Annual Report for Fiscal Year Ending December 31, 2024 (Form 10-K)

Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes appearing elsewhere in this Annual Report. This discussion and analysis may contain forward-looking statements based on assumptions about our future business. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including but not limited to those set forth under "Risk Factors" and elsewhere in this Annual Report.

Company Overview

We are a technology-forward golf company, with a growing portfolio of golf products, including putting instruments, golf shafts, golf grips, and other golf related products. In consideration of our growth opportunities in shaft technologies, in April of 2022, we expanded our manufacturing business to include advanced premium golf shafts by opening a new shaft manufacturing facility in St. Joseph, MO. It is our intent to manufacture and assemble substantially all products in the United States. We anticipate expansion into golf apparel and other golf related product lines to enhance our growth. Our future expansions may include broadening our offerings through mergers, acquisitions or internal developments of product lines that are complementary to our premium brand.

On August 14, 2023, we entered into an underwriting agreement with The Benchmark Company for the purchase of shares of the Company's common stock, in an offering of securities registered under an effective registration statement filed with the Securities and Exchange Commission. In the offering, the Company sold 10,667 shares of common stock, at a price of $1,200.00 per share. The offering closed on August 17, 2023, and total proceeds received, net of fees, were $11.6 million including an underwriting discount of 7% and a non-accountable expenses allowance of 1% based on the aggregate proceeds of the offering.

Recent Events

Secondary Public Offering

On October 8, 2024, the Company entered into an underwriting agreement with Aegis Capital Corp. as the sole underwriter relating to the offering, issuance and sale of up to 12,200 shares of the Company's common stock at a public offering price of $60.00 per share. The offering closed on October 10, 2024. The net proceeds to the Company for the offering were $467,000, after deducting the underwriting discounts and commissions and estimated offering expenses.

On December 12, 2024, we entered into an underwriting agreement with Aegis Capital Corp. as the sole underwriter relating to the sale of up to 233,333 Common Units, each consisting of one (1) share of Common Stock, one (1) Series A Common Warrant to purchase one (1) share of Common Stock per warrant, and one (1) Series B Common Warrant to purchase one (1) share of Common Stock per warrant. The public offering price per Common Unit is $36.00. The initial exercise price of each Series A Common Warrant is $72.00 per share of Common Stock. The Series A Common Warrants are exercisable following stockholder approval and expire 60 months thereafter. The initial exercise price of each Series B Common Warrant is $72.00 per share of Common Stock or pursuant to an alternative cashless exercise option. The Series B Common Warrants are exercisable following stockholder approval and expire 30 months thereafter. The offering closed on December 13, 2024. The net proceeds to us for the offering were approximately $7,326,000, after deducting underwriting discounts and commissions and estimated offering expenses.

Newton Motion Shafts

On November 20, 2023, we announced a significant expansion of our product portfolio. We introduced "Newton," the Company's latest business division and the Company's first foray into the world of golf club shafts. The Newton Motion driver shaft, the first Newton shaft to debut in the market, is a carbon fiber shaft designed to enhance a golfer's performance by promoting straighter and longer shots with reduced effort.

On April 4, 2024, we announced another expansion of our product portfolio, the Newton Motion fairway wood shaft, which like the Newton Motion driver shaft discussed above, is a carbon fiber shaft designed to enhance a golfer's performance by promoting straighter and longer shots with reduced effort.

The Newton Motion shafts are manufactured at our manufacturing and assembly facility in St. Joseph, Missouri

Gravity Putters

As part of the rebranding to Newton Golf Company, we introduced a new line of putters under the Newton Gravity brand.

Nasdaq Notice of Delisting or Failure to Satisfy a Continued Listing Rule or Standard

On December 5, 2023, the Company received a deficiency letter from the Listing Qualifications Department of The NASDAQ Stock Market LLC ("Nasdaq") notifying the Company that, for the preceding 30 consecutive business days, the closing bid price of the Company's common stock remained below the minimum $1.00 per share requirement for continued listing on The Nasdaq Capital Market as set forth in Nasdaq Listing Rule 5550(a)(2) (the "Bid Price Requirement"). The Company was provided a compliance period of 180 calendar days from the date of the letter, or until June 3, 2024, to regain compliance with the Bid Price Requirement.

