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Note 1 - Organization and Nature of Business
12 Months Ended
Dec. 31, 2022
Notes to Financial Statements  
Nature of Operations [Text Block]

1. Organization and Nature of Business

 

Guerrilla RF, Inc. (formerly known as Laffin Acquisition Corp., the “Company”) was incorporated in the State of Delaware on November 9, 2020.  On October 22, 2021, the Company's wholly-owned subsidiary, Guerrilla RF Acquisition Corp., a corporation formed in the State of Delaware on October 20, 2021 (“Acquisition Sub”) and privately held Guerrilla RF Operating Corporation (formerly known as Guerrilla RF, Inc.) entered into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”).  Pursuant to the terms of the Merger Agreement, on October 22, 2021 (the “Closing Date”), Acquisition Sub merged with and into Guerrilla RF Operating Corporation with Guerrilla RF Operating Corporation continuing as the surviving corporation and a wholly-owned subsidiary of the Company (the “Merger”). 

 

Prior to the Merger, Laffin Acquisition Corp. was a “shell” company registered under the Exchange Act, with no specific business plan or purpose until it began operating the business of Guerrilla RF Operating Corporation following the closing of the Merger.

 

All references in these Consolidated Financial Statements to “Guerrilla RF” refer to Guerrilla RF Operating Corporation, our direct, wholly-owned subsidiary.  Unless otherwise stated or the context otherwise indicates, references to the “Company”, “we”, “our”, “us” or similar terms refer to Guerrilla RF, Inc. (formerly known as Laffin Acquisition Corp.) together with its wholly-owned subsidiary, Guerrilla RF.  Guerrilla RF holds all material assets and conducts all business activities and operations of the Company.  Accordingly, throughout these Consolidated Financial Statements, there are frequent references to Guerrilla RF. 

 

Guerrilla RF designs and manufactures high‐performance Monolithic Microwave Integrated Circuits (MMICs) for the wireless infrastructure market.  Guerrilla RF primarily focuses on researching and developing its existing products and building an infrastructure to handle a global distribution network; therefore, it has incurred significant start‐up losses. 

 

The Merger was accounted for as a “reverse acquisition” since, immediately following the consummation of the Merger, Guerrilla RF effectively controlled the Company. For accounting purposes, Guerrilla RF was deemed to be the accounting acquirer in the Merger and, consequently, the Merger is treated as a recapitalization of Guerrilla RF (i.e., a capital transaction involving the issuance of shares by the Company for the shares of Guerrilla RF). Accordingly, the assets, liabilities, and results of operations of Guerrilla RF became the historical consolidated financial statements of the Company, and the Company’s assets, liabilities, and results of operations were consolidated with Guerrilla RF beginning at the Closing Date.  No step-up in basis or intangible assets or goodwill were recorded in the Merger.

 

Liquidity and Going Concern

 

Per Accounting Standards Update (“ASU”) No. 2014-15, Disclosure of Uncertainties about an Entitys Ability to Continue as a Going Concern (Subtopic 205-40), the Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the consolidated financial statements are issued.

 

The accompanying consolidated financial statements have been presented on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the ordinary course of business.  The Company has historically financed its activities principally from common and preferred equity securities and debt issuance.

 

The Company has incurred substantial negative cash flows from operations in nearly every fiscal period since inception.  For the year ended December 31, 2022, the Company incurred a net loss of $12.0 million and used $9.2 million in cash to fund operations.  As a result, the Company had an accumulated deficit of $27.1 million as of December 31, 2022.  The Company's cash as of December 31, 2022 was $4.3 million.  We expect losses and negative cash flows to continue in the near term, primarily due to continued investment in research and development, sales and marketing efforts, and increased administration expenses as our Company grows.  We plan to continue to invest in the implementation of our long-term strategic plan and we anticipate that we will require additional funding in fiscal 2023.  There is no assurance that appropriate funding will be available on terms, which are acceptable to us, or at all.  This requirement for additional funding raises substantial doubt about our ability to continue as a going concern.

 

 

 

Our primary source of liquidity is cash raised from private placements and debt financing.  We also have two loan facilities, one of which is for up to $3.0 million with a specialty lender (referred to as the Spectrum Loan Facility, described in Note 5 to our consolidated financial statements), and the other of which is for up to $8.0 million with a different lender (referred to as the Salem Loan Facility, also described in Note 5 to our consolidated financial statements).  As of December 31, 2022, we had drawn down $0.72 million under the Spectrum Loan Facility and $5.0 million under the Salem Loan Facility.  The Company raised gross proceeds of approximately $9.2 million in a private placement offering with the final closing on February 28, 2023, including $4.2 million after December 31, 2022, to further support its current and future liquidity needs.  The Company believes that its existing cash and cash equivalents will provide sufficient resources to support operations through the second quarter of 2023.  Potentially, the Company could draw down additional funds under the Spectrum Loan Facility; however, its ability to do so is dependent upon the value of eligible accounts receivable assigned to Spectrum as security for advances under the Spectrum Loan Facility, which value fluctuates from time to time and is ultimately outside of the Company’s control.  In addition, the Company anticipates seeking permission from Salem to draw down up to an additional $3.0 million of the $8.0 million Salem Loan Facility; however, Salem has discretion to, and may, decline the Company’s request.  The Company is also pursuing additional funding opportunities, including planning for a further capital raise in the second quarter of 2023 in connection with its planned uplisting to the Nasdaq or another national securities exchange.  In the event the Company is unable to secure these or other funding sources, it may be unable to fund ongoing operations and pay its obligations as they become due after the second quarter of 2023. 

 

The Company will require additional funds to respond to business challenges, including developing new solutions or enhancing existing solutions, enhancing our operating infrastructure, expanding our sales and marketing capabilities, and acquiring complementary businesses, technologies, or assets.  We plan to engage in additional equity or debt financing to secure the necessary funds; however, equity and debt financing might not be available when needed or, if available, might not be available on terms satisfactory to us.  If we raise additional funds through equity financing, our stockholders may experience dilution.  Debt financing, if available, may involve covenants restricting our operations or our ability to incur additional debt.  If we are unable to obtain adequate financing or financing on terms satisfactory to us in the future, our ability to continue as a going concern, to support our business growth, and to respond to business challenges could be significantly limited as we may have to delay, reduce the scope of, or eliminate some or all of our initiatives, which could harm our operating results.

 

Risks and Uncertainties

 

The Company is subject to several risks associated with companies at a similar stage, including dependence on key individuals, competition from similar products and larger companies, volatility of the industry, ability to obtain adequate financing to support growth, the ability to attract and retain additional qualified personnel to manage the anticipated growth of the Company, and general economic conditions.