Form 8-K - Current report

false0001407973NONE00014079732024-08-072024-08-07

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): August 07, 2024

 

 

Sonendo, Inc.

(Exact name of Registrant as Specified in Its Charter)

 

 

Delaware			001-40988	20-5041718
(State or Other Jurisdiction of Incorporation)			(Commission File Number)	(IRS Employer Identification No.)
26061 Merit Circle, Suite 102
Laguna Hills, California				92653
(Address of Principal Executive Offices)				(Zip Code)

 

Registrant’s Telephone Number, Including Area Code: [phone]

 

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, par value $0.001 per share		SONX		OTC Markets

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

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. ☐

 

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Item 2.02 Results of Operations and Financial Condition.

On August 7, 2024, Sonendo, Inc. (the “Company”) issued a press release announcing its financial results for the quarter ended June 30, 2024 and updating its revenue guidance for 2024 (the “Press Release”). A copy of the Press Release is being furnished as Exhibit 99.1 to this Current Report on Form 8-K.

As provided in General Instruction B.2 of Form 8-K, the information in this Item 2.02 of this Current Report on Form 8-K (including Exhibits 99.1 and 99.2) shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

Discussion of Non-GAAP Financial Measure

In the Press Release, in addition to financial measures reported in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”), the Company provides various non-GAAP financial measures, including (1) gross profit and gross margin excluding certain excess and obsolete inventory charges, long-lived asset impairment charges, and stock-based compensation expense (“Adjusted Gross Profit” and “Adjusted Gross Margin”), (2) earnings (loss) before income tax expense, interest and financing costs, net, depreciation and amortization, excluding certain excess and obsolete inventory charges, stock-based compensation expense, and long-lived asset impairment charges (“Adjusted EBITDA Loss”), and (3) the sum of net cash used in operating activities and purchases of property and equipment (“Free Cash Flow (Burn)”).

Management believes that the presentation of Adjusted Gross Profit, Adjusted Gross Margin, Adjusted EBITDA Loss and Free Cash Flow (Burn) (collectively, the “Non-GAAP Measures”) is useful in helping identify the Company’s core operating performance and enables management to consistently analyze the period-to-period financial performance of the core business operations. Management also believes that the Non-GAAP Measures will enable investors to assess the Company in the same way that management has historically assessed the Company’s operating results against comparable companies with conventional accounting methodologies. The Company’s definition for each of the Non-GAAP Measures has limitations as an analytical tool and may differ from other companies reporting similarly named measures. Non-GAAP Measures should not be considered measures of financial performance under GAAP, and the items excluded from (or, in the case of Free Cash Flow (Burn), included in) such Non-GAAP Measures should not be considered in isolation or as alternatives to financial statement data presented in the financial statements as an indicator of financial performance or liquidity. These Non-GAAP Measures should be considered in addition to results prepared in accordance with GAAP but should not be considered a substitute for or superior to GAAP results.

Adjusted Gross Profit and Adjusted Gross Margin

Adjusted Gross Profit and Adjusted Gross Margin represent GAAP Gross Profit and GAAP Gross Margin, respectively, excluding the impact of the following items recorded in cost of sales:

•

Excess and obsolete inventory charges related to recently discontinued products. Management excludes this item when evaluating the Company’s operating performance because of its unusually occurring nature and the significant volatility of these charges, which are related to infrequent discrete decisions to phase out or discontinue specific products.

•

Impairments of long-lived assets. Management excludes this item when evaluating the Company’s operating performance because these amounts represent costs that are capitalizable as purchases of long-lived assets, but for GAAP purposes are then immediately impaired under ASC 360. Such immediate impairments are not indicative of the Company’s ongoing operational performance.

•

Stock-based compensation. Management excludes this item when evaluating the Company’s operating performance because it is a non-cash expense.

Adjusted EBITDA Loss

Adjusted EBITDA Loss consists of GAAP earnings (loss) before income tax expense, interest and financing costs, net, depreciation and amortization (“EBITDA”), excluding the impact of stock-based compensation, excess and obsolete inventory charges related to recently discontinued products, and impairments of long-lived assets, recorded herein. See explanation above for the rationale of exclusion of these items from the EBITDA.

Free Cash Flow (Burn)

Free Cash Flow (Burn) is calculated by subtracting (adding) cash used to purchase property and equipment expenditures from (to) net cash flows provided by (used in) operating activities. Free cash flow is an important indicator of how much cash is generated or used by the Company’s business operations, including capital expenditures. Management uses free cash flow to measure progress on its capital efficiency and cash flow initiatives.

