What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2022-03-29 compared with 2021-03-31 · 72 added, 399 removed, 12 unchanged (98% of the section changed)

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information

On February 17,

2021, we completed a public offering of 6,210,000 shares of our common stock, inclusive of the underwriters’

full overallotment, at $10.00 per share for total gross offering proceeds of $62,100,000.

In connection with the offering,

we received approval to list our common stock on the Nasdaq Capital Market under the symbol “UGRO”.

offering, shares of our common stock were quoted on the OTC Markets Group, Inc.

OTCQX Marketplace under the symbol “UGRO”.

Although our shares were quoted on the OTCQX Marketplace from October 7, 2019 through February 11, 2021, because

trading on the OTCQX Marketplace was infrequent and limited in volume, the prices at which such transactions occurred did not

necessarily reflect the price that would have been paid for our common stock in a more liquid market.

The trading price

of our common stock has been, and may continue to be, subject to wide price fluctuations in response to various factors, many

of which are beyond our control, including those described in Part I, Item 1A, “Risk Factors.”

following table sets forth the high and low closing bid price information for our common stock on the OTCQX Marketplace for the

periods indicated.

The over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down, or commission

and may not necessarily represent actual transactions.

Trading activity for our common stock prior to listing on the Nasdaq Capital

Market on February 12, 2021 can be found at www.otcmarkets.com .

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

February 17, 2021, we completed a public offering of 6,210,000 shares of our common stock, inclusive of the underwriters’ full

overallotment, at $10.00 per share for total gross offering proceeds of $62,100,000.

In connection with the offering, we received approval

to list our common stock on the Nasdaq Capital Market under the symbol “UGRO”.

Prior to the offering, shares of our common

stock were quoted on the OTC Markets Group, Inc.

OTCQX Marketplace under the symbol “UGRO”.

Although our shares were quoted

on the OTCQX Marketplace from October 7, 2019 through February 11, 2021, because trading on the OTCQX Marketplace was infrequent and

limited in volume, the prices at which such transactions occurred did not necessarily reflect the price that would have been paid for

our common stock in a more liquid market.

trading price of our common stock has been, and may continue to be, subject to wide price fluctuations in response to various factors,

many of which are beyond our control, including those described in Part I, Item 1A, “Risk Factors.”

The following table sets forth the high and low closing

bid price information for our common stock on the Nasdaq Capital Market for the time periods indicated.

Prior to February

12, 2021, our common stock was traded on the OTCQX Marketplace.

Trading activity for our common stock on the OTCQX Marketplace

can be found at www.otcmarkets.com .

Quarter Ended

2 unchanged sentences

June 30, 2021

March 31, 2020

October 7, 2019 thru December 31, 2019

February 12 thru March 31, 2021

of March 26, 2021, we had 6,846 holders of record for our Common Stock.

our inception, we have not paid any dividends on our common stock, and we currently expect that, for the foreseeable future, all

earnings, if any, will be retained for use in the development and operation of our business.

In the future, our Board may decide,

at its discretion, whether dividends may be declared and paid to holders of our common stock.

our inception, we have not paid any dividends on our common stock, and we currently expect that, for the foreseeable future, all earnings,

if any, will be retained for use in the development and operation of our business.

In the future, our Board may decide, at its discretion,

whether dividends may be declared and paid to holders of our common stock.

are subject to certain reporting requirements and furnish annual financial reports to our stockholders, certified by our independent

accountants, and furnish unaudited quarterly financial reports in our quarterly reports filed electronically with the SEC.

reports and information filed by us can be found at the SEC website, www.sec.gov.

and information filed by us can be found at the SEC website, www.sec.gov.

SALES OF UNREGISTERED SECURTIES

the year ended December 31, 2020, we issued the following

securities that were not registered under the Securities Act:

February 21, 2020, we entered into a letter agreement (the “Credit Agreement”) by and among us, as borrower,

urban-gro Canada Technologies Inc.

and Impact Engineering, Inc., as guarantors, the lenders party thereto, and Bridging

Finance Inc., as administrative agent for the lenders (the “Agent”).

As additional consideration for the entering

into the Credit Agreement, we issued 83,333 shares of our common stock and warrants to purchase 20,746 shares of common stock

with an exercise price of $14.46 per share to the Agent.

