UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 1-SA
☒ SEMIANNUAL REPORT PURSUANT TO REGULATION A
or
☐ SPECIAL FINANCIAL REPORT PURSUANT TO REGULATION A
For the fiscal semiannual period ended: June 30, 2022
Coherix, Inc.
(Exact name of issuer as specified in its charter)
| Delaware | 38-3693744 |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
3980 Ranchero Dr.
Ann Arbor, Michigan
(Mailing Address of principal executive offices)
(734) 922-4073
Issuer’s telephone number, including area code
COHERIX, INC.
SEMIANNUAL REPORT ON FORM 1-SA
| i |
Item 1. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion of our financial condition and results of operations should be read in conjunction with the (1) unaudited condensed consolidated financial statements and related notes thereto included in Item 3 of this report, and (2) the audited consolidated financial statements and the related notes thereto for the year ended December 31, 2021 included in our Form 1-K. The financial statements included in this filing as of and for the six months ended June 30, 2022 are unaudited and in the opinion of management all adjustments necessary to make interim condensed consolidated statements of operations not misleading have been included.
Unless the context indicates otherwise, as used in this report, the terms “Coherix,” “we,” “us,” “our,” or “the company” refer to Coherix, Inc. and its subsidiaries taken as a whole, unless otherwise noted.
This report on Form 1-SA may contain forward looking statements, as that term is defined under the federal securities laws. Forward-looking statements include, among others, statements about our business plan, strategy and industry. These statements are often, but not always, made through the use of words or phrases such as “may,” “will,” “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “predict,” “potential,” “opportunity,” and similar words or phrases or the negatives of these words or phrases.
These forward-looking statements are based on our current assumptions, expectations and beliefs and are subject to substantial risks, estimates, assumptions, uncertainties, and changes in circumstances that may cause our actual results, performance, or achievements to differ materially from those expressed or implied in any forward-looking statement, including, among others, the profitability of the business. These statements reflect management’s current views with respect to future events and are subject to risks and uncertainties that could cause the company’s actual results to differ materially from those contained in the forward-looking statements. Because the risks, estimates, assumptions and uncertainties referred to above could cause actual results or outcomes to differ materially from those expressed in any forward-looking statements, you should not place undue reliance on any forward-looking statements. Also, forward-looking statements represent our management’s beliefs and assumptions only as of the date of this report on Form 1-SA. You should read this report on Form 1-SA completely and with the understanding that our actual future results may be significantly different from our expectations.
Any forward-looking statement speaks only as of the date hereof, and, except as required by law, we assume no obligation and do not intend to update any forward-looking statement to reflect events or circumstances occurring after the date hereof.
Overview
The company was organized on October 30, 2003, under the laws of the State of Delaware. We have a wholly owned subsidiary in Singapore, Coherix Asia Pte. Ltd., to market Coherix semiconductor products in the Asia Pacific region, a wholly owned subsidiary in Germany, Coherix Europe GmbH, to market Coherix products in Europe and a wholly owned subsidiary in Shanghai, China, Coherix China Inc., to market and distribute Coherix, Inc. products in China. We have a distribution agreement with Marubeni to market Coherix products in Japan. In January 2022, we began to operate a Japanese wholly owned subsidiary in Yokohama City, Japan, Coherix Japan G.K., to market and distribute Coherix, Inc. products in Japan.
Since our incorporation in 2003, Coherix has been engaged primarily in the design and manufacturing of 3D machine vision products for the automotive, electronics and semiconductor industries. The company produces 3D machine vision solutions that provide “on-the-fly” inspections within tight tolerances. Our prospects must be considered in light of the uncertainties, risks, expenses, and difficulties frequently encountered by companies in their early stages of operations. We expect to incur additional net expenses over the next several years as we continue to accelerate our revenue growth.
| 1 |
Results of Operations
The company’s operations include Coherix, Inc., and its wholly-owned subsidiaries which include Coherix Asia Pte. Ltd., located in Singapore, Coherix Europe GmbH, located in Germany, Coherix China Inc., located in Shanghai, China and since January 5, 2022, Coherix Japan G.K. , located in Yokohama City, Japan.
We derive revenues primarily from the sales of our products and software to be used in manufacturing plants. The company also has a revenue licensing agreement for usage of certain intellectual property.
The company recognizes product revenue when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable, and collectability is probable. In instances where a product has to be completed based on customer specifications, revenue is deferred until tested and approved by the customer. Service and machine rental revenue is generally recognized once services are performed or based on the rental term. In the case of contracts with milestones, the company recognizes revenue for contingent consideration earned from the achievement of a substantive milestone in the entirety in the period in which the substantive milestone is achieved. The company also has a revenue licensing agreement for usage of certain intellectual property. Licensing revenue from the usage of the intellectual property is recorded based upon a third party’s use of the property, on a licensing fee per item manufactured basis.
Results of Operations for the Six Months Ended June 30, 2022 and June 30, 2021
Net Revenue
Net revenues were $7,908,900 for the six months ended June 30, 2022; an increase of 15% as compared with $6,897,100 during the six months ended June 30, 2021. Product revenues were $6,308,800 during the six months ended June 30, 2022, an increase of 68% compared with $3,757,500 for the same 2021 period driven by growth in customer penetration.
License fee revenue was $1,056,400 during the six months ended June 30, 2022, a decrease of 60% compared with $2,672,100 during the same 2021 period. This decrease in license fee revenue was due to reaching the maturity date of the technical agreement on March 26, 2022. A new licensing contract with the same customer was signed in March 2022. Other revenue amounted to $543,600 during the six months ended June 30, 2022, an increase of 16% compared with $467,500 for the same 2021 period primarily due to additional service revenue generated from the non-US customers.
Cost of Revenue
Cost of revenue consists of material, labor and overhead related to our product revenue and increased from $1,338,500 for the six months ended June 30, 2021, to $1,857,000 for the six months ended June 30, 2022. This increase is primarily due to the increased product volume over the prior period. The company’s gross profit percentage based upon net revenue decreased from 81% for the six months ended June 30, 2021 to 77% for the six months ended June 30, 2022. The company’s gross profit percentage based upon product revenue, which excludes licensing revenue, improved to 71% for the six months ended June 30, 2022 from 64% for the same period in 2021.