For a reconciliation of the Non-GAAP Measures presented herein to the most directly comparable GAAP financial measure, please see the “Reconciliation of GAAP to Non-GAAP Measures” section in the Press Release.

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The Company may, in the future, incur expenses of a nature similar to many of the non-GAAP adjustments described above, and exclusion (or inclusion) of these items from (in) its Non-GAAP Measures should not be construed as an inference that all of these costs are unusual, infrequent or non-recurring.

The Company recently revised its methodology for calculating the Non-GAAP Measures. The revised calculations for each of the quarterly periods from January 1, 2023 through June 30, 2024 are being furnished as Exhibit 99.2 to this Current Report on Form 8-K.

Item 9.01 Financial Statements and Exhibits.

The following exhibits are furnished as part of this report:

 

Exhibit Number	Description
99.1	Press Release issued by Sonendo, Inc., dated August 7, 2024
99.2	Historical quarterly Non-GAAP Measures
104	Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

			Sonendo, Inc.
Date:	August 7, 2024	By:	/s/ Bjarne Bergheim
			Bjarne Bergheim President and Chief Executive Officer

 

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Ex. 99.1

Sonendo, Inc. Reports Second Quarter 2024 Financial Results and Raises Full Year Revenue Guidance

LAGUNA HILLS, CA – August 7, 2024 – Sonendo, Inc. (“Sonendo” or the “Company”) (OTCQX: SONX), a leading dental technology company and developer of the GentleWave® System, today reported financial results for the second quarter ended June 30, 2024.

Recent Highlights

•

Generated $8.3 million total revenue for second quarter of 2024 and carried over a healthy console backlog for the second straight quarter;

•

Drove substantial increases in GAAP gross margin and adjusted gross margins (non-GAAP) to 37.5% and 40.7%, respectively, based primarily on lower manufacturing and console warranty costs;

•

Significantly reduced GAAP operating loss to $6.7 million and adjusted EBITDA (non-GAAP) loss to $5.7 million, a 61% and 55% improvement, respectively, compared to the second quarter of 2023; and

•

Raised 2024 full year revenue guidance range to $31 to $32 million, from prior guidance of $29 to $31 million

 

“We are very encouraged by the early results of the strategic reset we embarked earlier this year,” said Bjarne Bergheim, President and Chief Executive Officer of Sonendo. “We are driving commercial discipline through a refined go-to-market strategy and we are exceeding our own timelines for delivering on gross margin expansion, all while dramatically reducing operating expenses and free cash flow burn through a leaner, more efficient organizational structure. Additionally, the increased reliability of the GentleWave® G4 System has improved the customer experience and enabled us to successfully re-engage our legacy customer base through upgrade programs while simultaneously expanding our new-customer base, both of which we expect to drive higher procedure instrument utilization and revenue in the long-term.”

Second Quarter 2024 Financial Results

Except as otherwise indicated, the GAAP and non-GAAP financial measures presented in this press release exclude discontinued operations associated with the Company’s divestiture of its TDO practice management software segment in March 2024.

Total revenue was $8.3 million for the second quarter of 2024, a 5% decrease compared to second quarter of 2023. GentleWave console revenue totaled $2.4 million, a 9% increase compared to the second quarter of 2023, which was comprised of 35 upgrades and a 13 unit increase to the installed base. The Company’s installed base totaled 1,155 as of June 30, 2024. Procedure instrument revenue totaled $4.7 million, a decrease compared to $5.6 million for the prior year quarter. Other product revenue totaled $1.2 million for the second quarter of 2024, a $0.2 million year-over-year increase.

GAAP gross margin for the second quarter of 2024 increased to 37.5%, compared to a negative gross margin of 5.5% for the second quarter of 2023. During the second quarter of 2024 and 2023, respectively, the Company recorded in cost of sales $0.2 million and $2.9 million in excess and obsolete inventory charges related to recently discontinued products. Adjusted gross margin (non-GAAP) for the second quarter of 2024 was 40.7% compared to 28.7% for the prior year quarter.

Total operating expenses for the second quarter of 2024 totaled $9.8 million, a $7.1 million reduction compared to the prior year period.

