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 September 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 November 7, 2023:

Common Stock, $0.001 par value – 2,013,180 shares outstanding

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

Table of Contents

WaveDancer, Inc.

Form 10-Q September 30, 2023

WAVEDANCER, INC.

FORM 10-Q

Table of Contents

		Page Number
PART I.	FINANCIAL INFORMATION

Item 1.	Unaudited Condensed Consolidated Financial Statements

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

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

	Condensed Consolidated Statements of Operations for the nine months ended September 30, 2023 and 2022	6

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

	Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three and nine months ended September 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

Table of Contents

WaveDancer, Inc.

Form 10-Q September 30, 2023

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Table of Contents

WaveDancer, Inc.

Form 10-Q September 30, 2023

WAVEDANCER, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	September 30, 2023			December 31, 2022
ASSETS
Current assets
Cash and cash equivalents	$	877,198		$	731,081
Accounts receivable		1,479,780			1,629,559
Prepaid expenses and other current assets		363,668			442,445
Total current assets		2,720,646			2,803,085

Intangible assets, net of accumulated amortization of $440,400 and $308,217, respectively		1,049,600			1,181,783
Goodwill		1,125,101			1,125,101
Right-of-use operating lease asset		279,132			376,104
Property and equipment, net of accumulated depreciation and amortization of $423,916 and $391,628, respectively		66,703			98,991
Other assets		20,623			79,305
Assets held for sale		-			2,316,845
Total assets	$	5,261,805		$	7,981,214

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable	$	495,895		$	573,789
Revolving line of credit		500,000			425,000
Premium financing note payable		94,071			-
Accrued payroll and related liabilities		604,079			676,796
Commissions payable		24,296			125,033
Income taxes payable		3,101			3,101
Other accrued liabilities		217,108			283,497
Contract liabilities		26,026			182,756
Operating lease liabilities - current		218,695			203,342
Deferred acquisition consideration		-			1,415,098
Total current liabilities		2,183,271			3,888,412

Operating lease liabilities - non-current		134,790			303,778
Deferred tax liabilities, net		59,121			59,121
Total liabilities		2,377,182			4,251,311

Stockholders' equity
Common stock, $0.001 par value 100,000,000 shares authorized; 2,148,291 and 2,083,860 shares issued, 1,980,986 and 1,916,555 shares outstanding as of September 30, 2023 and December 31, 2022, respectively		2,148			2,084
Additional paid-in capital		36,303,586			35,883,831
Accumulated deficit		(32,455,900	)		(31,190,801	)
Treasury stock, 167,305 shares at cost, as of September 30, 2023 and December 31, 2022		(965,211	)		(965,211	)
Total stockholders' equity		2,884,623			3,729,903
Total liabilities and stockholders' equity	$	5,261,805		$	7,981,214

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

Table of Contents

WaveDancer, Inc.

Form 10-Q September 30, 2023

WAVEDANCER, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended September 30,
	2023			2022
Revenues
Professional fees	$	1,921,300		$	2,114,012
Software sales		45,977			192,367
Total revenues		1,967,277			2,306,379

Cost of revenues
Cost of professional fees		1,268,820			1,467,065
Cost of software sales		48,645			100,718
Total cost of revenues excluding depreciation and amortization		1,317,465			1,567,783

Gross profit		649,812			738,596

Selling, general and administrative expenses		1,166,657			1,868,714

Operating income (loss) from continuing operations		(516,845	)		(1,130,118	)

Gain on sale of equity investment and settlement of contingent consideration receivable		382,525			-
Other income (expense), net		3,113			3,188
Interest expense		(18,725	)		(20,437	)

Income (loss) from continuing operations before income taxes		(149,932	)		(1,147,367	)

Provision for income taxes		-			23,000

Net income (loss) from continuing operations		(149,932	)		(1,170,367	)

Loss from discontinued operations		-			(3,530,152	)

Net income (loss)	$	(149,932	)	$	(4,700,519	)

Basic and diluted loss per share from continuing operations	$	(0.08	)	$	(0.64	)
Basic and diluted loss per share from discontinued operations		-			(1.92	)
Basic and diluted net loss per share	$	(0.08	)	$	(2.56	)

Weighted average common shares outstanding
Basic and diluted		1,939,790			1,838,213

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

Table of Contents

WaveDancer, Inc.