On June 4,2024, the Company received a staff determination letter (the "Determination Letter") from the Staff notifying the Company that it had not regained compliance with the Bid Price Requirement by June 3, 2024, and is not eligible for a second 180-day period due to the Company's failure to comply with the minimum stockholders' equity initial listing requirement of The Nasdaq Capital Market.

Pursuant to the Determination Letter, the Company requested a hearing before a Hearings Panel (the "Panel"). The hearing request automatically stayed any suspension or delisting action pending the hearing and the expiration of any additional extension period granted by the Panel following the hearing. By letter dated June 24, 2024, the Company was notified that the Panel granted the Company a temporary exception to regain compliance with the Bid Price Requirement subject to the following milestones: (1) on or before July 31, 2024, the Company must effect a reverse stock split and, thereafter maintain a $1.00 closing bid price for a minimum of ten consecutive business days; and (2) on or before August 13,2024, the Company must demonstrate compliance with the Bid Price requirement by evidencing a closing bid price of $1.00 or more for a minimum of ten consecutive trading sessions. As set forth below, the Company effected a reverse stock split on July 30, 2024. By letter dated August 13, 2024 from the Nasdaq Office of General Counsel, the Company was informed that it has regained compliance with the minimum bid price requirement of $1.00 per share under Nasdaq Listing Rule 5550(a)(2).

On January 29, 2025, the Company received a written notice (the "Notice") from Nasdaq notifying the Company that it is not in compliance with the minimum bid price requirement set forth in Nasdaq Listing Rule 5550(a)(2) due to the Company's common stock not maintaining a closing bid price of at least $1.00 per share for a period of 30 consecutive business days. The Notice has no immediate effect on the listing of the Company's common stock on The Nasdaq Capital Market.

Normally, a company would be afforded a 180-day calendar period to demonstrate compliance with the minimum bid price requirement. However, pursuant to Nasdaq Listing Rule 5810(c)(3)(A)(iv), the Company is not eligible for any compliance period due to the fact that the Company has affected a reverse split within the prior one-year period.

The Company requested a hearing a Panel, as provided in the Nasdaq Rules. The hearing request automatically stayed any suspension or delisting action pending the hearing. On March 11, 2025, the hearing was held and the Company requested an extension based on the reverse split occurring on March 17, 2025. The Panel has granted an extension to the Company to regain compliance.

Additionally, as of December 31, 2024, the Company had a negative Shareholders' Equity of $4,4142,000 resulting from the derivative liability from the issuance of the Company's Series A and Series B Warrants in December 2025 as part of the Company's public offering. However, because most of the Series B Warrants were exercised on or before March 31, 2025, the issuance of the shares upon such exercise will be accounted for as additional paid-in capital. The effect of the exercised warrants and corresponding adjustment to the warrant liability and additional paid-in-capital on a pro forma basis, is that as of December 31, 2024, the stockholder's equity is $6,653,000. Accordingly, as of March 31, 2025, the Company believes it will be in full compliance with the continuing listing requirement for stockholders' equity.

Reverse Stock Splits

On July 18, 2024, the Company filed a Certificate of Amendment to amend its Certificate of Incorporation with the Secretary of State of Delaware to affect a reverse stock split of the Company's common stock at a ratio of 1-for-10 shares (the "First Reverse Stock Split"). The First Reverse Stock Split became effective as of 12:01 a.m. Eastern Time on July 30, 2024 and the Company's common stock began trading on The Nasdaq Capital Market on a post-split basis under its existing trading symbol. As a result of the First Reverse Split, every ten shares of common stock were automatically combined into one share of common stock. The authorized number of shares of common stock was not affected by the First Reverse Stock Split. No fractional shares were issued in connection with the First Reverse Stock Split, as all fractional shares were rounded up to the next whole share.

On March 4, 2025, the Company filed a Certificate of Amendment to amend its Certificate of Incorporation with the Secretary of State of Delaware to affect a reverse stock split of the Company's common stock at a ratio of 1-for-30 shares (the "Second Reverse Stock Split"). The Second Reverse Stock Split became effective as of 12:01 a.m. Eastern Time on March 17, 2025 and the Company's common stock began trading on The Nasdaq Capital Market on a post-split basis under its existing trading symbol.