Operating Expenses
Company operating expenses increased by approximately $1,789,300 to $6,884,400 for the first six months of 2022 compared to $5,095,100 during the first six months of 2021. Current year expense includes an increase in wages, new hires and related costs, higher professional fees, costs associated with establishing the Japan office and royalties associated with Predator3D sales which totaled approximately $313,000 during the six months ended June 30, 2022 (an increase of approximately $150,000 over the royalty expense recognized in the same 2021 period).
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Operating Income (Loss)
The Company incurred an operating loss of ($832,500) for the first six months of 2022, or (11%) of net revenues as compared to operating income of $463,500 for the first six months of 2021, or 7% of net revenues for the reasons discussed above.
Interest Expense
Interest expense remained relatively flat at $1,062,600 for the first six months of 2022 as compared to $1,077,000 for the first six months of 2021.
Net Income (Loss)
The company incurred a net loss of ($2,075,800) during the first six months of 2022, compared to a net loss of ($1,342,100) during the first six months of 2021. The increase in net loss was due to the reasons discussed above as well as the negative effect of a net loss on foreign currency transactions mostly related to intercompany balances.
Cash Flows for the Six Months Ended June 30, 2022 and June 30, 2021
Net Cash Used in Operating Activities
For the six months ended June 30, 2022, net cash used in operating activities was ($1,675,900), a decrease over the net cash used in operating activities of $82,800 in the comparable 2021 period. This decrease was primarily the result of the expiration of the licensing contract and increase in operating expenses as discussed above.
Net Cash Used in Investing Activities
Net cash used in investing activities for the six months ended June 30, 2022 was $138,200, an increase over the net cash used of $127,300 for the comparable 2021 period representing the purchase of property and equipment.
Net Cash Provided by (Used in) Financing Activities
Net cash provided by financing activities for the six months ended June 30, 2022 was $3,413,700 as compared with net cash used in financing activities of ($130,500) in the corresponding 2021 period. Net borrowings under line of credit agreements of $479,000, proceeds from the issuance of long-term debt of $3,500,000 and the exercise of stock options for common stock totaling $11,900 favorably impacted net cash flows from financing activities offset by payments on long-term debt of $541,800 and capital lease obligations of $35,400.
Liquidity and Capital Resources
As of June 30, 2022, the company had cash on hand of $3,495,460. Funding for the company to date has come primarily from debt.
Line of Credit
As of June 30, 2022, the company had drawn down $479,000 under this line of credit. See Note 4 to the company’s unaudited condensed consolidated financial statements in the accompanying financial statements for further information.
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Long-Term Debt Instruments
Since inception, the company has also funded its operations through the issuance of long-term debt instruments. At June 30, 2022, long-term debt amounted to $15,733,400 (net of unamortized debt issuance costs of $643,800), of which the current portion was $7,083,200. Convertible notes in the amount of $697,100 are past due. A promissory note with Volvo Group Venture Capital AB in the principal amount of $1,973,600 is past due and in default. See Note 5 to the company’s unaudited condensed consolidated financial statements in the accompanying financial statements for further information.
On June 26, 2020, the Company qualified for and received a loan pursuant to the Economic Injury Disaster Loan (“EIDL”) program, a program implemented by the SBA under the CARES Act, from a qualified lender (the “EIDL Lender”) for an aggregate principal amount of $150,000 (the "EIDL Loan"). The EIDL Loan bears interest at a fixed rate of 3.75% per annum with monthly payments of $731 including interest beginning in December 2022, matures in 2050, and is secured by substantially all assets of the Company. At June 30, 2022, the EIDL Loan is recorded as a promissory note in the consolidated balance sheets.
Critical Accounting Policies
Our unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States, which require us to make estimates, judgments and assumptions that affect the reported amounts of certain assets, liabilities, revenues, expenses and related disclosures and contingencies. We evaluate estimates used in preparation of our financial statements on a continual basis. There have been no significant changes to our critical accounting policies that are described in Note 2 to our consolidated financial statements included in the Coherix, Inc. Form 1-K for the year ended December 31, 2021.
Recent Accounting Pronouncements
Recent accounting pronouncements are described in Note 2 to the accompanying financial statements.
None.
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Item 3. Unaudited Interim Financial Statements
COHERIX, INC. AND SUBSIDIARIES
| June 30 | December 31, | |||||||
| 2022 | 2021 | |||||||
| (Unaudited) | (Note) | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash | $ | 3,495,460 | $ | 1,841,050 | ||||
| Accounts receivable | ||||||||
| Trade, net | 3,453,560 | 2,978,510 | ||||||
| Related party, net | 98,430 | 56,850 | ||||||
| Inventories, net | 2,324,640 | 2,143,810 | ||||||
| Prepaid expenses and other | 515,800 | 246,560 | ||||||
| Total current assets | 9,887,890 | 7,266,780 | ||||||
| PROPERTY AND EQUIPMENT, NET | 335,230 | 237,870 | ||||||
| OTHER ASSETS | ||||||||
| Deposits | 50,000 | 50,000 | ||||||
| TOTAL ASSETS | $ | 10,273,120 | $ | 7,554,650 | ||||
Note: The balance sheet at December 31, 2021 has been derived from the audited financial statements at that date but does not include all of the information at footnotes required by accounting principles generally accepted in the United States for complete financial statements.
See notes to unaudited condensed consolidated financial statements.
