MultiSensor AI Holdings Inc

Previous wording

Unless the context otherwise requires, all references in this subsection to the “Company,” “we,” “us” or “our” refer to ICI prior to the consummation of the Business Combination and New ICI after the consummation of the Business Combination.

Current wording

Unless the context otherwise requires, all references in this subsection to the “Company,” “we,” “us” or “our” refer to Legacy ICI prior to the consummation of the Business Combination and the business of MultiSensor AI Holdings, Inc. after the consummation of the Business Combination.

Previous wording

As part of our financing efforts in connection with the Business Combination, a number of purchasers (each, a “Financing Investor”) purchased from us an aggregate of $6.805 million in convertible promissory notes in connection with the closing of the Business Combination (the “Financing Notes”). Of the $6.8 million in Financing Notes, $1.3 million were issued in exchange for cancellation of an equal amount of existing promissory notes of Legacy SMAP (rather than having such notes repaid at the closing of the Business Combination), $1.0 million were rolled over from an existing related party promissory note of Legacy ICI (rather than having such note repaid at closing of the Business Combination), and $4.5 million were cash proceeds to us.

Current wording

As part of our financing efforts in connection with the Business Combination, a number of purchasers (each, a “Financing Investor”) purchased from us an aggregate of $6,800 in convertible promissory notes in connection with the Closing (the “Financing Notes”). Of the $6,800 in Financing Notes, $1,300 were issued in exchange for cancellation of an equal amount of existing promissory notes of Legacy SMAP (rather than having such notes repaid at the Closing), $1,000 were rolled over from an existing related party promissory note of Legacy ICI (rather than having such note repaid at Closing), and $4,500 were cash proceeds to us.

Previous wording

As part of the Financing Transaction, Legacy SMAP also issued warrants (the “Financing Warrants”) to the Financing Investors to purchase an aggregate of 340,250 shares of our Common Stock (such shares issuable upon exercise of the Financing Warrants, the “Financing Warrant Shares”), at an exercise price of $11.50 per Financing Warrant Share. The Financing Warrants were allocated ratably among the Financing Investors in accordance with their respective investment amounts. The Financing Warrants are exercisable at any time before the fifth anniversary of the closing of the Business Combination. The Financing Warrants are not subject to any redemption provision and can be exercised for cash or on a cashless basis at the discretion of the holder. In addition, in order to induce the Financing Investors’ investments, certain holders of Legacy SMAP’s founder shares and stockholders of Legacy ICI transferred, and Legacy ICI issued prior to the closing of the Business Combination for exchange at the Exchange Ratio at Closing, an aggregate of 680,500 shares of our Common Stock to the Financing Investors at the Closing.

Current wording

As part of the Financing Transaction, Legacy SMAP also issued warrants (the “Financing Warrants”) to the Financing Investors to purchase an aggregate of 340,250 shares of our Common Stock (such shares issuable upon exercise of the Financing Warrants, the “Financing Warrant Shares”), at an exercise price of $11.50 per Financing Warrant Share. The Financing Warrants were allocated ratably among the Financing Investors in accordance with their respective investment amounts. The Financing Warrants are exercisable at any time before the fifth anniversary of the Closing. The Financing Warrants are not subject to any redemption provision and can be exercised for cash or on a cashless basis at the discretion of the holder. In addition, in order to induce the Financing Investors’ investments, certain holders of Legacy SMAP’s founder shares and stockholders of Legacy ICI transferred, and Legacy ICI issued prior to the Closing for exchange at the Exchange Ratio at Closing, an aggregate of 680,500 shares of our Common Stock to the Financing Investors at the Closing.

Previous wording

As of June 30, 2024, all of the $6.2 million of the Financing Notes and $0.2 million of the SMAP Related Party Promissory Notes were converted to equity, which resulted in a loss of $1.4 million recorded under Loss on Financing Transaction within the Condensed Consolidated Statements of Operations.

Current wording

During the nine months ended September 30, 2024, all of the $6,200 of the Financing Notes and $200 of the SMAP Related Party Promissory Notes were converted to equity, which resulted in a loss of $1,400 recorded under Loss on Financing Transaction within the Condensed Consolidated Statements of Operations.