We relied upon the exemption from registration provided by Section

4(a)(2) of the Securities Act to issue the securities.

December 15, 2020, we signed a $1,854,500 convertible note (the “Notes”) bridge financing (the “Bridge

Financing”).

The Bridge Financing is a combination of $1,354,500 received on November 20, 2020, and an additional

$500,000 received on December 15, 2020.

The Bridge Financing was raised by a combination of our Board of Directors, our

current investors and two new institutional funds.

In connection with the Bridge Financing, an outstanding $1,000,000

promissory note and $4,500 interest accrued thereon was converted into a Note.

The Notes were issued in reliance upon the

exemption from registration under Section 4(a)(2) of the Securities Act.

The Notes carried interest at the rate of 12% and

were scheduled to mature on December 31, 2021.

Pursuant to the mandatory conversion provisions therein, the Notes plus

accrued interest of $53,725 were converted into 254,430 shares of common stock upon completion of the public offering

described in more detail below.

the years ended December 31, 2020 and 2021, we issued the following securities that were not registered under the Securities

February 21, 2020, we entered into a letter agreement (the “Credit Agreement”) by and among us, as borrower, urban-gro

Canada Technologies Inc.

and Impact Engineering, Inc., as guarantors, the lenders party thereto, and Bridging Finance Inc., as administrative

agent for the lenders (the “Agent”).

As additional consideration for the entering into the Credit Agreement, we issued

83,333 shares of our common stock and warrants to purchase 20,746 shares of common stock with an exercise price of $14.46 per share

to the Agent.

We relied upon the exemption from registration provided by Section 4(a)(2) of the Securities Act to issue the securities.

December 15, 2020, we signed a $1,854,500 convertible note (the “Notes”) bridge financing (the “Bridge Financing”).

The Bridge Financing is a combination of $1,354,500 received on November 20, 2020, and an additional $500,000 received on December

The Bridge Financing was raised by a combination of our Board of Directors, our current investors and two new institutional

In connection with the Bridge Financing, an outstanding $1,000,000 promissory note and $4,500 interest accrued thereon was

converted into a Note.

The Notes were issued in reliance upon the exemption from registration under Section 4(a)(2) of the Securities

The Notes carried interest at the rate of 12% and were scheduled to mature on December 31, 2021.

Pursuant to the mandatory conversion

provisions therein, the Notes plus accrued interest of $53,725 were converted into 254,430 shares of common stock upon completion

of the public offering described in more detail below.

of Registered Public Offering

February 11, 2021, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with ThinkEquity,

a division of Fordham Financial Management, Inc.

(the “Underwriter”), relating to the Company’s underwritten

public offering of its common stock.

Pursuant to the Underwriting Agreement, the Company agreed to sell 5,400,000 shares of Common

Stock to the Underwriter at a public offering price of $10.00 per share, and granted the Underwriter

a 45-day over-allotment option to purchase up to 810,000 additional shares of Common Stock, equivalent to 15% of the shares of

Common Stock sold in the Offering (the “Option”), pursuant to the Company’s registration statement on Form S-1

333-250120 and 333-253011) (the “Registration Statement”), under the Securities Act of 1933.

closed on February 17, 2021, and the Company sold 6,210,000 shares of Common Stock to the Underwriter for total gross proceeds

of $62.1 million, which includes 810,000 shares sold upon the full exercise of the Option.

After deducting the underwriting commissions,

discounts, and offering expenses, the Company received net proceeds of approximately $57.8 million.

On February 17, 2021, pursuant

to the Underwriting Agreement, the Company issued the Warrants to purchase up to an aggregate of 310,500 shares of Common Stock.

February 11, 2021, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with ThinkEquity, a

division of Fordham Financial Management, Inc.

(the “Underwriter”), relating to the Company’s underwritten public offering

of its common stock.

Pursuant to the Underwriting Agreement, the Company agreed to sell 5,400,000 shares of Common Stock to the Underwriter

at a public offering price of $10.00 per share, and granted the Underwriter a 45-day over-allotment option to purchase up to 810,000

additional shares of Common Stock, equivalent to 15% of the shares of Common Stock sold in the Offering (the “Option”), pursuant

to the Company’s registration statement on Form S-1 (File Nos.

