Consolidated Financial Statements
Mace Security International, Inc.
March 31, 2024 and 2023
Contents
Page | |
Consolidated Balance Sheets | 2-3 |
Consolidated Statements of Operations | 4 |
Consolidated Statements of Shareholders' Equity | 5 |
Consolidated Statements of Cash Flows | 6 |
Notes to Consolidated Financial Statements | 7 - 18 |
Mace Security International, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share and per share information)
ASSETS | March 31, | December 31, | |||
2024 | 2023 | ||||
(Unaudited) | |||||
Current assets: | |||||
Cash and cash equivalents | $ | 146 | $ | 239 | |
Accounts receivable, less allowance for credit losses | |||||
of $93 and $125 at March 31, 2024 and December 31, 2023, | |||||
respectively | 568 | 755 | |||
Inventories | 3,265 | 3,398 | |||
Other current assets | 366 | 535 | |||
Total current assets | |||||
4,345 | 4,927 | ||||
Property and equipment: | |||||
Buildings and leasehold improvements | 257 | 257 | |||
Machinery and equipment | 2,182 | 2,179 | |||
Furniture and fixtures | 109 | 109 | |||
Total property and equipment | 2,548 | 2,545 | |||
Accumulated depreciation and impairment | (2,494) | (2,491) | |||
Total property and equipment, net | 54 | 54 | |||
Operating lease - right-of-use asset, net of amortization | 1,067 | 1,122 | |||
Finance lease - right-of-use asset, net of amortization | 26 | 31 | |||
Goodwill | 739 | 739 | |||
Intangible assets, net of amortization and impairments | 608 | 608 | |||
Other non-current assets | 14 | 14 | |||
Total other assets | 2,454 | 2,514 | |||
Total assets | $ | 6,853 | $ | 7,495 | |
The accompanying notes are an integral part of these consolidated financial statements.
2
Mace Security International, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share and per share information)
March 31, | December 31, | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY | 2024 | 2023 | |||
(Unaudited) | |||||
Current liabilities: | |||||
Line of credit | $ | 1,135 | $ | 1,329 | |
Derivative liability | 159 | 99 | |||
Current operating lease obligation | 227 | 223 | |||
Current finance lease obligation | 22 | 19 | |||
Accounts payable | 611 | 577 | |||
Income taxes payable | 56 | 56 | |||
Accrued expenses and other current liabilities | 290 | 370 | |||
Total current liabilities | 2,500 | 2,673 | |||
Convertible debt | 607 | 461 | |||
Subordinated note | 150 | - | |||
Non-current operating lease obligations | 861 | 920 | |||
Non-current finance lease obligations | 4 | 12 | |||
Total liabilities | 4,122 | 4,066 | |||
Shareholders' equity: | |||||
Preferred stock, $.01 par value; authorized 10,000,000 shares, no shares | |||||
issued and outstanding at March 31, 2024 and December 31, 2023 | - | - | |||
Common stock, $.01 par value; authorized 100,000,000 shares, | |||||
issued shares of 66,256,075 and 65,817,049, at | |||||
March 31, 2024 and December 31, 2023, respectively | 662 | 658 | |||
Additional paid-in capital | 104,236 | 104,199 | |||
Accumulated deficit | (102,145) | (101,406) | |||
2,753 | 3,451 | ||||
Less treasury stock at cost, 90,548 shares at March 31, 2024 | |||||
and December 31, 2023 | (22) | (22) | |||
Total shareholders' equity | 2,731 | 3,429 | |||
Total liabilities and shareholders' equity | $ | 6,853 | $ | 7,495 | |
The accompanying notes are an integral part of these consolidated financial statements.
3
Mace Security International, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Amounts in thousands)
Three Months Ended | |||||
March 31, | |||||
2024 | 2023 | ||||
Net sales | $ | 1,357 | $ | 1,662 | |
Cost of goods sold | 908 | 1,252 | |||
Gross profit | 449 | 410 | |||
Selling, general, and administrative expenses | 1,068 | 1,068 | |||
Amortization of intangible assets | - | 65 | |||
Operating loss | (619) | (723) | |||
Interest expense | (82) | (24) | |||
Loss on derivative liability | (38) | - | |||
Loss before income tax provision | (739) | (747) | |||
Income tax provision | - | - | |||
Net loss | $ | (739) | $ | (747) | |
Net loss per share | |||||
Basic | $ | (0.01) | $ | (0.01) | |
Diluted | $ | (0.01) | $ | (0.01) | |
Weighted average number of common shares (basic) | 66,055,771 | 65,144,030 | |||
Weighted average number of common shares (diluted) | 66,055,771 | 65,144,030 |
The accompanying notes are an integral part of these consolidated financial statements.
