Interactive Strength Inc
For the period ended Jun 30, 2024. Filed Aug 14, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 14, 2024
TRNR$1.22+2.5%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-20.
0000950170-24-062553
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-14.
0000950170-24-097225
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 526 previous paragraphs and 324 current paragraphs.
235 unchanged; 67 reworded; 21 added; 209 removed; 15 previous and 1 current paragraphs rearranged.
Tables are not compared: 12 previous and 12 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (21)
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Change in Fair Value of Earn Out
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The change in fair value of earn out consists of the change in the fair value of the outstanding contingent considerations since the previous reporting period.
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Change in Fair Value of Derivatives
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The change in fair value of derivatives consists of the change in the fair value of the outstanding derivatives since the previous reporting period.
Current report
Fitness product revenue increased $0.03 million or 15% and $0.02 million or 5% for the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023, respectively. The increase was primarily attributable to the acquisition of CLMBR, Inc.
Current report
Training revenue increased $0.1 million or 160% and $0.2 million or 157% for the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023, respectively. The increase was primarily attributable to the acquisition of CLMBR, Inc.
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General and administrative expense decreased $3.4 million or 44% and $13.4 million or 56% for the three and six months ended June 30, 2024, as compared to the three and six months ended June 30, 2023, respectively. The decrease was due primarily to decreases of $1.0 million and $11.2 million, respectively in stock-based compensation expenses, $0.5 million and $1.4 million in accounting and tax expenses, respectively, and $2.1 million and $1.5 million in digital marketing and advisory services, respectively, offset by increase of $0.1 million and $0.4 million in insurance, respectively with the remaining difference due to change in other miscellaneous expenses.
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Other (expense) income, net consists of unrealized currency gains and losses, fair value of Loss Restoration Agreement derivative and fair value of warrants issued in connection with Registered Direct Offering.
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Loss on extinguishment of debt and accounts payable
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Change in Fair Value of Convertible Notes, Change in the Fair Value of Earn out, Change in Fair Value of Derivatives, Change in Fair Value of Warrants
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Loss on extinguishment of debt from conversion to equity.
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As previously disclosed, on August 22, 2023, the Listing Qualifications staff (the “Staff”) of Nasdaq had notified the Company that it did not comply with the minimum $2,500,000 stockholders’ equity requirement for continued listing set forth in Nasdaq Listing Rule 5550(b)(1) (the “Rule”). On February 16, 2024, the Company filed a Form 8-K stating that as of February 15, 2024, as a result of the Company’s debt conversion and acquisition, the Company believed it had regained compliance with the Rule. Based on this representation, the Staff notified the Company that it regained compliance with the Rule; however, the Staff noted that if the Company failed to evidence compliance upon filing its periodic report for the period ended March 31, 2024, it may be subject to delisting. On May 22, 2024, the Company received a delist determination letter from the Staff advising the Company that the Staff had determined that the Company no longer complies with the Rule. Specifically, the Staff noted that the Company’s stockholders’ equity reported in its Form 10-Q for the period ended March 31, 2024 did not satisfy the minimum $2,500,000 stockholders’ equity requirement for continued listing. The Company appeared before a Hearings Panel (the “Panel”) on July 16th. On August 6, 2024, the Company received a letter from the Panel stating that the Panel has determined to grant the request of the Company to continue its listing on the Nasdaq Stock Market until November 14, 2024. The Company’s continued listing is subject to the condition that on or before November 14, 2024, i) the Company files a Form 10-Q for the period ending September 30, 2024, describing the transactions undertaken by the Company to achieve compliance and demonstrate long-term compliance with the Equity Rule and provide an indication of its equity following those transactions; and ii) the Company provides the Panel with income projections for the next 12 months. There can be no assurance that the Company will be able to regain compliance with the applicable Nasdaq listing requirements, or that a Panel will stay the suspension of the Company’s securities. If the Company’s securities are delisted from Nasdaq, it could be more difficult to buy or sell the Company’s common stock or to obtain accurate quotations, and the price of the Company’s common stock could suffer a material decline. Delisting could also impair the Company’s ability to raise capital and/or trigger defaults and penalties under outstanding agreements or securities of the Company.
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Q2 2024 Convertible Preferred Notes
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In April and May 2024, the Company issued convertible preferred notes in the aggregate principal amount of approximately $1.7 million, due April and May 2025. Interest on the outstanding principal of the notes accrues initially at a rate of 12% per annum. In April and May 2024, a portion of the convertible note was converted into 1,407,186 shares of the Company's Series A Preferred Stock at a blended conversion price of $1.03 per share. The Company recognized a loss equal to $0.9 million on the extinguishment of debt. The Company paid a portion of the promissory notes of $0.3 million.
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Treadway Warrants
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On May 20, 2024, the Company entered into a securities purchase agreement with certain institutional investors, pursuant to which the Company agreed to issue and sell, in a registered direct offering priced at-the-market under the rules of The Nasdaq Stock Market (the "Registered Offering), an aggregate of 142,046 shares of common stock, par value $0.0001, at an offering price of $7.04 per share. Pursuant to the securities purchase agreement, in a concurrent private placement (together with the Registered Offering, the “Offering”), the Company has also agreed to issue to the Investors unregistered warrants to purchase up to an aggregate of 142,046 shares of Common Stock, which represent 100% of the shares of Common Stock to be issued and sold in the Registered Offering. The Warrants have an exercise price of $7.04 per share, and will expire five and one-half years from the Stockholder Approval Date on May 31, 2024. The warrants are classified as other long-term liabilities within the condensed consolidated balance sheets and are carried at fair value, with changes in fair value recorded in earnings. The Company recognized a gain equal to $0.6 million for the three and six months ended June 30, 2024, related to the change in fair value of the warrants issued in May 2024.
Current report
On May 8, 2024, the Company entered into an engagement agreement with the Placement Agent, pursuant to which the Placement Agent agreed to act as the exclusive placement agent in connection with the Registered Offering. The Company has agreed to issue the Placement Agent or its designees as compensation in connection with the Offering, warrants to purchase up to an aggregate of 10,653 shares of Common Stock (equal to 7.5% of the aggregate number of Shares sold in the Registered Offering) and will have a term of five years from the commencement of sales in the Registered Offering and an exercise price of $8.80 per share. The warrants are classified as other long-term liabilities within the condensed consolidated balance sheets and are carried at fair value, with changes in fair value recorded in earnings. The Company recognized a gain equal to $0.05 million for the three and six months ended June 30, 2024, related to the change in fair value of the warrants issued in May 2024.
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Comparison of the six months ended June 30, 2024 and 2023
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On May 20, 2024, the Company entered into a securities purchase agreement with certain institutional investors, pursuant to which the Company agreed to issue and sell, in a registered direct offering priced at-the-market under the rules of The Nasdaq Stock Market (the "Registered Offering), an aggregate of 142,046 shares of common stock, par value $0.0001, at an offering price of $7.04 per share. Pursuant to the securities purchase agreement, in a concurrent private placement (together with the Registered Offering, the
Current report
“Offering”), the Company has also agreed to issue to the Investors unregistered warrants to purchase up to an aggregate of 142,046 shares of Common Stock, which represent 100% of the shares of Common Stock to be issued and sold in the Registered Offering. The Warrants have an exercise price of $7.04 per share, and will expire five and one-half years from the Stockholder Approval Date on May 31, 2024. The warrants are classified as other long-term liabilities within the condensed consolidated balance sheets and are carried at fair value, with changes in fair value recorded in earnings. The Company recognized a gain equal to $0.6 million for the three and six months ended June 30, 2024, related to the change in fair value of the warrants issued in May 2024.
