What changed in this filing

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Item 1. Financial Statements

2022-11-07 compared with 2022-08-08 · 95 added, 68 removed, 405 unchanged (29% of the section changed)

3 unchanged sentences

(in thousands, except per share amounts)

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Current assets:

Cash, cash equivalents, and restricted cash $ 10,885 $ 13,427

Accounts receivable, net of allowance for doubtful accounts of $ 2,819 and $ 2,210 at June 30, 2022 and December 31, 2021, respectively

Accounts receivable, net of allowance for doubtful accounts of $ 2,751 and $ 2,210 at September 30, 2022 and December 31, 2021, respectively

Inventory 323 246

36 unchanged sentences

44,000 shares authorized;

20,455 and 20,412 shares issued, 20,141 and 20,028 shares outstanding at June 30, 2022 and December 31, 2021, respectively

Treasury stock at cost, 384 shares at June 30, 2022 and December 31, 2021

20,544 and 20,412 shares issued, 20,160 and 20,028 shares outstanding at September 30, 2022 and December 31, 2021, respectively

Treasury stock at cost, 384 shares at September 30, 2022 and December 31, 2021

( 5,017 ) ( 5,017 )

9 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

13 unchanged sentences

Interest expense, net ( 1,122 ) ( 530 ) ( 3,006 ) ( 977 )

(Loss) gain on extinguishment of debt — ( 342 ) 180 8,312

Employee retention tax credit — 10,533 — 10,533

Other income, net 399 — 1,349 —

25 unchanged sentences

Share based compensation — — — 814 — — 814

Share issuance costs — — — — — — —

Net loss — — — — ( 5,860 ) — ( 5,860 )

1 unchanged sentence

Balance at June 30, 2022 20,142 $ 205 $ ( 5,017 ) $ 431,647 $ ( 275,637 ) $ ( 1,658 ) $ 149,540

Stock issued upon option exercise and vesting of restricted stock units 18 — — — — — —

Share based compensation — — — 798 — — 798

Net loss — — — — ( 4,533 ) — ( 4,533 )

Other comprehensive loss — — — — — ( 1,243 ) ( 1,243 )

Balance at September 30, 2022 20,160 $ 205 $ ( 5,017 ) $ 432,445 $ ( 280,170 ) $ ( 2,901 ) $ 144,562

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

16 unchanged sentences

Balance at June 30, 2021 19,099 $ 195 $ ( 5,017 ) $ 421,633 $ ( 267,787 ) $ 396 $ 149,420

Stock issued upon option exercise and vesting of restricted stock units 102 1 — 57 — — 58

Shares issued — acquisitions 767 8 — 6,420 — — 6,428

Share based compensation — — — 784 — — 784

Net income — — — — 5,328 — 5,328

Other comprehensive loss — — — — — ( 79 ) ( 79 )

Balance at September 30, 2021 19,968 $ 204 $ ( 5,017 ) $ 428,894 $ ( 262,459 ) $ 317 $ 161,939

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

2 unchanged sentences

(in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Cash flows from operating activities:

12 unchanged sentences

Change in fair value of contingent purchase consideration ( 1,350 ) ( 191 )

Adjustment to Intangibles 23 —

Changes in operating assets and liabilities:

16 unchanged sentences

Cash flows from financing activities:

Proceeds from notes payable — 29,425

Payments of notes payable ( 1,688 ) ( 15,073 )

Payments of contingent purchase consideration ( 9 ) ( 1,784 )

Debt financing fees — ( 878 )

Net proceeds from issuance of common stock 192 526

8 unchanged sentences

(in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Reconciliation of cash, cash equivalents, restricted cash, and restricted cash equivalents to the Condensed Consolidated Balance Sheets

5 unchanged sentences

Cash paid for income taxes $ 246 $ 332

Net assets added from acquisitions $ — $ 763

Non-cash investing and financing activities:

Contingent purchase consideration issued for acquisitions $ — $ 3,038

Notes payable issued for acquisitions $ 411 $ 4,386

Stock issuance for acquisitions $ — $ 6,428

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

16 unchanged sentences

GAAP”) for complete financial statements.