333-250120 and 333-253011) (the “Registration Statement”),

under the Securities Act of 1933.

The offering closed on February 17, 2021, and the Company sold 6,210,000 shares of Common Stock to

the Underwriter for total gross proceeds of $62.1 million, which includes 810,000 shares sold upon the full exercise of the Option.

deducting the underwriting commissions, discounts, and offering expenses, the Company received net proceeds of approximately $57.4

On February 17, 2021, pursuant to the Underwriting Agreement, the Company issued the Warrants to purchase up to an aggregate

of 310,500 shares of Common Stock.

The Warrants may be exercised beginning on August 11, 2021 until February 11, 2026.

The initial exercise price of each Warrant

is $12.50 per share, which represents 125% of the Offering Price.

On February 19, 2021 we used $5.8 million of the net proceeds

to repay outstanding under and terminated the Credit Agreement.

We intend to use the remaining net proceeds to support our organic

growth, to expand in the European CEA market and for other general corporate purposes, including to fund potential future investments

and acquisitions of companies that we believe are complementary to our business and consistent with our growth strategy.

we may, from time to time, evaluate potential strategic investments and acquisitions, we do not have any definitive agreements

The initial exercise

price of each Warrant is $12.50 per share, which represents 125% of the Offering Price.

On February 19, 2021 we used $5.8 million of

the net proceeds to repay outstanding under and terminated the Credit Agreement.

We intend to use the remaining net proceeds to support

our organic growth, to expand in the European CEA market and for other general corporate purposes, including to fund potential future

investments and acquisitions of companies that we believe are complementary to our business and consistent with our growth strategy.

Although we may, from time to time, evaluate potential strategic investments and acquisitions, we do not have any definitive agreements

in place to make any such acquisitions at this current time.

The expected use of net proceeds from the offering represents our

intentions based upon our current plans and business conditions, which could change in the future as our plans and business conditions

evolve and change.

The expected use of net proceeds from the offering represents our intentions

based upon our current plans and business conditions, which could change in the future as our plans and business conditions evolve and

As a result, our management will have broad discretion over how these proceeds are used.

The remaining net

proceeds will be invested in short-term investments until needed for the uses described above.

Selected Financial Data

a smaller reporting company, we are not required to provide this information.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

following discussion and analysis of our results of operations and financial condition should be read together with the financial

statements and related notes and the other financial information included elsewhere in this Report.

Such discussion and analysis

reflects our historical results of operations and financial position.

This discussion contains forward-looking statements based

upon current expectations that involve risks and uncertainties.

Our actual results may differ materially from those anticipated

in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors”

and “Cautionary Note Regarding Forward-Looking Statements”

and elsewhere in this Report.

All share and per share amounts

presented herein have been restated to reflect the implementation of the 1-for-6 reverse stock split as if it had occurred at

the beginning of the earliest period presented.

AND HISTORY –

See “Item 1.

Business”

for a further description of our History and Background

are a leading engineering and design services company focused on the sustainable commercial indoor horticulture market.

and design indoor CEA facilities and then integrate complex environmental equipment systems into those facilities.

December 2019, a novel strain of coronavirus, COVID-19, was reported to have surfaced in Wuhan, China.

In January 2020, this coronavirus

spread to other countries, including the United States, and efforts to contain the spread of this coronavirus intensified.

March 2020, the World Health Organization declared the outbreak of the coronavirus a pandemic.

We are a business that supplies

other essential businesses with support and supplies necessary to operate and we therefore believe we are an essential business

allowed to continue operating under the Stay-At-Home Orders that may be issued by many states and cities.

The extent to which the COVID-19 pandemic impacts our results will

depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge

concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its impact.

The outbreak and any preventative

or protective actions that governments or we may take in respect of COVID-19 may result in a period of business disruption, reduced

client business and reduced operations.

to the uncertainty and adverse impact on our operations and financial condition resulting from the outbreak of COVID-19, we took

the following actions:

March 2020, we began executing a substantial reduction in discretionary marketing and general & administrative expenses.

March 30, 2020, we reduced our headcount by 13 people (27%), from 48 to 35, by terminating ten employees and furloughing three

other employees, including one member of our leadership team.

