Note

– Restatement of Previously Issued Financial Statements

In accordance with Accounting Standards Codification ("ASC")

470

50,

as well as guidance from a speech given by an SEC staff member at a

2010

AICPA conference, for debt extinguishments and conversions with related parties that meet certain criteria and give rise to a loss, an extinguishment loss should be recognized. In

February 2021,

the Company and Cross River Partners, L.P. entered into an agreement whereby the remaining principal amount of subordinated debt held by Cross River Partners, L.P. totaling

$1.25

million, as well as

$62,000

in accrued interest, was converted to

601,674

shares of Company common stock, at a conversion price equal to

$2.18

per share, which was the closing price of the Company's stock reported on the NYSE American on the date of the conversion. In connection with such conversion, the Company issued a warrant to Cross River Partners, L.P. to purchase up to

150,418

additional shares of Company common stock in the future at an exercise price of

$2.507

per share. The warrant for the

150,418

shares has a

five

-year term and is exercisable beginning

February 3, 2022

until

February 3, 2026.

While the conversion of common stock was done for

gain or loss, the issuance of the warrant should have been accounted for as a loss equal to the warrant fair value at the date of issuance, or approximately

$304,000.

The Company restated its consolidated financial statements to recognize the loss attributable to the issuance of the warrant during the

first

quarter of

2021.

The Company did a similar conversion during the

third

quarter of

2020

with Cross River Partners, L.P., but that transaction gave rise to a gain, and transactions such as these with related parties that result in gains are

not

recognized.

The following tables summarize the effect of the restatement on each financial statement line item as of the date, and for the period, indicated (in thousands except per share amounts):

	March 31, 2021
	As Previously Reported			Adjustments			As Restated
Condensed Consolidated Balance Sheet (unaudited)
Additional paid-in capital	$	40,456		$	304		$	40,760
Accumulated deficit		(29,702	)		(304	)		(30,006	)

	For the Three Months Ended March 31, 2021
	As Previously Reported			Adjustments			As Restated
Condensed Consolidated Statement of Operations (unaudited)
Other (expense) income	$	226		$	(304	)	$	(78	)
Total other expense		193			(304	)		(111	)
Loss from continuing operations before taxes		(2,165	)		(304	)		(2,469	)
Loss from continuing operations		(2,165	)		(304	)		(2,469	)
Net loss		(2,173	)		(304	)		(2,477	)
Loss from continuing operations per common share - basic and diluted		(0.24	)		(0.03	)		(0.27	)
Net loss per share - basic and diluted		(0.24	)		(0.03	)		(0.27	)

	Additional Paid-in Capital		Accumulated Deficit			Total Stockholders' Equity
Consolidated Statement of Stockholders' Equity (Deficit) (unaudited)
As Previously Reported:
Shares and warrant issued to Cross River Partners, L.P. in subordinated debt and accrued interest conversion, net of discount	$	1,246	$	-		$	1,249
Net loss		-		(2,173	)		(2,173	)
Balance at March 31, 2021		40,456		(29,702	)		10,811
Adjustments:
Shares and warrant issued to Cross River Partners, L.P. in subordinated debt and accrued interest conversion, net of discount	$	304	$	-		$	304
Net loss		-		(304	)		(304	)
Balance at March 31, 2021		304		(304	)		-
As Restated:
Shares and warrant issued to Cross River Partners, L.P. in subordinated debt and accrued interest conversion, net of discount	$	1,550	$	-		$	1,553
Net loss		-		(2,477	)		(2,477	)
Balance at March 31, 2021		40,760		(30,006	)		10,811

	For the Three Months Ended March 31, 2021
	As Previously Reported			Adjustments			As Restated
Condensed Consolidated Statement of Cash Flows (unaudited)
OPERATING ACTIVITIES
Net loss	$	(2,173	)	$	(304	)	$	(2,477	)
Net loss from continuing operations		(2,165	)		(304	)		(2,469	)
Fair value of warrant issued upon conversion of subordinated debt to equity		-			304			304