What changed in this filing

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Item 1. Financial Statements

2021-11-05 compared with 2021-08-23 · 114 added, 181 removed, 263 unchanged (53% of the section changed)

2 unchanged sentences

CONDENSED BALANCE SHEETS

June 30, 2021

September 30,

Current Assets:

25 unchanged sentences

Authorized shares - 5,714,000

Issued and outstanding shares - 1,765,000 at June 30, 2021 and 1,748,000 at December 31, 2020, respectively

Issued and outstanding shares - 1,768,000 at September 30, 2021 and 1,748,000 at December 31, 2020, respectively

Additional paid-in capital

8 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

Services revenues

7 unchanged sentences

General and administrative

Gain on sale of business

Total Operating Expenses

2 unchanged sentences

( 3,849,000 )

( 2,986,000 )

Other income (expense):

Gain on forgiveness of debt and accrued interest

Interest expense

Interest income (expense)

Miscellaneous

2 unchanged sentences

( 3,857,000 )

( 2,979,000 )

Income tax expense (benefit)

8 unchanged sentences

CONDENSED STATEMENTS OF SHAREHOLDERS’ EQUITY

Additional Paid-In

Accumulated Deficit

Balance at December 31, 2020, as restated

Balance at December 31, 2020

$ ( 9,587,000 )

1 unchanged sentence

Value of stock-based compensation

Net loss, as restated

Balance at March 31, 2021, as restated

Balance at March 31, 2021

$ ( 10,324,000 )

3 unchanged sentences

$ ( 11,218,000 )

Additional Paid-In

Accumulated Deficit

Balance at December 31, 2019, as restated

Value of stock-based compensation

Repurchase of common stock upon vesting of restricted stock units

Balance at September 30, 2021

$ ( 12,139,000 )

Balance at December 31, 2019

$ ( 4,972,000 )

Issuance of common stock, net

Value of stock-based compensation

Net loss, as restated

Balance at March 31, 2020, as restated

Balance at March 31, 2020

$ ( 5,897,000 )

1 unchanged sentence

Repurchase of common stock upon vesting of restricted stock units

Net loss, as restated

( 1,843,000 )

Balance at June 30, 2020, as restated

Balance at June 30, 2020

$ ( 7,740,000 )

Value of stock-based compensation

Vesting of restricted stock units offset by repurchase of common stock upon vesting of retricted stock units and awards

Common stock issued for accrued liabilities

Balance at September 30, 2020

$ ( 8,626,000 )

See accompanying notes to financial statements.

1 unchanged sentence

CONDENSED STATEMENTS OF CASH FLOWS

Six Months Ended June 30

Nine Months Ended September 30

Operating Activities:

3 unchanged sentences

Depreciation and amortization

Impairment loss - services

Gain on sale of property and equipment

Impairment loss

Gain on sale of business

Changes in allowance for doubtful accounts

7 unchanged sentences

Accounts payable

( 1,655,000 )

Accrued liabilities

Income tax payable

Accrued income taxes

Deferred revenue

1 unchanged sentence

( 3,323,000 )

( 1,647,000 )

Investing Activities:

Purchases of property and equipment

Proceeds from sale of custom print business

Proceeds from sale of property and equipment

Net cash used in investing activities

Net cash provided by (used in) investing activities

Financing Activities:

Proceeds from issuance of common stock, net

Cash dividends paid ($0.70 per share)

Repuchase of common stock upon vesting of restricted stock awards and vesting of restricted stock units

Proceeds from issuance of common stock, net

Repurchase of common stock upon vewsting of restricted stock awards

Proceeds from PPP loan

Net cash provided by financing activities

Increase (decrease) in cash and cash equivalents

Net cash provided by (used in) financing activities

Decrease in cash and cash equivalents

( 3,394,000 )

2 unchanged sentences

Supplemental disclosures for cash flow information:

Cash paid (refunded) during the period for income taxes

$ ( 107,000 )

Non-cash financing activity:

Operating lease right-of-use asset obtained in exchange for lease obligation

Cash refunded during the period for income taxes

Non-cash investing and financing activities:

Purchases of property and equipment included in accounts payable

Common stock issued for accrued liabilities

Receivables recorded from sale of cusom print business

Operating lease right of use asset obtained in exchange for lease obligations

Forgiveness of debt and accrued interest

Purchase of property and equipment included in accounts payable

See accompanying notes to financial statements.

4 unchanged sentences

Insignia Systems, Inc.