Previous wording

On March 27, 2024, and March 28, 2024, we entered into certain letter agreements effective June 30, 2024 (“Inducement Letters”) to induce certain holders of the Financing Notes with an aggregate principal balance of $3.3 million to elect to convert their Financing Notes into shares of our Common Stock at a price of $5 per share pursuant to the terms of the Financing Notes. Pursuant to the letter agreement, the Company agreed to issue an additional share of Common Stock (each an “Inducement Share”) for each share of Common Stock to be issued pursuant to the converted principal balance of the Financing Notes. Pursuant to the terms of the Financing Notes and the Inducement Letters, we issued 335,818 shares of Common Stock related to the principal balance and accrued interest of the Financing Notes and 327,500 Inducement Shares for an aggregate of 663,318 shares of Common Stock.

Current wording

On March 27, 2024, and March 28, 2024, we entered into certain letter agreements effective June 30, 2024 (“Inducement Letters”) to induce certain holders of the Financing Notes with an aggregate principal balance of $3,300 to elect to convert their Financing Notes into shares of our Common Stock at a price of $5 per share pursuant to the terms of the Financing Notes. Pursuant to the letter agreement, the Company agreed to issue an additional share of Common Stock (each an “Inducement Share”) for each share of Common Stock to be issued pursuant to the converted principal balance of the Financing Notes. Pursuant to the terms of the Financing Notes and the Inducement Letters, we issued 335,818 shares of Common Stock related to the principal balance and accrued interest of the Financing Notes and 327,500 Inducement Shares for an aggregate of 663,318 shares of Common Stock.

Previous wording

On April 5, 2024, April 30, 2024, and May 10, 2024, we modified the terms of the remaining $3.53 million in principal amount of the Financing Notes that were not the subject of the Inducement Letters described above (the “Remaining Notes”), among other things, to reduce the conversion price of the principal and interest to $5.00 per share of Common Stock. Two of those Remaining Notes (which hereafter are referred to as the “Related Party Notes”) are owned by David Gow, a director of the Company, and the Jill A Blashack Strahan Trust, which is deemed to be beneficially owned by Gary Strahan, Chief Executive Officer and a director of the Company. The aggregate principal balance of such Related Party Notes was $1.2 million. As an incentive to induce the holders of the Remaining Notes to convert such notes, and with the objective of meeting Nasdaq’s listing requirements specific to stockholders’ equity, we approved the reduction of the conversion price of the principal and interest to $5.00 per share of Common Stock and entered into Note Amendments with David Gow and the Jill A Blashack Strahan Trust (the “Note Amendments”). Thereafter David Gow and the Jill A Blashack Strahan Trust elected to convert the Remaining Notes into shares of Common Stock. We issued 243,048 shares of Common Stock pursuant to David Gow’s and the Jill A Blashack Strahan Trust’s respective elections to convert their Remaining Notes. The Note Amendments contain prohibitions against the direct or indirect transfer, pledge, sale or other disposal of the shares of Common Stock issued as a result of the conversion for a period of six months.

Current wording

On April 5, 2024, April 30, 2024, and May 10, 2024, we modified the terms of the remaining $3,530 in principal amount of the Financing Notes that were not the subject of the Inducement Letters described above (the “Remaining Notes”), among other things, to reduce the conversion price of the principal and interest to $5.00 per share of Common Stock. Two of those Remaining Notes (which hereafter are referred to as the “Related Party Notes”) are owned by David Gow, a director of the Company, and the Jill A Blashack Strahan Trust, which is deemed to be beneficially owned by Gary Strahan, Chief Executive Officer and a director of the Company. The aggregate principal balance of such Related Party Notes was $1,200. As an incentive to induce the holders of the Remaining Notes to convert such notes, and with the objective of meeting Nasdaq’s listing requirements specific to stockholders’ equity, we approved the reduction of the conversion price of the principal and interest to $5.00 per share of Common Stock and entered into Note Amendments with David Gow and the Jill A Blashack Strahan Trust (the “Note Amendments”). Thereafter David Gow and the Jill A Blashack Strahan Trust elected to convert the Remaining Notes into shares of Common Stock. We issued 243,048 shares of Common Stock pursuant to David Gow’s and the Jill A Blashack Strahan Trust’s respective elections to convert their Remaining Notes. The Note Amendments contain prohibitions against the direct or indirect transfer, pledge, sale or other disposal of the shares of Common Stock issued as a result of the conversion for a period of six months.

Previous wording

As previously disclosed, we previously issued a $200,000 promissory note (the “Loan”) to David Gow, a director of the Company, in exchange for a $200,000 loan from David Gow to us. The Loan was non-interest bearing. On March 30, 2024, we entered into a subscription agreement (the “Subscription Agreement”) whereby we agreed to issue 60,060 shares of Common Stock to David Gow in exchange for the cancellation of such Loan obligation (at an effective price per share of $3.33). The Subscription Agreement contains prohibitions against the direct or indirect transfer, pledge, sale or other disposal of the shares of Common Stock issued as a result of the conversion for a period of six months.

