024 | ||||||||
| Average exercise price | $ | $ | ||||||
| Warrants granted | ||||||||
| Warrants forfeited | ||||||||
| Warrants exercised | ( | ) | ||||||
| Average exercise price | $ | |||||||
| Warrants outstanding, March 31, 2025 | ||||||||
| Average exercise price | $ | $ | ||||||
Information relating to outstanding warrants at March 31, 2025, summarized by exercise price, is as follows:
| Outstanding | Exercisable | |||||||||||||||||||||||
| Exercise Price | Life | Weighted Average | Weighted Average | |||||||||||||||||||||
| Per Share | Warrants | (Years) | Exercise Price | Warrants | Exercise Price | |||||||||||||||||||
| Series A | $ | $ | $ | |||||||||||||||||||||
| Series B | $ | |||||||||||||||||||||||
| $ | $ | |||||||||||||||||||||||
Series A Warrants
Beginning on February 26, 2025 (the “Warrant
Stockholder Approval”), the Series A Warrants contain a reset of the exercise price to a price equal to the lesser of (i) the then
exercise price and (ii) the lowest volume weighted average price (“VWAP”) for the five trading days immediately following
the date the Company effects a reverse split with a proportionate adjustment to the number of shares underlying the Series A Warrants
(a “Reverse Split Reset”).
The Series A Warrants also require the Company to calculate the fair value in the event of certain fundamental transactions. The fair value calculation provides for a floor on the volatility amount utilized in the value calculation at 100% or greater. The Company has determined this provision introduces leverage to the holders of the Series A Warrants and Series B Warrants (collectively, the “Purchase Warrants”) that could result in a value that would be greater than the settlement amount of a fixed-for-fixed option on the Company’s own equity shares.
The fair value of the Series
A Warrants was valued with a binomial model using the exercise price of $
| F-14 |
As of March 31, 2025, there has been
Series B Warrants
The Series B Warrants are exercisable at $
Beginning on the date of the Warrant Stockholder Approval, in lieu of a cash exercise, the holder of the Series B Warrants has the right to elect to receive an aggregate number of shares of common stock equal to the product of (x) the aggregate number of shares of common stock that would be issuable upon a cash exercise of the Series B Warrants and (y) 2.0. Also, the Series B Warrants will provide for a Reverse Split Reset subject to the Floor Price. Additionally, effective on the 11th trading day following the date of the Warrant Stockholder Approval, the exercise price and the number of shares underlying the Common Warrants will be reset to the then-current lowest VWAP in the period commencing on the first trading day following the date of the Warrant Stockholder Approval and ending the close of trading on the 10th trading day thereafter. Such reset will be subject to the Floor Price. With respect to all of the Common Warrants, with the consent of the holder, the Company may adjust the exercise price to such amount and for such time as may be agreed upon. None of the Common Warrants may be exercisable until the Warrant Stockholder Approval. The Series B Warrants allow an alternative cashless conversion The alternative cashless conversion is determined by multiplying the number of exercised Series B Warrants by the exercise price and dividing the result by the lesser of the VWAP price or the $ floor. This amount is then doubled to arrive at the final share total.
Therefore, pursuant to ASC
815, the Company has classified the Purchase Warrants as liabilities in its balance sheet. The classification of the Purchase
Warrants, including whether the Purchase Warrants should be recorded as liabilities or as equity, is evaluated at the end of each
reporting period with changes in the fair value reported in other income (expense) in the condensed statements of operations. Upon
the closing of the registered direct offering, the fair value of the Series B Warrant liability was $
NOTE 9 - REPORTABLE SEGMENT INFORMATION
The Company is organized and operates as
The following table presents our net sales by region for the period presented:
Three Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Region | Revenue | Revenue | ||||||
| United States | $ | $ | ||||||
| South Korea | ||||||||
| All other regions | ||||||||
| Net Sales | $ | $ | ||||||
This determination is based on the management approach which designates internal information regularly available to the Chief Operating Decision Maker (“CODM”) for making decisions and assessing performance as the source of determination of the Company’s reportable segments. The Company’s CODM, the Chief Executive Officer, reviews financial information presented on a consolidated basis for the purpose of making operating decisions and assessing financial performance.
| F-15 |
The accounting policies of the one reportable segment are the same as those described in Note 2, “Summary of Significant Accounting Policies”. The CODM uses net (loss) income, as reported in our consolidated statements of operations, to measure segment profit or loss, assess performance, and make strategic capital resources allocations. The measure of segment assets is reported on our consolidated balance sheets as total assets. The significant expense categories regularly provided to the CODM are the expenses as noted on the face of the consolidated statements of operations.
| Three Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Net sales | $ | $ | ||||||
| Cost of sales | ||||||||
| Gross profit | ||||||||
| Less: | ||||||||
| Employee compensation and benefits | ||||||||
| Stock-based compensation expense | ||||||||
| Sales and marketing expense | ||||||||
| Other operating expenses | ||||||||
| Total operating expenses | ||||||||
| Loss from operations | $ | ( | ) | $ | ( | ) | ||
NOTE 10 – SUBSEQUENT EVENTS
Exercise of Warrants
Subsequent to March 31, 2025, the Company issued of its common shares on the exercise of Series B Warrants, leaving Series B Warrants unexercised as of May 1, 2025. All Series A Warrants remain unexercised.