| 5 |
COHERIX, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
| June 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| (Unaudited) | (Note) | |||||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| CURRENT LIABILITIES | ||||||||
| Line of credit | $ | 478,960 | $ | – | ||||
| Current portion of long-term debt | 6,319,270 | 6,097,100 | ||||||
| Current portion of deferred compensation | 1,048,470 | 1,120,940 | ||||||
| Current portion of capital lease obligations | – | 35,350 | ||||||
| Accounts payable – trade | 619,210 | 316,620 | ||||||
| Accounts payable – related party | 72,690 | 60,640 | ||||||
| Current portion of accrued interest | 3,185,790 | 3,162,080 | ||||||
| Deposits | 44,950 | 121,730 | ||||||
| Current portion of preferred dividends payable | 204,690 | 204,690 | ||||||
| Other accrued liabilities | 1,237,410 | 1,062,530 | ||||||
| Total current liabilities | 13,211,440 | 12,181,680 | ||||||
| LONG-TERM LIABILITIES | ||||||||
| Long-term debt, less current portion | 9,414,130 | 6,516,770 | ||||||
| Long-term debt - contingent payment obligation | 2,874,740 | 3,015,130 | ||||||
| Deferred compensation, less current portion | 1,056,750 | 1,056,750 | ||||||
| Accrued interest, less current portion | 4,543,170 | 4,543,170 | ||||||
| Preferred dividends payable, less current portion | 542,810 | 542,800 | ||||||
| Total long-term liabilities | 18,431,600 | 15,674,620 | ||||||
| Total liabilities | 31,643,040 | 27,856,300 | ||||||
| STOCKHOLDERS’ DEFICIT | ||||||||
| Common stock, $0.001 par value, 30,000,000 authorized, and 13,488,466 and 13,461,385 shares issued and outstanding, respectively | 13,540 | 13,520 | ||||||
| Additional paid-in-capital | 44,906,130 | 43,761,800 | ||||||
| Notes and interest receivable – related parties | (1,568,530 | ) | (1,566,950 | ) | ||||
| Accumulated deficit | (64,631,270 | ) | (62,555,440 | ) | ||||
| Accumulated other comprehensive income (loss), net of income taxes of $-0- | (89,790 | ) | 45,420 | |||||
| Total stockholders’ deficit | (21,369,920 | ) | (20,301,650 | ) | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | $ | 10,273,120 | $ | 7,554,650 | ||||
Note: The balance sheet at December 31, 2021 has been derived from the audited financial statements at that date but does not include all of the information at footnotes required by accounting principles generally accepted in the United States for complete financial statements.
See notes to unaudited condensed consolidated financial statements.
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COHERIX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS)
| Six months ended June 30, | ||||||||
| 2022 | 2021 | |||||||
| (Unaudited) | ||||||||
| Net revenue | ||||||||
| Product revenue | $ | 6,308,830 | $ | 3,757,480 | ||||
| Licensing revenue | 1,056,420 | 2,672,130 | ||||||
| Other | 543,630 | 467,480 | ||||||
| Total net revenue | 7,908,880 | 6,897,090 | ||||||
| Cost of product revenue | 1,856,960 | 1,338,500 | ||||||
| Gross profit | 6,051,920 | 5,558,590 | ||||||
| Operating expense | 6,884,410 | 5,095,080 | ||||||
| Income (loss) from operations | (832,490 | ) | 463,510 | |||||
| Other income (expense) | ||||||||
| Interest income | 1,910 | 1,910 | ||||||
| Interest expense | (1,062,620 | ) | (1,076,990 | ) | ||||
| Loss on extinguishment of debt | – | (759,120 | ) | |||||
| Other income, net | 1,840 | 3,820 | ||||||
| Net gain (loss) on foreign currency transactions | (184,470 | ) | 24,740 | |||||
| Total other expense, net | (1,243,340 | ) | (1,805,640 | ) | ||||
| Loss before income tax | (2,075,830 | ) | (1,342,130 | ) | ||||
| Income tax expense | – | – | ||||||
| Net loss | $ | (2,075,830 | ) | $ | (1,342,130 | ) | ||
| COMPREHENSIVE INCOME (LOSS) | ||||||||
| Net loss | $ | (2,075,830 | ) | $ | (1,342,130 | ) | ||
| Foreign currency translation adjustment, net of income taxes of $-0- | (135,210 | ) | (42,840 | ) | ||||
| COMPREHENSIVE INCOME (LOSS) | $ | (2,211,040 | ) | $ | (1,384,970 | ) | ||
See notes to unaudited condensed consolidated financial statements.
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COHERIX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
Six Months Ended June 30, 2022 and 2021 (unaudited)
| Common Stock | Additional | Notes and Interest Receivable – | Accumulated Other Comprehensive Income (Loss), Net of | Total | ||||||||||||||||||||||||
Number of Shares | Amount | Paid-in Capital | Related Parties | Accumulated Deficit | Income Taxes | Stockholders’ Deficit | ||||||||||||||||||||||
| Balance, January 1, 2021 | 13,461,385 | $ | 13,460 | $ | 40,466,890 | $ | (1,563,750 | ) | $ | (61,125,160 | ) | $ | 1,520 | $ | (22,207,040 | ) | ||||||||||||
| Share-based compensation | – | – | 707,440 | – | – | – | 707,440 | |||||||||||||||||||||
| Exercise of stock options | 27,081 | 30 | 6,740 | – | – | – | 6,770 | |||||||||||||||||||||
| Warrants issued to extend the maturity date of certain long-term debt | – | – | 1,440,340 | – | – | – | 1,440,340 | |||||||||||||||||||||
| Net loss | – | – | – | – | (1,342,130 | ) | – | (1,342,130 | ) | |||||||||||||||||||
| Foreign currency translation adjustment, net of income taxes of $-0- | – | – | – | – | – | (42,830 | ) | (42,830 | ) | |||||||||||||||||||
| Other | – | – | – | (1,590 | ) | – | – | (1,590 | ) | |||||||||||||||||||
| Balance, June 30, 2021 | 13,488,466 | 13,490 | 42,621,410 | (1,565,340 | ) | (62,467,290 | ) | (41,310 | ) | (21,439,040 | ) | |||||||||||||||||
| Common Stock | Additional | Notes and Interest Receivable – | Accumulated Other Comprehensive Income (Loss), Net of | Total | ||||||||||||||||||||||||
Number of Shares | Amount | Paid-in Capital | Related Parties | Accumulated Deficit | Income Taxes | Stockholders’ Deficit | ||||||||||||||||||||||
| Balance January 1, 2022 | 13,523,903 | 13,520 | 43,761,800 | (1,566,950 | ) | (62,555,440 | ) | 45,420 | (20,301,650 | ) | ||||||||||||||||||
| Share-based compensation | – | – | 794,310 | – | – | – | 794,310 | |||||||||||||||||||||
| Exercise of stock options | 17,600 | 20 | 11,880 | – | – | – | 11,900 | |||||||||||||||||||||
| Warrants issued in conjunction with issuance of new long-term debt | – | – | 338,140 | – | – | – | 338,140 | |||||||||||||||||||||
| Net loss | – | – | – | – | (2,075,830 | ) | – | (2,075,830 | ) | |||||||||||||||||||
| Foreign currency translation adjustment, net of income taxes of $-0- | – | – | – | – | – | (135,210 | ) | (135,210 | ) | |||||||||||||||||||
| Other | – | – | – | (1,580 | ) | – | – | (1,580 | ) | |||||||||||||||||||
| Balance, June 30, 2022 | 13,506,066 | $ | 13,540 | $ | 44,906,130 | $ | (1,568,530 | ) | $ | (64,631,270 | ) | $ | (89,790 | ) | $ | (21,369,920 | ) | |||||||||||
See notes to unaudited condensed consolidated financial statements.