4
Mace Security International, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited)
(Amounts in thousands, except share information)
Common Stock | Additional | |||||||||||||||
Paid-in | Accumulated | Treasury | ||||||||||||||
Shares | Amount | Capital | Deficit | Stock | Total | |||||||||||
Balance at January 1, 2023 | 65,039,030 | $ | 650 | $ | 104,018 | $ | (96,975) | $ | (22) | $ | 7,671 | |||||
Stock-based compensation | 778,019 | 8 | 181 | - | - | 189 | ||||||||||
Net loss | - | - | - | (4,431) | - | (4,431) | ||||||||||
Balance at December 31, 2023 | 65,817,049 | $ | 658 | $ | 104,199 | $ | (101,406) | $ | (22) | $ | 3,429 | |||||
Balance at December 31, 20223 | ||||||||||||||||
65,817,049 | $ | 658 | $ | 104,199 | $ | (101,406) | $ | (22) | $ | 3,429 | ||||||
Stock-based compensation | 439,026 | 4 | 37 | - | - | 41 | ||||||||||
Net loss | - | - | - | (739) | - | (739) | ||||||||||
Balance at March 31, 2024 | 66,256,075 | $ | 662 | $ | 104,236 | $ | (102,145) | $ | (22) | $ | 2,731 | |||||
The accompanying notes are an integral part of these consolidated financial statements.
5
Mace Security International, Inc. and Subsidiaries | |||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||
(Unaudited) | |||||
(Amounts in thousands) | |||||
Three Months | |||||
Ended March 31, | |||||
2024 | 2023 | ||||
Cash Flows from Operating Activities: | |||||
Net loss | $ | (739) | $ | (747) | |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||
Depreciation and amortization, including right-of-use asset amortization | 63 | 179 | |||
Amortization of debt discount | 17 | - | |||
Stock-based compensation | 41 | 52 | |||
Provision for losses on receivables | 9 | 7 | |||
Loss on derivative liability | 38 | - | |||
Changes in operating assets and liabilities: | |||||
Accounts receivable | 178 | (21) | |||
Inventories | 133 | (106) | |||
Other current assets | 169 | 67 | |||
Accounts payable | 34 | 123 | |||
Accrued expenses and other current liabilities | (80) | (100) | |||
Operating lease obligations | (54) | (46) | |||
Income taxes payable | - | - | |||
Net cash used in operating activities | (191) | (592) | |||
Cash Flows from Investing Activities: | |||||
Purchase of property and equipment | (3) | (19) | |||
Net cash used in investing activities | (3) | (19) | |||
Cash Flows from Financing Activities: | |||||
Proceeds from line of credit | 1,199 | 985 | |||
Repayment of line of credit | (1,393) | - | |||
Convertible debt offering proceeds | 150 | - | |||
Subordinated note proceeds | 150 | - | |||
Payments on financing lease obligations | (5) | (5) | |||
Net cash provided by financing activities | 101 | 980 | |||
Net increase (decrease) in cash and cash equivalents | (93) | 369 | |||
Cash and cash equivalents at beginning of year | 239 | 62 | |||
Cash and cash equivalents at end of period | $ | 146 | $ | 431 | |
The accompanying notes are an integral part of these consolidated financial statements.
6
Mace Security International, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Amounts in thousands, except share and per share amounts)
NOTE 1 - DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
The accompanying consolidated financial statements include accounts of Mace Security International, Inc. and its wholly owned subsidiaries (collectively, the "Company"). All significant intercompany transactions have been eliminated in consolidation. The Company's independent auditors have not performed an audit or review of these consolidated financial statements.
Mace Security International, Inc. operates in one business segment, the Security Segment, which sells personal safety and security products to retailers, distributors, and individual consumers. The Company also sells tactical spray products and systems to law enforcement, security professionals, correctional institutions, and military markets.
These unaudited consolidated financial statements should be read in conjunction with the Company's December 31, 2023 audited Consolidated Financial Statements. The results of operations for any interim period are not necessarily indicative of the results to be expected for other interim periods or the full year.
Going Concern
The accompanying consolidated financial statements of the Company have been prepared assuming the Company will continue as a going concern and in accordance with generally accepted accounting principles in the United States of America. The going concern basis of presentation assumes that the Company will continue in operations one year after the date these financial statements are issued and will be able to realize its assets and discharge its liabilities and commitments in the normal course of business. Pursuant to the requirements of the Financial Accounting Standards Board's Accounting Standards Codification (the "ASC") Topic 250-40, Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern, management must evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company's ability to continue as a going concern for one year from the date these financial statements are issued. This evaluation does not take into consideration the potential mitigating effects of management's plans that have not yet been fully implemented or are not within control of the Company as of the date the financial statements are issued. When substantial doubt exists under this methodology, management evaluates whether the mitigating effect of its plans sufficiently alleviates substantial doubt about the Company's ability to continue as a going concern. The mitigating effect of management's plans , however, is only considered if both (1) it is probable that the plans will be effectively implemented within one year after the date that the financial statements are issued, and (2) it is probable that the plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about the entity's ability to continue as a going concern within one year after the date that the financial statements are issued.