Current report
On May 8, 2024, the Company entered into an engagement agreement with the Placement Agent, pursuant to which the Placement Agent agreed to act as the exclusive placement agent in connection with the Registered Offering. The Company has agreed to issue the Placement Agent or its designees as compensation in connection with the Offering, warrants to purchase up to an aggregate of 10,653 shares of Common Stock (equal to 7.5% of the aggregate number of Shares sold in the Registered Offering) and will have a term of five years from the commencement of sales in the Registered Offering and an exercise price of $8.80 per share. The warrants are classified as other long-term liabilities within the condensed consolidated balance sheets and are carried at fair value, with changes in fair value recorded in earnings. The Company recognized a gain equal to $0.05 million for the three and six months ended June 30, 2024, related to the change in fair value of the warrants issued in May 2024.
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Previous report
Fitness product revenue decreased $0.02 million or 26% for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. This decrease was primarily attributable to more deliveries in 2023.
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Training revenue increased $0.09 million or 154% for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The increase was primarily attributable to the acquisition of CLMBR, Inc.
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General and administrative expense decreased $9.9 million or 62% for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023, respectively. The decrease was due primarily due to decreases of $10.2 million in stock-based compensation expenses, rent expenses of $0.1 million and transaction costs related to IPO in prior year of $0.8 million offset by transaction costs related to the acquisition of CLMBR, Inc. of $0.8 million and increase in insurance expenses of $0.3 million and increase in legal expenses of $0.1 million.
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Loss on debt extinguishment
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Loss on debt extinguishment of $1.1 million related to the conversion of promissory notes and senior secured notes to convertible notes.
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The Company received a deficiency letter from the Nasdaq Stock Market (“Nasdaq”) on January 26, 2024 notifying the Company that, for the last 30 consecutive business days, the closing bid price for the Company’s common stock, par value $0.0001 per share (the “Common Stock”) has been below the minimum $1.00 per share required for continued listing on The Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2) (“Rule 5550(a)(2)”). The Nasdaq deficiency letter has no immediate effect on the listing of the Common Stock, and the Common Stock will continue to trade on The Nasdaq Capital Market under the symbol “TRNR” at this time. The Company has 180 calendar days, or until July 24, 2024, to regain compliance. To regain compliance, the closing bid price of the Company’s securities must be at least $1.00 per share for a minimum of ten consecutive business days. If compliance is not regained by July 24, 2024, the Company may be eligible for additional time to regain compliance or if otherwise not eligible, the Company may request a hearing before a hearings panel. In the Company fails regain compliance and/or secure an extension, the Company will be subject to being delisted from the Nasdaq market. If a delisting occurs, the Company will be faced with a number of material adverse consequences, including limited availability of market quotations for its common stock; limited news and analyst coverage; decreased ability to obtain additional financing or failure to comply with the covenants required by the Company’s borrowing arrangement; limited liquidity for the Company’s stockholders due to thin trading; and a potential loss of confidence by investors, employees and other third parties who do business with the Company.
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BUSINESS
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Our Purpose
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We are an innovative specialty fitness equipment company that leverages technology and content to deliver highly engaging and versatile workout experiences. With CLMBR, we provide an unmatched cardio workout that delivers a low-impact, full-body, and effective workout. With FORME, we make strength training and personal coaching accessible to anyone, anywhere, at any time.
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We are driven to provide the best in both cardio and strength training. Our products combine industry-leading engineering and design with world-class technology and content.
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Who We Are
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Through the CLMBR brand, we offer a revolutionary vertical climbing machine that delivers a proven fully-body, cardio and strength workout, but with a design and content platform that makes the workout mass appealing and accessible to all fitness levels. A workout that has long been exclusive to celebrities and professional athletes with personal trainers can now be accessed by anyone. The patented open central design and content platform provides a vertical climbing experience that is unlike any other. CLMBR offers two display options: a 21” touch screen and a 10” touch screen – making it suitable for any commercial fitness application, both self-directed to instructor-directed environments, from large health clubs to boutique training studios. With its low impact and ergonomic movement, CLMBR is safe and accessible for most ages and levels of ability and can be found at gyms and fitness studios, hotels, and physical therapy facilities, and residential homes. CLMBR MSRP is $3,995 or less, depending on display option and order quantity.
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Connected Hardware Platform
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We offer our vertical climbing machine with two touch screen display options, a 21” and a 10” version. The CLMBR MSRP is $3,995 or less, depending on display option and order quantity. The CLMBR is sold with either a Pure or Connected display, although the displays are interchangeable and can be swapped. The CLMBR Connected machine is available to a D2C audience exclusively from CLMBR owned website, CLMBR.com and accounts for the majority of CLMBR sales to date. Both CLMBR Connected and Pure are sold to the commercial fitness market through our exclusive global distribution partner, Woodway. The CLMBR design is patented and has a form-factor that is unlike any other vertical climbing machine. Traditional vertical climbing machines have a central “mono-pole” design that makes it impossible to fit a large, landscape style screen. Furthermore, the design positions the screen only inches away from the user's face, and obstructs any view forward of an in-real-life instructor. The user-friendly CLMBR design, display options, advanced technology, and on-demand content platform allows for placement into any environment with mass adoption. (Something that has not been the case with other vertical climbers over the last 40+ years)
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Digital Services Platform
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The CLMBR software provides a digital experience that is among the very best in the industry. The CLMBR Connected display provides a feature-rich experience with 100’s of on-demand classes from world-class trainers. There is a variety of content to suit all ability levels, from first-time users to seasoned climbers. The class and collection library offers something for everyone, ranging from glute focused training, to strength and conditioning. Monthly challenges and new weekly content keep users and members engaged, the results keep coming back for more. No matter the user's fitness goal, CLMBR Connected allows for the seamless identification of a program or class that will provide the training needed to achieve the results the user wants. The CLMBR Pure display provides clear and concise metrics and information - exactly what is needed in an instructor/trained led environment. The interface is easy to navigate and users can quickly and easily see the metrics that matter. Both the Connected and Pure display connect to the CLMBR Mobile Companion App, allowing users to create an account, keep track of workouts, progress, and milestones, see new content and challenges, connect with other users, and share their achievements. (Available on the Apple and Google Play app stores)
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Channels
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The CLMBR’s full-body, safe, and easy-to-use design allows for placement into virtually any environment. You can find CLMBR in everything from professional training centers (NBA, UFC, NFL) to thousands of homes across the US.
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CLMBR has two hardware configurations that are designed to support specific use cases. The 21” touch screen display is termed the “CLMBR Connected” and is intended for any self-directed environment, such as: health clubs, hotels, multi-family residential gyms, community centers, member clubs, rehabilitation/physical therapy centers, corporate gyms, and private residences. The 10” touch screen version is termed “CLMBR Pure” and is intended for any instructor/trainer-directed environment, such as: boutique training studios, large group fitness, small group fitness, professional/collegiate training facilities, and functional training/Crossfit® gyms.
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Large Group Fitness: Group climbing is one of the hottest new fitness concepts and is popping up across major markets across the globe. CLMBR is the perfect option for large group climbing concepts, the user-friendly interface and patented open-central design provides a vastly superior experience. CLMBR owns and operates its very own vertical climbing concept (Studio CLMBR) and consults other leading group climbing businesses. Combining CLMBR with weight based strength training provided unmatched workout efficiency and effectiveness.