Current wording

As previously disclosed, we previously issued a $200 promissory note (the “Loan”) to David Gow, a director of the Company, in exchange for a $200 loan from David Gow to us. The Loan was non-interest bearing. On March 30, 2024, we entered into a subscription agreement (the “Subscription Agreement”) whereby we agreed to issue 60,060 shares of Common Stock to David Gow in exchange for the cancellation of such Loan obligation (at an effective price per share of $3.33). The Subscription Agreement contains prohibitions against the direct or indirect transfer, pledge, sale or other disposal of the shares of Common Stock issued as a result of the conversion for a period of six months.

Previous wording

On April 5, 2024, we entered into letter agreements (“Conversion Agreements”), effective April 5, 2024, with certain holders of our outstanding Financing Notes having an aggregate principal balance of $1.65 million pursuant to which the holders of such Financing Notes elected to convert their Financing Notes into shares of our Common Stock at a price of $10 per share pursuant to the terms of the Financing Notes. Pursuant to the Conversion Agreements, we agreed to issue an additional share of Common Stock (each an “Additional Share”) for each share of Common Stock to be issued pursuant to the converted principal balance of the Financing Notes. Pursuant to the terms of the Financing Notes and the Conversion Agreements, we issued 165,000 shares of Common Stock related to the principal balance of the Financing Notes, 165,000 Additional Shares, and 4,397 shares of Common Stock related to accrued interest on the Notes, for an aggregate of 334,397 shares of Common Stock.

Current wording

On April 5, 2024, we entered into letter agreements (“Conversion Agreements”), effective April 5, 2024, with certain holders of our outstanding Financing Notes having an aggregate principal balance of $1,650 pursuant to which the holders of such Financing Notes elected to convert their Financing Notes into shares of our Common Stock at a price of $10 per share pursuant to the terms of the Financing Notes. Pursuant to the Conversion Agreements, we agreed to issue an additional share of Common Stock (each an “Additional Share”) for each share of Common Stock to be issued pursuant to the converted principal balance of the Financing Notes. Pursuant to the terms of the Financing Notes and the Conversion Agreements, we issued 165,000 shares of Common Stock related to the principal balance of the Financing Notes, 165,000 Additional Shares, and 4,397 shares of Common Stock related to accrued interest on the Notes, for an aggregate of 334,397 shares of Common Stock.

Previous wording

On April 30, 2024, we entered into additional Conversion Agreements, with certain holders of Financing Notes with an aggregate principal balance of $430,000in order to amend the conversion price of the principal amount of the amended notes to $5.00 per share of Common Stock for each share of Common Stock In connection with the note amendments, the holders of the amended notes elected to convert the amended notes into shares of Common Stock effective as of April 30, 2024. On April 30, 2024, we issued 87,411 shares of Common Stock pursuant to conversion of the amended notes.

Current wording

On April 30, 2024, we entered into additional Conversion Agreements, with certain holders of Financing Notes with an aggregate principal balance of $430 in order to amend the conversion price of the principal amount of the amended notes to $5.00 per share of Common Stock for each share of Common Stock. In connection with the note amendments, the holders of the amended notes elected to convert the amended notes into shares of Common Stock effective as of April 30, 2024. On April 30, 2024, we issued 87,411 shares of Common Stock pursuant to conversion of the amended notes.

Previous wording

On May 10, 2024, we entered into additional Conversion Agreement with a certain Financing Note holder with an aggregate principal balance of $250,000 in order to amend the conversion price of the principal amount of the amended note to $5.00 per share of Common Stock, and to amend the conversion price of the interest amount of such amended note to $10.00 per share of Common Stock. In connection with the note amendment, the holder of the amended Financing Note elected to convert the amended Financing Note into shares of Common Stock effective as of May 10, 2024. On May 10, 2024, we issued 50,882 shares of Common Stock pursuant to conversion of the amended note.

Current wording

On May 10, 2024, we entered into an additional Conversion Agreement with a certain Financing Note holder with an aggregate principal balance of $250 in order to amend the conversion price of the principal amount of the amended note to $5.00 per share of Common Stock, and to amend the conversion price of the interest amount of such amended note to $10.00 per share of Common Stock. In connection with the note amendment, the holder of the amended Financing Note elected to convert the amended Financing Note into shares of Common Stock effective as of May 10, 2024. On May 10, 2024, we issued 50,882 shares of Common Stock pursuant to conversion of the amended note.