In the opinion of management, these interim financial statements contain all adjustments, consisting of normal, recurring adjustments, necessary for a fair presentation of our financial position as of June 30, 2022 and the results of operations, statements of changes in stockholders’ equity for the three and six months ended June 30, 2022 and June 30, 2021, and our statements of cash flows for the six months ended June 30, 2022 and June 30, 2021.

In the opinion of management, these interim financial statements contain all adjustments, consisting of normal, recurring adjustments, necessary for a fair presentation of our financial position as of September 30, 2022 and the results of operations, statements of changes in stockholders’ equity for the three and nine months ended September 30, 2022 and September 30, 2021, and our statements of cash flows for the nine months ended September 30, 2022 and September 30, 2021.

Certain amounts in the prior period financial statements have been reclassified to conform to the presentation of the current period financial statements.

These reclassifications had no effect on the consolidated financial position or consolidated results of operations of the Company.

These unaudited Condensed Consolidated Financial Statements should be read in conjunction with our audited Consolidated Financial Statements and notes thereto filed with the SEC in our annual report on Form 10-K for the fiscal year ended December 31, 2021 (our “2021 Annual Report on Form 10-K”).

14 unchanged sentences

Restricted cash consists of cash balances which are restricted as to withdrawal or usage.

As of June 30, 2022, the Company has $500 of restricted cash related to our agreement with South State Bank.

As of September 30, 2022, the Company has $500 of restricted cash related to collateralizing a letter of credit issued by South State Bank in connection with our money transmission licenses.

RECENT ACCOUNTING PRONOUNCEMENTS

13 unchanged sentences

ACCUMULATED OTHER COMPREHENSIVE LOSS

As of June 30, 2022 and December 31, 2021, accumulated other comprehensive loss consisted of net unrealized gains and losses on available-for-sale securities.

As of September 30, 2022 and December 31, 2021, accumulated other comprehensive loss consisted of net unrealized gains and losses on available-for-sale securities.

NOTE 3 - BUSINESS COMBINATIONS AND ASSET ACQUISITIONS

Effective January 1, 2022, the Company acquired customer relationships of a payroll business for a cash payment of $ 1,970 , which included $ 31 of transaction costs, and the delivery of a promissory note in the amount of $ 411 .

The acquired customer relationships are recorded as an intangible asset and are being amortized on a straight-line basis over eight years.

In September 2021, the Company acquired certain assets (the “Asset Purchase Agreement”) of a payroll business, which was used to provide payroll processing services.

6 unchanged sentences

(i) $ 15,000 was paid in cash at closing, (ii) the delivery of 523 shares of the Company’s common stock which both parties agreed had an aggregate value of $ 4,800 at closing, and (iii) the delivery of a promissory note of $ 4,350 .

The promissory note also includes a contingent consideration, which is contingent on certain thresholds and will be based on the trailing twelve-month revenue at September 30, 2022, which we expect will be paid in the fourth quarter of 2022.

The promissory note also includes a contingent consideration, which is contingent on certain thresholds and will be based on the trailing twelve-month revenue at September 30, 2022.

Additionally, we utilized a Monte Carlo simulation to determine the fair value of the contingent consideration.

For the year ended December 31, 2021, there was a measurement period adjustment to the fair value of the contingent consideration of $ 465 .

For the quarter ended June 30, 2022, there was a measurement period adjustment to the fair value of the contingent consideration of $1,350.

The promissory note was adjusted to $4,533 to account for post close and working capital adjustments.

The acquired customer relationships are recorded as an intangible asset and are being amortized on a straight-line basis over eight years.

For the quarter ended September 30, 2022, there was a measurement period adjustment to the fair value of the contingent consideration of $ 404 .

For the nine months ended September 30, 2022 the fair value of the contingent consideration was $671, which will be added to promissory note in the fourth quarter of 2022.

The promissory note amount as of September 30, 2022 was $ 4,080 due to a principal payment made during the period.