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Small Group & Group X: CLMBR’s small footprint and mobility makes it the perfect option for any small group or group X training environment. Vertical climbing is an excellent complement for virtually any other workout, from weight training to pilates.
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Health Clubs: A dominant force in the fitness industry, health clubs are always on the lookout for new workouts that will provide value to their members while adding differentiation to their business. The CLMBR has achieved success with providing health clubs multiple applications. From the cardio floor to underutilized group fitness areas.
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Professional & Collegiate Training: Professional and collegiate athletes need to take a specialized approach to their training to ensure that they are ready to perform and most importantly do not get injured during training. CLMBR provides the ultimate high intensity, low impact workout. From the UFC training center to NBA facilities, the CLMBR is trusted among the most elite athletes in the world.
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Community & Rec Centers: CLMBR is engineered for everyone and supports the building of community and strong families. Engaging challenges add a level of fun for members as they track their progress on the mobile companion app. The user-friendly, intuitive, low-impact workout is accessible to all abilities levels. The design is both durable and approachable while being easy to maintain. Metric led classes are engaging and drive engagement with the work-out results sent directly to email, allowing members to easily share their milestones and climbs.
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Hospitality & Multi-Family: Designed to elevate the guest and resident fitness experience. CLMBR’s modern and sleek design paired with the greatest efficiency full-body workout allows even guests and residents with the tightest schedules to achieve a full-body workout that will leave them energized during their stay. With CLMBR Connected, users can choose climbing classes from an extensive on-demand library based on instructor, music genre, and type of workout, creating a fun and customizable experience. CLMBR’s small footprint and low cost of ownership and maintenance make it an affordable and low space addition to any hotel or multi-family fitness center.
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Rehabilitation & Physical Therapy: Climbing has been a staple for rehabilitation for many years; the low impact nature of climbing is easy on the joints and allows for life-long use without negative effects. With CLMBR, the patient is in a partial weight-bearing position that is conducive to successful rehabilitation and exercise of orthopedically and cardiac impaired patients. CLMBR allows for an ergonomic spinal alignment, helping to strengthen your core, improve posture, and help to prevent further injury.
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Corporate Gyms: CLMBR provides corporate fitness centers with a solution that is safe, effective, user friendly, and inviting. CLMBR's compact footprint is ideal for even the smallest of spaces, and its low cost and maintenance makes it an affordable addition to your corporate gym. CLMBR allows users to achieve an effective and low-impact workout while tracking your progress with metrics that can be both shared and saved. Fun and engaging challenges provide a perfect way to bring the team together with some friendly and healthy competition!
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Functional & Crossfit®: Engineered to go all out. All the time. CLMBR was built for Crossfit ® and functional fitness – mobile, compact and built to last without laborious maintenance. The full-body, low impact nature of climbing is the perfect complement to high-intensity Crossfit® and functional fitness. CLMBR provides members the challenge they are looking for while providing the facility with differentiation and innovation. CLMBR offers a smaller footprint with up to 60% greater efficiency over the typical rower or bike, all while being easily moved by a single person.
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Residential: With CLMBR’s sleek and compact design, it is a perfect addition to the home workout experience. The compact design allows for CLMBR to be placed in even the smallest of dwellings. Users will have access to an extensive on-demand library and can participate in live instructor-led climbing classes. CLMBR allows you to be face-to-face with top fitness instructors without leaving the comforts and convenience of home. CLMBR’s high definition large format display and powerful built-in sound system will fully immerse you in a climbing class experience. CLMBR creates a sense of community and helps users stay engaged and motivated from home.
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Connected Hardware Platform
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Through the FORME brand, we offer two connected hardware products, the FORME Studio (fitness mirror) and the FORME Lift (fitness mirror and cable-based digital resistance), which are currently priced at $2,495 and $6,495, respectively. The FORME products are designed to provide a more integrated and immersive experience than similar products currently on the market. The FORME Studio features a 43-inch 4K ultra high definition (“UHD”) touchscreen display, which is among the largest and highest definition screens in the connected fitness equipment market, as well as two front-facing 12 megapixel (“MP”), wide angle cameras designed to facilitate seamless live interaction with a trainer. The FORME Lift is an add-on to the FORME Studio and features two cable-based resistance arms that can provide up to 100 pounds of resistance per arm. Our products ship with a set of premium accessories that are included with purchase. We also offer add-on accessories, including our barre, a unique accessory that attaches to the FORME Studio or FORME Studio Lift and enables members to incorporate a wooden ballet barre into their barre routines. Sales of our connected fitness hardware products have accounted for the substantial portion of our revenue to date.
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The FORME Hardware Platform leverages our digital resistance technology and library of hundreds of Video On-Demand (“VOD” or “On-Demand”) classes to facilitate engaging workout experiences in both commercial and at-home settings. The commercial grade connected fitness hardware products are a marriage of design and technology, combining high level aesthetic quality with robust strength training equipment. For commercial clients, the expertly engineered hardware lends to durability, holding up to a high volume of use. Confidence in the equipment, matched with the design style, leads to greater results and engagement for their residents, members, and employees. All members who purchase the FORME Studio and FORME Studio Lift are able to access the VOD content library through their respective memberships. The cost of membership for class access is included with the commercial purchase.
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At-home purchases require a monthly $49 membership. Members are able to search the classes by filtering based on length, difficulty level, type, equipment used, and instructor. Core to VOD content, FORME provides both individual classes and multi-week programs spanning a range of modalities, including strength training, yoga, pilates, mobility, barre and recovery, among others. The multi-week programs offer not only guidance on movements but also progression in challenge. Having goal oriented programming options, sets the FORME product apart from others who focus more on singular workout experiences. By offering a wide variety of workouts, the FORME hardware platform supports a range of user goals and needs, enabling the products to appeal to a broad user base and provide a fitness solution to consumers who may be underserved by traditional free weight options and selectorized machines. Members are able to cancel the membership at any time, after which they could no longer have access to our VOD content or our performance training services.
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Digital Services Platform
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In addition to the connected hardware products, FORME has developed a proprietary digital services platform through which consumers can access expert performance coaching in different formats, including live and asynchronous as well as 30 and 60 minute durations, which enables our commercial or at-home members to customize their training plans according to their unique needs.
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FORME’s digital services platform delivers a consistent, high quality user experience for both the member and coach. Live sessions with performance coaches include value added features like on-screen biometrics, adjustable field of vision for the trainer, and UI elements to provide context as well as motivation to the member during the session. Training packages start at $399 per month for 4 one hour sessions each month. The live 1:1 training program employs a client-centered coaching approach, ensuring the client’s goals and needs are central to the program. The full program includes unlimited asynchronous programming and VOD assignments, supporting the member even when the trainer is not with them. As the program progresses, members are routinely reassessed to track progress toward goals and inform the next phases of the training plan. Additional add-on services are available for nutrition coaching, sleep coaching, and behavior based lifestyle coaching. Currently, the majority of live 1:1 training activity on the platform takes place with at-home customers; however, we see a compelling opportunity for this offering in the commercial market as we provide solutions to a variety of challenges faced by operators of hotels, multifamily buildings, active aging communities and a variety of other commercial settings.
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FORME Golf
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Additionally, as a specialty offering within the digital platform, we offer FORME Golf, a performance training program focused on helping golfers play at their best. Powered by Titleist Performance Institute (TPI) certified coaches, FORME Golf creates a custom program for the member leveraging the TPI movement screen. The resulting program mixes live sessions with custom workouts to address the mechanics of the golf swing as well as develop a greater level of golf fitness.