April 6, 2020, we reduced compensation for almost every remaining employee, including a 20% reduction for the senior members

of our leadership team.

July 27, 2020, the reduced compensation for everyone other than the leadership team was reinstated.

Effective September 7,

2020, the reduced compensation for the leadership team was reinstated.

ultimate magnitude of COVID-19, including the extent of its impact on our financial and operational results, which could be material,

will depend on the length of time that the pandemic continues, its effect on the demand for our products and our supply chain,

the effect of governmental regulations imposed in response to the pandemic, as well as uncertainty regarding all of the foregoing.

We cannot at this time predict the full impact of the COVID-19 pandemic, but it could have a larger material adverse effect on

our business, financial condition, results of operations and cash flows beyond what is discussed within this Report.

Aid, Relief, and Economic Security Act (“CARES Act”)

March 27, 2020, the CARES Act was enacted.

The CARES Act is an approximate $2 trillion emergency economic stimulus package passed

in response to the coronavirus outbreak.

The CARES Act, among other things, includes broad sweeping provisions such as direct

financial assistance to Americans in the form of one-time payments to individuals;

aid to businesses in the form of loans and

and efforts to stabilize the U.S.

economy and keep Americans employed in general.

On April 16, 2020, we received a loan

in the amount of $1,020,600 under the Paycheck Protection Program (“PPP”) of the CARES Act.

The PPP provides for loans

to qualifying businesses for amounts up to 2.5 times the average monthly payroll expenses of the qualifying business.

5, 2020, the Paycheck Protection Program Flexibility Act of 2020 (the “PPPFA”) was enacted.

The PPPFA extended the

covered period of the loans under the PPP from eight weeks to 24 weeks from the origination date of the loan, or December 31,

2020, whichever is earlier.

Therefore, the PPP now provides a mechanism for forgiveness of up to the full amount borrowed after

24 weeks as long as the borrower uses the loan proceeds during the 24-week period after the loan origination for eligible purposes,

including payroll costs, certain benefits costs, rent and utilities costs or other permitted purposes, and maintains its payroll

levels, subject to certain other requirements and limitations.

The amount of loan forgiveness is subject to reduction, among other

reasons, if the borrower terminates employees or reduces salaries during the 24-week period.

The interest rate on the loan is

1.0% per annum.

The PPPFA also extended the deferment period for principal and interest payments on PPP loans from six months

to ten months.

Therefore, the payments of principal and interest under our PPP loan are deferred for ten months from the final

day of the loan forgiveness period (the “Deferral Period”).

Although the Company believes the PPP loan proceeds were

used in accordance with the CARES Act guidance, the Company has not yet determined if any of the PPP loan is subject to forgiveness

and has therefore continued to show the entire PPP loan as an obligation on its financial statements.

Any unforgiven portion of

the PPP loan is payable over the two-year term, with payments deferred during the Deferral Period.

The Company may elect to prepay

the unforgiven loan at any time without payment of any premium.

the fourth quarter of 2020 the Company entered into bridge financing notes (the “Bridge Financing Notes”) totalling

The Bridge Financing Notes are a combination of $1,004,500 in the New James Lowe Note (See Note 3 –

Party Transactions), $350,000 received in November 2020, and an additional $500,000 received in December 2020.

The Bridge Financing

Notes carry interest at the rate of 12% and mature on December 31, 2021.

The Bridge Financing Notes provided for a mandatory

conversion into common stock upon the closing of a sale of the securities of the Company, whether in a private placement or

pursuant to an effective registration statement under the Securities Act, resulting in at least $2,500,000 of gross proceeds to

the Company (a “Qualified Offering”).

In the event of a Qualified Offering, the outstanding principal and interest

of the Bridge Financing Notes will be converted into the identical security issued at such Qualified Offering at 75% of the per

security price paid by investors in connection with the Qualified Offering.

The offering described above under Item 5 “Market

for the Registrant’s Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities—Completion

of Registered Public Offering”

was a Qualified Offering and the Bridge Financing Notes plus accrued interest of $53,725

were converted into 254,430 shares of common stock in connection with the offering on February 17, 2021.