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COHERIX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
| Six months ended June 30, | ||||||||
| 2022 | 2021 | |||||||
| (Unaudited) | ||||||||
| OPERATING ACTIVITIES | ||||||||
| Net loss | $ | (2,075,830 | ) | $ | (1,342,130 | ) | ||
| Adjustments to reconcile net loss to net cash flows from operating activities: | ||||||||
| Depreciation and amortization | 31,870 | 65,120 | ||||||
| Share-based compensation | 794,300 | 707,440 | ||||||
| Amortization of debt discount | 65,060 | 103,890 | ||||||
| Paid-in-kind interest | 294,010 | 336,750 | ||||||
| Loss on extinguishment of debt | – | 759,120 | ||||||
| Net unrealized (gain) loss on foreign currency transactions | 120,600 | (77,870 | ) | |||||
| Non-cash interest income | (1,580 | ) | (1,590 | ) | ||||
| Changes in assets and liabilities: | ||||||||
| Accounts receivable | (700,650 | ) | 258,050 | |||||
| Inventories | (248,480 | ) | (781,610 | ) | ||||
| Prepaid expenses and other current assets | (258,000 | ) | (13,690 | ) | ||||
| Accounts payable | 319,570 | 201,010 | ||||||
| Accrued interest payable | 23,710 | 159,520 | ||||||
| Other accrued liabilities and deposits | 113,810 | (375,170 | ) | |||||
| Deferred compensation | (72,470 | ) | (81,630 | ) | ||||
| Net cash used in operating activities | (1,594,080 | ) | (82,790 | ) | ||||
| INVESTING ACTIVITIES | ||||||||
| Purchase of property and equipment | (138,230 | ) | (127,330 | ) | ||||
| Net cash used in investing activities | (138,230 | ) | (127,330 | ) | ||||
| FINANCING ACTIVITIES | ||||||||
| Net borrowings under line-of-credit agreements | 478,960 | 411,850 | ||||||
| Payments on long-term debt | (541,800 | ) | (922,760 | ) | ||||
| Proceeds from issuance of long-term debt | 3,500,000 | 470,000 | ||||||
| Proceeds from exercise of stock options for common stock | 11,900 | 6,770 | ||||||
| Payments on capital lease obligations | (35,350 | ) | (96,350 | ) | ||||
| Net cash provided by (used in) financing activities | 3,413,710 | (130,490 | ) | |||||
| Effect of exchange rate changes on cash | (26,990 | ) | 850 | |||||
| NET CHANGE IN CASH | 1,654,410 | (339,760 | ) | |||||
| CASH, Beginning of Year | 1,841,050 | 1.465,100 | ||||||
| CASH, End of Year | $ | 3,495,460 | $ | 1,125,340 | ||||
See notes to unaudited condensed consolidated financial statements.
| 9 |
COHERIX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
| Six months ended June 30, | ||||||||
| 2022 | 2021 | |||||||
| SUPPLEMENTAL CASH FLOW INFORMATION | ||||||||
| Cash paid during the year for: | ||||||||
| Interest | $ | 678,800 | $ | 528,300 | ||||
| Income taxes | $ | – | $ | – | ||||
| SUPPLEMENTAL NONCASH INVESTING AND FINANCING ACTIVITIES | ||||||||
| Debt discount recorded upon issuance of warrants for the issuance of new debt | $ | 338,140 | $ | – | ||||
| Debt discount recorded upon issuance of warrants to extend the maturity date of certain long-term debt | $ | – | $ | 1,440,340 | ||||
| Inventory transferred to fixed asset | $ | 19,470 | $ | – | ||||
See notes to unaudited condensed consolidated financial statements.
| 10 |
COHERIX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – BUSINESS AND OPERATIONS
Coherix, Inc. and Subsidiaries (the “Company”) is primarily engaged in the design and manufacturing of 3-D vision process control solutions for the dispensing of adhesives and sealants for the automotive and automotive electronics industries in North America, Europe, and Asia. These solutions provide eyes with depth perception for robots, enabling customers to manage complex manufacturing processes and dispensing challenges.
The Company has incurred historical losses, and current liabilities exceed current assets at June 30, 2022, with the majority of the current liabilities tied to maturing long-term notes which have been a primary funding mechanism. The Company’s revenue increased for the six months ended June 30, 2022, however the Company incurred a net loss as operating expenses were impacted by higher costs associated with increased wages, new hires and related costs, higher professional fees and costs to establish the Japan office.
On November 5, 2018, the Company filed an offering statement on Form 1-A with the Securities Exchange Commission (“SEC”) with respect to an offering (the “Offering”) of up to $15 million in common shares for a price of $6.00 per share. The offering statement was qualified by the SEC on February 11, 2020. As of December 31, 2019, the Company decided not to extend the Offering upon its expiration in February 2020. Due to the expiration of the Offering, the Company decided to postpone making its required filings under the Offering. As a result, the Company has been delinquent in its related SEC filings.
As of June 30, 2022, the Company holds certain liabilities that are in default or otherwise past due. These unsecured liabilities include notes payable, convertible notes payable, deferred compensation owed to employees, and accrued interest due to creditors and employees related to the aforementioned liabilities, all of which total approximately $7,900,000. Given the nature of these obligations, the Company has previously been successful in extending the maturity dates of these various instruments. As these items are unsecured, the Company does not anticipate that the creditors would take any action against the Company.
While the Company has instituted measures to preserve cash and secure additional financing, there are uncertainties as to the success of such measures. Management realizes that the combination of these uncertainties casts substantial doubt upon the Company’s ability to continue as a going concern within one year from issuance of these financial statements. In response, the Company plans to:
| 1. | Continue the recent initiatives to generate profitable growth leading to positive operating cash flow generation | |
| 2. | Continue efforts to extend maturing debt with shareholders | |
| 3. | Continue to pursue opportunities to raise equity capital |
Having considered the above, management of the Company continues using the going concern basis in preparing the consolidated financial statements.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 1-SA. Accordingly, these financial statements do not include all of the information and footnotes required by U.S. GAAP for annual financial statements.
| 11 |
In our opinion, the accompanying financial statements include all adjustments of a normal, recurring nature considered necessary for a fair presentation of our financial position as of June 30, 2022 and the results of operations for the six months ended June 30, 2022 and 2021. Results of operations for the six months ended June 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.