Operating loss totaled $6.7 million for the second quarter of 2024, a $10.7 million reduction compared to the prior year quarter. Adjusted EBITDA (non-GAAP) loss totaled $5.7 million, a $6.9 million reduction compared to the prior year period.

Net loss from continuing operations totaled $7.4 million for the second quarter of 2024, a $10.7 million reduction compared to the prior year quarter.

1

 

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Ex. 99.1

Free cash flow burn (non-GAAP), which the Company defines as the sum of net cash used in operating activities and purchases of property and equipment, totaled $(6.7) million for the second quarter of 2024, a $3.0 million improvement compared to the prior year quarter.

As of June 30, 2024, the Company’s cash and cash equivalents and short-term investments totaled $24.2 million, and there were $20.5 million of principal payments outstanding under its term loan facility.

2024 Financial Guidance

For the full year 2024, the Company is increasing its expectations for total revenue from continuing operations to be in the range of $31 to $32 million, compared to previous guidance of $29 to $31 million.

Webcast and Conference Call Information

Sonendo will host a conference call to discuss the second quarter 2024 financial results after the market close on Wednesday, August 7, 2024, at 1:30 p.m. Pacific Time / 4:30 p.m. Eastern Time. Investors interested in listening to the conference call may do so by dialing [phone] for domestic callers or [phone] for international callers, using access code: 699662. Live audio of the webcast will be available at: https://investor.sonendo.com. An archived recording will be available on the “Investors” section of the Company’s website for replay for at least 30 days after the event.

About Sonendo

Sonendo is a commercial-stage medical technology Company focused on saving teeth from tooth decay, the most prevalent chronic disease globally. Sonendo develops and manufactures the GentleWave® System, an innovative technology platform designed to treat tooth decay by cleaning and disinfecting the microscopic spaces within teeth without the need to remove tooth structure. The system utilizes a proprietary mechanism of action, which combines procedure fluid optimization, broad-spectrum acoustic energy and advanced fluid dynamics, to debride and disinfect deep regions of the complex root canal system in a less invasive procedure that preserves tooth structure. The clinical benefits of the GentleWave System when compared to conventional methods of root canal therapy include improved clinical outcomes, such as superior cleaning that is independent of root canal complexity and tooth anatomy, high and rapid rates of healing and minimal to no post-operative pain. In addition, the GentleWave System can improve the workflow and economics of dental practices.

For more information about Sonendo and the GentleWave System, please visit www.sonendo.com. To find a GentleWave doctor in your area, please visit www.gentlewave.com.

Forward Looking Statements

This press release includes forward-looking statements (statements which are not historical facts) within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, express or implied forward-looking statements relating to the Company’s anticipated business and financial performance on an on-going basis and Sonendo’s 2024 financial guidance. You are cautioned that such statements are not guarantees of future performance and that our actual results may differ materially from those set forth in the forward-looking statements. Forward-looking statements are predictions, projections and other statements about future events that are based on current expectations and assumptions; speak only as of the date they are made; and, as a result, are subject to risks and uncertainties that may change at any time. Factors that could cause the Company’s actual results to differ materially from these forward-looking statements are described in detail in our registration statements, reports and other filings with the Securities and Exchange Commission, including the “Risk Factors” set forth in our Annual Report on Form 10-K, as supplemented by our quarterly reports on Form 10-Q. Such filings are available on our website or at www.sec.gov. We undertake no obligation to publicly update or revise forward-looking statements to reflect subsequent developments, events, or circumstances, except as may be required under applicable securities laws. Readers are cautioned not to put undue reliance on forward-looking statements, and the Company assumes no obligation and does not intend to update or revise these forward-looking statements, whether as a result of new information, future events, or otherwise.

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Ex. 99.1

Use of Non-GAAP Financial Measures

Sonendo’s financial results are prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”). In this press release, the Company also presents various non-GAAP financial measures, including adjusted gross margin, adjusted EBITDA loss and free cash flow burn (collectively, the “Non-GAAP” measures). The Company recently revised its methodology for calculating the Non-GAAP Measures. The following tables present reconciliations of various financial measures calculated in accordance with GAAP to those Non-GAAP measures that exclude (or, in the case of free cash flow burn, include) items specified in the tables. The GAAP measures shown in the tables below represent the most comparable GAAP measure to the applicable non-GAAP measures shown in the table. For further information regarding the nature of these exclusions or inclusions, why the Company believes that these non-GAAP financial measures provide useful information to investors, the specific manner in which management uses these measures, and some of the limitations associated with the use of these measures, please refer to the Company’s Current Report on Form 8-K regarding this press release filed today with the SEC available on the SEC’s website at www.sec.gov and on the “Investors” page of the Company’s website at https://investor.sonendo.com.