Nasdaq Compliance
On April 14, 2025, the Company received a deficiency letter from Nasdaq notifying the Company that it is not in compliance
with Nasdaq Listing Rule 5550(b)(1), which requires the Company to maintain a minimum of $ in stockholders’ equity for
continued listing on The Nasdaq Capital Market (the “Stockholders’ Equity Requirement”). As disclosed in the Company’s
Annual Report on Form 10-K for the year ended December 31, 2024, the deficiency in the Stockholders’ Equity Requirement was a result
of the derivative liability from the issuance of the Company’s Series A Warrants and Series B Warrants in December 2024 as part
of the Company’s public offering. However, because most of the Series B Warrants were exercised on or before March 31, 2025, our
stockholders’ equity as of such date was $
Lease Extension
The Company has extended its Missouri facility lease described in Note 6 to December 2026 under similar terms.
| F-16 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
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 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 Delisting or Failure to Satisfy a Continued Listing Rule or Standard
On December 5, 2023, the Company received a deficiency letter from the Listing Qualifications Department of The Nasdaq Stock Market LLC (“Nasdaq”) notifying the Company that, for the preceding 30 consecutive business days, the closing bid price of the Company’s common stock remained below the minimum $1.00 per share requirement for continued listing on The Nasdaq Capital Market as set forth in Nasdaq Listing Rule 5550(a)(2) (the “Bid Price Requirement”). The Company was provided a compliance period of 180 calendar days from the date of the letter, or until June 3, 2024, to regain compliance with the Bid Price Requirement.
On June 4,2024, the Company received a staff determination letter (the “Determination Letter”) from the Staff notifying the Company that it had not regained compliance with the Bid Price Requirement by June 3, 2024, and is not eligible for a second 180-day period due to the Company’s failure to comply with the minimum stockholders’ equity initial listing requirement of The Nasdaq Capital Market.
Pursuant to the Determination Letter, the Company requested a hearing before a Hearings Panel (the “Panel”). The hearing request automatically stayed any suspension or delisting action pending the hearing and the expiration of any additional extension period granted by the Panel following the hearing. By letter dated June 24, 2024, the Company was notified that the Panel granted the Company a temporary exception to regain compliance with the Bid Price Requirement subject to the following milestones: (1) on or before July 31, 2024, the Company must effect a reverse stock split and, thereafter maintain a $1.00 closing bid price for a minimum of ten consecutive business days; and (2) on or before August 13, 2024, the Company must demonstrate compliance with the Bid Price Requirement by evidencing a closing bid price of $1.00 or more for a minimum of ten consecutive trading sessions. As set forth below, the Company effected a reverse stock split on July 30, 2024. By letter dated August 13, 2024 from the Nasdaq Office of General Counsel, the Company was informed that it has regained compliance with the Bid Price Requirement.
On January 29, 2025, the Company received a written notice (the “Notice”) from Nasdaq notifying the Company that it is not in compliance with the Bid Price Requirement due to the Company’s common stock not maintaining a closing bid price of at least $1.00 per share for a period of 30 consecutive business days.
Pursuant to Nasdaq Listing Rule 5810(c)(3)(A)(iv), the Company is not eligible for the typical 180-day calendar period to demonstrate compliance due to the fact that the Company has affected a reverse stock split within the prior one-year period.
The Company requested a hearing before a Panel, as provided in the Nasdaq Rules. The hearing request automatically stayed any suspension or delisting action pending the hearing. On March 11, 2025, the hearing was held and the Company requested an extension based on the reverse stock split occurring on March 17, 2025. The Panel has granted an extension to the Company to regain compliance.
On April 14, 2025, the Company received a deficiency letter from Nasdaq notifying the Company that it is not in compliance with Nasdaq Listing Rule 5550(b)(1), which requires the Company to maintain a minimum of $2,500,000 in stockholders’ equity for continued listing on The Nasdaq Capital Market (the “Stockholders’ Equity Requirement”). As disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, the deficiency in the Stockholders’ Equity Requirement was a result of the derivative liability from the issuance of the Company’s Series A Warrants and Series B Warrants in December 2024 as part of the Company’s public offering. However, because most of the Series B Warrants were exercised on or before March 31, 2025, our stockholders’ equity as of such date was $6.2 million, which is in excess of the Stockholders’ Equity Requirement.
| 1 |
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.