As a result of the Second Reverse Split, every thirty shares of common stock were automatically combined into one share of common stock. The authorized number of shares of common stock was not affected by the Second Reverse Stock Splits. No fractional shares were issued in connection with the Second Reverse Stock Split, as all fractional shares were rounded up to the next whole share. Accordingly, all share and per share amounts presented herein with respect to common stock have been retroactively adjusted to reflect the First and Second Reverse Stock Splits for all periods presented. Proportionate adjustments for the First and Second Reverse Stock Splits have been made to the per share exercise price and the number of shares issuable upon the exercise of warrants, the number of shares reserved for issuance under the Company's equity plans, and all the then outstanding awards under the Company's equity plans. The First and the Second Reverse Stock Splits did not change the par value of the common stock or modify any voting rights or other terms of common stock.

Key Factors Affecting Our Performance

Seasonality and General Trends in Golf Participation

Because golf is a seasonal sport, our sales are cyclical and unlikely to remain consistent from quarter to quarter. Further, if golf participation decreases or the number of rounds of golf played decreases generally, for any or no reason, sales of our products may be adversely affected. In the future, the overall dollar volume of the market for golf-related products may not grow or may decline. The recent COVID-19 pandemic has resulted in a surge in golf participation and growth for our industry, but such a trend may not continue, and future trends are difficult to predict.

Public Company Costs

Effective August 17, 2023, our Common Stock was registered with the SEC and listed on The Nasdaq Capital Market, which requires us to hire additional personnel and implement public company procedures and processes. We incur additional annual expenses as a public company for internal controls compliance and public company reporting obligations, directors' and officers' liability insurance, director fees and additional internal and external accounting and legal and administrative resources, including increased audit and legal fees.

Impact of Inflation

Recent inflationary trends have led to a moderate increase in some of the component parts used to manufacture our products. To date, we have not passed the increase in cost to our consumers. Continued prolonged periods of inflationary pressure on some or all costs may result in increased costs to produce our products that could have an adverse effect on profits from sales of these products or require us to increase prices for our products that could adversely affect consumer demand for our products.

While we have not had significant other disruptions that materially impacted our financial results, we continue to seek and expand the number of qualified domestic vendors used to source materials.

Comparison of the Year Ended December 31, 2024 Compared to the Year Ended December 31, 2023

Our sales, cost of goods sold, operating expenses, and net loss from operations for the year ended December 31, 2024, as compared to the year ended December 31, 2023 were as follows (amounts are rounded to nearest thousands):

		Year Ended December 31, 2024				Year Ended December 31, 2023				% Change
Net Sales		$	3,445,000			$	349,000				887	%
Cost of goods sold			1,171,000				227,000				416	%
Gross profit			2,274,000				122,000				1,764	%
Operating expenses:
Selling, general and administrative			6,509,000				4,497,000				45	%
Research and development			743,000				258,000				188	%
Total operating expenses			7,252,000				4,755,000				53	%
Loss from operations			(4,978,000	)			(4,633,000	)			7	%
Interest income (expense), net			161,000				8,000				1,900	%
Financing costs			(6,913,000	)			-				100	%
Change in fair value of warrant liability			(22,000	)			-				100	%
Net loss		$	(11,752,000	)		$	(4,625,000	)			154	%

Net Sales

Our net sales increased $3.1 million, or 887%, to approximately $3.5 million during the year ended December 31, 2024, compared to $349,000 during the year ended December 31, 2023. The increase in net sales was from the introduction of our Newton Motion driver shaft product line in November 2023, and our Newton Motion fairway shaft product line in April 2024. For the year ended December 31, 2024, we generated $2.9 million of net sales from the Newton Motion shafts, and we generated approximately 84% of our net sales through our websites.