 

Investor Contact:

Gilmartin Group

Greg Chodaczek

[e-mail]

 

 

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Ex. 99.1

SONENDO, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

 

		June 30,				December 31,
		2024				2023
		(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	15,703			$	14,009
Short-term investments			8,533				32,773
Accounts receivable, net			4,528				4,790
Inventory			11,798				11,074
Prepaid expenses and other current assets			1,025				1,969
Current assets of discontinued operations			927				656
Total current assets			42,514				65,271
Property and equipment, net			766				461
Operating lease right-of-use assets			2,899				2,703
Other assets			124				128
Non-current assets of discontinued operations			—				9,597
Total assets		$	46,303			$	78,160
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	931			$	1,142
Accrued expenses			1,874				3,072
Accrued compensation			1,550				2,413
Operating lease liabilities			983				1,250
Current portion of term loan			10,800				24,900
Other current liabilities			1,592				1,844
Current liabilities of discontinued operations			—				700
Total current liabilities			17,730				35,321
Operating lease liabilities, net of current			1,765				1,423
Term loan, net of current			8,511				12,467
Other liabilities			428				530
Total liabilities			28,434				49,741
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.001 par value; authorized —10,000,000 shares; issued and outstanding - none			—				—
Common stock, $0.001 par value; authorized — 500,000,000 shares; issued and outstanding— 72,834,586 shares as of June 30, 2024 and 63,547,467 shares as of December 31, 2023			73				64
Additional paid-in-capital			461,938				458,357
Accumulated other comprehensive loss			(2	)			11
Accumulated deficit			(444,140	)			(430,013	)
Total stockholders’ equity			17,869				28,419
Total liabilities and stockholders’ equity		$	46,303			$	78,160

 

4

 

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Ex. 99.1

SONENDO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF

OPERATIONS AND COMPREHENSIVE LOSS

(unaudited)

(In thousands, except share and per share data)

		Three Months Ended June 30,								Six Months Ended June 30,
		2024				2023				2024				2023
Revenue, net		$	8,314			$	8,763			$	15,361			$	17,441
Cost of sales			5,198				9,248				10,244				15,948
Gross profit (loss)			3,116				(485	)			5,117				1,493
Operating expenses:
Selling and marketing			4,072				7,693				9,216				15,674
General and administrative			4,163				6,416				9,080				12,549
Research and development			1,568				2,764				3,757				5,691
Total operating expenses			9,803				16,873				22,053				33,914
Operating loss			(6,687	)			(17,358	)			(16,936	)			(32,421	)
Other expense, net:
Interest and financing costs, net			(759	)			(739	)			(2,699	)			(1,318	)
Loss before income tax expense			(7,446	)			(18,097	)			(19,635	)			(33,739	)
Income tax expense			—				—				—				—
Loss from continuing operations, net of tax			(7,446	)			(18,097	)			(19,635	)			(33,739	)
Income from discontinued operations, net of tax			81				407				5,508				678
Net loss		$	(7,365	)		$	(17,690	)		$	(14,127	)		$	(33,061	)
Other comprehensive income (net of tax):
Unrealized (loss) gain on short-term investments			(1	)			(25	)			(13	)			31
Comprehensive loss		$	(7,366	)		$	(17,715	)		$	(14,140	)		$	(33,030	)
Net loss per share from continuing operations – basic and diluted		$	(0.08	)		$	(0.19	)		$	(0.21	)		$	(0.36	)
Net income per share from discontinued operations – basic and diluted		$	—			$	—			$	0.06			$	0.01
Net loss per share – basic and diluted		$	(0.08	)		$	(0.19	)		$	(0.15	)		$	(0.35	)
Weighted-average shares outstanding – basic and diluted			95,429,233				93,684,289				95,085,847				93,538,676

 

 

5

 

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Ex. 99.1

SONENDO, INC.

