UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For transition period from to

Commission File Number 001-40682

Nogin, Inc.

(Exact name of registrant as specified in its charter)

Delaware

86-1370703

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)

1775 Flight Way STE 400

Tustin, CA 92782

(949) 222-0209

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of each exchange on which registered
Common stock, par value $0.0001 per share	NOGN	The Nasdaq Stock Market LLC
Warrants to purchase common stock	NOGNW	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No ☒

As of October 26, 2023, there were 11,288,253 shares of the registrant’s common stock outstanding, par value $0.0001 per share.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this “Report”) contains forward-looking statements. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical facts contained in this Report, including statements concerning possible or assumed future actions, business strategies, events or results of operations, and any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

In some cases, you can identify forward-looking statements by terms such as “may,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential” or “continue” or the negative of these terms or other similar expressions. The forward-looking statements in this Report are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements speak only as of the date of this Report and are subject to a number of important factors that could cause actual results to differ materially from those in the forward-looking statements, including the risks, uncertainties and assumptions described under the section in our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the Securities and Exchange Commission (the “SEC”) on March 23, 2023 titled “Risk Factors.” These forward-looking statements are subject to numerous risks, including, without limitation, the following:

●

the ability to maintain the listing of the shares of Common Stock and Warrants on Nasdaq;

●

litigation, complaints, product liability claims and/or adverse publicity;

●

privacy and data protection laws, privacy or data breaches, or the loss of data;

●

the impact of changes in customer spending patterns, customer preferences, local, regional and national economic conditions, crime, weather, demographic trends and employee availability; and

●

our ability to fulfill the obligations and comply with the covenants under the Indenture governing our Convertible Notes; and

●

other risks and uncertainties included in this Report, including those under the section entitled “Risk Factors.”

Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified and some of which are beyond our control, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur, and actual results could differ materially from those projected in the forward-looking statements. Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties. As a result of these factors, we cannot assure you that the forward-looking statements in this Report will prove to be accurate. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.

You should read this Report completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

Nogin, Inc. and Subsidiaries

Form 10-Q

Table of Contents

	Page
Part I – Financial Information	1
Item 1. Financial Statements	1
Condensed Consolidated Balance Sheets as of September 30, 2023 (unaudited) and December 31, 2022	1
Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2023 and 2022 (unaudited)	2
Condensed Consolidated Statements of Stockholders’ Deficit for the three and nine months ended September 30, 2023 and 2022 (unaudited)	3
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 and 2022 (unaudited)	4
Notes to Condensed Consolidated Financial Statements (unaudited)	5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3. Quantitative and Qualitative Disclosures About Market Risk	46
Item 4. Controls and Procedures	46
Part II – Other Information	47
Item 1. Legal Proceedings	47
Item 1A. Risk Factors	47
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	47
Item 3. Defaults Upon Senior Securities	47
Item 4. Mine Safety Disclosures	47
Item 5. Other Information	47
Item 6. Exhibits	48
Signatures	49

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

Nogin, Inc. and Subsidiaries

Unaudited Condensed Consolidated Balance Sheets
(In thousands, except share and per share data)

	September 30,			December 31,
	2023			2022
ASSETS
Current assets:
Cash	$	1,885		$	15,385
Accounts receivable, net		2,913			1,578
Inventory		9,374			15,726
Prepaid expenses and other current assets		1,356			2,539
Total current assets		15,528			35,228
Property and equipment, net		1,872			1,595
Right-of-use asset, net (Note 19)		15,254			17,391
Goodwill		—			6,748
Intangible assets, net		5,258			5,493
Investment in unconsolidated affiliates		8,388			7,404
Other non-current asset		963			1,074
Total assets		47,263			74,933
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable	$	15,396		$	19,605
Due to clients		5,556			10,891
Related party payables		931			1,033
Loans (Note 7)		7,608			—
Accrued expenses and other liabilities (Note 6)		16,814			17,826
Convertible notes (Note 7)		60,385			—
Lease liabilities, current portion (Note 19)		4,547			4,367
Total current liabilities	$	111,237		$	53,722
Convertible notes (Note 7)		—			60,852
Deferred tax liabilities		585			394
Lease liabilities, net of current portion (Note 19)		12,538			15,223
Other long-term liabilities (Note 6)		18,455			17,766
Total liabilities		142,815			147,957