Previous wording

In April 2024, we entered into the Purchase Agreement with B. Riley pursuant to which we have the right, but not the obligation, to sell to B. Riley up to $25.0 million of Common Stock (the “Purchase Shares”) and issued 171,821 shares of our Common Stock to B. Riley as consideration for its commitment to purchase the Purchase Shares under the Purchase Agreement (the “Commitment Shares”). See “— Liquidity and Capital Resources — Equity Line of Credit.”

Current wording

In April 2024, we entered into a purchase agreement with B. Riley (the “Purchase Agreement”) pursuant to which we have the right, but not the obligation, to sell to B. Riley up to $25,000 of Common Stock (the “Purchase Shares”) and issued 171,821 shares of our Common Stock to B. Riley as consideration for its commitment to purchase the Purchase Shares under the Purchase Agreement (the “Commitment Shares”). See “— Liquidity and Capital Resources — Equity Line of Credit.”

Previous wording

*Revenue:Revenue *for the three months ended June 30, 2024, was approximately $2.1 million, and increased $0.8 million, or 59%, from approximately $1.3 million for the three months ended June 30, 2023. The increase in revenue was attributable to an increase in units sold and a favorable shift in product mix, as we sold a higher proportion of higher-priced sensors (such as, IR Pad 640, Gas DetectIR VOC and FMX 400).

Current wording

Revenue: The increase in revenue was attributable to an increase in units sold and a favorable shift in product mix.

Previous wording

Selling, General and Administrative Expense: Selling, general and administrative expense for the three months ended June 30, 2024, was approximately $2.8 million and increased $0.6 million, or 25%, from approximately $2.2 million for the three months ended June 30, 2023. The increase in selling, general and administrative expenses was attributable to an increase in professional and legal expenses of approximately $0.5 million.

Current wording

Selling, General and Administrative Expense: The increase in selling, general and administrative expenses was attributable to an increase in professional and legal expenses associated with the cost of compliance as a public company.

Previous wording

*Depreciation Expense:*Depreciation expense for the three months ended June 30, 2024, was approximately $0.3 million and increased by $0.1 million, or 35% from approximately $0.2 million for the three months ended June 30, 2023. The increase in depreciation expense was primarily due to additions to property, plant, and equipment (primarily software) during the prior year.

Current wording

Depreciation Expense: The increase in depreciation expense was primarily due to additions to property, plant, and equipment (primarily software).

Previous wording

Interest Expense and Interest Expense, related parties: Interest expense for the six months ended June 30, 2024, was approximately $0.06 million and decreased by approximately $0.02 million, or 18% from approximately $0.08 million for the six months ended June 30, 2023. The decrease in interest expense was due to the payoff of the B1 line of credit in December 2023, offset in part by interest accrued on the related party promissory notes.

Current wording

*Interest Expense and Interest Expense, related parties:*The decrease in interest expense was due to the settlement of all debt in prior quarters.

Previous wording

*Loss (gain) in fair value of convertible notes:*Loss (gain) in fair value of convertible notes includes the loss (gain) related to the fair value of the convertible notes issued in December 2022, January 2023, June 2023, July 2023, August 2023, September 2023 and Financing Notes in December 2023. All the notes were converted as of June 30, 2024 and as such there was no loss or gain convertible note for the three months ended June 30, 2024.

Current wording

*Loss (gain) in fair value of convertible notes:*The decrease in Loss (gain) in fair value of convertible notes is the result of these notes being converted in prior quarters and as such there was no loss or gain for the three months ended September 30, 2024.

Previous wording

Revenue: Revenue for the six months ended June 30, 2024, was approximately $4.4 million, and increased $2.1 million, or 90%, from approximately $2.3 million for the six months ended June 30, 2023. The increase in revenue of $2.1 million was attributable to an increase in units sold and a favorable shift in product mix, as we sold a higher proportion of higher-priced sensors (such as, IR Pad 640, Gas DetectIR VOC and FMX 400) which was partially offset by $2.9 million in sales returns for the six months ended June 30, 2024. The sales returns related to a transaction with a long-standing customer who also is a launch customer for the MSAI Cloud suite of products. Under the terms of this transaction, certain biorisk-related devices sold to this customer in prior years were exchanged for devices appropriate for industrial use, when combined with the MSAI Edge and MSAI Cloud software. The customer paid cash as well as receiving credit for the returned devices. The returned devices were put back into inventory at net realizable value. There were no sales returns for the six months ended June 30, 2023.