NOTE 4 - INVESTMENTS AND FAIR VALUE MEASUREMENTS

9 unchanged sentences

Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The following table presents the fair value hierarchy for our financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2022 and December 31, 2021, respectively (in thousands):

The following table presents the fair value hierarchy for our financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2022 and December 31, 2021, respectively (in thousands):

Total Carrying Value Level 1 Level 2 Level 3

June 30, 2022

September 30, 2022

Funds held for clients

15 unchanged sentences

Restricted cash equivalents and investments classified as available-for-sale within funds held for clients consisted of the following (in thousands):

June 30, 2022

September 30, 2022

Restricted cash equivalents $ 3,120 $ — $ — $ 3,120

16 unchanged sentences

(1) Unrealized gains and losses on available-for-sale securities are included as a component of comprehensive loss.

As of June 30, 2022 and December 31, 2021, there were 22 and 10 securities, respectively, in an unrealized gain position and there were 85 and 57 securities in an unrealized loss position, respectively.

As of June 30, 2022, these unrealized losses were less than $ 68 individually and $ 1,761 in the aggregate.

As of September 30, 2022 and December 31, 2021, there were 2 and 10 securities, respectively, in an unrealized gain position and there were 104 and 57 securities in an unrealized loss position, respectively.

As of September 30, 2022, these unrealized losses were less than $ 99 individually and $ 2,601 in the aggregate.

As of December 31, 2021, these unrealized losses were less than $ 11 individually and $ 114 in the aggregate.

3 unchanged sentences

Factors considered in determining whether a loss is other-than-temporary include the length of time and extent to which fair value has been less than the cost basis, the financial condition and near-term prospects of the investee, and our intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value.

(2) At June 30, 2022 and December 31, 2021, none of these securities were classified as cash and cash equivalents on the accompanying Condensed Consolidated Balance Sheets.

(2) At September 30, 2022 and December 31, 2021, none of these securities were classified as cash and cash equivalents on the accompanying Condensed Consolidated Balance Sheets.

Funds held for clients represent assets that the Company has classified as restricted for use solely for the purposes of satisfying the obligations to remit funds relating to the Company’s payroll and payroll tax filing services, which are classified as client funds obligations on our Condensed Consolidated Balance Sheets.

Funds held for clients have been invested in the following categories (in thousands):

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Restricted cash and cash equivalents held to satisfy client funds obligations $ 126,690 $ 185,213

2 unchanged sentences

Total funds held for clients $ 181,969 $ 217,273

Expected maturities of available-for-sale securities as of June 30, 2022 are as follows (in thousands):

Expected maturities of available-for-sale securities as of September 30, 2022 are as follows (in thousands):

One year or less $ 7,215

1 unchanged sentence

Total $ 55,279

The previously reported comprehensive loss on the Condensed Consolidated Statement of Comprehensive Loss for the three-month and six-month period ended June 30, 2022, was inconsistent with the amount reported as “Other Comprehensive Loss” on the Condensed Consolidated Balance Sheet and the Condensed Consolidated Statement of Stockholders’ Equity as of and for the period ended June 30, 2022, which reported the correct changes in other comprehensive loss.

For the three months ended June 30, 2022 the Company reported “Other Comprehensive Loss” of $7,614 versus the amount of $6,356.

For the six months ended June 30, 2022 the Company reported “Other Comprehensive Loss” of $9,940 versus the amount of $10,436.

The Company completed an analysis based on the guidance from Staff Accounting Bulletin No.

99 and determined that the related impacts were not material to any previously presented financial statements, and therefore decided to modify the reporting of this inconsistency on a prospective basis.

NOTE 5 - GOODWILL AND OTHER INTANGIBLE ASSETS

2021 Acquisitions 2022

December 31, 2021 Acquisitions September 30, 2022

Goodwill $ 86,011 $ — $ 86,011

We believe significant synergies are expected to arise from our strategic acquisitions and their assembled workforces.

We believe significant synergies are expected to arise from our strategic acquisitions and their assembled work forces.

This factor contributed to a purchase price that was in excess of the fair value of the net assets acquired and, as a result, we recorded goodwill for each acquisition.

A portion of acquired goodwill will be amortizable for tax purposes.

As of June 30, 2022, there has been no impairment of goodwill based on the qualitative assessments performed by the Company.

