Equity Financing

Common Stock Purchase Agreement:

On January 12, 2022, the Company entered into a common stock purchase agreement with Tumim Stone Capital LLC. Pursuant to the agreement, the Company has the right, but not the obligation, to sell to the Investor, and the Investor is obligated to purchase, up to $50,000,000 of newly issued shares of the Company’s common stock, par value $0.0001 per share from time to time during the term of the agreement, subject to certain limitations and conditions. The Total Commitment is inclusive of 607,287 shares of common stock, valued at $750,000 at the time of issuance, issued to the Investor as consideration for its commitment to purchase shares of common stock under the Common Stock Purchase Agreement.

The common stock purchase agreement initially precludes the Company from issuing and selling more than 14,747,065 shares of its common stock, including the commitment shares, which number of shares equals 19.99% of the common stock issued and outstanding immediately prior to the execution of the agreement, unless the Company obtains stockholder approval to issue additional shares, or unless certain exceptions apply.

From the effective date of the agreement through March 25, 2022, the Company received $5,542,000 in consideration for the issuance of 5,146,683 shares of common stock, per the common stock purchase agreement.

Debt Financing

Securities Purchase Agreement, Convertible Notes, and Security Agreement:

On January 12, 2022, the Company also entered into a securities purchase agreement with three institutional investors providing for the sale and issuance of an aggregate original principal amount of $6,300,000 in convertible notes due 2023. The Company and the Note Holders also entered into a security agreement, dated January 12, 2022, in connection with the note offering, pursuant to which the Company granted a security interest to the Note Holders in substantially all of its assets.

The Company received $6,000,000 in gross proceeds from the sale of the Notes. The Note Offering closed on January 12, 2022. The Notes bear interest of 6.0% per annum, have an original issue discount of 5.0%, mature 12 months from the closing date, and have an initial conversion price of $3.00, subject to adjustment in certain circumstances as set forth in the Note.

Beginning on May 12, 2022, the Company is required to make nine monthly principal payments of $333,333, plus accrued interest, to the Note Holders, with the remaining principal amount of $3,300,000, plus accrued interest, due on the maturity date.

As a result of the debt financing, the Company paid $380,000 of debt issue costs. Accordingly, both the debt discount of $300,000 and the debt issue costs are being amortized over the term of the agreement using the effective interest rate method of amortization.

Issuances of Common Stock

From January to March 2022, the Company issued 372,446 shares of common stock to vendors and employees for services rendered with a fair value of $442,000. These shares of common stock were valued based on the market value of the Company’s stock price at the issuance date or the date the Company entered into the agreement related to the issuance.

From January to March 2022, the Company issued 432,046 shares of common stock to officers and board members associated with the vesting of a Restricted Stock Unit.

Exercise of Options

From January to March 2022, a total of 332,730 options were exercised into 332,730 shares of common stock at a weighted average exercise price of $1.13. The Company received cash of $377,000 upon exercise of the options.

Issuances of Restricted Stock Units

From January to March 2022, the Company granted an additional 1,033,669 shares of its restricted stock to employees and members of Board of Directors. The Restricted Stock Units vest in various dates, starting on January 20, 2022 up to February 1, 2026. These Restricted Stock Units were valued based on market value of the Company’s stock price at the respective date of grant and had aggregate fair value of $1,261,000, which is being amortized as stock compensation expense over its vesting term.

Issuances of Stock Options

From January to March 2022, the Company granted stock options to employees and consultants to purchase a total of 1,983,555 stock options for services to be rendered. The options have an average exercise price of $1.25 per share, expire in five years, and vest between one and four years from grant date. The total fair value of these options at the grant date was $1,835,000 using the Black-Scholes option pricing model.

Termination of Lease Agreements

On January 3, 2022, the Company terminated the lease agreements with JMCC properties for four office and warehouse leases in American Fork, Utah. The lease for the spaces were terminated as of January 15, 2022. On this date, and in accordance with ASC 842, the Company derecognized the right of use asset of $1,287,000, net of accumulated amortization of $744,000. The Company has also derecognized the corresponding lease liabilities of $521,000, resulting in a net loss on termination of $22,000.

Payment of Deferred Incentive Compensation to Officers

On January 20, 2022, the Company paid the remaining balance of $377,000 to Rory Cutaia, Chief Executive Officer, for amounts due related to deferred incentive compensation to officers.

Departure and Replacement of Officers

On January 20, 2022, Jeffrey Clayborne, the Company’s Chief Financial Officer and Treasurer, resigned. Pursuant to a consulting agreement, Mr. Clayborne continued as a consultant with the Company to assist with transition matters. Mr. Clayborne’s departure is not due to a dispute or disagreement with the Company. As part of a separation agreement, the Company issued 116,160 shares of the Company’s common stock to satisfy the remaining balance of $144,000 related to deferred incentive compensation to officers.

On January 20, 2022, the Company eliminated the Chief Information Officer position. The employment of Mitchell Bledsoe, the Company’s former Chief Information officer, ended on January 20, 2022 and his role and responsibilities were reassigned to existing personnel.

On January 20, 2022, the Company appointed Salman H. Khan as Interim Chief Financial Officer, Treasurer, Principal Financial Officer and Principal Accounting Officer.

On March 30, 2022, the Company’s Board of Directors approved Mr. Khan’s appointment as the Company’s permanent Chief Financial Officer.