On October 20, 2023, the Company's bank line of credit was repaid with the proceeds of a $2,000 revolving credit loan from a commercial asset-based lender ("2023 Credit Agreement"). The new credit facility matures in 3 years, and bears interest at Wall Street Prime plus 6 percent, with a floor of 14.25%. This new credit facility is secured by substantially all assets of the Company. The amount drawn under the new credit facility was $1,135 and $1,329 at March 31, 2024 and December 31, 2023, respectively.
The Company closed a non-brokered private placement of an $150 unsecured subordinated convertible note and a $150 unsecured subordinated note with a board member on March 7, 2024 and March 21, 2024, respectively. The convertible note has a principal amount of $150, matures on July 27, 2025, 10% per annum simple interest and is convertible into common shares of the Company at a conversion price of $0.0852 per common share. This convertible note's terms are the same as the terms of the $590 convertible notes closed on July 27, 2023. The $150 unsecured subordinated note is due the sooner of July 22, 2025,
7
Mace Security International, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Amounts in thousands, except share and per share amounts)
upon the repayment of the 2023 Credit Agreement, or termination of the individual. The note bears interest at 10% per annum and has no conversion features. This additional funding was provided because the terms of the Company's asset-based financing are heavily weighted toward finished inventory, and the Company has had some success in its efforts to reduce inventory levels which has resulted in reduced borrowing availability.
The Company has experienced significant operating losses due to lower sales levels in recent quarters. The amount of credit available under the 2023 Credit Agreement due to these lower sales levels may not provide sufficient working capital for the Company. Alternative sources of financing may need to be obtained. There are no assurances that such financing would be available to the Company on favorable terms or at all. The Company's ability to obtain financing in the debt and equity capital markets is subject to several factors, including market and economic conditions, the Company's performance, and investor sentiment with respect to the Company. These factors raise substantial doubt regarding the Company's ability to continue as a going concern for a period of at least one year from the date of issuance of these consolidated financial statements.
NOTE 2 - REVENUE
Virtually all the Company's net sales are generated from products sold at a point in time through ship-and- bill performance obligations. Revenue is recognized at a point in time when obligations under the terms of a contract with the Company's customer are satisfied. Generally, this occurs with the transfer of control of the Company's products at the time of shipment of products. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring product. In some cases, the nature of the Company's contracts give rise to variable revenue as defined in Accounting Standards Codification ("ASC") topic 606, including rebates, credits, allowances for returns or other similar items that decrease the transaction price. These variable amounts generally are credited to the customer based on achieving certain levels of sales activity, product returns and making payments with specific terms. Variable revenue is estimated at the most likely amount that is expected to be earned. Such estimated amounts are recognized when revenue is recorded. Estimates of variable revenue and determination of whether to include estimated amounts in the transaction price are based largely on an assessment of the anticipated performance and all information (historical, current, and forecasted) that is reasonably available.
Sales, value-added or other taxes collected by the Company concurrent with revenue producing activities are excluded from revenue. The Company allows some customers to return product when the product is defective as manufactured. The Company accrues for estimated future warranty cost in the period in which the sale is recorded. The expected cost associated with the Company's warranties is recognized in cost of goods sold in the consolidated statements of income. The Company calculates its warranty accrual based on its historic warranty loss experience. Amounts billed to customers in sales transactions related to shipping and handling represent revenue earned for the product provided and are included in net sales. Costs of shipping and handling are included in cost of goods sold.
8
Mace Security International, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Amounts in thousands, except share and per share amounts)
The following table disaggregates the Company's net sales by type of customer.
Three Months Ended March 31, | ||||
Net Sales by Type of Customer | 2024 | 2023 | ||
Consumer | $ | 1,247 | $ | 1,527 |
Tactical | 50 | 70 | ||
International | 3 | 33 | ||
Other | 57 | 32 | ||
Total | $ | 1,357 | $ | 1,662 |
NOTE 3 - NET LOSS PER SHARE
The Company's net loss per share was computed by dividing net loss by the weighted-average number of common shares outstanding for each respective period. Diluted loss per share was calculated by dividing net loss by the weighted-average number of all potentially dilutive common shares that were outstanding during the periods presented using the treasury stock method.
The calculation of basic and diluted loss per share were as follows:
Three Months Ended March 31, | ||||
Numerator | 2024 | 2023 | ||
$ | (739) | |||
Net loss | $ | (787) | ||
Denominator | ||||
Determination of shares | 66,055,771 | |||
Weighted-average common shares outstanding | 65,144,030 | |||
Dilutive effect - share based awards | - | - | ||
Diluted weighted-average common shares outstanding | 66,055,771 | 65,144,030 | ||
Loss per common share | ||||
Basic | $ | (0.01) | $ | (0.01) |
Diluted | $ | (0.01) | $ | (0.01) |
Outstanding stock options relating to approximately 2,621,791 and 3,310,708 weighted-average shares were excluded from the calculation of diluted earnings per share for the three months ended March 31, 2024 and 2023, respectively, as the impact of including such stock options in the calculation of diluted earnings per share would have an anti-dilutive effect.
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Mace Security International Inc. published this content on 15 May 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 15 May 2024 21:07:18 UTC.