Cost of goods sold

Cost of goods sold represents primarily our material, labor, components, and changes in inventory reserves for slow-moving or potentially obsolete products. Our cost of goods sold increased by $944,000 to $1.2 million for the year ended December 31, 2024, compared to $227,000 for the year ended December 31, 2023, due to our increase in net sales. Our gross margin was 66% and 35% for the year ended December 31, 2024 and 2023, respectively. The increase in gross margin was due to the change in product mix sold and changes to our inventory reserves as compared to the prior year period.

Operating expenses

Operating expenses include selling, general and administrative expenses, and research and development costs.

Selling, general and administrative expenses include employee costs, legal and professional fees, sales and marketing expenses, stock-based compensation, public company expenses, rent, depreciation and other general expenses. Our selling, general and administrative expenses increased approximately $2.0 million to $6.5 million during the year ended December 31, 2024, compared to $4.5 million during the year ended December 31, 2023. The increase in selling, general and administrative expenses were from increased employee related expenses, increased public company related costs, increased advertising expense, and from routine changes in our selling, general and administrative expenses accounts to support our operations, as compared to the prior year period.

Research and development costs include employee costs, consultants, licensing fees, and product design and development costs. Research and development expenses increased $485,000 to $742,000 during the year ended December 31, 2024, compared to $258,000 during the year ended December 31, 2023. The increase in research and development costs were due to costs incurred to test and refine prior to the commercialization of our Newton Motion fairway wood shaft product, which was launched in early April 2024. In addition, beginning in October 2023, the employment costs of our Chief Technology Officer and Vice President of Research & Development were recorded as a component of our research and development expenses, which we previously recorded to selling general and administrative expenses.

Loss from operations

Loss from operations increased to $5.0 million for the year ended December 31, 2024, compared to $4.6 million for the year ended December 31, 2023. The increase in our net loss was due to our increased operating expenses, offset by increased gross profit, as discussed above.

Other income (expense), net

During the year ended December 31, 2024, the Company recorded financing cost of $6,913,000 and a change in the fair value of warrant liabilities of $22,000 (see Note 8 of the accompanying financial statements), both of which did not occur in the prior year period. Interest income, net was $161,000 for the year ended December 31, 2024, compared to interest income, net of $8,000 for the year ended December 31, 2023. The increase in interest income was due to our paying off our debt with the proceeds received from our initial public offering in August 2023, and the interest earned on our bank balances, as compared to the prior year period.

Net loss

Net loss increased to $11.8 million for the year ended December 31, 2024, compared to $4.6 million for the year ended December 31, 2023. The increase in our net loss was due to the short-term warrant liability of $14,261,000, of which $6,676,000 was attributed to financing costs, with an additional $259,000 due to the change in fair value of the warrant liability. Additional operating expenses and other expenses were offset by increased gross profit, as discussed above.

Liquidity and Capital Resources

The following table summarizes our cash flows for the periods indicated (amounts are rounded to nearest thousands):

		Year Ended December 31,
		2024				2023
Net cash provided by (used in):
Operating activities		$	(4,929,000	)		$	(5,047,000	)
Investing activities			(502,000	)			(289,000	)
Financing activities			7,743,000				10,503,000
Net increase in cash		$	2,312,000			$	5,167,000

Operating Activities

Net cash used in operating activities for the year ended December 31, 2024 totalled $4,929,000, compared to net cash used in operating activities for the year ended December 31, 2023 of $5,047,000. The decrease in net cash used in operations for the year ended December 31, 2024, was primarily related to cash used to repay our accrued payroll to officers.

Investing Activities

Net cash used in investing activities for the year ended December 31, 2024 totalled $502,000, and was for the purchase of property and equipment. Net cash used in investing activities for the year ended December 31, 2023 totaled $289,000, and was for the purchase of property and equipment.

Financing Activities

Net cash provided by financing activities for the year ended December 31, 2024 was $7,743,000, which included net proceeds after commissions and expenses of $7.8 million from our initial public offering, offset by $50,000 for repayment of our software licensing obligation. Net cash provided by financing activities for the year ended December 31, 2023 was $10.5 million, which included net proceeds after commissions and expenses of $11.0 million from our initial public offering, proceeds of $180,000 received in the private placement of common stock, proceeds of $81,000 from loans, $230,000 for deferred offering costs related to our initial public offering, offset by loan repayments to related parties of $557,000, repayment of notes payables of $445,000, and $15,000 repayment of our equipment purchase obligation.