(the “Company”) is a leading provider of in-store and digital advertising solutions to consumer-packaged goods (“CPG”) manufacturers, retailers, shopper marketing agencies and brokerages.

(the “Company”) is a leading provider of in-store advertising solutions to consumer-packaged goods (“CPG”) manufacturers, retailers, shopper marketing agencies and brokerages.

The Company operates in a single reportable segment.

20 unchanged sentences

The following table provides a reconciliation of cash, cash equivalents and restricted cash to amounts shown in the statement of cash flows:

September 30,

Cash and cash equivalents

Restricted cash

Total cash, cash equivalents and retricted cash

Total cash, cash equivalents and restricted cash

Restricted Cash.

The Company’s restricted cash consists of cash the Company is contractually obligated to maintain in accordance with the terms of its lease signed in April 2021 for headquarters space in Minneapolis.

The Company’s restricted cash consists of cash the Company is contractually obligated to maintain in accordance with the terms of its lease signed in April 2021 for its headquarters space in Minneapolis.

See Note 4 for further discussion.

1 unchanged sentence

Inventories are primarily comprised of sign cards and hardware.

Inventory is valued at the lower of cost or net realizable value using the first-in, first-out (“FIFO”) method, and consisted of the following as of the dates indicated:

Raw materials

Inventory is valued at the lower of cost or net realizable value using the first-in, first-out method, and consisted of the following as of the dates indicated:

September 30,

Work-in-process

2 unchanged sentences

Property and equipment consisted of the following as of the dates indicated:

September 30,

Property and Equipment:

2 unchanged sentences

Computer equipment and software

Leasehold improvements

Construction in-progress

2 unchanged sentences

Net Property and Equipment

Depreciation expense was approximately $ 11,000 and $ 32,000 in the three and six months ended June 30, 2021, respectively, and was $ 85,000 and $ 170,000 in the three and six months ended June 30, 2020, respectively.

Depreciation expense was approximately $ 14,000 and $ 46,000 in the three and nine months ended September 30, 2021, respectively, and was $ 85,000 and $ 255,000 in the three and nine months ended September 30, 2020, respectively.

Stock-Based Compensation .

4 unchanged sentences

These variables include, but are not limited to, the expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors.

During the six-month periods ended June 30, 2021 and 2020 no equity awards were issued by the Company, except those awarded to non-employee members of the Board of Directors.

During the nine months ended September 30, 2021 and 2020, no equity awards were issued by the Company, except those awarded to non-employee members of the Board of Directors.

In June 2021, non-employee members of the Board of Directors received restricted stock grants totaling 5,514 shares pursuant to the 2018 Equity Incentive Plan (the “2018 Plan”).

The shares underlying the awards were assigned a value of $ 8.16 per share, which was the closing price of the Company’s common stock on the date of grant, for a total grant date value of $ 45,000 , the shares are schedule to vest the day immediately preceding the date of the next annual shareholder meeting.

The shares are scheduled to vest the day immediately preceding the date of the next annual shareholder meeting.

The awards granted to directors in December 2020 vested in full on the day immediately preceding the date of the 2021 annual shareholder meeting, June 9, 2021.

The Company estimated the fair value of stock-based awards granted during the six months ended June 30, 2021 under the Company’s employee stock purchase plan using the following weighted average assumptions:

In July 2020, the Company issued 11,053 shares of common stock in settlement of $ 9,000 of total deferred fees as a result of a non-employee director’s departure from the Board of Directors.

The Company’s non-employee directors are eligible to participate in a director deferred compensation plan, which allows a director to make voluntary deferrals of up to 100% of their annual cash retainers relating to Board and committee service.

The Company estimated the fair value of stock-based awards granted during the nine months ended September 30, 2021 under the Company’s employee stock purchase plan using the following weighted average assumptions:

expected life of 1.0 year, expected volatility of 142.2 %, dividend yield of 0 % and risk-free interest rate of 0.1 %.

Total stock-based compensation expense recorded for the three and six months ended June 30, 2021 was $ 86,000 and $ 141,000 , respectively, and for the three and six months ended June 30, 2020 was $ 59,000 and $ 108,000 , respectively.

Total stock-based compensation expense recorded for the three and nine months ended September 30, 2021 was $ 56,000 and $ 198,000 , respectively, and for the three and nine months ended September 30, 2020 was $ 37,000 and $ 145,000 , respectively.

Net Loss per Share .

Basic net loss per share is computed by dividing net loss by the weighted average shares outstanding and excludes any potential dilutive effects of stock options and restricted stock units and awards.

