iaic20230630

iaic20230630_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2023

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

Commission File Number 001-41092

WaveDancer, Inc.

(Exact name of registrant as specified in its charter)


Delaware	54-1167364
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
12015 Lee Jackson Memorial Highway, Suite 210
Fairfax, Virginia	22033
(Address of principal executive offices)	(Zip Code)

Registrant's telephone number, including area code: (703) 383-3000

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 $0.001 per share		WAVD		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 ☑

Number of shares outstanding by each class of common stock, as of August 10, 2023:

Common Stock, $0.001 par value – 19,459,834, shares outstanding

This document is also available through our website at http://ir.wavedancer.com/.

WaveDancer, Inc.

Form 10-Q June 30, 2023

WAVEDANCER, INC.

FORM 10-Q

Table of Contents

PART I.	FINANCIAL INFORMATION	Page Number

Item 1.	Unaudited Condensed Consolidated Financial Statements

	Condensed Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022	4

	Condensed Consolidated Statements of Operations for the three months ended June 30, 2023 and 2022	5

	Condensed Consolidated Statements of Operations for the six months ended June 30, 2023 and 2022	6

	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2023 and 2022	7

	Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three and six months ended June 30, 2023 and 2022	8

	Notes to Condensed Consolidated Financial Statements	9

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	20

Item 4.	Controls and Procedures	26

PART II.	OTHER INFORMATION	27

Item 1.	Legal Proceedings	27

Item 1A.	Risk Factors	27

Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	27

Item 3.	Defaults Upon Senior Securities	27

Item 4.	Mine Safety Disclosures	27

Item 5.	Other Information	27

Item 6.	Exhibits	28

SIGNATURES		29

WaveDancer, Inc.

Form 10-Q June 30, 2023

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

WaveDancer, Inc.

Form 10-Q June 30, 2023

WAVEDANCER, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	June 30, 2023			December 31, 2022
ASSETS
Current assets
Cash and cash equivalents	$	338,300		$	731,081
Accounts receivable		1,734,944			1,629,559
Prepaid expenses and other current assets		525,846			442,445
Total current assets		2,599,090			2,803,085

Intangible assets, net of accumulated amortization of $396,339, and $308,217, respectively		1,093,661			1,181,783
Goodwill		1,125,101			1,125,101
Right-of-use operating lease asset		312,066			376,104
Property and equipment, net of accumulated depreciation and amortization of $411,333, and $391,628, respectively		79,286			98,991
Contingent consideration receivable		682,000			-
Equity investment		335,475			-
Other assets		20,623			79,305
Assets held for sale		-			2,316,845
Total assets	$	6,247,302		$	7,981,214
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable	$	839,711		$	573,789
Revolving line of credit		1,000,000			425,000
Premium financing note payable		186,115			-
Accrued payroll and related liabilities		531,524			676,796
Commissions payable		20,363			125,033
Income taxes payable		3,101			3,101
Other accrued liabilities		512,012			283,497
Contract liabilities		72,003			182,756
Operating lease liabilities - current		215,018			203,342
Deferred acquisition consideration		-			1,415,098
Total current liabilities		3,379,847			3,888,412
Operating lease liabilities - non-current		190,745			303,778
Deferred tax liabilities, net		59,121			59,121
Total liabilities		3,629,713			4,251,311
Stockholders' equity
Common stock, $0.001 par value 100,000,000 shares authorized; 20,932,885 and 20,838,599 shares issued, 19,259,834 and 19,165,548 shares outstanding as of June 30, 2023 and December 31, 2022, respectively		20,933			20,839
Additional paid-in capital		35,867,835			35,865,076
Accumulated deficit		(32,305,968	)		(31,190,801	)
Treasury stock, 1,673,051 shares at cost, as of June 30, 2023 and December 31, 2022		(965,211	)		(965,211	)
Total stockholders' equity		2,617,589			3,729,903
Total liabilities and stockholders' equity	$	6,247,302		$	7,981,214

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

WaveDancer, Inc.

Form 10-Q June 30, 2023

WAVEDANCER, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended June 30,
	2023			2022
Revenues
Professional fees	$	1,967,957		$	2,277,832
Software sales		56,665			1,472,688
Total revenues		2,024,622			3,750,520

Cost of revenues
Cost of professional fees		1,263,822			1,424,689
Cost of software sales		55,787			1,421,990
Total cost of revenues excluding depreciation and amortization		1,319,609			2,846,679

Gross profit		705,013			903,841

Selling, general and administrative expenses		1,654,365			2,503,111
Gain on settlement of litigation		(1,442,468	)		-

Operating income (loss) from continuing operations		493,116			(1,599,270	)

Other income (expense), net		131			195
Interest expense		(36,809	)		(19,818	)

Income (loss) from continuing operations before income taxes and equity in net loss of affiliate		456,438			(1,618,893	)

Provision for income taxes		-			303,000

Net income (loss) from continuing operations before equity in net loss of affiliate		456,438			(1,921,893	)

Equity in net loss of affiliate		(221,653	)		-

Net income (loss) from continuing operations		234,785			(1,921,893	)

Income from discontinued operations		-			396,451

Net income (loss)	$	234,785		$	(1,525,442	)

Income (loss) per share from continuing operations
Basic	$	0.01		$	(0.11	)
Diluted		0.01			(0.11	)
Income per share from discontinued operations
Basic		-			0.02
Diluted		-			0.02
Income (loss) per share
Basic		0.01			(0.09	)
Diluted	$	0.01		$	(0.09	)

Weighted average common shares outstanding
Basic		19,259,834			17,294,808
Diluted		19,454,934			17,294,808

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

WaveDancer, Inc.