Public Company Costs
Effective August 17, 2023, our common stock was registered with the SEC and listed on The Nasdaq Capital Market, which required us to hire additional personnel and implement public company procedures and processes. We incur additional annual expenses as a public company for internal controls compliance and public company reporting obligations, directors’ and officers’ liability insurance, director fees and additional internal and external accounting and legal and administrative resources, including increased audit and legal fees.
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.
| 2 |
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.
Comparison of the Three Months Ended March 31, 2025 to the Three Months Ended March 31, 2024
Our sales, cost of goods sold, operating expenses, and loss from operations for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024 were as follows (amounts are rounded to nearest thousands):
| Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | % Change | ||||||||||
| Net Sales | $ | 1,210,000 | $ | 350,000 | 246 | % | ||||||
| Cost of goods sold | 358,000 | 144,000 | 149 | % | ||||||||
| Gross profit | 852,000 | 206,000 | 314 | % | ||||||||
| Operating expenses: | ||||||||||||
| Selling, general and administrative | 2,541,000 | 1,271,000 | 100 | % | ||||||||
| Research and development | 282,000 | 190,000 | 48 | % | ||||||||
| Total operating expenses | 2,823,000 | 1,461,000 | 93 | % | ||||||||
| Loss from operations | (1,971,000 | ) | (1,255,000 | ) | 57 | % | ||||||
| Change in fair value of warrant liability | 1,401,000 | - | 100 | % | ||||||||
| Interest income, net | 45,000 | 62,000 | -27 | % | ||||||||
| Net loss | $ | (525,000 | ) | $ | (1,193,000 | ) | -56 | % | ||||
Net Sales
Our net sales increased $0.9 million, or 246%, to $1.2 million during the three months ended March 31, 2025, compared to $0.4 million during the three months ended March 31, 2024. The increase in net sales was primarily from the introduction of our Newton Motion driver shaft product line in November 2023, and our Newton Motion fairway shaft product line in April 2024. For the three months ended March 31, 2025, we generated $1.0 million of net sales through our websites, compared to $0.3 million for the three months ended March 31, 2024.
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 $0.2 million to $0.4 million for the three months ended March 31, 2025, compared to $0.1 million for the three months ended March 31, 2024, primarily due to our increase in net sales. Our gross margin was 70% and 59% for the three months ended March 31, 2025 and 2024, respectively. The increase in gross margin was primarily due to the change in product mix sold and changes to our inventory reserves as compared to the prior year period.
Operating expenses
Operating expenses include selling, general and administrative expenses, and research and development costs.
| 3 |
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 $1.3 million to $2.5 million during the three months ended March 31, 2025, compared to $1.3 million during the three months ended March 31, 2024. The increase in selling, general and administrative expenses was primarily from additional legal expense associated with special shareholder meetings and Series B Warrant exercises, higher accounting and audit expense associated with warrant valuation and warrant accounts, transfer agent costs associated with the exercise of Series B Warrants, and proxy solicitor costs associated with special shareholder meeting.
Research and development costs include employee costs, consultants, licensing fees, and product design and development costs. Research and development expenses increased $0.1 million to $0.3 million during the three months ended March 31, 2025, compared to $0.2 million during the three months ended March 31, 2024. The increase in research and development costs was due to costs incurred to test and refine prior to the commercialization of our Newton Fast Motion product, which was launched in May 2025.
Loss from operations
Loss from operations increased to $2.0 million for the three months ended March 31, 2025, compared to $1.3 million for the three months ended March 31, 2024. The increase in our loss from operations was primarily from additional legal expense associated with special shareholder meetings and Series B Warrant exercises, higher accounting and audit expense associated with warrant valuation and warrant accounts, transfer agent costs associated with the exercise of Series B Warrants, and proxy solicitor costs associated with special shareholder meeting.
Change in Fair Value of Warrant Liability
The change in fair value of warrant liability was due to a reduction of the Series A Warrants of $1.6 million, partially offset by an increase in the fair value of the remaining Series B Warrants of $226,000, for a total expense reduction of $1.4 million.
Interest income, net
Interest income was $45,000 for the three months ended March 31, 2025, compared to $62,000 for the three months ended March 31, 2024. The decrease was attributable to lower interest earned on our bank balances, as compared to the prior year period.
Net loss
Net loss decreased $0.7 million to $0.5 million during the three months ended March 31, 2025, compared to $1.2 million for the three months ended March 31, 2024. The decrease in net loss was primarily due to the change in fair value of the warrant liability, as discussed above.