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FORME’s digital platform is accessible via download or streaming through our connected fitness hardware products or via streaming through our standalone FORME Studio app, which is available through iOS mobile devices, most iOS tablets, Android mobile devices, and Android tablets. Members can access Custom Training and Live 1:1 personal training services through both the connected hardware products and the FORME Studio app, allowing the member to take their training anywhere they go.
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The FORME digital platform is the greatest expression of connected fitness with a live coach leading a truly individualized experience. We believe the combination of our proprietary software and immersive content combined with our premium connected fitness hardware products and expert coaching network creates a compelling value proposition for both our commercial and in-home member base as well as our trainers, and can generate attractive recurring membership revenue.
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Reworded paragraphs (67)
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our expectations regarding the impact of general economic conditions, geopolitical events, and global pandemics such as the COVID-19 pandemic;
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our expectations regarding the impact of general economic conditions, geopolitical events, and global pandemics such as the COVID-19 pandemic; and
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our expectations regarding the period during which we qualify as an emerging growth company under the JOBS Act and as a smaller reporting company; and
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our expectations regarding the period during which we qualify as an emerging growth company under the JOBS Act and as a smaller reporting company.
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During the three months ended March 31, 2024 and 2023, we generated total revenue of $0.3 million and $0.2 million, respectively, and incurred net losses of $11.4 million and $16.0 million, respectively. As we generated recurring net losses and negative operating cash flow during the research and development stage of the Forme Studio and Forme Studio Lift products, we have funded our operations primarily with gross proceeds from the sales of our redeemable convertible preferred stock, the sale of our SAFE notes, the issuance of convertible notes, and the issuance of common stock.
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During the three and six months ended June 30, 2024 and 2023, we generated total revenue of $0.6 million and $0.3 million and $1.0 million and $0.5 million, respectively, and incurred net losses of $11.1 million and $13.6 million and $22.5 million and $29.6 million, respectively. As we generated recurring net losses and negative operating cash flow during the research and development stage of the Forme Studio and Forme Studio Lift products, we have funded our operations primarily with gross proceeds from the sales of our redeemable convertible preferred stock, the sale of our SAFE notes, the issuance of convertible notes, and the issuance of common stock.
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We intend to reach sport specific markets, specifically golf, tennis and pickleball, which have historically been underserved by the fitness market. Golf is one of the fastest growing sports in the United States. According to the National Golf Foundation, golf participation grew 10% year-over-year surpassing 41.1 million in 2022. In 2023, on-course golfers rose for the fifth consecutive year. Similarly for tennis, according to data from the USTA and the Tennis Industry Association Participation and Engagement Study, in 2022 there were 23.6 million players, a 33% increase since the beginning of 2020. Pickleball has solidified its status as America's fastest-growing sport for the third consecutive year. According to the 2023 Sports & Fitness Industry Association's (SFIA) Topline Participation Report, participation in pickleball almost doubled in 2022, showing an 85.7 percent increase year-over-year and a staggering 158.6 percent increase over the past three years. Each of these sports, as well as others, benefit greatly from high quality strength and conditioning as well as the style of training that can be provided by both a cable based system and vertical climbing. Providing greater access to quality training to support place is a high value service in both commercial and direct to consumer markets.
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We intend to reach sport specific markets, specifically golf, tennis and pickleball, which have historically been underserved by the fitness market. Golf is one of the fastest growing sports in the United States. According to the National Golf Foundation, golf participation grew 10% year-over-year surpassing 41.1 million in 2022. In 2023, on-course golfers rose for the fifth consecutive year. Similarly for tennis, according to data from the United States Tennis Association, and the Tennis Industry Association Participation and Engagement Study, in 2022 there were 23.6 million players, a 33% increase since the beginning of 2020. Pickleball has solidified its status as America's fastest-growing sport for the third consecutive year. According to the 2023 Sports & Fitness Industry Association's (SFIA) Topline Participation Report, participation in pickleball almost doubled in 2022, showing an 85.7 percent increase year-over-year and a staggering 158.6 percent increase over the past three years. Each of these sports, as well as others, benefit greatly from high quality strength and conditioning as well as the style of training that can be provided by both a cable-based system and vertical climbing. Providing greater access to quality training to support place is a high value service in both commercial and direct to consumer markets.
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We derive a significant majority of our revenue from sales of our Forme Studio and Forme Lift equipment and if sales of our Forme Studio and Forme Lift equipment decline, it would materially and negatively affect our future revenue and results of operations.
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We derive a significant majority of our revenue from sales of our CLMBR vertical climbing machine, FORME Studio and FORME Studio Lift equipment and if sales of our CLMBR vertical climbing machine, FORME Studio and FORME Studio Lift equipment decline, it would materially and negatively affect our future revenue and results of operations.
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Our membership revenue is largely dependent on our ability to sell our Forme Studio equipment and if sales of our Forme Studio equipment decline, our membership revenue would decline, and it would materially and negatively affect our future revenue and results of operations. Similarly, we may be unable to attract and retain members, which could have an adverse effect on our business and rate of growth.
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Our membership revenue is largely dependent on our ability to sell our CLMBR vertical climbing machine, FORME Studio equipment and if sales of our FORME Studio equipment decline, our membership revenue would decline, and it would materially and negatively affect our future revenue and results of operations. Similarly, we may be unable to attract and retain members, which could have an adverse effect on our business and rate of growth.
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The sufficiency of our liquidity and capital resources, and our ability to obtain additional funding as needed for our operations and to execute our strategy.
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The sufficiency of our liquidity and capital resources, and our ability to obtain additional funding as needed for our operations and to execute on our strategy.
Previous wording
Connected Fitness Product revenue consists of sales of our connected fitness products and related accessories, delivery and installation services, and extended warranty agreements offered through a third-party. Fitness Product revenue is recognized at the time of delivery, except for extended warranty revenue which is recognized over the warranty period. For the third-party extended warranty service sold along with the connected fitness products, we do not obtain control of the warranty before transferring it to the customers. Therefore, we account for revenue related to the fees paid to the third-party extended warranty provider on a net basis, by recognizing only the net commission we retain. Connected fitness product revenue represented 15% of total revenue for the three months ended March 31, 2024, and 46% of total revenue for the three months ended March 31, 2023.
Current wording
Connected Fitness Product revenue consists of sales of our connected fitness products and related accessories, delivery and installation services, and extended warranty agreements offered through a third-party. Fitness Product revenue is recognized at the time of delivery, except for extended warranty revenue which is recognized over the warranty period. For the third-party extended warranty service sold along with the connected fitness products, we do not obtain control of the warranty before transferring it to the customers. Therefore, we account for revenue related to the fees paid to the third-party extended warranty provider on a net basis, by recognizing only the net commission we retain. Connected fitness product revenue represented 42% and 32% and 71% and 63% of total revenue for the three and six months ended June 30, 2024 and 2023, respectively.
Previous wording
Membership revenue consists of revenue generated from our monthly Connected Fitness membership. Membership revenue represented 43% of total revenue for the three months ended March 31, 2024, and 15% of total revenue for the three months ended March 31, 2023.
Current wording
Membership revenue consists of revenue generated from our monthly Connected Fitness membership. Membership revenue represented 33% and 37% and 10% and 12% of total revenue for the three and six months ended June 30, 2024 and 2023, respectively.
Previous wording
Training revenue consists of sales of our personal training services delivered through our connected fitness products and third-party mobile devices. Training revenue is recognized at the time of delivery. Training revenue represented 43% of total revenue for the three months ended March 31, 2024, and 39% of total revenue for the three months ended March 31, 2023.