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business.

On October 8, 2024, the Company entered into an underwriting agreement with Aegis Capital Corp. as the sole underwriter relating to the offering, issuance and sale of up to 12,200 shares of the Company's common stock at a public offering price of $60.00 per share. The offering closed on October 10, 2024. The net proceeds to the Company for the offering were $467,000, after deducting the underwriting discounts and commissions and estimated offering expenses.

On December 12, 2024, we entered into an underwriting agreement with Aegis Capital Corp. as the sole underwriter relating to the sale of up to 233,333 Common Units, each consisting of one (1) share of Common Stock, one (1) Series A Common Warrant to purchase one (1) share of Common Stock per warrant, and one (1) Series B Common Warrant to purchase one (1) share of Common Stock per warrant. The public offering price per Common Unit is $36.00. The initial exercise price of each Series A Common Warrant is $72.00 per share of Common Stock. The Series A Common Warrants are exercisable following stockholder approval and expire 60 months thereafter. The initial exercise price of each Series B Common Warrant is $72.00 per share of Common Stock or pursuant to an alternative cashless exercise option. The Series B Common Warrants are exercisable following stockholder approval and expire 30 months thereafter. The offering closed on December 13, 2024. The net proceeds to us for the offering were approximately $7,326,000, after deducting underwriting discounts and commissions and estimated offering expenses.

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying financial statements, during the year ended December 31, 2024, we incurred a net loss of $11,752,000 and used cash in operations of $4,929,000. These factors raise substantial doubt about the Company's ability to continue as a going concern within one year after the date of the financial statements being issued. In addition, the Company's independent registered public accounting firm, in its report on the Company's consolidated financial statements for the year ended December 31, 2024, expressed substantial doubt about the Company's ability to continue as a going concern.

At December 31, 2024, we had cash and cash equivalents on hand in the amount of $7.7 million. Management expects its cash on hand on December 31, 2024, to last for at least the next 12 months.

The continuation of the Company as a going concern is dependent upon its ability to obtain necessary debt or equity financing to continue operations until it begins generating positive cash flow. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing or cause substantial dilution for our stockholders, in case or equity financing.

Emerging Growth Company

We are an "emerging growth company" as defined in the Jumpstart Our Business Startups Act of 2012, which we refer to as the JOBS Act. We would cease to be an emerging growth company upon the earliest of: (i) the last day of the first fiscal year in which our annual gross revenues are $1.07 billion or more; (ii) the end of any fiscal year in which the market value of our common stock held by non-affiliates exceeded $700 million as of the end of the second quarter of that fiscal year; or (iii) the date on which we have, during the previous three-year period, issued more than $1.07 billion in non-convertible debt securities. An emerging growth company may take advantage of specified reduced reporting and other burdens that are otherwise applicable generally to public companies. We have elected to take advantage of these reduced disclosure obligations and may elect to take advantage of other reduced reporting obligations in the future.

For so long as we are an emerging growth company, we will not be required to:

	●	comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor's report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis);
	●	have an auditor report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act;
	●	submit certain executive compensation matters to stockholder advisory votes, such as "say-on-pay," "say-on-frequency" and pay ratio; and
	●	disclose certain executive compensation-related items such as the correlation between executive compensation and performance and comparisons of the CEO's compensation to median employee compensation.

In addition, Section 107 of the JOBS Act also provides that an EGC can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. As a result, the Company may adopt new or revised accounting standards by the date private companies are required to comply.

Off-Balance Sheet Arrangements

At December 31, 2024 and 2023, the Company did not have any transactions, obligations or relationships that could be considered off-balance sheet arrangements.

Critical Accounting Policies and Estimates

Our discussion and analysis of our results of operations, financial condition and liquidity are based upon our consolidated financial statements, which have been prepared and audited in accordance with GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, stockholders' equity, revenues and expenses, as well as related disclosures of contingent assets and liabilities. We base our estimates on historical experience and various other assumptions that management believes to be reasonable under the circumstances. Actual results may materially differ from these estimates under different assumptions or conditions. On an ongoing basis, we review our estimates to ensure that the estimates appropriately reflect changes in our business and new information as it becomes available.