Liquidity and Capital Resources
The following table summarizes our cash flows for the periods indicated (amounts are rounded to nearest thousands):
Three Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Net cash (used in) provided by: | ||||||||
| Operating activities | $ | (1,564,000 | ) | $ | (1,151,000 | ) | ||
| Investing activities | (131,000 | ) | (104,000 | ) | ||||
| Financing activities | (84,000 | ) | - | |||||
| Net decrease in cash | $ | (1,779,000 | ) | $ | (1,255,000 | ) | ||
| 4 |
Operating Activities
Net cash used in operating activities for the three months ended March 31, 2025 totaled $1.6 million, compared to net cash used in operating activities for the three months ended March 31, 2024 of $1.2 million. The increase in net cash used in operations for the three months ended March 31, 2025, was primarily from additional legal expense associated with special shareholder meetings and Series B Warrant exercises, higher accounting and audit expense associated with warrant valuation and warrant accounts, transfer agent costs associated with the exercise of Series B Warrants, and proxy solicitor costs associated with special shareholder meeting.
Investing Activities
Net cash used in investing activities for the three months ended March 31, 2025 totaled $131,000, and was for the purchase of software licensing and property and equipment. Net cash used in investing activities for the three months ended March 31, 2024 totaled $83,000, and was for the purchase of software licensing and property and equipment.
Financing Activities
Financing activities during the three months ended March 31, 2025 totaled $84,000, and was related to warrant exercises completed in the three months ended March 31, 2025.
The accompanying condensed financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying financial statements, during the three months ended March 31, 2025, we incurred a net loss of $0.5 million and used cash in operations of $1.6 million. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date of the financial statements being issued. These accompanying condensed financial statements do not include adjustments relating to the recoverability and classification of reported asset amounts or the amount and classification of liabilities that might be necessary should we be unable to continue as a going concern.
At March 31, 2025, we had cash and cash equivalents on hand in the amount of $5.9 million. We expect our cash on hand on March 31, 2025, to last for at least the next 12 months.
The continuation of the Company as a going concern is dependent upon our ability to obtain necessary debt or equity financing to continue operations until we begin generating positive cash flow from operations. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if we are able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing, or cause substantial dilution for our stockholders, in the case of equity financing, or grant unfavorable terms in licensing future licensing agreements.
Off-Balance Sheet Arrangements
At March 31, 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.
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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 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, it estimates its expected stock volatility based on the historical volatility of a publicly traded set of peer companies within the consumer products industry with characteristics similar to the Company. 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.
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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 Accounting Standards Codification 480, Distinguishing Liabilities from Equity (“ASC 480”) and Accounting Standards Codification 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 Accounting Standards Codification 480, Distinguishing Liabilities from Equity (“ASC 480”) and Accounting Standards Codification 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.
Recently Issued Accounting Pronouncements
See Note 2 of the Notes to Condensed Financial Statements for a discussion of recent accounting pronouncements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
A smaller reporting company is not required to provide the information required by this Item.
Item 4. Controls and Procedures.
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) the Company had an insufficient number of personnel with an appropriate level of U.S. GAAP knowledge and experience and ongoing training in the application of U.S. GAAP and SEC disclosure requirements commensurate with the Company’s financial reporting requirements, and (iii) the Company did not maintain effective controls over its financial statement close and reporting process. Specifically, the Company (i) had insufficient preparation and review procedures for disclosures accompanying the Company’s financial statements and (ii) 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.
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We are working to remediate the deficiencies and material weaknesses, including the hiring of a new Chief Financial Officer in January 2025, as well as a new Accounting Controller and System Administrator in March 2025. Work has begun on implementing and documenting policies, procedures, and internal controls. We have taken steps to enhance our internal control environment through a collaborative process workflow, and plan to take additional steps 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 and at the direction of our Audit Committee, will continue to assess the control environment and the above-mentioned efforts to remediate the underlying causes of the identified material weaknesses.
We are unable, at this time, to estimate how long it will take to compete 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 change to our internal control over financial reporting during the quarter ended March 31, 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.
PART II – OTHER INFORMATION
Item 1. Legal Proceedings
There are no legal proceedings that are pending against the Company or that involve the Company that, in the opinion of management, could reasonably be expected to have a material adverse effect on the Company’s business or financial condition.
Item 1A. Risk Factors
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.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
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Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
During the three months ended March 31, 2025, none
of our directors or officers (as defined in Rule 16a-1(f) of the Exchange Act)
Item 6. Exhibits
The following exhibits are filed herewith as a part of this report.
* Filed herewith
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| NEWTON GOLF COMPANY, INC. | ||
| Date: May 14, 2025 | By: | /s/ Greg Campbell |
| Chief Executive Officer (Principal Executive Officer) | ||
| Date: May 14, 2025 | By: | /s/ Ryan Stearns |
| Ryan Stearns | ||
Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) |
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