STOCKHOLDERS’ DEFICIT
Common stock, $0.0001 par value, 500,000,000 shares authorized; 11,288,523 and 3,334,714 shares issued and outstanding as of September 30, 2023 and December 31, 2022		1			—
Additional paid-in capital		22,709			9,270
Accumulated deficit		(118,262	)		(82,294	)
Total stockholders’ deficit		(95,552	)		(73,024	)
Total liabilities and stockholders’ deficit	$	47,263		$	74,933

See the accompanying notes to the unaudited condensed consolidated financial statements.

Nogin, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Operations
(In thousands, except share and per share data)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
Net service revenue	$	5,585		$	10,013		$	22,046		$	27,800
Net product revenue		4,596			8,645			15,879			29,401
Net revenue from related parties		722			2,316			2,396			9,321
Total net revenue		10,903			20,974			40,321			66,522
Operating costs and expenses:
Cost of services ⁽¹⁾		3,112			6,304			11,919			17,496
Cost of product revenue ⁽¹⁾		4,318			7,956			10,231			23,363
Sales and marketing		1,117			925			2,534			2,111
Research and development		1,260			1,400			3,386			4,227
General and administrative		11,359			15,969			44,498			46,332
Goodwill impairment		6,748			—			6,748			—
Depreciation and amortization		318			194			755			614
Total operating costs and expenses		28,232			32,748			80,071			94,143
Operating loss		(17,329	)		(11,774	)		(39,750	)		(27,621	)
Interest expense		(2,087	)		(2,568	)		(6,878	)		(4,685	)
Change in fair value of promissory notes		—			(1,995	)		(418	)		(4,561	)
Change in fair value of derivative instruments		4,732			64			9,042			64
Change in fair value of unconsolidated affiliates		1,922			87			984			(1,895	)
Change in fair value of convertible notes		(1,250	)		(9,182	)		2,044			(9,182	)
Debt extinguishment gain		—			(1,885	)		63			(1,885	)
Other (loss) income, net		(45	)		(1,574	)		(863	)		87
Loss before income taxes		(14,057	)		(28,827	)		(35,776	)		(49,678	)
(Benefit) Provision for income taxes		178			69			191			134
Net loss	$	(14,235	)	$	(28,896	)	$	(35,966	)	$	(49,812	)

Net loss per common share – basic and diluted	$	(1.28	)	$	(11.58	)	$	(4.31	)	$	(23.12	)
Weighted average shares outstanding – basic and diluted		11,092,559			2,496,060			8,339,682			2,154,638

(1)	Exclusive of depreciation and amortization shown separately.

See the accompanying notes to the unaudited condensed consolidated financial statements

Nogin, Inc. and Subsidiaries

Unaudited Condensed Consolidated Statements of Stockholders’ Deficit

(In thousands, except share data)

	Convertible Redeemable Preferred Stock																Additional									Total
	Series A						Series B						Common Stock				Paid-in			Treasury			Accumulated			Stockholders’
	Shares			Amount			Shares			Amount			Shares		Amount		Capital			Stock			Deficit			Deficit
Balance, December 31, 2021		443,224			4,687			316,707			6,502			1,981,097		—		4,362			(1,330	)		(16,262	)		(13,230	)
Stock-based Compensation		—			—			—			—			—		—		58			—			—			58
Net loss		—			—			—			—			—		—		—			—			(9,942	)		(9,942	)
Balance, March 31, 2022		443,224			4,687			316,707			6,502			1,981,097		—		4,420		$	(1,330	)	$	(26,204	)	$	(23,114	)
Stock-based Compensation		—			—			—			—			—		—		25			—			—			25
Warrant issuance		—			—			—			—			—		—		713			—			—			713
Net loss		—			—			—			—			—		—		—			—			(10,970	)		(10,970	)
Balance, June 30, 2022		443,224			4,687			316,707			6,502			1,981,097		—		5,158		$	(1,330	)	$	(37,174	)	$	(33,346	)
Stock-based compensation		—			—			—			—			—		—		17			—			—			17
Net settlement of liability classified warrants into common stock		—			—			—			—			10,134		—		1,706			—			—			1,706
Net settlement of equity classified warrants into common stock		—			—			—			—			27,953		—		—			—			—			—
Exercise of stock options		—			—			—			—			9,957		—		84			—			—			84
Conversion of redeemable convertible preferred stock to common shares and cancellation of treasury shares		(443,224	)		(4,687	)		(316,707	)		(6,502	)		759,931		—		9,857			1,330			—			11,187
Reverse capitalization, net of transaction costs		—			—			—			—			543,204		—		(8,439	)		—			(13,307	)		(21,746	)
Equity classified warrants issued with PIPE convertible notes		—			—			—			—			—		—		366			—			—			366
Common stock issued to settle PIPE convertible note issuance costs		—			—			—			—			2,438		—		488			—			—			488
Net loss		—			—			—			—			—		—		—			—			(28,896	)		(28,896	)
Balance, September 30, 2022		—			—			—			—			3,334,714		—		9,237		$	—		$	(79,379	)	$	(70,142	)