For further information, refer to the consolidated financial statements and footnotes thereto included in the Coherix, Inc. Form 1-K for the year ended December 31, 2021.
The consolidated financial statements for the six months ended June 30, 2022 and 2021 include the operating results of Coherix, Inc., and its wholly-owned subsidiaries for the six months ended June 30, 2022 and 2021 except for Coherix Japan G.K. which is only included since January 5, 2022, its date of inception. All significant intercompany balances, transactions and equity holdings have been eliminated in consolidation.
Use of Estimates
Preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. In particular, the COVID-19 pandemic and the resulting impact to global economic conditions, as well as the Company, may affect future operations.
Cash and Cash Equivalents
The Company considers all highly liquid investments, generally with an original maturity of three months or less, to be cash equivalents.
Accounts Receivable
The Company transacts business with companies on an open credit basis. The Company’s trade accounts receivable are generally uncollateralized. The Company carries its accounts receivable at invoiced amount. The Company's policy is not to accrue interest on past due accounts receivable. The Company periodically reviews accounts receivable for collectability and establishes reserves for accounts when the Company considers amounts uncollectible. Balances that remain outstanding after the Company has used reasonable collection efforts are written off. Trade accounts receivable are stated net of an allowance for doubtful accounts of $85,050 and $5,000 at June 30, 2022 and December 31, 2021, respectively. Related party accounts receivable are stated net of an allowance for doubtful accounts of $-0- and $93,000 at June 30, 2022 and December 31, 2021, respectively.
Inventories
Inventories consist of components used in manufacturing and assembling machines and are stated at the lower of cost or net realizable value with cost being determined using the first-in, first-out method. Maintenance, operating and office supplies are not inventoried, but are charged to expense when purchased. Management has deemed it impracticable to track inventories by classes of raw materials, work-in-process and finished goods. The reserve for potentially obsolete inventory totaled $119,000 as of June 30, 2022 and December 31, 2021, respectively.
Income Taxes
At June 30, 2022 and December 31, 2021, there were no uncertain tax positions for which a reserve or liability is necessary and no undistributed earnings of foreign subsidiaries as Coherix Asia Pte. Ltd., Coherix Europe GmbH, and Coherix China Inc., each had an accumulated deficit.
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Revenue Recognition
The Company recognizes revenue in accordance with ASC Topic 606, “Revenue from Contracts with Customers” ("ASC Topic 606"). This guidance requires that an entity recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance requires an entity to follow a five-step model to (a) identify the contract(s) with a customer, (b) identify the performance obligations in the contract, (c) determine the transaction price, (d) allocate the transaction price to the performance obligations in the contract, and (e) recognize revenue when (or as) the entity satisfies a performance obligation.
Product revenue is recognized in the amount in which the Company expects to be entitled when control of the goods is transferred to the customer. Control is generally transferred when the Company has a present right to payment, and title and the significant risks and rewards of ownership of the goods are transferred to its customers. The Company’s product revenues are recognized at the point in time when control transfers to the customer, which is upon shipment of goods.
Licensing revenue is recognized in the amount in which the Company expects to be entitled when customer usage of the Company’s certain intellectual property has occurred. The Company’s licensing revenues are recognized at the point in time when the Company’s intellectual property is used by a customer in their products and is based on a per unit sold basis. The Company earns revenue under one licensing contract with a customer which matures on March 28, 2022. The Company entered into a new licensing contract with that customer which matures on March 17, 2030.
Estimates of variable consideration, which may include discounts, reduce the transaction price when it is probable that a customer will attain the sales incentive. The Company estimates variable consideration at the most likely amount it expects to receive. Estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on an assessment of anticipated performance and all information (historical, current and forecasted) that is reasonably available to management. The Company includes estimated amounts in the transaction price only to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with variable consideration is resolved. Cash payments received in advance for product sales are recorded as customer deposits.
Trade accounts receivable, net of allowance for doubtful accounts are $3,453,560, $2,978,510 and $3,915,270 at June 30, 2022 and December 31, 2021 and 2020, respectively. Contract liabilities, which consist of deposits, totaled $44,950, $121,730 and $216,440 at June 30, 2022 and December 31, 2021 and 2020, respectively. Each of these balances were recognized as revenue in the subsequent year.
The Company has elected to account for shipping and handling as activities to fulfill the promise to transfer goods rather than separate performance obligations. The Company also has elected to expense sales commissions and similar costs to obtain contracts when incurred because the amortization period would be one year or less. These costs are recorded in other operating expenses.
Shipping and Handling
The Company classifies costs incurred by the Company for shipping and handling as cost of revenue.
Share-Based Compensation
Share-based compensation represents the cost related to stock-based awards granted to employees or consultants. The Company measures share-based compensation based on the estimated fair value of the award on the grant date, which is recognized as expense on a straight-line basis over the requisite service period for awards that vest over time. The Company estimates the fair value of stock options using the Black-Scholes valuation model.
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Foreign Operations
Operations outside of the United States of America are subject to risks inherent in operating under different legal systems and various political and economic environments. Among the risks are changes in existing tax laws, possible limitations on foreign investment and income repatriation, government price or foreign exchange controls, and restrictions currency exchange. The Company does not engage in hedging activities to mitigate its exposure to fluctuations in foreign currency exchange rates.
The consolidated financial statements include the operations of Coherix Asia Pte. Ltd., Coherix Europe GmbH, Coherix China Inc., and Coherix Japan G.K., which is only included since January 5, 2022, its date of inception. Included in the consolidated statements of operations and comprehensive income (loss) are net revenue of approximately $3,209,000 and $1,884,000, and net income (loss) of approximately $230,000 and ($172,000), for the six months ended June 30, 2022 and 2021, respectively, which related to these foreign subsidiaries. The consolidated balance sheet included total assets of approximately $2,928,000 and $2,342,000 at June 30, 2022 and December 31, 2021, respectively, which related to these foreign subsidiaries.
Comprehensive Income (Loss)
Comprehensive income (loss) is defined as net income (loss) and all non-ownership changes in stockholders’ deficit. For the Company, comprehensive income (loss) for the six months ended June 30, 2022 and 2021 consists of net income (loss) and the foreign currency translation adjustment.
