Notes
to Condensed Consolidated Financial Statements
March
31, 2022
(Unaudited)
1.
Summary of Business, Basis of Presentation
Marrone
Bio Innovations, Inc. (the “Company”), was incorporated under the laws of the State of Delaware on June 15, 2006, and is
located in Raleigh, North Carolina. In July 2012, the Company formed a wholly-owned subsidiary, Marrone Michigan Manufacturing LLC (“MMM
LLC”), which holds the assets of a manufacturing plant the Company purchased in July 2012. In September 2019 the Company closed
its acquisition of Pro Farm Technologies OY, a Finnish limited company, which consisted of Pro Farm Technologies OY and its five subsidiaries
Pro Farm International Oy (Finland), Pro Farm OU (Estonia), Pro Farm Technologies Comercio de Insumos Agricolas do Brasil ltda. (Brazil
– 99% controlling interest), Pro Farm Inc. (Delaware), and Glinatur SA (Uruguay) (collectively “Pro Farm”). As a result
of the acquisition, Pro Farm became a wholly-owned subsidiary of the Company. In December 2019, the Company created its subsidiary Pro
Farm Russia, LLC (Russia). The condensed consolidated financial statements include the accounts of the Company and its wholly-owned and
substantially owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
The
accompanying condensed consolidated financial information as of March 31, 2022, and for the three months ended March 31, 2022 and 2021,
has been prepared by the Company, without audit, in accordance with generally accepted accounting principles in the United States (“U.S.
GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial
reporting. Certain information and note disclosures normally included in annual financial statements prepared in accordance with U.S.
GAAP have been condensed or omitted pursuant to such SEC rules and regulations and accounting principles applicable for interim periods.
However, the Company believes that the disclosures are adequate to make the information presented not misleading. The information included
in this Quarterly Report on Form 10-Q should be read in connection with the consolidated financial statements and accompanying notes
included in the Company’s Annual Report filed on Form 10-K for the fiscal year ended December 31, 2021.
In
the opinion of management, the condensed consolidated financial statements as of March 31, 2022, and for the three months ended March
31, 2022 and 2021, reflect all adjustments, which are normal recurring adjustments, necessary to present a fair statement of financial
position, results of operations and cash flows. The results of operations for the three months ended March 31, 2022 are not necessarily
indicative of the operating results for the full fiscal year or any future periods.
The
Company is a growth-oriented agricultural company that supports environmentally sustainable farming practices through the discovery,
development and sale of innovative biological products for crop protection, crop health and crop nutrition. The Company’s portfolio
of 18 products helps customers operate more sustainably while increasing their return on investment. The Company’s products are
used globally and can be applied as foliar treatments or as seed-and-soil treatments, either on their own or in combination with other
agricultural products. The Company targets the major markets that use conventional chemical products, including certain agricultural
markets where its biological products are used as alternatives for, or mixed with, conventional chemical products. The Company also targets
new markets for which (i) there are no available conventional chemical products or (ii) the use of conventional chemical products may
not be desirable or permissible either because of health and environmental concerns (including for organically certified crops) or because
the development of pest resistance has reduced the efficacy of conventional chemical products. The Company’s products are sold
through distributors and other commercial partners to growers around the world for use in integrated pest management systems that improve
efficacy and increase yields while protecting the environment. The Company’s products are often used in conjunction with or as
an alternative to other agricultural solutions to control pests and enhance plant nutrition and health. The Company’s bioprotection
products help farmers manage pests and plant diseases, the Company’s plant health products help farmers reduce crop
stress, and both the Company’s plant health and bionutrition products to increase yields and quality. The Company delivers
EPA-approved and registered biological crop protection products and other biological products that address the global demand for effective,
safe and environmentally responsible products.
Going
Concern, Liquidity, and Management Plans
The
accompanying condensed consolidated financial statements have been prepared under the assumption that the Company will continue to operate,
although there is substantial doubt about its ability to continue as a going concern for 12 months after the issuance of these condensed
consolidated financial statements. This assessment contemplates the realization of assets and the settlement of liabilities in the normal
course of business. The condensed consolidated financial statements do not include any adjustments to reflect the possible future effects
on the recoverability and classification of assets or the amounts of liabilities that may result from the Company’s substantial
doubt about its ability to continue as a going concern.