Current wording
Training revenue consists of sales of our personal training services delivered through our connected fitness products and third-party mobile devices. Training revenue is recognized at the time of delivery. Training revenue represented 25% and 32% and 19% and 26% of total revenue for the three and six months ended June 30, 2024 and 2023, respectively.
Previous wording
Other (expense) income, net consists of unrealized currency gains and losses, expenses related to equity line of credit commitment, and gain on conversion of accounts payable to Series A Preferred Stock.
Current wording
Other (expense) income, net consists of unrealized currency gains and losses, expenses related to equity line of credit commitment, and gain (loss) on conversion of debt and accounts payable to Series A Preferred Stock.
Previous wording
Stock-based compensation of $0.2 million and $0.4 million was capitalized as software costs for the three months ended March 31, 2024 and 2023.
Current wording
For the three months and six months ended June 30, 2024 and 2023, $(0.07) million and $0.2 million and $0.2 million and $0.6 million of stock-based compensation was capitalized as software costs, respectively.
Previous wording
In December 2022, the Company enacted a restructuring cost savings initiative which resulted in employee terminations in both December 2022 and January 2023. In association with the January 2023 terminations, the Company accelerated the vesting of a number of individual option awards, resulting in the accelerated vesting of 5,938 shares on the date of modification. Also in January 2023, the Company repriced 301,537 option awards. Both the accelerated vesting and repricing were accounted for as an equity award modifications under ASC Topic 718 which resulted in adjustment of the award value to reflect the fair value at the modification date and acceleration of the recognition schedule in the case of awards which were modified to have accelerated vesting. The adjustment resulted in additional expense of $0.5 million.
Current wording
In December 2022, the Company enacted a restructuring cost savings initiative which resulted in employee terminations in both December 2022 and January 2023. In association with the January 2023 terminations, the Company accelerated the vesting of a number of individual option awards, resulting in the accelerated vesting of 148 shares on the date of modification. Also in January 2023, the Company repriced 7,538 option awards. Both the accelerated vesting and repricing were accounted for as an equity award modification under ASC Topic 718 which resulted in adjustment of the award value to reflect the fair value at the modification date and acceleration of the recognition schedule in the case of awards which were modified to have accelerated vesting. The adjustment resulted in additional expense of $0.5 million.
Previous wording
Comparison of the three months ended March 31, 2024 and 2023
Current wording
Comparison of the three months and six months ended June 30, 2024 and 2023
Previous wording
Membership revenue increased $0.1 million or 546% for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The increase was primarily attributable to the acquisition of CLMBR, Inc.
Current wording
Membership revenue increased $0.2 million or 547% and $0.3 million or 546% for the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023, respectively. The increase was primarily attributable to the acquisition of CLMBR, Inc.
Previous wording
Fitness product cost of revenue for the three months ended March 31, 2024 decreased $0.4 million, or 49%, compared to the three months ended March 31, 2023. The decrease is primarily due to an inventory valuation reserve expense in the three months ended March 31, 2023 from the purchase of inventory. There were no inventory purchases in the three months ended March 31, 2024.
Current wording
Fitness product cost of revenue decreased $0.08 million or 19% and $0.4 million or 38% for the three and six months ended June 30, 2024 compared to the three months ended June 30, 2023, respectively. The decrease is mostly due to the decrease in the inventory valuation reserve as no inventory purchases for FORME studio and lift were made in the six months ended June 30, 2024.
Previous wording
Membership cost of revenue for the three months ended March 31, 2024 increased $0.06 million, or 6%, compared to the three months ended March 31, 2023. The increase is primarily related to the acquisition of CLMBR, Inc.
Current wording
Membership cost of revenue increased $0.04 million or 5% and $0.1 million or 5% for the three and six months ended June 30, 2024 compared to the three months ended June 30, 2023, respectively. The increase is primarily related to the amortization of intangible assets from the acquisition of CLMBR, Inc offset by decrease in headcount.
Previous wording
Training cost of revenue for the three months ended March 31, 2024 increased $0.06 million, or 60%, compared to the three months ended March 31, 2023. The increase is primarily related to the acquisition of CLMBR, Inc.
Current wording
Training cost of revenue increased $0.08 million or 95% and $0.1 million or 76% for the three and six months ended June 30, 2024 compared to the three months ended June 30, 2023, respectively. The increase is attributable to increase in training personnel from the acquisition of CLMBR, Inc.
Previous wording
Our gross loss decreased by $0.5 million for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 due to the decrease in the inventory valuation reserve.
Current wording
Our gross loss decreased by $0.3 million or 23% and $0.7 million or 25% for the three and six months ended June 30, 2024 compared to the three months ended June 30, 2023, respectively mostly due to the decrease in inventory valuation reserve for FORME studio and lift and acquisition of CLMBR, Inc.
Previous wording
Research and development expense decreased $1.1 million or 35% for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023, respectively. The decrease was primarily due to a decrease in personnel-related expenses from a reduction in headcount of $0.4 million, and a decrease in stock-based compensation expenses of $0.9 million partially offset by an increase of $0.2 million in engineering related expenses.
Current wording
Research and development increased $0.1 million or 6% and decreased $0.9 million and 17% for the three and six months ended June 30, 2024, as compared to the three and six months ended June 30, 2023, respectively. The increase of $0.1 million for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023 was due to increase in software and subscriptions related to the acquisition of CLMBR, Inc. The decrease of $0.9 million for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023 was primarily due to a decrease in personnel-related expenses from a reduction in headcount of $0.1 million, and a decrease in stock-based compensation expenses of $1.1 million partially offset by an increase of $0.3 million in engineering related expenses.
Previous wording
Sales and marketing expense decreased $0.3 million or 57% for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023, respectively. The decrease was primarily due to a decrease in personnel-related expenses from a reduction in headcount of $0.1 million, a decrease of $0.1 million in advertising and marketing, and a decrease of $0.1 million in stock-based compensation expenses.
Current wording
Sales and marketing expense decreased $0.5 million or 81% and $0.8 million or 69% for the three and six months ended June 30, 2024, as compared to the three and six months ended June 30, 2023, respectively. The decrease was primarily due to a decrease in personnel-related expenses from a reduction in headcount of $0.06 million and $0.2 million, respectively, a decrease of $0.4 million and $0.5 million in advertising and marketing, respectively, a decrease in stock-based compensation of $0.2 million and $0.3 million, respectively, partially offset by an increase in amortization expense of customer related intangibles from the acquisition of CLMBR, Inc. of $0.1 million and $0.2 million in stock-based compensation expenses, respectively.
Previous wording
Interest expense increased $2.2 million for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023 as a result of the December 2023 Note, February 2024 Convertible Notes and Vertical Loan and amortization of the debt discounts.
Current wording
Interest expense increased $1.5 million and $3.7 million for the three and six months ended June 30, 2024, respectively as compared to the three and six months ended June 30, 2023 as a result of the December 2023 Note, February 2024 Convertible Notes and Vertical Loan and amortization of the debt discounts.
Previous wording
Gain on debt extinguishment was a result of forgiveness of debt of $2.6 million related to the third-party content provider for the three months ended March 31, 2023.
Current wording
Gain on debt extinguishment was a result of forgiveness of debt of $2.6 million related to the third-party content provider for the six months ended June 30, 2023.
Previous wording
Loss on debt extinguishment was a result of conversion of promissory loans and senior secured debt into convertible notes resulting in a loss of $1.1 million for the three months ended March 31, 2024.