Recent Adopted Accounting Pronouncements
In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes (Topic 740) – Simplifying the Accounting for Income Taxes.” It removes certain exceptions to the general principles in ASC Topic 740 and improves consistent application of and simplifies U.S. GAAP for other areas of ASC Topic 740 by clarifying and amending existing guidance. This guidance was effective annual reporting periods beginning after December 15, 2020. The Company adopted this guidance as of January 1, 2021, and the impact on its Consolidated Financial Statements was immaterial.
Recent Accounting Pronouncements – Not Yet Adopted
Under Section 107 of the Jumpstart Our Business Startups Act of 2012, the Company is permitted to use the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended (the “Securities Act”) for complying with new or revised accounting standards. This permits the Company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. The Company has elected to use the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date the Company (i) is no longer an emerging growth company or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the Section 7(a)(2)(B). By electing to extend the transition period for complying with new or revised accounting standards, these consolidated financial statements may not be comparable to companies that adopt accounting standard updates upon the public business entity effective dates.
In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)” (“ASU 2016-02”) which requires that all leases be reflected on the balance sheet as assets and liabilities for the rights and obligations created by these leases. For the Company, ASU 2016-02 is effective for fiscal years beginning after December 15, 2021, and interim periods with fiscal years beginning after December 31, 2022. The Company is currently evaluating the impact that this standard will have on its consolidated financial statements.
In June 2016, the FASB issued ASU 2016-13, “Measurement of Credit Losses on Financial Instruments (Topic 326)” (“ASU 2016-13”) which replaces the “incurred loss” credit losses framework with a new accounting standard that requires management’s measurement of the allowance for credit losses to be based on a broader range of reasonable and supportable information for lifetime credit loss estimates. For the Company, ASU 2016-13 is effective for fiscal years beginning after December 15, 2022. The Company is currently evaluating the impact that this standard will have on its consolidated financial statements.
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NOTE 3 – NOTES RECEIVABLE – RELATED PARTIES
At both June 30, 2022 and December 31, 2021, the Company had 33 notes receivable from stockholders with balances totaling $936,410. As these notes are no longer interest bearing, there was no interest income related to these notes for the six months ended June 30, 2022 and 2021. These notes can be extended at the Company’s option and are classified as a contra-equity item in stockholders’ deficit as they were issued to exercise stock options or warrants for common stock. The Company has the ability, and intends to, offset these notes receivable with deferred compensation liabilities owed to these related parties. At June 30, 2022 and December 31, 2021, accrued interest receivable related to these notes amounted to $295,070.
At June 30, 2022 and December 31, 2021, the Company had 15 notes receivable from stockholders with balances totaling $321,940. These notes were entered into during 2020, 2018 and 2017. One of these notes totaling $90,000 bears no interest; another note totals $110,000 bears no interest; another note totaling $5,500 bears no interest; and 12 of these notes totaling $116,440 bear interest at 2.75%. These notes can be extended at the Company’s option and are classified as a contra-equity item in stockholders’ deficit as they were issued to exercise stock options or warrants for common stock. The Company has the ability, and intends to, offset these notes receivable with deferred compensation liabilities owed to these related parties. At June 30, 2022 and December 31, 2021, accrued interest receivable related to these notes amounted to $15,120 and $13,530, respectively. Related party interest income from these notes amounted to $1,590 for each of the six months ended June 30, 2022 and 2021.
NOTE 4 – LINE OF CREDIT
The Company is party to a credit agreement under which the Company may borrow up to $4,000,000. In January 2021, the Company amended certain terms of this line and was required to make monthly principal payments until it was paid off in 2021. The Company may borrow on this line based on eligible accounts receivable, as defined in the credit agreement. The line is due on demand, with interest due monthly at prime plus 2% per annum, but never less than 7.5% (effective rate of 7.5% at June 30, 2022). The balance on the line was $478,960 and $-0- at June 30, 2022 and December 31, 2021, respectively. The Company is required to pay an annual fee of 1% of the maximum allowable borrowings, a monthly maintenance fee ranging from 0.45% to 0.55% of the average outstanding monthly balance, an additional monthly maintenance fee of 0.55% of the average outstanding monthly balance of advances made on foreign accounts receivable, and a 2% fee of the maximum allowable borrowings in the event that Company decides to exit the agreement prior to two years from the date of the agreement. The Company is required to pay interest and monthly maintenance fees on a $1,000,000 minimum outstanding balance. The line of credit is subject to certain restrictive financial covenants. The personal guaranty on this line, previously made by the chief executive officer of the Company who is also a stockholder of the Company, has been prospectively released under the terms of the amendment to the credit agreement effective January 2021.
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NOTE 5 – LONG-TERM DEBT
At June 30, 2022 and December 31, 2021, long-term debt consists of the following (all interest rates are per annum):
| June 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Convertible notes payable with principal, and interest ranging from 4% to 10%, due at maturity. These convertible notes are all past due and are unsecured. Approximately 18% of these notes are with related parties. | $ | 697,090 | $ | 697,090 | ||||
| Note payable with principal payments of $200,000 plus 2.2% interest due quarterly starting December 31, 2015. The note is past due, in default and unsecured. | 1,973,630 | 1,973,630 | ||||||
| Notes payable with 4% interest due quarterly for the first two years, and principal and interest due quarterly during years three through seven. Maturity dates range from April 2022 to January 2024. These notes are unsecured. The balance of these notes is due to related parties. | 10,360 | 17,790 | ||||||
| Related party notes payable with the principal balance due at maturity, and 16% interest due monthly. These notes are unsecured and mature on various dates in 2022. | 1,200,000 | 1,230,000 | ||||||
| Notes payable with the principal balances due at maturity, and 4% interest due quarterly. Maturity dates vary through December 2023. These notes are unsecured. | 2,400,000 | 2,500,000 | ||||||
| Notes payable with the principal balances due at maturity, and 8% interest due monthly. These notes mature in 2024 and are unsecured. Approximately 49% of these notes are with related parties. | 680,000 | 680,0000 | ||||||
| Notes payable with the principal balance due at maturity and interest ranging from 12% to 12.5% due quarterly. 71% of these notes mature in December 2022, with the remainder maturing in 2023. These notes are secured by certain inventory and receivables. Approximately 93% of these notes are with related parties. Subsequent to June 30, 2022, notes maturing in December 2022 were extended to mature on various dates in 2023 and 2024. | 801,000 | 801,000 | ||||||
| SBA Economic Injury Disaster Loan. See below for further discussion. | 150,000 | 150,000 | ||||||
| Notes payable with the principal balance due at maturity and 8% interest due monthly. 89% of these notes are with related parties. These notes are unsecured and mature in 2026. | 2,214,200 | 2,183,320 | ||||||
| Notes payable under the revenue-based royalty program discussed below. Approximately 87% of these notes are with related parties. | 2,750,940 | 2,781,790 | ||||||
| Related party note payable with principal payments and 8% interest due monthly based upon an eight-year amortization schedule, with a balloon payment due at maturity after five years. | 3,500,000 | – | ||||||
| 16,377,220 | 12,984,620 | |||||||
| Less: unamortized debt discount | (643,820 | ) | (370,750 | ) | ||||
| 15,733,400 | 12,613,870 | |||||||
| Less: current portion of long-term debt | (7,083,160 | ) | (6,097,100 | ) | ||||
| $ | 8,650,240 | $ | 6,516,770 | |||||
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On June 2, 2020, the Company qualified for and received a loan pursuant to the Economic Injury Disaster Loan (“EIDL”) program, a program implemented by the SBA under the CARES Act, from a qualified lender (the “EIDL Lender”) for an aggregate principal amount of $150,000 (the "EIDL Loan"). The EIDL Loan bears interest at a fixed rate of 3.75% per annum with monthly payments of $731 including interest beginning in December 2022, matures in 2050, and is secured by substantially all assets of the Company. At June 30, 2022 and December 31, 2021, the EIDL Loan is recorded as a promissory note in the consolidated balance sheets.