Gross Intangible Assets 2021 Acquisitions 2022

As of September 30, 2022, there has been no impairment of goodwill based on the qualitative assessments performed by the Company.

Gross Intangible Assets December 31, 2021 Acquisitions September 30, 2022

Customer relationships $ 114,611 $ 2,360 $ 116,971

4 unchanged sentences

$ 129,536 $ 2,687 $ 132,223

The gross carrying amount and accumulated amortization of our intangible assets as of June 30, 2022 are as follows (in thousands, except weighted average periods):

The gross carrying amount and accumulated amortization of our intangible assets as of September 30, 2022 are as follows (in thousands, except weighted average periods):

Weighted Average

1 unchanged sentence

Amortization Net

June 30, 2022

September 30, 2022

Customer relationships 8.9 $ 116,971 $ ( 49,427 ) $ 67,544

12 unchanged sentences

We record amortization expenses using the straight-line method over the estimated useful lives of the intangible assets, as noted above.

Amortization expenses recorded in Operating Expenses were $ 6,784 and $ 5,056 for the six months ended June 30, 2022 and 2021, respectively.

Amortization expenses recorded in Cost of Sales were $ 593 and $ 757 for the six months ended June 30, 2022 and 2021, respectively.

There was no impairment of intangibles during the six months ended June 30, 2022 based on the qualitative assessment performed by the Company.

Amortization expenses recorded in Operating Expenses were $ 10,134 and $ 7,590 for the nine months ended September 30, 2022 and 2021, respectively.

Amortization expenses recorded in Cost of Sales were $ 889 and $ 1,135 for the nine months ended September 30, 2022 and 2021, respectively.

There was no impairment of intangibles during the nine months ended September 30, 2022 based on the qualitative assessment performed by the Company.

However, if market, political and other conditions over which we have no control continue to affect the capital markets and our stock price declines, we may experience an impairment of our intangibles in future quarters.

The following table summarizes the future estimated amortization expense relating to our intangible assets as of June 30, 2022 (in thousands):

The following table summarizes the future estimated amortization expense relating to our intangible assets as of September 30, 2022 (in thousands):

Thereafter 10,377

1 unchanged sentence

The following table summarizes our outstanding debt as of the dates indicated (in thousands):

Maturity Cash Interest Rate June 30, 2022 December 31, 2021

Maturity Cash Interest Rate September 30, 2022 December 31, 2021

Subordinated Notes Payable – Acquisitions (1)

6 unchanged sentences

Gross Notes Payable Debt Issuance Costs and Debt Discount Net Notes Payable

June 30, 2022

September 30, 2022

Current portion of notes payable $ 3,274 $ ( 210 ) $ 3,064

5 unchanged sentences

Total $ 38,402 $ ( 3,375 ) $ 35,027

The following table summarizes the future principal payments related to our outstanding debt as of June 30, 2022 (in thousands):

The following table summarizes the future principal payments related to our outstanding debt as of September 30, 2022 (in thousands):

Total $ 37,269

Subordinated Notes Payable - Acquisitions

In August 2022, the Company reached an agreement with the holders of the subordinated note payable, issued in connection with the purchase of a business acquired in 2018 to settle outstanding indemnification claims for $ 190 , which reduced the outstanding balance of the subordinated note payable (including interest) to $ 600 .

There remained no outstanding balance on the note as of September 30, 2022.

There remains an outstanding principal balance on the subordinated note payable issued in connection with the

purchase of a business the Company acquired in 2020, which note matured on July 1, 2022.

$ 634 of the principal balance was paid on July 1, 2022.

A $ 232 payment on the principal balance was withheld as security for outstanding claims for which we are entitled to indemnification under the purchase agreement.

The Company will make payment, subject to its rights of set-off under the purchase agreement, when the claims are resolved.

Due to its rights under the purchase agreement and the terms of this note, the Company is not in default under the note.

Senior Credit Facility with Structural Capital Investments III, LP

4 unchanged sentences

At the onset of the agreement, we paid to the Lenders an origination fee of $ 500 .

Interest accrues on any outstanding balance at a rate equal to the greater of 9.0% or the Prime Rate, plus 5.75% (the “Basic Rate”) and is payable in advance.