Current wording
Loss on extinguishment of debt and accounts payable was a result of conversion of promissory loans and senior secured debt into convertible notes resulting in a loss of $1.7 million for the six months ended June 30, 2024.
Previous wording
Change in fair value of convertible notes and warrants for the three months ended March 31, 2024 and 2023 were due to change in fair value of these financial instruments. The change in fair value of convertible notes was driven by the conversion of bridge loans to Series A Preferred Stock and the change in fair value of warrants was attributable to the change in fair value of warrants issued with December 2023 Note and February 2024 Convertible Note.
Current wording
Change in fair value of convertible notes, earn out, derivatives and warrants for the three and six months ended June 30, 2024 and 2023 were due to change in fair value of these financial instruments. The change in fair value of convertible notes was driven by the conversion of bridge loans to Series A Preferred Stock, change in the fair value of earn out was due to the Company's remote chance of obtaining the 2024 unit sales targets, change in fair value of derivatives was due to the Loss Restoration agreement, and the change in fair value of warrants was attributable to the change in fair value of warrants issued with December 2023 Note and February 2024 Convertible Note.
Previous wording
For the three months ended March 31, 2024 and 2023, $0.2 million and $0.4 million of stock-based compensation was capitalized as software costs, respectively.
Current wording
Stock-based compensation of $(0.07) million and $0.2 million and $0.2 million and $0.6 million was capitalized as software costs for the three and six months ended June 2024 and 2023, respectively
Previous wording
Since its inception, the Company has incurred significant operating losses and used net cashflows in its operations. For the three months ended March 31, 2024, the Company incurred a net operating loss of $9.4 million and used net cash in its operations of $2.9 million. As of March 31, 2024, the Company had an accumulated deficit of $178.3 million. Management expects the Company will continue to incur significant operating losses and use net cash in its operations for the foreseeable future.
Current wording
Since its inception, the Company has incurred significant operating losses and used net cashflows in its operations. For the six months ended June 30, 2024, the Company incurred a net operating loss of $17.3 million and used net cash in its operations of $5.1 million. As of June 30, 2024, the Company had an accumulated deficit of $188.9 million. Management expects the Company will continue to incur significant operating losses and use net cash in its operations for the foreseeable future.
Previous wording
As of the issuance date, the Company had approximately $0 million of cash or cash equivalents available to fund its operations and no available sources of financing or capital to sustain its operations for a period of 12 months beyond the issuance date.
Current wording
As of the issuance date, the Company had approximately $0.2 million of cash or cash equivalents available to fund its operations and no available sources of financing or capital to sustain its operations for a period of 12 months beyond the issuance date.
Previous wording
As of March 31, 2024, the Company had total outstanding debt of approximately $19.1 million, all of which was classified as current in the accompanying condensed consolidated balance sheet. Approximately $4.9 million of this debt pertains to personal loans from certain individual related parties disclosed in Note 20. Several of these loans matured prior to March 31, 2024, but their repayment has been temporarily waived, and the remaining loans are scheduled to mature over the next 12 months beyond the issuance date. However, as disclosed in Note 10, $3.0 million of loan payable with Vertical Investors, LLC was converted into 1,500,000 shares of the Company’s Series A Convertible Preferred Stock on April 24, 2024. Accordingly, as of the issuance date, the Company’s total outstanding debt was approximately $16.1 million, including accrued, but unpaid interest and penalties on delayed interest payments, all of which is currently due or scheduled to mature over the next 12 twelve months beyond the issuance date. While the Company is actively seeking to secure additional outside capital (and has historically been able to successfully secure such capital) to repay these outstanding borrowings, no additional outside capital has been secured or was deemed probable of being secured as of the issuance date. In addition, management can provide no assurance the Company will be able to secure additional outside capital or on acceptable terms. In the event the Company is unable to secure additional outside capital and/or secure amendments or waivers from its lenders to defer or modify the repayment terms of the Company’s outstanding indebtedness, management will be required to seek other strategic alternatives, which may include, among others, a significant curtailment of the Company’s operations, a sale of certain of the Company’s assets, a sale of the entire Company to strategic or financial investors, and/or allowing the Company to become insolvent by filing for bankruptcy protection under the provisions of the U.S. Bankruptcy Code.
Current wording
As of June 30, 2024, the Company had total outstanding debt of approximately $17.2 million, all of which was classified as current in the accompanying condensed consolidated balance sheet. Approximately $5.1 million of this debt pertains to personal loans from certain individual related parties disclosed in Note 20. Several of these loans matured prior to June 30, 2024, but their repayment has been temporarily waived, and the remaining loans are scheduled to mature over the next 12 months beyond the issuance date. Accordingly, as of the issuance date, the Company’s total outstanding debt was approximately $17.2 million, including accrued, but unpaid interest and penalties on delayed interest payments, all of which is currently due or scheduled to mature over the next 12 twelve months beyond the issuance date. While the Company is actively seeking to secure additional outside capital (and has historically been able to successfully secure such capital) to repay these outstanding borrowings, no additional outside capital has been secured or was deemed probable of being secured as of the issuance date. In addition, management can provide no assurance the Company will be able to secure additional outside capital or on acceptable terms. In the event the Company is unable to secure additional outside capital and/or secure amendments or waivers from its lenders to defer or modify the repayment terms of the Company’s outstanding indebtedness, management will be required to seek other strategic alternatives, which may include, among others, a significant curtailment of the Company’s operations, a sale of certain of the Company’s assets, a sale of the entire Company to strategic or financial investors, and/or allowing the Company to become insolvent by filing for bankruptcy protection under the provisions of the U.S. Bankruptcy Code.
Previous wording
The Company recognized losses equal to $0.1 million for the three months ended March 31, 2023 related to changes in fair value for the November 2022 Convertible Notes.
Current wording
The Company recognized losses equal to $0.3 million for the six months ended June 30, 2023 related to changes in fair value for the November 2022 Convertible Notes.
Previous wording
On February 1, 2024, the Company, entered into a Credit Agreement (the "Term Loan") with Vertical Investors LLC, (the “Lender”) pursuant to which the Company agreed to borrow from the Lender a term loan in the aggregate principal amount of approximately $8 million. The term loan bears interest at Daily Simple SOFR-Based Rate and the Company shall pay a guarantee fee of $2.3 million due on the maturity date. The guarantee fee was treated as a debt discount and accreted through interest expense through maturity date. The maturity date of the Note was originally June 28, 2024. On March 29, 2024, the Company issued 1,500,000 shares of the Company’s Series A Convertible Preferred Stock to the Lender. On April 24, 2024, the Company entered into a Loan Modification agreement reducing the outstanding debt and increasing stockholders deficit by $3.0 million and extending the maturity date to December 31, 2024.
Current wording
On February 1, 2024, the Company, entered into a Credit Agreement (the "Term Loan") with Vertical Investors LLC, (the “Lender”) pursuant to which the Company agreed to borrow from the Lender a term loan in the aggregate principal amount of approximately $8 million. The term loan bears interest at Daily Simple SOFR-Based Rate and the Company shall pay a guarantee fee of $2.3 million due on the maturity date. The guarantee fee was treated as a debt discount and accreted through interest expense through maturity date. The maturity date of the Note was originally June 28, 2024. On March 29, 2024, the Company issued 1,500,000 shares of the Company’s Series A Convertible Preferred Stock to the Lender. On April 24, 2024, the Company entered into a Loan Modification agreement reducing the outstanding debt by $3.0 million and extending the maturity date to December 31, 2024.