Current wording

Revenue: Revenue increased due to an increase in units sold and a favorable shift in product mix, as we sold a higher proportion of higher-priced sensors which was partially offset by $2,880 in sales returns for the nine months ended September 30, 2024. The sales returns are related to a transaction with a long-standing customer who also is a launch customer for the MSAI Cloud suite of products. Under the terms of this transaction, certain biorisk-related devices sold to this customer in prior years were exchanged for devices appropriate for industrial use, when combined with the MSAI Edge and MSAI Cloud software. The customer paid cash as well as receiving credit for the returned devices. There were no sales returns for the nine months ended September 30, 2023.

Previous wording

*Share-Based Compensation Expense:*Share-Based Compensation Expense for the three months ended June 30, 2024, was approximately $3.3 million and increased $3.2 million, or 3767%, from approximately $0.1 million for the three months ended June 30, 2023. The increase in share-based compensation was mainly attributable to the vesting and granting of 3,269,075 restricted stock units during the three months ended June 30, 2024 .

Current wording

Share-Based Compensation Expense: The increase in share-based compensation was mainly attributable to the vesting and granting of restricted stock units during the nine months ended September 30, 2024.

Previous wording

Loss (gain) in fair value of convertible notes: Loss (gain) in fair value of convertible notes includes the loss (gain) related to the fair value of the convertible notes issued in December 2022, January 2023, June 2023, July 2023, August 2023, September 2023 and Financing Notes in December 2023. All the notes were converted as of June 30, 2024. The loss on convertible note for the six months ended June 30, 2024, was approximately $0.5 million.

Current wording

Loss (gain) in fair value of convertible notes: Loss (gain) in fair value of convertible notes includes the loss (gain) related to the fair value of the convertible notes issued in December 2022, January 2023, June 2023, July 2023, August 2023, September 2023 and Financing Notes in December 2023 in prior quarters.

Previous wording

*Gain in fair value of warrants liabilities:*Gain in fair value of warrants liabilities includes the gain related to the fair value of the warrants issued in December 2023 as part of the Financing Transaction. The gain fair value of warrants liabilities for the three months ended June 30, 2024, was approximately $0.09 million.

Current wording

Gain in fair value of warrants liabilities: Gain in fair value of warrants liabilities includes the gain related to the fair value of the warrants issued in December 2023 as part of the Financing Transaction.

Previous wording

Loss on Financing Transaction: Loss on Financing Transaction resulted from the conversion of the convertible notes into common stock. On December 19, 2023, in connection with the Business Combination, $1.3 million of the promissory notes were exchanged for an equal amount of Financing Notes which resulted in an outstanding balance of $0.2 million as of December 31, 2023. The $0.2 million outstanding balance was converted to equity on June 30, 2024, which resulted in loss of $0.1 recorded under Loss on Financing Transaction within the Consolidated Statements of Operations. As of June 30, 2024, $6.2 million of the Financing Notes and $0.2 million of SMAP Related Party Promissory Notes were converted to equity, which resulted in loss of $1.4 million recorded under Loss on Financing Transaction within the Consolidated Statements of Operations.

Current wording

Loss on Financing Transaction: Loss on Financing Transaction resulted from the conversion of the convertible notes into common stock in prior quarters.

Previous wording

Earnings before interest, taxes, depreciation and amortization (“EBITDA”), Adjusted EBITDA, EBITDA Margin, and Adjusted EBITDA Margin are supplemental non-GAAP financial measures used by management. We define EBITDA as net (loss) income before (i) interest expense (net interest income), (ii) depreciation and (iii) taxes. We define Adjusted EBITDA as EBITDA before share-based compensation expenses and other non-operating income and expenses. We define EBITDA Margin as EBITDA divided by revenue and Adjusted EBITDA Margin as Adjusted EBITDA divided by revenue.

Current wording

Earnings before interest, taxes, depreciation and amortization (“EBITDA”), Adjusted EBITDA, EBITDA Margin, and Adjusted EBITDA Margin are supplemental non-GAAP financial measures used by management. We define EBITDA as net (loss) income before (i) interest expense (net interest income), (ii) depreciation and (iii) taxes. We define Adjusted EBITDA as EBITDA before share-based compensation expenses and other non-operating income or expenses or other non-cash items. We define EBITDA Margin as EBITDA divided by revenue and Adjusted EBITDA Margin as Adjusted EBITDA divided by revenue.