Diluted net loss per share gives effect to all diluted potential common shares outstanding during the period.

Due to the net loss incurred during the three and six months ended June 30, 2021 and 2020 all outstanding stock options were anti-dilutive for those periods.

Weighted average common shares outstanding for the three and six months ended June 30, 2021 and 2020 were as follows:

Diluted net loss per share gives effect to all dilutive potential common shares outstanding during the period.

Due to the net loss incurred during the three and nine months ended September 30, 2021 and 2020 all outstanding stock options were anti-dilutive for the periods.

Weighted average common shares outstanding for the three and nine months ended September 30, 2021 and 2020 were as follows:

Three Months Ended

Six Months Ended

Nine Months Ended

Denominator for basic net loss per share - weighted average shares

2 unchanged sentences

Denominator for diluted net loss per share - weighted average shares

Restatement of Previously Issued Financial Statements.

The financial statements for the three and six months ended June 30, 2020 have been restated to reflect the correction of misstatements.

The Company also restated all amounts impacted within the notes to the financial statements.

A description of the adjustments and their impact on the previously issued financial statements are included below.

Description of Restatement Adjustments.

Commencing in the second quarter of 2021, the Company conducted a review of its sales tax positions, and related accounting, with the assistance of outside consultants.

As a result of the review, it was determined that certain non-POPs services/products sales were subject to sales tax and that the Company had not assessed sales tax on sales of those services/products to customers.

Company management then undertook a process to obtain documentation from significant customers to determine if each was exempt from sales tax assessments during the applicable periods.

Based on responses received from these customers, the Company determined that it did not properly accrue sales tax and accrued the estimated sales tax.

The misstatements in the previously issued financial statements are considered material and are described below.

As described in additional detail in the Explanatory Note in our Annual Report on Form 10-K/A for the year ended December 31, 2020, the Company restated its audited financial statements for the years ended December 31, 2020 and 2019, and its unaudited financial statements for the quarterly periods ended March 31, 2020 and 2019, June 30, 2020 and 2019, and September 30, 2020 and 2019.

The Company also filed a Quarterly Report on Form 10-Q/A for the three months ended March 31, 2021 to restate its unaudited financial statements for the three months ended March 31, 2021 and 2020.

As a result of the misstatements, the Company restated our interim financial statements for the three and six months ended June 30, 2020.

A summary of the impact of the misstatements is as follows:

June 30, 2020

Three Months Ended

As previously

Total Net Sales

Operating Loss

( 1,777,000 )

( 1,830,000 )

( 2,886,000 )

( 2,986,000 )

( 1,772,000 )

( 1,843,000 )

( 2,635,000 )

( 2,768,000 )

June 30, 2020

As previously

Shareholders' equity

The categories of restatement adjustments and their impact on previously reported financial statements are described below:

Sales Tax and Related Misstatements – Sales tax on sales to customers who were subject to sales tax that was not previously accrued by the Company is corrected by an increase to accrued liabilities on the balance sheets and a reduction of net sales on the statements of operations.

The Company also determined on which past sales the Company would bill for sales tax and corrected by increasing accounts receivable, net of an allowance for doubtful collectability, on the balance sheets and increasing net sales on the statements of operations.

Estimated penalties on the related sales tax are corrected by an increase to accrued liabilities on the balance sheets and an increase to general and administrative expenses on the statements of operations.

Estimated interest on the related sales tax is corrected by an increase to accrued liabilities on the balance sheets and an increase to interest expense within other income on the statement of operations.

Related Income Tax Impact - Any impact on income tax benefit from the impact on loss before taxes due to the correction in (a) above is reflected as a change in deferred tax asset or liability on the balance sheet and a change in income tax benefit on the statements of operations.

The following is a summary of the impact of the correction of the sales tax error for the periods previously reported for the three and six months ended June 30, 2020.

The following table sets forth the corrections in each of the individual line items affected in the statements of operations:

June 30, 2020

Reduction of net sales

Increase in general and administrative expense for penalties

Increase in interest expense

Total effect of restatement items

June 30, 2020

Six Months Ended

As previously

Services revenues

Products revenues

Total Net Sales

Cost of services

Cost of goods sold

Impairment loss

Total Cost of Sales

Operating Expenses:

General and administrative

Total Operating Expenses

Operating Loss

( 1,777,000 )

( 1,830,000 )

( 2,886,000 )

( 2,986,000 )

Other income (expense):

Interest expense

Miscellaneous

Loss Before Taxes

( 1,761,000 )

( 1,832,000 )

( 2,846,000 )

( 2,979,000 )

Income tax benefit

$ ( 1,772,000 )

$ ( 1,843,000 )

$ ( 2,635,000 )

$ ( 2,768,000 )

Net loss per share:

Shares used in calculation of net loss per share:

The following table sets forth the corrections in each of the individual line items affected in the balance sheet:

June 30, 2020

As previously reported

Error correction

Accounts receivable, net

Accrued liabilities - sales tax

Accrued liabilities - other

Accumulated deficit

The following table sets forth the corrections to retained earnings (accumulated deficit) and total shareholders’ equity in the statements of shareholders’ equity.

SHAREHOLDERS' EQUITY

Shareholders'

June 30, 2020

$ ( 6,896,000 )

Adjustment due to cumulative error correction

$ ( 7,740,000 )

The Company did not present tables for adjustments within the statement of cash flows, since all of the foregoing adjustments were within the operating activities section of the cash flows.

These adjustments did not affect total cash flows from operating activities, financing activities or investing activities for the three and six month periods ended June 30, 2020.

Revenue Recognition.

Under Accounting Standards Update (“ASU”) 2014-09 Revenue from Contracts with Customers (“Topic 606”), revenue is measured based on consideration specified in the contract with a customer, adjusted for any applicable estimates of variable consideration and other factors affecting the transaction price, including noncash consideration, consideration paid or payable to a customer and significant financing components.

Revenue from all customers is recognized when a performance obligation is satisfied by transferring control of a distinct good or service to a customer, as further described below under “ Performance Obligations .”

Revenue from all customers is recognized when a performance obligation is satisfied by transferring control of a distinct good or service to a customer, as further described below under “.”

Taxes collected from customers and remitted to governmental authorities are excluded from revenue on the net basis of accounting.

The Company includes shipping and handling fees in revenues.

Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment cost and are included in cost of goods sold.

Shipping and handling costs associated with outbound freight after control over a product has been passed to a customer are accounted for as a fulfillment cost and are included in cost of goods sold.

Performance Obligations

18 unchanged sentences

In the following table, revenue is disaggregated by major revenue stream and timing of revenue recognition.

Three months ended June 30, 2021

Six months ended June 30, 2021

Services Revenues

Products Revenue

Total Revenue

Services Revenues

Products Revenue

Total Revenue

Three months ended September 30, 2021

Nine months ended September 30, 2021

Timing of revenue recognition:

1 unchanged sentence

Products and services transferred at a point in time

Three months ended June 30, 2020

Six months ended June 30, 2020

Services Revenues

Products Revenue

Total Revenue

Services Revenues

Products Revenue

Total Revenue

Three months ended September 30, 2020

Nine months ended September 30, 2020

Timing of revenue recognition:

10 unchanged sentences

Cash received in advance and not recognized as revenue

Balance at June 30, 2021

Balance at September 30, 2021

Transaction Price Allocated to Remaining Performance Obligations

1 unchanged sentence

This practical expedient is being applied to arrangements for certain incomplete services and unshipped custom signage materials.

Among our contracts with an expected duration of greater than one year, we anticipate that revenue of $ 38,000 , $ 116,000 and $ 60,000 related to performance obligations that are unsatisfied (or partially unsatisfied) as of June 30, 2021 will be recognized during the remainder of fiscal 2021, 2022 and 2023, respectively.

Among our contracts with an expected duration of greater than one year, we anticipate that revenue of $ 29,000 , $ 116,000 and $ 60,000 related to performance obligations that are unsatisfied (or partially unsatisfied) as of September 30, 2021 will be recognized during the remainder of fiscal 2021, 2022 and 2023, respectively.

Selling Arrangement.

7 unchanged sentences

The Company also shortened the remaining useful life of the underlying asset from March 31, 2021 to December 31, 2020 and recorded remaining amortization expense on a straight-line basis over the remainder of 2020.

Amortization expense without the impairment was $ 36,000 and $ 97,000 in the three and six months ended June 30, 2020.

The selling arrangement was fully amortized as of June 30, 2021 and December 31, 2020.

Amortization expense without the impairment was $ 34,000 and $ 131,000 in the three and nine months ended September 30, 2020.

The selling arrangement was fully amortized as of September 30, 2021 and December 31, 2020.

As of September 30, 2021 the Company leases space under two non-cancelable operating leases for our corporate headquarters and for warehouse space.

Both leases have escalating lease payment terms but neither contains a contingent rent provision.

The Company also had a lease for additional office space under an operating lease that expired August 31, 2021.

The leases for both the Company’s corporate headquarters and its warehouse include both lease (e.g., fixed payments including rent, taxes, and insurance costs) and non-lease components which are accounted for as a single lease component as the Company has elected the practical expedient to group lease and non-lease components for all leases.

The headquarters lease required the Company to provide a letter of credit, which is supported by $ 85,000 which is reflected as restricted cash on the balance sheet.

The Company’s leases include options to renew.

The exercise of lease renewal options is at the Company’s sole discretion.

Therefore, the renewals to extend the lease terms are not included in the Company’s right of use assets and lease liabilities as they are not reasonably certain of exercise.

The Company regularly evaluates the renewal options and when they are reasonably certain of exercise, the Company includes the renewal period in its lease term.

The Company used its incremental borrowing rate in determining the present value of the lease payments based on the information available at the lease commencement date.

The cost components of the Company’s operating leases were as follows for the periods ended September 30, 2021:

Three months ended September 30, 2021

Operating lease cost

Variable lease cost

Short-term lease cost

Nine months ended September 30, 2021

Operating lease cost

Variable lease cost

Short-term lease cost

Variable lease costs consist primarily of taxes, insurance, and common area or other maintenance costs which are paid based on actual costs incurred by the lessor.

Maturities of the Company’s lease liabilities for is corporate headquarters and its warehouse operating leases are as follows as of September 30, 2021:

Maturity of Lease Liabilities

Total lease payments

Present value of lease liabilities

The remaining lease terms as of September 30, 2021 for the Company’s corporate headquarters and its warehouse leases were 2.8 years and 1.5 years, respectively.

The discount rate for both leases is 4.75 %.

The cash outflow for operating leases for the three and nine months ended September 30, 2021 was $ 15,000 and $ 76,000 , respectively.

The cash outflow for operating leases for the three and nine months ended September 30, 2020 was $ 86,000 and $ 178,000 , respectively.

Operating lease liabilities and right-of-use assets were increased for new non-cash leases by $ 219,000 for the nine months ended September 30, 2021.

Income Taxes.

For the three and six months ended June 30, 2021, the Company recorded income tax expense of $ 10,000 and $ 23,000 , respectively, or ( 1.1 )% and ( 1.4 )% of loss before taxes, respectively.

For the three and six months ended June 30, 2020, the Company recorded income tax expense of $ 11,000 and an income tax benefit of $211,000, respectively, or ( 0.6 )% and 7.1 % of loss before taxes, respectively.

The income tax benefit or expense for the three and six months ended June 30, 2021 and 2020 is comprised of federal and state taxes.

The primary differences between the Company’s June 30, 2021 and 2020 effective tax rates and the statutory federal rate are nondeductible stock-based compensation, nondeductible meals and entertainment and increases in the Company’s valuation allowance against its deferred tax assets and nondeductible penalties for June 30, 2021, and loan forgiveness from the Paycheck Protection Program (PPP) loan.

For the three and nine months ended September 30, 2021, the Company recorded income tax expense of $ 9,000 and $ 32,000 , or 1.0 % and 1.3 % of loss before taxes, respectively.

For the three and nine months ended September 30, 2020, the Company recorded income tax expense and an income tax benefit, respectively, of $ 8,000 and $203,000, or 0.9 % and ( 5.3 %) of loss before taxes, respectively.

The income tax expense or benefit for the three and nine months ended September 30, 2021 and 2020 is comprised of federal and state taxes.

The primary differences between the Company’s September 30, 2021 and 2020 effective tax rates and the statutory federal rate are expenses related to stock-based compensation and nondeductible meals and entertainment and increases in the Company’s valuation allowance against its deferred tax assets and nondeductible penalties for September 30, 2021, and forgiveness for the loan under the Paycheck Protection Program (“PPP”) of the CARES Act administered by the U.S.

Small Business Administration (the “SBA”).

The Company reassesses its effective rate each reporting period and adjusts the annual effective rate if deemed necessary, based on projected annual taxable income (loss).

Deferred income taxes are determined based on the estimated future tax effects of differences between the financial statements and tax basis of assets and liabilities given the provisions of enacted tax laws.

In providing for deferred taxes, the Company considers tax regulations of the jurisdictions in which it operates, estimates of future taxable income and available tax planning strategies.

In providing for deferred taxes, the Company considers tax regulations of the jurisdictions in which we operate, estimates of future taxable income and available tax planning strategies.

If tax regulations, operating results or the ability to implement tax-planning strategies vary, adjustment to the carrying value of deferred tax assets and liabilities may be required.

Valuation allowances are recorded related to deferred tax assets based on the “more likely than not” criteria.

At June 30, 2021 and December 31, 2020, the Company had a valuation allowance of approximately $ 2,586,000 and $ 1,946,000 , respectively, against its entire deferred tax asset because the Company does not believe it is more likely than not that it will realize its deferred tax asset.

As of June 30, 2021, and December 31, 2020, the Company had unrecognized tax benefits totaling $ 694,000 and $ 677,000 , respectively, including interest, which relates to state nexus issues.

At September 30, 2021 and December 31, 2020, the Company had a valuation allowance of approximately $ 2,811,000 and $ 1,946,000 , respectively, against its entire net deferred tax asset because the Company does not believe it is more likely than not that it will realize its net deferred tax asset.

As of September 30, 2021, and December 31, 2020, the Company had unrecognized tax benefits totaling $ 703,000 and $ 677,000 , respectively, including interest, which relates to state nexus issues.

The amount of the unrecognized tax benefits, if recognized, that would affect the effective income tax rates of future periods is $ 703,000 .

7 unchanged sentences

Concentrations.

During the six months ended June 30, 2021, three customers accounted for 15 %, 12 % and 11 %, respectively of the Company’s total net sales.

During the six months ended June 30, 2020, one customer accounted for 19 % of the Company’s total net sales.

At June 30, 2021, two customers represented 17 % and 14 %, respectively of the Company’s total accounts receivable.

At December 31, 2020, two customers represented 17 % and 10 %, respectively, of the Company’s total accounts receivable.

During the nine months ended September 30, 2021, two customers accounted for 16 % and 10 % respectively, of the Company’s total net sales.

During the nine months ended September 30, 2020, two customers accounted for 13 % and 11 % respectively, of the Company’s total net sales.

At September 30, 2021, two customers represented 16 % and 13 % respectively, of the Company’s total accounts receivable.

At December 31, 2020, two customers represented 17 % and 10 % of the Company’s total accounts receivable.

Legal Proceedings.

10 unchanged sentences

On December 7, 2020, the Court granted News America’s motion for summary judgment on the counterclaim in part, requiring Insignia to strike certain allegations from its complaint and finding News America’s request for attorneys’ fees and costs premature.

Discovery is underway and trial has been scheduled for December 2021.

Following the close of discovery, on August 27, 2021, News America moved for summary judgment on Insignia’s claims.

On September 17, 2021, Insignia filed its response opposing summary judgment.

On October 1, 2021, News America filed its reply brief.

The court is scheduled to hear argument on the motion on January 26, 2022.

At this stage of the proceedings, the Company is unable to determine the likelihood of an unfavorable outcome or estimate any potential resulting liability.

In April 2020, the Company entered into a promissory note (the “Note”) with Alerus Financial, N.A.

The Note evidenced a loan to the Company in the amount of $ 1,054,000 pursuant to the Paycheck Protection Program (the “PPP”) of the CARES Act administered by the U.S.

Small Business Administration (the “SBA”).

The Note evidenced a loan to the Company in the amount of $ 1,054,000 pursuant to PPP.

In accordance with the requirements of the CARES Act, the Company used the proceeds from the loan exclusively for qualified expenses under the PPP, including payroll costs, rent and utility costs, as further detailed in the CARES Act and applicable guidance issued by the SBA.

2 unchanged sentences

The Company’s application for forgiveness of the entire principal amount and all accrued interest under the Note was approved by the SBA on January 29, 2021.

Accordingly, for the six months ended June 30, 2021 the debt of $ 1,054,000 , plus accrued interest of $ 8,000 , was eliminated with a gain on debt forgiveness and accrued interest included in other income.

Subsequent Event.

The Company signed a lease for its headquarters space in Minneapolis for a three-year term commencing in July 2021 with monthly payments of approximately $ 8,300 , inclusive of common area maintenance costs.

A right-of-use asset and lease liability of approximately $ 183,000 will be recorded during the three months ended September 30, 2021.

Accordingly, for the nine months ended September 30, 2021 the debt of $ 1,054,000 , plus accrued interest of $ 8,000 , was eliminated with a gain on debt forgiveness and accrued interest included in other income.

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