Previous wording
In August 2023, CLMBR, Inc. issued secured promissory notes in the aggregate principal amount of approximately $0.5 million, due August 31, 2026. Interest on the outstanding principal of the notes accrues initially at a rate of 15% per annum. The note was assumed by the Company in January 2024. The note was amended in January 2024, and subsequently amended in February 2024, to include a conversion provision whereby at any time prior to maturity date the lender has the right to convert any outstanding and unpaid principal and accrued interest of the note into shares of the Company's Series A Preferred Stock at a conversion price of $1.82 per share. In February 2024, the convertible note was converted into 398,252 shares of Series A Preferred Stock. The Company recognized a loss equal to $0.2 million on the extinguishment of debt upon conversion to Series A Preferred Stock of $0.9 million for the three months ended March 31, 2024.
Current wording
In August 2023, CLMBR, Inc. issued secured promissory notes in the aggregate principal amount of approximately $0.5 million, due August 31, 2026. Interest on the outstanding principal of the notes accrues initially at a rate of 15% per annum. The note was assumed by the Company in January 2024. The note was amended in January 2024, and subsequently amended in February 2024, to include a conversion provision whereby at any time prior to maturity date the lender has the right to convert any outstanding and unpaid principal and accrued interest of the note into shares of the Company's Series A Preferred Stock at a conversion price of $1.82 per share. In February 2024, the convertible note was converted into 398,252 shares of Series A Preferred Stock. The Company recognized a loss equal to $0.2 million on the extinguishment of debt upon conversion to Series A Preferred Stock of $0.9 million.
Previous wording
In October 2023, CLMBR, Inc issued in the aggregate principal amount of approximately $0.3 million, due October 15, 2026. Interest on the outstanding principal of the notes accrues initially at a rate of 15% per annum. The note was assumed by the Company in January 2024. The note was amended in January 2024, and subsequently amended in February 2024, to include a conversion provision whereby at any time prior to maturity date the lender has the right to convert any outstanding and unpaid principal and accrued interest of the note into shares of the Company's Series A Preferred Stock at a conversion price of $1.82 per share. In February 2024, the convertible note was converted into 258,929 shares of Series A Preferred Stock. The Company recognized a loss equal to $0.1 million on the extinguishment of debt upon conversion to Series A Preferred Stock of $0.6 million for the three months ended March 31, 2024.
Current wording
In October 2023, CLMBR, Inc. issued secured promissory notes in the aggregate principal amount of approximately $0.3 million, due October 15, 2026. Interest on the outstanding principal of the notes accrues initially at a rate of 15% per annum. The note was assumed by the Company in January 2024. The note was amended in January 2024, and subsequently amended in February 2024, to include a conversion provision whereby at any time prior to maturity date the lender has the right to convert any outstanding and unpaid principal and accrued interest of the note into shares of the Company's Series A Preferred Stock at a conversion price of $1.82 per share. In February 2024, the convertible note was converted into 258,929 shares of Series A Preferred Stock. The Company recognized a loss equal to $0.1 million on the extinguishment of debt upon conversion to Series A Preferred Stock of $0.6 million.
Previous wording
In November 2023, CLMBR, Inc issued promissory notes in the aggregate principal amount of approximately $0.7 million, due January 31, 2025. Interest on the outstanding principal of the notes accrues initially at a rate of 12% per annum. The note was assumed by the Company in February 2024 in connection with the acquisition of CLMBR, Inc. Total outstanding principal balance including accrued interest as of March 31, 2024 was $0.8 million.
Current wording
In November 2023, CLMBR, Inc issued promissory notes in the aggregate principal amount of approximately $0.7 million, due January 31, 2025. Interest on the outstanding principal of the notes accrues initially at a rate of 12% per annum. The note was assumed by the Company in February 2024 in connection with the acquisition of CLMBR, Inc. Total outstanding principal balance including accrued interest as of June 30, 2024 was $0.7 million.
Previous wording
In June 2023, the Company entered into a note purchase agreement (the "June 2023 Notes") pursuant to which the Company agreed to issue up to $15.8 million in aggregate principal amount of 10% senior secured notes due June 25, 2025 at their sole discretion. The June 2023 Notes are the senior secured obligations of the Company, bear interest at a rate of 10.0% per annum, and contain customary events of default. The June 2023 Notes will mature on June 25, 2025, subject to earlier repurchase by the Company. The Company may redeem the June 2023 Notes, in whole or in part, at a redemption price equal to 100% of the principal amount of the June 2023 Notes to be redeemed, plus any accrued and unpaid interest to (including any additional interest), but excluding, the redemption date. Additional senior secured notes may become available at the sole discretion of the Lender. As of September 30, 2023, the Company defaulted on the payment of interest due on the June 2023 Notes. On November 3, 2023, the Lender waived their rights to seek remedies resulting from an event of default. The note was amended in January 2024, and subsequently amended in February 2024, to include a conversion provision whereby at any time prior to maturity date the lender has the right to convert any outstanding and unpaid principal and accrued interest of the note into shares of the Company's Series A Preferred Stock at a conversion price of $1.82 per share. In February 2024, the convertible note was converted into 769,567 shares of Series A Preferred Stock. The Company recognized a loss equal to $0.4 million on the extinguishment of debt upon conversion to Series A Preferred Stock of $1.8 million for the three months ended March 31, 2024.
Current wording
In June 2023, the Company entered into a note purchase agreement (the "June 2023 Notes") pursuant to which the Company agreed to issue up to $15.8 million in aggregate principal amount of 10% senior secured notes due June 25, 2025 at their sole discretion. The June 2023 Notes are the senior secured obligations of the Company, bear interest at a rate of 10.0% per annum, and contain customary events of default. The June 2023 Notes will mature on June 25, 2025, subject to earlier repurchase by the Company. The Company may redeem the June 2023 Notes, in whole or in part, at a redemption price equal to 100% of the principal amount of the June 2023 Notes to be redeemed, plus any accrued and unpaid interest to (including any additional interest), but excluding, the redemption date. Additional senior secured notes may become available at the sole discretion of the Lender. As of September 30, 2023, the Company defaulted on the payment of interest due on the June 2023 Notes. On November 3, 2023, the Lender waived their rights to seek remedies resulting from an event of default. The note was amended in January 2024, and subsequently amended in February 2024, to include a conversion provision whereby at any time prior to maturity date the lender has the right to convert any outstanding and unpaid principal and accrued interest of the note into shares of the Company's Series A Preferred Stock at a conversion price of $1.82 per share. In February 2024, the convertible note was converted into 769,567 shares of Series A Preferred Stock. The Company recognized a loss equal to $0.0 million and $0.4 million on the extinguishment of debt upon conversion to Series A Preferred Stock of $1.8 million for the three and six months ended June 30, 2024.
Previous wording
The note was amended in January 2024, and subsequently amended in February 2024, to include a conversion provision whereby at any time prior to maturity date the lender has the right to convert any outstanding and unpaid principal and accrued interest of the note into shares of the Company's Series A Preferred Stock at a conversion price of $1.82 per share. In February 2024, a portion of the convertible note was converted into 673,562 shares of Series A Preferred Stock. In March 2024, the remaining portion of the convertible note was converted into 538,039 shares of Series A Preferred Stock. The Company recognized a loss equal to $0.2 million on the extinguishment of debt and loss on change in fair value of $0.3 million upon conversion to Series A Preferred Stock of $2.3 million for the three months ended March 31, 2024.