Management believes the critical accounting estimates discussed below affect its more significant estimates and assumptions used in the preparation of its consolidated financial statements.

Revenue Recognition

We account for revenue recognition in accordance with Accounting Standards Codification ("ASC") Topic 606, "Revenue from Contracts with Customers."

The amount of revenue we recognize is based on the amount of consideration we expect to receive from customers. The amount of consideration is the sales price adjusted for estimates of variable consideration, including sales returns, discounts and allowances as well as sales programs, sales promotions and price concessions that we offer, as described further below. These estimates are based on amounts earned or expected to be claimed by customers on the related sales, and are therefore recorded to the respective net revenue, trade accounts receivable, and sales program liability accounts.

We may offer short-term sales program incentives, which include sell-through promotions and price concessions or price reductions. Sell-through promotions are generally offered throughout a product's life cycle, which varies from two to three years but could be shorter or longer. Price concessions or price reductions are generally offered at the end of the product's life cycle. The estimated variable consideration related to these potential programs will be based on a rate that includes historical and forecasted data. We may record a reduction to net revenues using this rate at the time of the sale. We will monitor this rate against actual results and forecasted estimates and adjusts the rate as necessary in order to reflect the amount of consideration it expects to receive from its customers.

We also may record an estimate for anticipated returns as a reduction of sales and cost of sales, and accounts receivable in the period that the related sales are recorded. The cost recovery of inventory associated with this reserve will be accounted for in other current assets. Sales returns will be estimated based upon historical returns, current economic trends, changes in customer demands and sell-through of products. We also may offer certain customers sales programs that would allow for specific returns. We may record a return reserve for anticipated returns related to these sales programs at the time of the sale based on the terms of the sales program.

Stock-Based Compensation

The Company periodically issues stock options to employees and non-employees in non-capital raising transactions for services and for financing costs. The Company accounts for such grants issued and vesting based on ASC 718, Compensation-Stock Compensation whereby the value of the award is measured on the date of grant and recognized for employees as compensation expense on the straight-line basis over the vesting period. The Company recognizes the fair value of stock-based compensation within its Statements of Operations with classification depending on the nature of the services rendered.

The fair value of each option or warrant grant is estimated using the Black-Scholes option-pricing model. The Company was a private company through August 14, 2023, and lacks company-specific historical and implied volatility information. Therefore, it estimates its expected stock volatility based on the historical volatility of a publicly traded set of peer companies within the consumer products industry with characteristics similar to the Company. The expected term of the Company's stock options has been determined utilizing the "simplified" method for awards that qualify as "plain-vanilla" options. The expected term of stock options granted to non-employees is equal to the contractual term of the option award. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. The expected dividend yield is zero, based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future.

Prior to August 14, 2023, the common shares of the Company were not publicly traded. As such, during the period, the Company estimated the fair value of common stock using an appropriate valuation methodology, in accordance with the framework of the American Institute of Certified Public Accountants' Technical Practice Aid, Valuation of Privately-Held Company Equity Securities Issued as Compensation. Each valuation methodology includes estimates and assumptions that require the Company's judgment. These estimates and assumptions include a number of objective and subjective factors, including external market conditions, guideline public company information, the prices at which the Company sold its common stock to third parties in arms' length transactions, the rights and preferences of securities senior to the Company's common stock at the time, and the likelihood of achieving a liquidity event such as an initial public offering or sale. Significant changes to the assumptions used in the valuations could result in different fair values of stock options at each valuation date, as applicable.

The Company accounts for common stock warrants as either equity-classified or liability-classified instruments based on an assessment of the specific terms of the warrants and the guidance provided by the Financial Accounting Standards Board (FASB) in ASC 480, Distinguishing Liabilities from Equity (ASC 480) and ASC 815, Derivatives and Hedging (ASC 815). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company's own stock and whether the holders of the warrants could potentially require net cash settlement in a circumstance outside of the Company's control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.

Recently Issued Accounting Pronouncements

See Note 2 of the Notes to Condensed Financial Statements for a discussion of recent accounting pronouncements.