During the first six months of 2021, the Company amended certain notes to extend the maturity dates of such notes that were coming due. The Company evaluated the restructuring of these notes to extend the maturity dates and determined that the restructurings are to be treated as extinguishments. Debt extinguishments require that the old notes payable are derecognized, and the new debt is recorded at fair value, with a gain or loss recorded for the difference between the net carrying value of the original debt, and the fair value of the new debt and any related warrants.
The Company recorded a loss on extinguishment of debt totaling $759,120 in the Consolidated Statement of Operations and Comprehensive Income (Loss) related to the following extinguishment transaction. A group of notes payable were restructured that had a carrying value of $2,514,370 at the restructuring date. The fair value of the new notes was determined to be $2,140,290. Warrants issued in conjunction with these restructurings had a fair value of $1,133,200. The difference between the fair value of the new debt and the remaining principal balance is amortized or accreted through interest expense over the life of the respective note.
In relation to the convertible notes payable, each creditor can convert the entire principal balance of its convertible note to shares of the Company’s common stock at conversion prices ranging from $2.50 to $6.25 per common share. As of June 30, 2022, the conversion prices and the related note face amounts are as follows:
| Conversion Price at June 30, 2022 | Face Amount of Notes | |||
| 2.50 | $ | 122,290 | ||
| 4.55 | 225,000 | |||
| 5.00 | 50,000 | |||
| 6.25 | 299,800 | |||
| $ | 697,090 | |||
NOTE 6 – LONG-TERM DEBT - CONTINGENT PAYMENT OBLIGATION
The unsecured contingent payment obligation represents amounts payable for future royalty proceeds under the Predator Royalty Opportunity Pools (“the “Opportunity Pool”). As further discussed in Note 9, under this program, certain investors and employees with accrued interest, salary or consulting fee balances, agreed to forfeit their right to payment for the opportunity to enter the Opportunity Pool. The Company will be required to pay royalties under the Opportunity Pool through June 2026. This unsecured contingent payment obligation is treated as long-term debt. The Company’s repayment obligation is contingent upon the sale of the Predator product. The carrying value of the contingent payment obligation is $2,874,740 and $3,015,130 as of June 30, 2022 and December 31, 2021, respectively.
The contingent payment obligation is measured at each reporting period, based on revised estimates of expected future cash outflows, using the catch-up approach. The Company measures these expected future cash outflows, discounted back to present value using a discount rate determined in accordance with accepted valuation methods based on the variable and contingent nature of the repayment provisions. Using the catch-up approach, the impact of the change in estimated future cash outflows is recorded in the current period in the Consolidated Statement of Operations and Comprehensive Income (Loss) under the heading “Change in estimate for contingent payment obligation” until the contingency is resolved.
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NOTE 7 – ACCRUED INTEREST
Under the terms of the Company’s line of credit discussed in Note 4, long-term debt arrangements discussed in Note 5, deferred compensation arrangements, and certain accrued dividends, the Company has accrued interest. The current portion of accrued interest includes current and past due amounts and amounted to $3,185,730 and $3,162,080 as of June 30, 2022 and December 31, 2021, respectively. During the years ended December 31, 2021 and 2019, the Company was successful in extending the maturity date for certain past due accrued interest to various dates in 2023 to 2025. As a result, $4,543,230 of accrued interest is included in long-term liabilities as of June 30, 2022 and December 31, 2021.
At June 30, 2022, approximately $4,200,000 of the above accrued interest was no longer accruing compounded interest, and approximately $3,200,000 of accrued interest was accruing compounded interest at rates ranging from 4% to 10%. The remaining accrued interest is being paid in accordance with payment terms as described in Note 5.
As of June 30, 2022 and December 31, 2021, accrued interest owed to related parties totaled approximately $4,600,000. Interest expense to related parties totaled approximately $600,000 for the six months ended June 30, 2022 and 2021, respectively.
NOTE 8 – COMMITMENTS AND CONTINGENCIES
Concentration, Credit, and Market Risks
Revenue from the Company’s two largest customers accounted for approximately 26% and 35% of net revenue for the six months ended June 30, 2022 and 2021, respectively. Approximately 19% and 38% of accounts receivable is related to these customers at June 30, 2022 and December 31, 2021, respectively.
The Company sells its products and services in domestic and international markets. Ongoing credit evaluations of its customers are performed and, generally, the Company does not require collateral. Losses have historically been insignificant.
For the six months ended June 30, 2022 and 2021, approximately 61% and 72%, respectively, of net revenue is from customers located in foreign countries in North America, Europe, and Asia.
The Company from time to time may maintain cash balances with financial institutions in excess of insured limits. Management has deemed this as a normal business risk. Depository institutions are selected by management based on their review of the financial stability of the institutions.