Current wording
The note was amended in January 2024, and subsequently amended in February 2024, to include a conversion provision whereby at any time prior to maturity date the lender has the right to convert any outstanding and unpaid principal and accrued interest of the note into shares of the Company's Series A Preferred Stock at a conversion price of $1.82 per share. In February 2024, a portion of the convertible note was converted into 673,562 shares of Series A Preferred Stock. In March 2024, the remaining portion of the convertible note was converted into 538,039 shares of Series A Preferred Stock. The Company recognized a loss equal to $0.2 million on the extinguishment of debt and loss on change in fair value of $0.3 million upon conversion to Series A Preferred Stock of $2.3 million.
Previous wording
In connection with the Company’s issuance of its December 2023 Note, the Company bifurcated the embedded conversion option and redemption rights and recorded embedded conversion option and redemption rights as a short term derivative liability in the Company’s balance sheet in accordance with FASB ASC 815, Derivatives and Hedging. The convertible debt and the derivative liability associated with the December 2023 Notes is presented on the condensed consolidated balance sheet as the convertible debt and derivative liability. The convertible debt is carried at amortized cost. The derivative liability will be remeasured at each reporting period using the lattice model with changes in fair value recorded in the condensed consolidated statements of operations in other expense (income).
Current wording
In connection with the Company’s issuance of its December 2023 Note, the Company bifurcated the embedded conversion option and redemption rights and recorded embedded conversion option and redemption rights as a short term derivative liability in the Company’s condensed consolidated balance sheet in accordance with FASB ASC 815, Derivatives and Hedging. The convertible debt and the derivative liability associated with the December 2023 Notes is presented on the condensed consolidated balance sheet as the convertible debt and derivative liability. The convertible debt is carried at amortized cost. The derivative liability will be remeasured at each reporting period using the lattice model with changes in fair value recorded in the condensed consolidated statements of operations in other expense (income).
Previous wording
Total conversions for the three months ended March 31, 2024 was $0.9 million for a total of 1,485,943 shares of common stock.
Current wording
Total conversions for the three and six months ended June 30, 2024 was $1.0 million and $1.9 million for a total of 251,084 and 288,233 shares of common stock, respectively.
Previous wording
The Company recognized gains equal to $0.1 million for the three months ended March 31, 2024 related to changes in fair value of the embedded derivative for the December 2023 Note.
Current wording
The Company recognized gains equal to $0.1 million and $0.1 million for the three and six months ended June 30, 2024 related to changes in fair value of the embedded derivative for the December 2023 Note.
Previous wording
Total principal payments for the three months ended March 31, 2024 was $0.1 million.
Current wording
Total principal payments for the three and six months ended June 30, 2024 was $0.5 million and $0.6 million, respectively.
Showing the first 40 of 67 pairs. Open the source sections for the rest.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
Pursuant to the warrant agreement entered into with 3i in December 2023, the warrant to purchase shares of common stock increased to 77,020 following dilutive issuances in May 2024 whereas the exercise price was reduced to an amount equal to the new issuance price. In June 2024, the exercise price was reduced to $4.00 and the warrant shares increased to 288,900. In June 2024, 3i exercised 23,112 warrant shares for $0.09 million. The remaining 265,788 warrants were exchanged for 375,000 shares of Series A Preferred Stock in June 2024 and the Company recognized a loss equal to $0.4 million.
Rearranged previous paragraphs (15)
Previous report — wording carried elsewhere
Other (expense) income, net consists of unrealized currency gains and losses.
Previous report — wording carried elsewhere
Change in Fair Value of Convertible Notes, and Change in Fair Value of Warrants
Previous report — wording carried elsewhere
Comparison of the three months ended March 31, 2024 and 2023
Previous report — wording carried elsewhere
Interactive Strength Inc. is the parent company of two leading brands serving the commercial and at-home markets with specialty fitness equipment and virtual training: CLMBR and FORME. CLMBR manufactures vertical climbing equipment and provides a unique digital and on-demand training platform. FORME is a hardware manufacturer and digital fitness service provider that combines award-winning smart gyms with live 1:1 personal training (from real humans) to deliver an immersive experience. The combination of technology with expert training leads to better outcomes for both consumers and trainers alike. CLMBR and FORME offer unique fitness solutions for both the commercial and at-home markets.
Previous report — wording carried elsewhere
Acquire complementary businesses that generate attractive synergies
Previous report — wording carried elsewhere
We acquired CLMBR in February 2024 and believe that there are other compelling business to be acquired. We expect that we will be able to acquire revenue-generating businesses, which would generate higher earnings and cashflow through synergies with our existing business. Our team has significant experience in M&A and we are one of the few companies in our industry with a public currency, which we believe makes us an attractive acquiror.
Previous report — wording carried elsewhere
Leverage well established equipment distributors to scale in commercial channels
Previous report — wording carried elsewhere
We have high value partnerships with distributors, including Woodway, to sell CLMBR and FORME products into a variety of commercial environments. These relationships allow us to leverage the sales knowledge, relationships and specialization of third parties to accelerate our sales initiatives. Importantly, this construct allows us to make the vast majority of our sales related expenses variable, as we typically pay commissions only when units are sold.
Previous report — wording carried elsewhere
We intend to expand the international reach of our product and service offerings. With more than 180 million people belonging to gyms globally in 2019, according to IHRSA, we believe there is significant opportunity to grow internationally. For example, we are currently evaluating potential international expansion with the United Kingdom and Canada, although we have not yet made any definitive plans regarding such expansion or the potential timing thereof. We plan to pursue disciplined international expansion by targeting countries with high fitness penetration and spend, as well as the presence of boutique fitness, and where we believe FORME’s value proposition will resonate.
Previous report — wording carried elsewhere
Increase uptake of add-on services through compelling member experience
Previous report — wording carried elsewhere
We intend to increase uptake of our add-on memberships and services by providing a compelling member experience focused on introducing our members to the variety of services available on our platform and specifically, the value-added benefits of our coaching and personal training offering. We believe our ability to provide service offerings at a number of price points will serve as a valuable lever for growth by increasing overall service revenues over time.
Previous report — wording carried elsewhere
Reduce the cost of personal training and expand addressable market without sacrificing quality
Previous report — wording carried elsewhere
We are exploring ways to leverage our products, technology, and proprietary trainer education platform to bring the cost of coaching down incrementally, while maintaining an unwavering focus on the quality of the coaching experience we deliver to our members. This strategy is key to our medium- to long-term objectives, as we believe we can expand the addressable market for coaching services by reducing the per session cost and increasing accessibility of expert coaching services through our hardware and mobile experiences.
Previous report — wording carried elsewhere
We plan to continue to build our strategic partner ecosystem with a focus on relationships that enable us to extend our platform to new audiences. We are pursuing opportunities in a number of attractive verticals, including sports, physical therapy and rehabilitation, and telemedicine. We are continuously identifying and evaluating opportunities to apply our coaching know-how in new and innovative ways to expand our reach and impact.
Previous report — wording carried elsewhere
We intend to continue expanding our recently launched corporate wellness initiative. Historically, corporate wellness programs were generally one-size-fits-all solutions for employees, such as corporate gyms. The rise of the hybrid workforce has made robust corporate wellness both an imperative and a challenge for many companies. We believe our comprehensive product portfolio makes us a better fit for modern corporate wellness programs than many existing alternatives. Our solution enables corporations to provide all of their employees with a coaching service regardless of whether they work from home, in the office, or both. Our multi-pronged service offering also provides a new level of customization that can be adapted to employees at virtually all levels of tenure.