OF OPERATIONS

generate revenues from (i) engineering design and managed services, (ii) the sale, integration, and commissioning of customized

environmental and cultivation equipment systems, and (iii) selling consumable products once facilities are operational.

of Results of Operations for the years ended December 31, 2020 compared to 2019

During the year

ended December 31, 2020, we generated revenues of $25.8 million compared to revenues of $24.2 million during the year ended December

31, 2019, an increase of $1.6 million, or 7%.

Equipment systems sales revenue increased $3.7 million primarily due to an increase

in cultivation equipment sales, services revenue decreased $1.3 million primarily due to a decrease in the average size of the

facilities being designed and consumable product sales decreased $0.8 million due to fewer products sold.

new engineering design project contracts in the year ended December 31, 2020, including six new projects in Europe, and secured

our first horticulture commissioning project, an East Coast based lettuce facility.

During the year ended December 31, 2020 one

client represented 25% and another client represented 13% of our total revenue.

During the year ended December 31, 2019

one client represented 21% of our total revenue.

Substantially all of the revenue derived from each of these separate clients

were equipment systems sales.

During the year ended December 31, 2020, cost

of revenues was $20.1 million compared to $17.6 million during the year ended December 31, 2019, an increase of $2.5 million,

This increase is attributable to an increase in revenue from our lower margin product equipment systems sales and

a reduction in our higher margin services revenue.

Gross profit was $5.7 million (22% of revenue)

during the year ended December 31, 2020 compared to $6.6 million (27% of revenue) during the year ended December 31, 2019.

profit as a percentage of revenue decreased due to a revenue mix shift in the current period favoring equipment systems

versus services revenue as noted above.

expenses decreased by $4.0 million, or 32%, to $8.5 million for the year ended December 31, 2020 compared to $12.5 million for

the year ended December 31, 2019.

The decrease in operating expenses was comprised of a $2.9 million reduction in general operating

expenses, mainly due to reduced salary and travel expenses, a $0.7 million reduction of marketing related expenses, and a $0.5

million decrease in amortization of broker issuing costs and broker warrants associated with our offering of convertible debentures

Non-operating expenses were $2.3 million for

the year ended December 31, 2020, compared to $2.5 million for the year ended December 31, 2019, a decrease of $0.2 million (8%).

Interest expense, excluding amortization related to the convertible debentures of $1.3 million in 2019, increased by $0.8 million

to $1.5 million compared to $0.7 million in the year ended December 31, 2019, due to an increase in debt.

For the years ended

December 31, 2020 and 2019, the Company recognized an impairment loss of $0.3 million and $0.5 million, respectively, related

to the investment in Total Grow Control Holdings Inc.

(“TGH”).

The Company incurred a $0.2 million expense for contingent

consideration from the acquisition of Impact Engineering, Inc.

during the year ended December 31, 2020.

The Company also

recorded a foreign exchange loss of $0.4 million in the year ended December 31, 2020 due to the revaluation of our Canadian denominated

a result of the above, we incurred a net loss of $5.1 million for the year ended December 31, 2020, or a net loss per share

of $1.06, compared to a net loss of $8.4 million for the year ended December 31, 2019, or a net loss per share of $1.90.

FINANCIAL MEASURES

Company uses the supplemental financial measure of Adjusted Earnings before Interest, Taxes, Depreciation and Amortization (“Adjusted

EBITDA”) as a measure of our operating performance.

Adjusted EBITDA is not calculated in accordance with accounting principles

generally accepted in the United States of America (“GAAP”) and it is not a substitute for other measures prescribed

by GAAP such as net income (loss), income (loss) from operations, and cash flows from operating activities.

We define Adjusted

EBITDA as net income (loss) attributable to urban-gro, Inc., determined in accordance with GAAP, excluding the effects of certain

operating and non-operating expenses including, but not limited to, interest expense, depreciation of tangible assets, amortization

of intangible assets, impairment of investments, and stock-based compensation that we do not believe reflect our core operating

board of directors and management team focus on Adjusted EBITDA as a key performance and compensation measure.