Contingencies
The Company is party to a patent infringement case covering the sale of the Company’s main product in Germany. The Company is vigorously defending its position in this case. At the present time, while it is possible that an unfavorable outcome in the case may occur, (i) management has concluded that it is not probable that a loss has been incurred in the pending case; or (ii) management is unable to estimate the possible loss or range of loss that could result from an unfavorable outcome of the pending case. Therefore, management has not provided any amounts in the consolidated financial statements for unfavorable outcomes, if any.
The Company records product liability legal expenses as operating expenses as those costs are incurred.
Predator Programs
As further described below, the Company will be required to pay royalties under the Predator Programs (the “Program”) through June 2026. The Program was established in 2015 and has been closed to new participants.
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Predator Royalty With Stock Investment Program
Under the Program, investors agreed to pay cash to purchase common stock with a right to receive royalties under the Program. Under the Program, two $2,000,000 pools were established for certain investors who acquire common stock for cash or through conversion of debt. For 10 years, commencing on the date of the first shipment for the sale of a Predator unit, each $2,000,000 pool is entitled to receive 5% of the revenue from Predator product sales. The royalties are deposited into the royalty pool and are paid quarterly to investors based on each investor’s respective interest in each respective pool.
As of both June 30, 2022 and December 31, 2021, pool 1 was filled with $2,000,000 of common stock purchases, and pool 2 was filled with $332,870 of common stock purchases. The Company records royalty expense related to these pools when revenue from Predator product sales is earned. During the six months ended June 30, 2022 and 2021, the Company incurred royalty expense of $309,500 and $158,830, respectively, which is included in operating expense in the consolidated statements of operations and comprehensive income (loss).
Predator Team Member Pool
Also under the Program, one pool was established for employees as a bonus. Under this pool, each employee is entitled to 2% of the pool royalties. For 10 years, commencing on the date of the first shipment for the sale of a Predator unit, the pool is entitled to receive 0.125% of the revenue from Predator product sales. The royalties are deposited into the royalty pool and are paid quarterly to employees at a rate of 2% of the pool per employee.
As of both June 30, 2022 and December 31, 2021, this pool was filled with 29 employees. The Company records royalty expense related to this pool when revenue from Predator product sales is earned. During the six months ended June 30, 2022 and 2021, the Company incurred royalty expense of $3,850 and $1,970, respectively, which is included in operating expense in the consolidated statements of operations and comprehensive income (loss).
Predator Royalty Opportunity Pools
Also under the Program, certain investors with accrued interest balances agreed to forfeit their right to payment for the opportunity to enter the Program. Under the Program, three pools of participating interests were created. Two $2,000,000 pools were established for investors and employees that agreed to forgive the accrued interest owed to them by the Company or convert a portion of salaries or consulting fees. Another $200,000 pool was established for employees that agreed to convert a portion of their salary. For 10 years, commencing on the date of the first shipment for the sale of a Predator unit, each $2,000,000 pool is entitled to receive 5% of the revenue from Predator product sales and the $200,000 pool is entitled to receive 0.5% of the revenue from Predator product sales. The royalties are deposited into the royalty pool and are paid quarterly to participants based on each participant’s respective interest in the respective pool.
As of both June 30, 2022 and December 31, 2021, pool 1 was filled with $2,000,000 of converted accrued interest, pool 2 was filled with $856,710 of converted accrued interest, converted salaries, and consulting fees, and pool 3 was filled with $199,520 of converted salaries. The obligation related to these pools is recorded as long-term debt – contingent payment obligation in the consolidated balance sheets. See Note 7 for further discussion.
NOTE 9 – RELATED PARTY TRANSACTIONS
In addition to the definition of related parties under US GAAP, the Company also considers any shareholder to be a related party.
During the six months ended June 30, 2022 and 2021, the Company had product revenue from a related party through common ownership of approximately $54,700 and $25,500, respectively. Related to these transactions, the Company had net accounts receivable due from related parties totaling $98,430 and $104,780 at June 30, 2022 and December 31, 2021, respectively.
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The Company had accounts payable due to employees and related parties through common ownership totaling $201,990 and $45,710 at June 30, 2022 and December 31, 2021, respectively.
In addition, as discussed in Note 3, at June 30, 2022 and December 31, 2021, the Company had notes receivable and accrued interest due from stockholders. As discussed in Note 5, the Company had various notes payable and accrued interest due to stockholders. As discussed in Note 6, the Company had a contingent payment obligation due to stockholders.
NOTE 10 – SUBSEQUENT EVENTS
The Company has performed a review of events subsequent to June 30, 2022, through December 31, 2022 the date the consolidated financial statements were available to be issued. Any effect of subsequent events on these consolidated financial statements has been included as appropriate.
| 20 |
The documents listed in the Exhibit Index of this report are incorporated by reference or are filed with this report, in each case as indicated below.
_____________________
| (1) | Filed as an exhibit to the Coherix, Inc. Regulation A Offering Statement on Form 1-A (Commission File No. 024-10918) and incorporated herein by reference. | |
| (2) | Filed as an exhibit to the Coherix, Inc. Current Report on Form 1-U filed February 20, 2019 and incorporated herein by reference. | |
| (3) | Filed as an exhibit to the Coherix, Inc. Current Report on Form 1-U filed March 15, 2019 and incorporated herein by reference | |
| (4) | Filed as an exhibit to the Coherix, Inc. Semiannual Report on Form 1-A filed September 30, 2019 and incorporated herein by reference. | |
| (5) | Filed as an exhibit to the Coherix, Inc. 2019 Annual Report on Form 1-K filed September 25, 2023 and incorporated herein by reference. | |
| (6) | Filed as an exhibit to the Coherix, Inc. 2020 Annual Report on Form 1-K filed September 25, 2023 and incorporated herein by reference. |
| 21 |
Pursuant to the requirements of Regulation A, the issuer has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Ann Arbor, Michigan, on September 26, 2023.
| Coherix, Inc. | |
| By /s/ Dwight D. Carlson | |
| Dwight D. Carlson, Chief Executive |
Pursuant to the requirements of Regulation A, this report has been signed below by the following person on behalf of the issuer and in the capacities and on the date indicated.
/s/ Dwight D. Carlson
Dwight D. Carlson, Chief Executive Officer,
Acting CFO
Date: September 26, 2023
/s/ Michael Schneider
Michael Schneider, Principal Accountant
Date: September 26, 2023
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