Form 10-Q September 30, 2023

WAVEDANCER, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Nine Months Ended September 30,
	2023			2022
Revenues
Professional fees	$	5,992,715		$	6,458,534
Software sales		159,307			2,593,877
Total revenues		6,152,022			9,052,411

Cost of revenues
Cost of professional fees		3,979,059			4,283,365
Cost of software sales		161,340			2,430,139
Total cost of revenues excluding depreciation and amortization		4,140,399			6,713,504

Gross profit		2,011,623			2,338,907

Selling, general and administrative expenses		4,432,550			6,745,357
Gain on litigation settlement		(1,442,468	)		-

Operating loss from continuing operations		(978,459	)		(4,406,450	)

Gain on sale of equity investment and settlement of contingent consideration receivable		382,525			-
Other income, net		3,335			3,977
Interest expense		(90,982	)		(59,574	)

Loss from continuing operations before income taxes and equity in net loss of affiliate		(683,581	)		(4,462,047	)

Provision for income taxes		-			789,573

Net loss from continuing operations before equity in net loss of affiliate		(683,581	)		(5,251,620	)

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

Net loss from continuing operations		(929,106	)		(5,251,620	)

Income (loss) from discontinued operations		(335,993	)		(3,052,648	)

Net loss	$	(1,265,099	)	$	(8,304,268	)

Basic and diluted loss per share from continuing operations	$	(0.48	)	$	(2.97	)
Basic and diluted loss per share from discontinued operations	$	(0.17	)	$	(1.73	)
Basic and diluted net loss per share	$	(0.65	)	$	(4.70	)

Weighted average common shares outstanding
Basic and diluted		1,929,067			1,768,853

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

Table of Contents

WaveDancer, Inc.

Form 10-Q September 30, 2023

WAVEDANCER, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months Ended September 30,
	2023			2022
Cash flows from operating activities
Net loss	$	(1,265,099	)	$	(8,304,268	)
Adjustments to reconcile net loss to net cash used in operating activities:
Loss from discontinued operations		335,993			3,052,648
Depreciation and amortization		164,471			165,770
Stock-based compensation		557,147			1,187,552
Deferred income tax expense		-			775,257
Amortization of right-of-use assets		96,972			136,441
Accretion of deferred acquisition consideration		27,370			59,467
Gain on litigation settlement		(1,442,468	)		-
Gain on sale of equity investment and settlement of contingent consideration receivable		(382,525	)		-
Equity in loss of affiliate		245,525			-
Changes in operating assets and liabilities:
Accounts receivable		149,779			132,688
Prepaid expenses and other current assets		61,925			84,842
Other assets		58,682			-
Accounts payable		(77,894	)		(422,939	)
Contract liabilities		(156,730	)		(149,149	)
Accrued payroll and related liabilities and other accrued liabilities		(139,106	)		653,786
Operating lease liability		(153,635	)		(142,420	)
Commissions payable		(100,737	)		846
Cash used in operating activities of continuing operations		(2,020,330	)		(2,769,479	)
Cash used in operating activities of discontinued operations		(693,106	)		(2,330,754	)
Net cash used in operating activities		(2,713,436	)		(5,100,233	)

Cash flows from investing activities
Acquisition of property and equipment		-			(234,060	)
Proceeds from sale of equity investment and settlement of contingent consideration receivable		1,400,000			-
Proceeds from disposal of business		935,974			-
Net cash provided by (used in) investing activities		2,335,974			(234,060	)

Cash flows from financing activities
Borrowings under revolving line of credit		575,000			-
Repayments under revolving line of credit		(500,000	)		-
Premium financing borrowings		305,759			-
Premium financing repayments		(211,688	)		-
Proceeds from issuance of stock		347,108			1,887,000
Proceeds from exercise of stock options		7,400			37,642
Net cash provided by financing activities		523,579			1,924,642

Net increase (decrease) in cash and cash equivalents		146,117			(3,409,651	)

Cash and cash equivalents, beginning of period		731,081

SEC Form 10-Q filed by WaveDancer Inc.