We believe that

Adjusted EBITDA assists us in comparing our operating performance over various reporting periods because it removes from our operating

results the impact of items that our management believes do not reflect our core operating performance.

following table reconciles net loss attributable to the Company to Adjusted EBITDA for the periods presented:

$ (5,073,695 )

$ (8,350,573 )

Interest expense

Interest expense –

amortization of convertible debentures

Impairment loss

Stock-based compensation

Contingent consideration –

purchase price

Depreciation and amortization

Unrealized exchange loss

Adjusted EBITDA

$ (3,277,577 )

and Capital Resources

of December 31, 2020, we had cash of $184,469, which represented a decrease of $264,234 from December 31, 2019.

inception, we have incurred significant operating losses and have funded our operations primarily through issuances of equity

securities, debt, and operating revenue.

As of December 31, 2020, we had an accumulated deficit of $21,964,321, a working capital

deficit of $9,300,836, and negative stockholders’

equity of $7,406,164.

Prior to the $62.1 million common stock offering

on February 17, 2021, our ability to generate sufficient revenues to pay our debt obligations and accounts payable when

due was subject to risks and uncertainties.

Historical consolidated financial statements included in this Report were prepared

on a going concern basis and do not include any adjustments relating to the recoverability and classification of recorded asset

amounts or amounts of liabilities that might result from the outcome of this uncertainty.

Our ability to continue as a going concern

was dependent upon, among other things, our ability to generate revenue, control costs and raise capital.

With the completion

of the $62.1 million common stock offering on February 17, 2021 management believes these doubts have been

described in the notes to the consolidated financial statements included in this Report, on February 21, 2020, we entered into

the letter agreement by and among us, as borrower, urban-gro Canada Technologies Inc.

and Impact Engineering, Inc., as guarantors,

the lenders party thereto, and Bridging Finance Inc., as administrative agent for the lenders, providing for a senior secured

demand term loan facility in the amount of C$2.7 million ($2.0 million) and a demand revolving credit facility of up to C$5.4

million ($4.0 million).

All amounts outstanding under the Credit Agreement were repaid in February of 2021 with a portion of the

net proceeds from the $62.1 million common stock offering and the Credit Agreement was terminated.

January 9, 2019, we executed a letter agreement with an exclusive placement agent in connection with a private placement offering.

Beginning in March 2019, the placement agent initiated an offering of up to $6.0 million from the sale of Units, with each Unit

consisting of a $1,000 Convertible Debenture (the “Debentures”) and Common Stock Purchase Warrants to purchase 34.58

shares of our Common Stock at $18.00 per share for a period of two years from the purchase date.

The Debentures were due May 31,

2021 and bore interest at 8%, compounded annually, with interest due at maturity.

On October 16, 2019, the $2.6 million in Debentures

plus $92,037 in accrued interest were converted into 183,752 shares of common stock at $14.46 per share pursuant to their

terms as a result of our registration of the securities on a registration statement that was declared effective on such date.

The Warrants contain a mandatory exercise provision if the weighted average share price of our Common Stock exceeds $30.00 per

share for a period of five consecutive days.

cash used in operating activities was $3.6 million during the year ended December 31, 2020, compared to $2.5 million used for

the year ended December 31, 2019.

Operating cash has been positively impacted from an increase in client deposits as demand for

our services and equipment solutions increased in the year ended December 31, 2020.

At December 31, 2020, we had $4.9 million

in client deposits related to client orders, which compared favorably to client deposits of $2.9 million as of December 31, 2019.

We require prepayments from clients before any design work is commenced and before any material is ordered from the vendor.

prepayments are booked to the client deposits liability account when received.

Our standard policy is to collect the following

before action is taken on a client order:

and the remaining 50% payment made prior to shipping.

We expect client

deposits to be relieved from the deposits account no longer than 12 months for each project.

We do not have trade payable terms

with most of our vendors and as a result, we are required to prepay a portion or all of the total order.

At December 31, 2020,

we had $0.7 million in accounts payable, compared to $3.8 million at December 31, 2019.

cash used in investing activities was $0.2 million for the year ended December 31, 2020, compared to $2.9 million during the year

ended December 31, 2019.

Historically, cash has been used to increase our investments in strategic partnerships and to acquire

property and equipment.

continue to have ongoing needs to purchase property and equipment to maintain our operations.

We had no material commitments for

capital expenditures as of December 31, 2020.

cash provided by financing activities was $3.5 million for the year ended December 31, 2020, compared to $2.9 million during the

year ended December 31, 2019.