Balance, December 31, 2022		—			—			—			—			3,334,714		—		9,270			—			(82,294	)		(73,024	)
Stock-based compensation		—			—			—			—			—		—		253			—			—			253
Fair value of equity classified warrants in common stock		—			—			—			—			—		—		430			—			—			430
Net loss		—			—			—			—			—		—		—			—			(9,901	)		(9,901	)
Balance, March 31, 2023		—		$	—			—		$	—			3,334,714	$	—	$	9,953		$	—		$	(92,195	)	$	(82,242	)
Issuance of common stock		—			—			—			—			7,699,277		1		12,526			—			—			12,527
Stock-based compensation		—			—			—			—			—		—		117			—			—			117
Warrant exercise		—			—			—			—			58,568		—		—			—			—			—
Net loss		—			—			—			—			—		—		—			—			(11,832	)		(11,832	)
Balance, June 30, 2023		—		$	—			—		$	—			11,092,559	$	1	$	22,596		$	—		$	(104,027	)	$	(81,430	)
Stock-based compensation		—			—			—			—			195,964		—		101			—			—			101
Warrant exercise		—			—			—			—			—		—		12			—			—			12
Net loss		—			—			—			—			—		—		—			—			(14,235	)		(14,235	)
Balance, September 30, 2023		—		$	—			—		$	—			11,288,523	$	1	$	22,709		$	—		$	(118,262	)	$	(95,552	)

See the accompanying notes to the unaudited condensed consolidated financial statements

Nogin, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Cash Flows
(In thousands)

	Nine Months Ended September 30,
	2023			2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(35,966	)	$	(49,812	)
Adjustments to reconcile net loss to net cash used by operating activities:
Depreciation and amortization		755			614
Amortization of debt issuance costs and discounts		3,154			2,154
Debt issuance costs expensed under fair value option		554			2,034
Stock-based compensation		472			100
Deferred income taxes		191			134
Change in fair value of unconsolidated affiliates		(984	)		1,895
Change in fair value of warrant liability		(8,471	)		717
Change in fair value of promissory notes		981			4,561
Change in fair value of convertible notes		(2,044	)		9,182
Change in fair value of derivatives		(847	)		(64	)
Loss on extinguishment of debt		—			1,885
Settlement of deferred revenue		—			(1,611	)
Gain on extinguishment of accounts payable liabilities		(63	)		—
Gain on disposal of asset		(1	)		—
Goodwill impairment		6,748			—
Other		(3	)		(321	)
Changes in operating assets and liabilities:
Accounts receivable		(1,335	)		346
Related party receivables		—			(3,120	)
Inventory		6,352			10,257
Prepaid expenses and other current assets		3,090			(4,037	)
Other non-current assets		85			—
Accounts payable		(2,213	)		1,875
Due to clients		(5,335	)		(1,617	)
Related party payables		(102	)		229
Lease assets and liabilities		(369	)		—
Accrued expenses and other liabilities		(407	)		(688	)
Net cash used in operatin

SEC Form 10-Q filed by Nogin Inc.