Previous wording

We incurred losses for the three and six months ended June 30, 2024, in both cases due to negative net working capital excluding deferred transaction costs and other current assets that are not settled in cash, and an increase in investment in technology innovation and commercial capabilities compared to the prior year periods. We have historically funded our operations with internally generated cash flows, lines of credit with banks, convertible notes, and promissory notes with stockholders and related parties.

Current wording

We incurred losses for the three and nine months ended September 30, 2024, in both cases due to negative net working capital excluding deferred transaction costs and other current assets that are not settled in cash, and an increase in investment in technology innovation and commercial capabilities compared to the prior year periods. We have historically funded our operations with internally generated cash flows, lines of credit with banks, convertible notes, and promissory notes with stockholders and related parties.

Previous wording

We will require additional capital in order to execute on our business plan and may require capital to fund our operations or to respond to technological advancements, competitive dynamics or technologies, customer demands, business opportunities, challenges, acquisitions or unforeseen circumstances, and we may determine to raise capital through equity or debt financings or enter into credit facilities for other reasons. In order to stay on our anticipated growth trajectory and to further business relationships with current or potential customers or partners, or for other reasons, we may issue equity or equity-linked securities to such current or potential customers or partners. See “—Concurrent Public Offering and Private Placement” section above for equity transactions that were consummated on July 1, 2024. We may not be able to timely secure additional debt or equity financing on favorable terms, or at all, as these plans are subject to market conditions and are not within the Company’s control. There is no assurance that the Company will be successful in implementing their plans. If we raise additional funds through the issuance of equity or convertible debt or other equity-linked securities or if we issue equity or equity-linked securities to current or potential customers to further business relationships, our existing stockholders could experience significant dilution. Any debt financing obtained by us in the future could involve restrictive covenants relating to our capital raising and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. If we are unable to obtain adequate financing or financing on terms satisfactory to us, when we require it, our ability to continue to grow or support our business and to respond to business challenges could be significantly limited and our business could be materially and adversely affected.

Current wording

We will require additional capital in order to execute on our business plan and may require capital to fund our operations or to respond to technological advancements, competitive dynamics or technologies, customer demands, business opportunities, challenges, acquisitions or unforeseen circumstances, and we may determine to raise capital through equity or debt financings or enter into credit facilities for other reasons. In order to stay on our anticipated growth trajectory and to further business relationships with current or potential customers or partners, or for other reasons, we may issue equity or equity-linked securities to such current or potential customers or partners. We may not be able to timely secure additional debt or equity financing on favorable terms, or at all, as these plans are subject to market conditions and are not within the Company’s control. There is no assurance that the Company will be successful in implementing their plans. If we raise additional funds through the issuance of equity or convertible debt or other equity-linked securities or if we issue equity or equity-linked securities to current or potential customers to further business relationships, our existing stockholders could experience significant dilution. Any debt financing obtained by us in the future could involve restrictive covenants relating to our capital raising and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. If we are unable to obtain adequate financing or financing on terms satisfactory to us, when we require it, our ability to continue to grow or support our business and to respond to business challenges could be significantly limited and our business could be materially and adversely affected.

Previous wording

As noted in the Company’s consolidated financial statements, there is substantial doubt as to our ability to fund our planned operations for the next twelve months and to continue to operate as a going concern. We have assessed our ability to continue as a going concern, and, based on our need to raise additional capital to finance our future operations, recurring losses from operations incurred since inception, and expectation of continuing operating losses for the foreseeable future, we have concluded that there is substantial doubt about our ability to continue as a going concern for a period of one year from the date that these condensed consolidated financial statements are issued.

Current wording

As noted in the Company’s condensed consolidated financial statements, there is substantial doubt as to our ability to fund our planned operations for the next twelve months and to continue to operate as a going concern. We have assessed our ability to continue as a going concern, and, based on our need to raise additional capital to finance our future operations, recurring losses from operations incurred since inception, and expectation of continuing operating losses for the foreseeable future, we have concluded that there is substantial doubt about our ability to continue as a going concern for a period of one year from the date that these condensed consolidated financial statements are issued.