Cash provided from financing activities during the year ended December 31, 2020 primarily related

to $5.3 million in proceeds received from the issuance of debt, $1.0 million related to a long-term loan, and $0.9 million of

convertible notes related to the Bridge Financing, offset by $3.0 million used in the repayment of

notes payable and $0.7 million in financing fees related to the issuance of debt.

debt, excluding operating leases, was $8.4 million and $3.8 million as of December 31, 2020 and December 31, 2019, respectively.

This represents an increase in gross debt of $4.6 million primarily due to $5.3 million in proceeds received from the issuance

of debt offset by principal paydowns.

our operations are influenced by general economic conditions, we do not believe that inflation had a material effect on our results

of operations during the year ended December 31, 2020.

Accounting Policies and Estimates

discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have

been prepared in accordance with accounting principles generally accepted in the United States.

The preparation of these financial

statements requires us to make estimates and judgments that affect the amounts of assets, liabilities, revenues and expenses,

and related disclosure of contingent assets and liabilities.

On an on-going basis, we evaluate our estimates based on historical

experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form

the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

Actual results may differ from these estimates under different assumptions or conditions.

See Note 2, Summary of Significant Accounting

Policies, to the Notes to Consolidated Financial Statements contained in this Report for a discussion of our significant accounting

ISSUED ACCOUNTING PRONOUNCEMENTS

time to time, the Financial Accounting Standards Board (“FASB”) or other standards setting bodies issue new accounting

pronouncements.

Updates to the FASB’s Accounting Standard Codifications (“ASCs”) are communicated through issuance

of an Accounting Standards Update (“ASU”).

Unless otherwise discussed, we believe that the impact of recently issued

guidance, whether adopted or to be adopted in the future, is not expected to have a material impact on our financial statements

upon adoption.

June 2016, the FASB issued ASU 2016-13, “Measurement of Credit Losses on Financial Instruments”

(ASU 2016-13), creating

ASC Topic 326 –

Financial Instruments –

Credit Losses.

ASU 2016-13 is intended to improve financial reporting by requiring

timelier recording of credit losses on financial assets measured at amortized cost basis (including, but not limited to loans),

net investments in leases recognized as lessor and off-balance sheet credit exposures.

ASU 2016-13 eliminates the probable initial

recognition threshold under the current incurred loss methodology for recognizing credit losses.

Instead, ASU 2016-13 requires

the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience,

current conditions, and reasonable and supportable forecasts.

The Company will continue to evaluate the extent of the impact of

ASU 2016-13 on the Company’s financial position, results of operations and cash flows.

With the release of ASU 2019-10,

the Company will monitor this impact through the effective date for fiscal years beginning after December 15, 2022.

In August 2020, the Financial Accounting Standards

Board FASB issued ASU 2020-06—Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts

in Entity’s Own Equity (Subtopic 815-40)—Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.

ASU 2020-06 simplifies accounting for convertible instruments by removing major separation models required under

current GAAP.

Consequently, more convertible debt instruments will be reported as a single liability instrument with no separate

accounting for embedded conversion features.

ASU 2020-06 removes certain settlement conditions that are required for equity

contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for it.

also simplifies the diluted net income per share calculation in certain areas.

The new guidance is effective for annual and

interim periods beginning after December 15, 2021, and early adoption is permitted for fiscal years beginning after December 15,

2020, and interim periods within those fiscal years.

The Company is currently evaluating the impact that this new guidance will

have on its consolidated financial statements.

are other various updates recently issued by the FASB, most of which represented technical corrections to the accounting literature

or application to specific industries and are not expected to have a material impact on the Company’s financial position,

results of operations or cash flows.

has reviewed all other recently issued, but not yet effective, accounting pronouncements and do not believe the future adoption

of any such pronouncements may be expected to cause a material impact on our financial condition or the results of our operations.

Sheet Arrangements

have not entered into any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect

on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures

or capital resources and would be considered material to investors.

Quantitative And Qualitative Disclosures About Market Risk

a smaller reporting company, we are not required to provide this information.

Financial Statements And Supplementary Data

financial statements and supplementary financial information required by this Item are set forth immediately following the signature

page and are incorporated herein by reference.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

The remaining net proceeds will be invested

in short-term investments until needed for the uses described above.

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-K

Item 5. Market for Registrant’s Common Equity