Recent Developments – Employee Retention Tax Credit
The Company currently anticipates receiving
a payroll tax credit through the Employee Retention Tax Credit (“ERTC”) for the first quarter of 2021. The ERTC was
initially established as part of the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) of 2020 and subsequently
amended by the Consolidated Appropriation Act (“CAA”) of 2021 and the American Rescue Plan Act (“ARPA”)
of 2021. The CAA and ARPA amendments to the ERTC program provide eligible employers with a tax credit in an amount equal to 70%
of qualified wages (including certain health care expenses) that eligible employers pay their employees after January 1, 2021 through
December 31, 2021. The maximum amount of qualified wages taken into account with respect to each employee for each calendar quarter
is $10,000 so that the maximum credit that an eligible employer may claim for qualified wages paid to any employee is $7,000 per
quarter. For purposes of the amended ERTC, an eligible employer is defined as having experienced a significant (20% or more) decline
in gross receipts during each 2021 calendar quarter when compared with the same quarter in 2019. The credit is taken against the
Company’s share of Social Security Tax when the Company’s payroll provider files the applicable quarterly tax filings
on Form 941. The receipt of the tax credit is expected to improve the Company’s liquidity due to the effects of the credit.
Although the Company currently anticipates receiving credits pursuant to the terms of the ERTC for each quarter of 2021, there
can be no assurances that the Company will continue to meet the requirements subsequent to the first quarter of 2021 or that changes
in the ERTC program, including changes in guidance provided by the IRS with respect to the implementation and operation of the
ERTC program, will not be adopted that could reduce or eliminate the benefits the Company may receive.
Risk Factors
The Company is supplementing the risk factors
previously disclosed in Item 1A of its Annual Report on Form 10-K for the year ended December 31, 2020 that the Company filed with
the Securities and Exchange Commission on March 25, 2020 to update the risk factor relating to compliance with NYSE American listing
standards.
We are subject to the continued listing
requirements of the NYSE American. If we are unable to comply with such requirements, our common stock would be delisted from the
NYSE American, which would limit investors’ ability to effect transactions in our common stock and subject us to additional
trading restrictions.
Our common stock is
currently listed on NYSE American. In order to maintain our listing, we must maintain certain share prices, financial and share
distribution targets, including maintaining a minimum amount of stockholders’ equity and a minimum number of public shareholders.
In addition to these objective standards, NYSE American may delist the securities of any issuer for other reasons involving the
judgment of NYSE American. On June 10, 2020 we received written notification from NYSE American that we are not in compliance with
the continued listing standard under Section 1003(a)(iii) of the NYSE American Company Guide (“Company Guide”), which
requires a listed company to have stockholders’ equity of at least $6 million if it has reported losses from continuing operations
and/or net losses in its five most recent fiscal years. In accordance with NYSE American requirements, we submitted a plan addressing
how we intend to regain compliance with Section 1003(a)(iii) by December 10, 2021, the deadline for us to regain compliance.
On August 27, 2020,
we received notice that our plan to regain compliance with Section 1003(a)(iii) of the Company Guide had been accepted and that
we had been granted a plan period through December 10, 2021. As a result, the listing of our common stock on NYSE American is being
continued during the plan period pursuant to an extension. However, during the plan period we will be subject to periodic review
by NYSE Regulation staff, including quarterly monitoring, to determine if we are making progress consistent with the plan.
On December 9, 2020, we received an additional
written notification from NYSE American that the we are not in compliance with the continued listing standard set forth in Section
1003(a)(ii) of the Company Guide, which requires a listed company to have stockholders’ equity of at least $4 million if
it has reported losses from continuing operations and/or net losses in three of its four most recent fiscal years.
On April 2, 2021, we received an additional
written notification from NYSE American that we are not in compliance with the continued listing standard set forth in Section
1003(a)(i) of the Company Guide, which requires a listed company to have stockholders’ equity of at least $2 million if it
has reported losses from continuing operations and/or net losses in two of its three most recent fiscal years.
If we are not in compliance
with all of these continued listing standards by December 10, 2021, or if NYSE Regulation determines that we are not making sufficient
progress consistent with our plan, delisting proceedings will be instituted against us, as appropriate.
Due largely to the
continuing effects of the COVID-19 pandemic, we did not meet certain elements of the near-term milestones we had included as part
of the compliance plan we submitted to the NYSE American. As a result, it is possible that NYSE Regulation will determine that
we are not making sufficient progress consistent with our plan and may request that we submit a revised plan or may initiate delisting
proceedings against us. We cannot assure you that we will make sufficient progress to regain compliance with these listing standards
by December 10, 2021 under our initial plan or any revision we make to such plan or that NYSE Regulation will accept any revisions
we propose to make to our initial plan, or that delisting proceedings may not be instituted against us based on our not meeting
certain elements of the near-term milestones we had included as part of the compliance plan we submitted. If delisting proceedings
are instituted against us, we would have the right to appeal any delisting determination.
If NYSE American delists
our common stock from trading on the exchange and we are not able to list our securities on another national securities exchange,
we expect our common stock would qualify to be quoted on an over-the-counter market. If this were to occur, we could experience
a number of adverse consequences, including:
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limited availability of market quotations for the common stock;
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reduced liquidity for our securities;
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our common stock being categorized as a “penny stock,” which requires brokers trading
in our common stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary
trading market for our common stock; and
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decreased ability to issue additional securities or obtain additional financing in the future.
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In addition, the National
Securities Markets Improvement Act of 1996 generally preempts the states from regulating the sale of “covered securities.”
Our common stock qualifies as “covered securities” because the shares of common stock are listed on NYSE American.
If our common stock were no longer listed on NYSE American, our securities would not be “covered securities” and we
would be subject to regulation in each state in which we offer our securities.