Interest accrues on any outstanding balance at a rate equal to the greater of 9.0% or the Prime Rate, plus 5.75% (the “Basic Rate”) and is payable in advance, which as of September 30, 2022 was 12.0%.

In addition, interest is paid in kind (“PIK”) at a rate of 1.00% or 1.25% based on our APR Ratio, measured on a quarterly basis.

11 unchanged sentences

NOTE 7 – CONTRACTS WITH CUSTOMERS AND REVENUE CONCENTRATION

Receivables from contracts with customers, net of allowance for doubtful accounts of $ 2,819 , were $ 5,736 at June 30, 2022.

Receivables from contracts with customers, net of allowance for doubtful accounts of $ 2,751 , were $ 6,821 at September 30, 2022.

Receivables from contracts with customers, net of allowance for doubtful accounts of $ 2,210 , were $ 5,308 at December 31, 2021.

No customers represented more than 10% of our net accounts receivable balance as of June 30, 2022 and December 31, 2021, respectively.

No customers represented more than 10% of our net accounts receivable balance as of September 30, 2022 and December 31, 2021, respectively.

Deferred Commissions

Deferred commission costs from contracts with customers were $ 5,467 and $ 4,684 at June 30, 2022 and December 31, 2021, respectively.

The amount of amortization recognized for the three and six months ended June 30, 2022 $ 435 and $ 780 , respectively, and for the three and six months ended June 30, 2021 was $ 307 and $ 539 , respectively.

Deferred commission costs from contracts with customers were $ 5,875 and $ 4,684 at September 30, 2022 and December 31, 2021, respectively.

The amount of amortization recognized for the three and nine months ended September 30, 2022 $ 412 and $ 1,192 , respectively, and for the three and nine months ended September 30, 2021 was $ 424 and $ 963 , respectively.

Deferred Revenue

During the three and six months ended June 30, 2022, revenue of $ 293 and $ 3,205 , and the three and six months ended June 30, 2021, revenue of $ 442 and $ 3,848 , respectively, was recognized from the deferred revenue balance at the beginning of each period.

During the three and nine months ended September 30, 2022, revenue of $ 156 and $ 3,362 , and the three and nine months ended September 30, 2021, revenue of $ 460 and $ 4,308 , respectively, was recognized from the deferred revenue balance at the beginning of each period.

Transaction Price Allocated to the Remaining Performance Obligations

As of June 30, 2022, approximately $ 26,340 of revenue is expected to be recognized from remaining performance obligations.

As of September 30, 2022, approximately $ 26,509 of revenue is expected to be recognized from remaining performance obligations.

We expect to recognize revenue on approximately 82 % of these remaining performance obligations over the next 12 months, with the balance recognized thereafter.

Revenue Concentration

During the three and six months ended June 30, 2022 and 2021, there were no customers that individually represented 10% or more of consolidated revenue.

During the three and nine months ended September 30, 2022 and 2021, there were no customers that individually represented 10% or more of consolidated revenue.

NOTE 8 - LEASES

6 unchanged sentences

In the accompanying Condensed Consolidated Statements of Comprehensive Loss, rent expense is included in operating expenses under general and administrative expenses.

The components of the rent expense for the six months ended June 30, 2022 and 2021 are as follows (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

The components of the rent expense for the nine months ended September 30, 2022 and 2021 are as follows (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

3 unchanged sentences

For purposes of calculating the operating lease assets and lease liabilities, extension options are not included in the lease term unless it is reasonably certain we will exercise the option, or the lessor has the sole ability to exercise the option.

The weighted average discount rate of our operating leases is 8 % as of June 30, 2022 and December 31, 2021, respectively.

The weighted average remaining lease term is five years and six years as of June 30, 2022 and December 31, 2021, respectively.

Supplemental cash flow information related to operating leases for the six months ended June 30 are as follows (in thousands):

Six Months Ended June 30,

The weighted average discount rate of our operating leases is 8 % as of September 30, 2022 and December 31, 2021, respectively.

The weighted average remaining lease term is five years and five years as of September 30, 2022 and December 31, 2021, respectively.