Previous wording

On April 16, 2024, we entered into a Purchase Agreement with B. Riley Principal Capital II. Pursuant to the Purchase Agreement, we have the right, but not the obligation, to sell to B. Riley Principal Capital II up to $25.0 million worth of Common Stock over the term of the Purchase Agreement, beginning only after certain conditions set forth in the Purchase Agreement have been satisfied, including that the registration statement registering the Purchase Shares for resale (the “Registration Statement”) shall have been declared effective under the Securities Act of 1933, as amended. In accordance with the Purchase Agreement, on April 16, 2024, we issued shares of our Common Stock to B. Riley Principal Capital II as consideration for its commitment to purchase the Purchase Shares under the Purchase Agreement (the “Commitment Shares”). Under the terms of the Purchase Agreement, in certain circumstances, we may be required to pay B. Riley Principal Capital II up to $500,000 (or 2.0% of the total commitment value under the Purchase Agreement), in cash, as a “make-whole” payment to the extent the aggregate amount of cash proceeds, if any, received by B. Riley Principal Capital II from the resale of the Commitment Shares prior to certain times set forth in the Purchase Agreement, is less than $500,000, in exchange for B. Riley Principal Capital II returning to us for cancelation all of the Commitment Shares we originally issued to B. Riley Principal Capital II upon execution of the Purchase Agreement that were not previously resold.

Current wording

On April 16, 2024, we entered into a Purchase Agreement with B. Riley Principal Capital II. Pursuant to the Purchase Agreement, we have the right, but not the obligation, to sell to B. Riley Principal Capital II up to $25,000 worth of Common Stock over the term of the Purchase Agreement, beginning only after certain conditions set forth in the Purchase Agreement have been satisfied, including that the registration statement registering the Purchase Shares for resale (the “Registration Statement”) shall have been declared effective under the Securities Act of 1933, as amended. In accordance with the Purchase Agreement, on April 16, 2024, we issued shares of our Common Stock to B. Riley Principal Capital II as consideration for its commitment to purchase the Purchase Shares under the Purchase Agreement (the “Commitment Shares”). Under the terms of the Purchase Agreement, in certain circumstances, we may be required to pay B. Riley Principal Capital II up to $500,000 (or 2.0% of the total commitment value under the Purchase Agreement), in cash, as a “make-whole” payment to the extent the aggregate amount of cash proceeds, if any, received by B. Riley Principal Capital II from the resale of the Commitment Shares prior to certain times set forth in the Purchase Agreement, is less than $500,000, in exchange for B. Riley Principal Capital II returning to us for cancelation all of the Commitment Shares we originally issued to B. Riley Principal Capital II upon execution of the Purchase Agreement that were not previously resold.

Previous wording

On July 1, 2024, we consummated a public offering (the “Public Offering”) of 6,250,000 shares of Common Stock, which was sold at a public offering price of $1.60 per share less the underwriting discount, generating gross proceeds to the Company of $10.0 million before deducting underwriting discounts, commissions and offering expenses. In connection with the Public Offering, the underwriters were granted a 45-day option from the date of the prospectus to purchase up to 937,500 additional shares of Common Stock at the public offering price, less the underwriting discount, and on June 28, 2024, the underwriters fully exercised the over-allotment option, generating additional gross proceeds of $1.5 million to the Company before deducting underwriting discounts, commissions and offering expenses.

Current wording

On July 1, 2024, we consummated a public offering (the “Public Offering”) of 6,250,000 shares of Common Stock, which was sold at a public offering price of $1.60 per share less the underwriting discount, generating gross proceeds to us of $10,000 before deducting underwriting discounts, commissions and offering expenses. In connection with the Public Offering, the underwriters were granted a 45-day option from the date of the prospectus to purchase up to 937,500 additional shares of Common Stock at the public offering price, less the underwriting discount, and on June 28, 2024, the underwriters fully exercised the over-allotment option, generating additional gross proceeds of $1,500 to us before deducting underwriting discounts, commissions and offering expenses.

Previous wording

Also on July 1, 2024, we issued and sold in a private placement (the “2024 Private Placement”) (i) 2,772,561 shares (the “Placement Shares”) and (ii) pre-funded warrants to purchase 6,602,439 shares of Common Stock (the “Pre-Funded Warrants”) for aggregate gross proceeds of $15.0 million before deducting placement agent fees and offering expenses. The purchase price of the Placement Shares was $1.60 per share, and the purchase price of each Pre-Funded Warrant was $1.5999. The exercise price for each share of Common Stock issuable upon exercise of the Pre-Funded Warrants is $0.0001 per share. The Pre-Funded Warrants are not exercisable unless or until approved by the Company’s stockholders, are not subject to any redemption provision and, once exercisable, can be exercised for cash or on a cashless basis at the discretion of the holder. The Pre-Funded Warrants do not have any voting rights but have the right to participate in any dividends or distributions made by the Company.

Current wording

On July 1, 2024, we issued and sold in a private placement (the “2024 Private Placement”) (i) 2,772,561 shares (the “Placement Shares”) and (ii) pre-funded warrants to purchase 6,602,439 shares of Common Stock (the “Pre-Funded Warrants”) for aggregate gross proceeds of $15,000 before deducting placement agent fees and offering expenses. The purchase price of the Placement Shares was $1.60 per share, and the purchase price of each Pre-Funded Warrant was $1.5999. The exercise price for each share of Common Stock issuable upon exercise of the Pre-Funded Warrants is $0.0001 per share. The Pre-Funded Warrants were not exercisable unless or until approved by the Company’s stockholders, are not subject to any redemption provision and, once exercisable, can be exercised for cash or on a cashless basis at the discretion of the holder. The Pre-Funded Warrants do not have any voting rights but have the right to participate in any dividends or distributions made by the Company.

Previous wording

In addition, upon the closing of the 2024 Private Placement, the Company entered into a voting agreement, dated as of July 1, 2024 (the “Voting Agreement”), with certain stockholders of the Company representing greater than 50% of the issued and outstanding Common Stock of the Company (prior to the Public Offering and 2024 Private Placement) to support the transactions contemplated by the Securities Purchase Agreement, including seeking an increase in the authorized number of shares of Common Stock to permit the exercise of the Pre-Funded Warrants.

Current wording

In addition, upon the closing of the 2024 Private Placement, the Company entered into a voting agreement, dated as of July 1, 2024, with certain stockholders of the Company representing greater than 50% of the issued and outstanding Common Stock of the Company (prior to the Public Offering and 2024 Private Placement) to support the transactions contemplated by the Securities Purchase Agreement, including of the authorization by the Company’s stockholders for the Company to issue the shares of Common Stock underlying the Pre-Funded Warrants in accordance with applicable Nasdaq rules. On August 23, 2024, the increase in the authorized number of shares of Common Stock was approved by our stockholders, and on September 24, 2024, the holders of the Pre - Funded Warrants exercised their warrants in exchange for Common Stock.

Previous wording

Net cash used in investing activities was $1.1 million for the six months ended June 30, 2024, an increase of $0.1 million as compared to $1.0 million of net cash used in investing activities for the six months ended June 30, 2023. The increase in net cash used in investing activities was primarily to an increase in capital expenditures related to software development for the six months ended June 30, 2024, compared to the six months ended June 30, 2023.

Current wording

Net cash used in investing activities was $1,600 for the nine months ended September 30, 2024, an increase of $204 as compared to $1,396 of net cash used in investing activities for the nine months ended September 30, 2023. The increase in net cash used in investing activities was primarily attributable to an increase in capital expenditures related to software development for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023.

Previous wording

Net cash provided by financing activities was $0.0 million for the six months ended June 30, 2024, a decrease of $1.8 million as compared to $1.8 million of net cash provided by financing activities for the six months ended June 30, 2023. The decrease in net cash provided by financing activities is primarily attributable $0.6 million in equity proceeds, $0.4 million of repayments of the line of credit, and $0.2 million repayment on related party promissory note for the six months ended June 30, 2024, compared to the six months ended June 30, 2023.

Current wording

Net cash provided by financing activities was $21,588 for the nine months ended September 30, 2024, an increase of $18,813 as compared to $2,775 of net cash provided by financing activities for the nine months ended September 30, 2023. The increase in net cash provided by financing activities is primarily attributable to $22,727 in equity proceeds from stock sales, offset by repayments of $622 and $575 of borrowings on the line of credit and related party promissory note.

Previous wording

Our principal commitments consist of lease obligations for corporate offices and production facilities.

Current wording

Our principal commitments consist of lease obligations for our corporate office and production facility.

Previous wording

The net present value of operating lease liabilities as of June 30, 2024, is $0.1 million. The net present value of operating lease liabilities for the years ended December 31, 2023, and 2022 is $0.1 million.

Current wording

The net present value of operating lease liabilities as of September 30, 2024, is $173. The net present value of operating lease liabilities for the years ended December 31, 2023 is $138.

Previous wording

Refer to Note 2 of the notes to our annual and interim consolidated financial statements for our assessment of recently issued and adopted accounting standards.

Current wording

See Note 2 of the notes to our annual consolidated financial statements in the 2023 Annual Report for our assessment of recently issued and adopted accounting standards.