Form 10-Q June 30, 2023

WAVEDANCER, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	6 Months Ended June 30,
	2023			2022
Revenues
Professional fees	$	4,071,415		$	4,344,522
Software sales		113,330			2,401,510
Total revenues		4,184,745			6,746,032

Cost of revenues
Cost of professional fees		2,710,239			2,816,298
Cost of software sales		112,695			2,329,423
Total cost of revenues excluding depreciation and amortization		2,822,934			5,145,721

Gross profit		1,361,811			1,600,311

Selling, general and administrative expenses		3,265,893			4,876,643
Gain on settlement of litigation		(1,442,468	)		-

Operating loss from continuing operations		(461,614	)		(3,276,332	)

Other income, net		222			789
Interest expense		(72,257	)		(39,137	)

Loss from continuing operations before income taxes and equity in net loss of affiliate		(533,649	)		(3,314,680	)

Provision for income taxes		-			766,573

Net loss from continuing operations before equity in net loss of affiliate		(533,649	)		(4,081,253	)

Equity in net loss of affiliate		(245,525	)		-

Net loss from continuing operations		(779,174	)		(4,081,253	)

Income (loss) from discontinued operations		(335,993	)		477,504

Net loss	$	(1,115,167	)	$	(3,603,749	)

Basic and diluted loss per share from continuing operations	$	(0.04	)	$	(0.24	)

Income (loss) per share from discontinued operations
Basic	$	(0.02	)	$	0.03
Diluted	$	(0.02	)	$	0.03

Basic and diluted loss per share	$	(0.06	)	$	(0.21	)

Weighted average common shares outstanding
Basic		19,236,148			17,294,808
Diluted		19,236,148			18,247,622

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

WaveDancer, Inc.

Form 10-Q June 30, 2023

WAVEDANCER, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	6 Months Ended June 30,
	2023			2022
Cash flows from operating activities
Net loss	$	(1,115,167	)	$	(3,603,749	)
Adjustments to reconcile net loss to net cash used in operating activities:
Loss (income) from discontinued operations		335,993			(477,504	)
Depreciation and amortization		107,827			112,380
Stock-based compensation		376,331			588,902
Deferred income tax expense		-			766,573
Amortization of right-of-use assets		64,038			90,396
Accretion of deferred acquisition consideration		27,370			39,137
Gain on litigation settlement		(1,442,468	)		-
Equity in loss of affiliate		245,525			-
Changes in operating assets and liabilities:
Accounts receivable		(105,385	)		(1,918,274	)
Prepaid expenses and other current assets		(45,561	)		(21,189	)
Other assets		58,682			-
Accounts payable		265,922			896,446
Contract liabilities		(110,753	)		(20,992	)
Accrued payroll and related liabilities and other accrued liabilities		83,243			556,220
Operating lease liability		(101,357	)		(93,932	)
Commissions payable		(104,670	)		25,977
Cash used in operating activities of continuing operations		(1,460,430	)		(3,059,609	)
Cash used in operating activities of discontinued operations		(693,106	)		(1,296,869	)
Net cash used in operating activities		(2,153,536	)		(4,356,478	)

Cash flows from investing activities
Acquisition of property and equipment		-			(31,033	)
Proceeds from disposal of business		935,974			-
Net cash provided by (used in) investing activities		935,974			(31,033	)

Cash flows from financing activities
Borrowing under revolving line of credit		575,000			-
Premium financing borrowings		305,759			-
Premium financing repayments		(119,644	)		-
Proceeds from issuance of stock		56,266			-
Proceeds from exercise of stock options		7,400			35,191
Net cash provided by financing activities		824,781			35,191

Net decrease in cash and cash equivalents		(392,781	)		(4,352,320	)

Cash and cash equivalents, beginning of period		731,081			4,931,302
Cash and cash equivalents, end of period	$	338,300		$	578,982

Supplemental cash flow Information
Interest paid	$	18,356		$	1,002
Non-cash investing and financing activities:
Non-cash proceeds on disposal of business	$	1,263,000		$	-

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

WaveDancer, Inc.

Form 10-Q June 30, 2023

WAVEDANCER, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)

	Shares of
	Common				Additional
	Stock		Common		Paid-In			Accumulated			Treasury
	Issued		Stock		Capital			Deficit			Stock			Total
Balances at December 31, 2022		20,838,599	$	20,839	$	35,865,076		$	(31,190,801	)	$	(965,211	)	$	3,729,903
Net loss		-		-		-			(1,349,952	)		-			(1,349,952	)
Stock option compensation		-		-		353,658			-			-			353,658
Forfeiture of stock options on disposal of business (Note 2)		-		-		(407,322	)		-			-			(407,322	)
Stock issued		74,286		74		37,557			-			-			37,631
Issuance of stock from exercise of options

SEC Form 10-Q filed by WaveDancer Inc.