Supplemental cash flow information related to operating leases for the nine months ended September 30 are as follows (in thousands):

Nine Months Ended September 30,

Cash paid for amounts included in the measurement of lease liabilities:

11 unchanged sentences

The number of shares available for issuance under the 2018 Plan is equal to the sum of (i) 4,350 shares, and (ii) any shares subject to issued and outstanding awards under the 2009 Plan as of the effective date of the 2018 Plan that expire, are canceled or otherwise terminate following the effective date of the 2018 Plan.

We have 2,312 options and RSUs granted and outstanding pursuant to the 2018 Plan as of June 30, 2022.

As of June 30, 2022, the number of shares available for issuance under the 2018 Plan is 1,535 .

Share based compensation for our stock option plans for the three months ended June 30, 2022 and June 30, 2021 was $ 814 and $ 714 , respectively and for the six months ended June 30, 2022 and June 30, 2021 $ 1,542 and $ 1,340 .

We issued no common stock related to exercises of stock options for the three months ended June 30, 2022 and issued 85 shares of common stock related to exercises for the three months ended June 30, 2021.

We issued 30 and 28 shares of common stock upon the vesting of restricted stock units, net for the three months ended June 30, 2022 and 2021, respectively.

We have 2,285 options and RSUs granted and outstanding pursuant to the 2018 Plan as of September 30, 2022.

As of September 30, 2022, the number of shares available for issuance under the 2018 Plan is 1,439 .

Share based compensation for our stock option plans for the three months ended September 30, 2022 and September 30, 2021 was $ 799 and $ 714 , respectively and for the nine months ended September 30, 2022 and September 30, 2021 $ 2,342 and $ 2,124 .

We issued no common stock related to exercises of stock options for the three months ended September 30, 2022 and issued 9 shares of common stock related to exercises for the three months ended September 30, 2021.

We issued 22 and 93 shares of common stock upon the vesting of restricted stock units, net for the three months ended September 30, 2022 and 2021, respectively.

NOTE 10 - NET LOSS PER SHARE

2 unchanged sentences

We compute the number of common share equivalents, which includes stock options, using the treasury stock method.

We have excluded stock options and restricted stock units of 2,312 and 2,172 for the three and six months ended June 30, 2022 and 2021, respectively, from the computation of the diluted shares because the effect of including the stock options and restricted stock units would have been anti-dilutive.

The following table sets forth the computation of basic and diluted net loss per common share for the three and six months ended June 30 (in thousands, except per share amounts):

Three Months Ended June 30, Six Months Ended June 30,

We have excluded stock options and restricted stock units of 2,285 and 2,040 for the three and nine months ended September 30, 2022 and 2021, respectively, from the computation of the diluted shares because the effect of including the stock options and restricted stock units would have been anti-dilutive.

The following table sets forth the computation of basic and diluted net loss per common share for the three and nine months ended September 30 (in thousands, except per share amounts):

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

5 unchanged sentences

Diluted loss per share $ ( 0.22 ) $ 0.28 $ ( 0.67 ) $ 0.39

NOTE 11 - SUBSEQUENT EVENTS

In July 2022, the Company reached an agreement with the holders of the subordinated note payable, issued in connection with the purchase of a business the Company acquired in 2018 to settle outstanding indemnification claims for $190, which reduced the outstanding balance of the subordinated note payable (including interest) to $600.

This note was adjusted to $600 as of June 30, 2022.

Also in July 2022, the Company agreed to the amount of the contingent consideration earned in connection with the acquisition of its payroll tax processing business in July 2020, and adjusted the amount of this contingent consideration as of June 30, 2022, to $2,229.

There remains an outstanding principal balance on the subordinated note payable issued in connection with the purchase of a business we acquired in 2020, which note matured on July 1, 2022.

$634 of the principal balance was paid on July 1, 2022.

A $232 payment on the principal balance was withheld as security for outstanding claims for which we are entitled to indemnification under the purchase agreement.

The Company will make payment, subject to its rights of set-off under the purchase agreement, when the claims are resolved.

Due to its rights under the purchase agreement and the terms of this note, the Company is not in default under the note.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements