Restatement of Consolidated Financial Statements

12 Months Ended

Dec. 31, 2021

Condensed Financial Information Disclosure [Abstract]

Restatement of Consolidated Financial Statements

Note 1A — Restatement of Previously Issued Financial Statements

Background

Subsequent to the filing of the Original Form 10-K, on May 17, 2022, the Company’s management determined that its prior conclusion that the “conversion feature” of the Company’s 12.5% senior secured convertible debentures (the “Debentures”) qualified for equity classification and, therefore, qualified for the application of the guidance in the Financial Accounting Standards Board’s (the “FASB”) Accounting Standards Update (ASU) 2020-06 was incorrect. Management has determined that the conversion feature was a liability classified derivative under the FASB’s Accounting Standards Codification (ASC) 815-40, Derivatives and Hedging – Contracts in Entity’s Own Equity from the inception requiring recognition at fair value for each reporting period.

The Company’s management and in agreement with the audit committee have determined that the previously issued financial statements for the year ended December 31, 2021, and the unaudited interim financial information for the three and nine month period ended September 30, 2021 “the Affected period should no longer be relied upon due to this error and require restatement. The correction of this error is included in the accompanying Consolidated Financial Statements in this Amended 10-K, the financial effect of this error from previously reported information for the year ended December 31, 2021, has resulted in an increase in net loss of $8.4 million, primarily as a result of a $6.3 million in fair value expense on the derivative conversion liability, interest expense increase of $0.9 million and an increase in the loss contingency on debt default of $1.2 million.

The amendment also includes restated unaudited financial information as of September 30, 2021, and for the three and nine months ended. See Note 20.

Restatement Adjustment

The table below presents the impact of the restatement adjustments on the Company’s previously reported consolidated balance sheet as of December 31, 2021 (in thousands):

	December 31, 2021
	As Previously Reported			Adjustments			As Restated
Conversion Feature derivative liability	$	-		$	8,355		$	8,355
Total current liabilities		29,526			8,355			37,881
Accumulated deficit		(40,910	)		(8,355	)		(49,265	)
Total stockholders’ deficit		(4,753	)		(8,355	)		(13,108	)

The table below presents the impact of the restatement adjustments on the Company’s previously reported consolidated statements of operations for the year ended December 31, 2021 (in thousands):

	Year ended December 31, 2021
	As Previously Reported			Adjustments			As Restated
Other Income (Expense)
Loss contingency on debt default	$	(6,594	)	$	(1,227	)	$	(7,821	)
Revaluation of conversion feature derivative liability		-			(6,278	)		(6,278	)
Interest Expense		(2,991	)		(850	)		(3,841	)
Net Loss – continuing operations		(46,011	)		(8,355	)		(54,366	)
Net Loss per share - basic and diluted - continuing operations	$	(0.33	)		(0.06	)		(0.39	)
Weighted Average Shares Outstanding - basic and diluted		139,061,084			-			139,061,084

The table below presents the impact of the restatement adjustments on the Company’s previously reported consolidated statement of cash flows for the year ended December 31, 2021 (in thousands):

	Year ended December 31, 2021
	As Previously Reported			Adjustments			As Restated
Net loss from continuing operations	$	(46,011	)	$	(8,355	)	$	(54,366	)
Changes in adjustment to reconcile net loss to net cash used in operating activities
Loss contingency on debt default		6,594			1,227			7,821
Change in fair value of derivative liability		-			6,278			6,278
Amortization of debt discount and debt issuance costs		1,323			850			2,173
Net cash used in operating activities	$	(8,473	)		-			(8,473	)