RECONCILIATION OF GAAP TO NON-GAAP

FINANCIAL MEASURES

(unaudited; in thousands; except percentage)

		Three Months Ended June 30,								Six Months Ended June 30,
		2024				2023				2024				2023
Gross profit (loss)		$	3,116			$	(485	)		$	5,117			$	1,493
Gross margin			37.5	%			(5.5	%)			33.3	%			8.6	%
Adjustments:
Excess and obsolete inventory reserve related to recently discontinued products			241				2,917				241				2,917
Impairment of long-lived assets			15				—				161				—
Stock-based compensation expense			8				79				310				218
Adjusted gross profit		$	3,380			$	2,511			$	5,829			$	4,628
Adjusted gross margin			40.7	%			28.7	%			37.9	%			26.5	%
Loss from continuing operations, net of tax		$	(7,446	)		$	(18,097	)		$	(19,635	)		$	(33,739	)
Adjustments:
Interest and financing costs, net			759				739				2,699				1,318
Depreciation and amortization			73				397				128				750
Excess and obsolete inventory reserve related to recently discontinued products			241				2,917				241				2,917
Stock-based compensation expense			635				1,422				2,433				2,766
Impairment of long-lived assets			15				—				161				—
Adjusted EBITDA		$	(5,723	)		$	(12,622	)		$	(13,973	)		$	(25,988	)
Cash Flows
Cash flow used in operating activities		$	(6,718	)		$	(9,365	)		$	(17,407	)		$	(26,341	)
Purchases of property and equipment			(15	)			(417	)			(161	)			(627	)
Free cash flow (burn)		$	(6,733	)		$	(9,782	)		$	(17,568	)		$	(26,968	)

 

 

 

 

 

 

 

6

 

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Ex. 99.2

 

SONENDO, INC.

RECONCILIATION OF GAAP TO NON-GAAP

FINANCIAL MEASURES

(unaudited; in thousands; except percentage)

 

		Q1 2023				Q2 2023				Q3 2023				Q4 2023				Q1 2024				Q2 2024
Gross profit (loss)		$	1,978			$	(485	)		$	884			$	2,292			$	2,001			$	3,116
Gross margin			22.8	%			(5.5	%)			10.8	%			25.4	%			28.4	%			37.5	%
Adjustments:
Excess and obsolete inventory reserve related to recently discontinued products			—				2,917				—				—				—				241
Impairment of long-lived assets			—				—				1,341				243				146				15
Stock-based compensation expense			139				79				44				54				302				8
Adjusted gross profit		$	2,117			$	2,511			$	2,269			$	2,589			$	2,449			$	3,380
Adjusted gross margin			24.4	%			28.7	%			27.8	%			28.7	%			34.8	%			40.7	%
Loss from continuing operations, net of tax		$	(15,642	)		$	(18,097	)		$	(17,449	)		$	(11,273	)		$	(12,189	)		$	(7,446	)
Adjustments:
Interest and financing costs, net			579				739				884				994				1,940				759
Depreciation and amortization			353				397				402				11				55				73
Excess and obsolete inventory reserve related to recently discontinued products			—				2,917				—				—				—				241
Stock-based compensation expense			1,903				2,012				1,739				1,443				2,521				703
Impairment of long-lived assets			—				—				3,392				280				146				15
Adjusted EBITDA		$	(12,807	)		$	(12,032	)		$	(11,032	)		$	(8,545	)		$	(7,527	)		$	(5,655	)
Cash Flows
Cash flow used in operating activities		$	(16,976	)		$	(9,365	)		$	(10,216	)		$	(9,505	)		$	(10,689	)		$	(6,718	)
Purchases of property and equipment			(210	)			(417	)			(216	)			(86	)			(146	)			(15	)
Free cash flow (burn)		$	(17,186	)		$	(9,782	)		$	(10,432	)		$	(9,591	)		$	(10,835	)		$	(6,733	)

 

 

 

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Document And Entity Information	Aug. 07, 2024
Cover [Abstract]
Document Type	8-K
Amendment Flag	false
Document Period End Date	Aug. 07, 2024
Entity Registrant Name	Sonendo, Inc.
Entity Central Index Key	0001407973
Entity Emerging Growth Company	true
Entity File Number	001-40988
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	20-5041718
Entity Address, Address Line One	26061 Merit Circle, Suite 102
Entity Address, City or Town	Laguna Hills
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	92653
City Area Code	(949)
Local Phone Number	766-3636
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Entity Ex Transition Period	false
Title of 12(b) Security	Common Stock, par value $0.001 per share
Trading Symbol	SONX
Security Exchange Name	NONE

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