The
Company has a limited number of commercialized products and has incurred significant losses since inception, and expects to continue
to incur losses for the foreseeable future. The Company’s historical operating results, including prior periods of negative use
of operating cash flows and debt maturities due within the 12 months of the balance sheet date indicate that substantial doubt exists
related to the Company’s ability to continue as a going concern for the next 12 months from the date of issuance of these condensed
consolidated financial statements. As of March 31, 2022, the Company had a working capital deficit of $8,748,000, including cash and
cash equivalents of $9,362,000. In addition, as of March 31, 2022, the Company had consolidated short-term and long-term debt of $31,872,000,
for which the underlying debt agreements contain various financial and non-financial covenants, and certain material adverse change clauses.
As of March 31, 2022, the Company had a total of $1,560,000 of restricted cash relating to these debt agreements. (Refer to Notes 6 of
these condensed consolidated financial statements).
The
Company expects it will exceed its current ratio and maximum debt-to-worth requirement under the June 2014 Secured Promissory Note with
Five Star Bank, and the June 2014 Secured Promissory
Note contains a material adverse change clause that could be invoked by the lender as a result of the uncertainty related to the Company’s
ability to continue as a going concern. If the lender were to declare an event of default, the entire amount of borrowings related to
all debt agreements at that time would have to be reclassified as current in the condensed consolidated financial statements. The lender
has waived its right to deem recurring losses, liquidity, going concern, and financial condition a material adverse change through March
31, 2023. As a result, the long-term portion of the June 2014 Secured Promissory Note has not been reclassified to current in these condensed
consolidated financial statements as of March 31, 2022. Further, a violation of a covenant in one debt agreement will cause the Company
to be in violation of certain covenants under each of its other debt agreements. Breach of covenants included in the Company’s
debt agreements, which could result in the lenders demanding payment of the unpaid principal and interest balances, will have a material
adverse effect upon the Company and would likely require the Company to seek to renegotiate these debt arrangements with the lenders.
If such negotiations are unsuccessful, the Company may be required to seek protection from creditors through bankruptcy proceedings.
The Company’s inability to maintain compliance with its debt covenants could have a negative impact on the Company’s financial
condition and ability to continue as a going concern.
The
Company believes that its existing cash and cash equivalents of $9,362,000
at March 31, 2022, together with expected revenues, expected future extension of debt maturities, equity financings and cost management
will be sufficient to fund operations as currently planned through one year from the date of the issuance of these condensed consolidated
financial statements. The Company anticipates securing additional sources of cash through equity and/or debt financings, or through other
sources of financing, consistent with historic results. However, the Company cannot predict, with certainty, the outcome of its actions
to grow revenues, to manage or reduce costs or to secure additional financing from outside sources on terms acceptable to the Company
or at all. Any future equity financing may result in dilution to existing stockholders and any debt financing may include additional
restrictive covenants. Any failure to obtain additional financing or to achieve the revenue growth necessary to fund the Company with
cash flows from operations will have a material adverse effect upon the Company and will likely result in a substantial reduction in
the scope of the Company’s operations and impact the Company’s ability to achieve its planned business objectives. Further,
the Company may continue to require additional sources of cash for general corporate purposes, which may include operating expenses,
working capital to improve and promote its commercially available products, advance product candidates, expand international presence
and commercialization, and general capital expenditures. The actions discussed above cannot be considered to mitigate the substantial
doubt raised by its historical operating results and satisfying its estimated liquidity needs for 12 months from the issuance of these
condensed consolidated financial statements.
2.
Significant Accounting Policies
Use
of Estimates
The
preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements
and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The
Company used significant estimates in accounting for assumptions and estimates associated with revenue recognition, including assumptions
and estimates used in determining the timing and amount of revenue to recognize for those transactions with variable considerations,
reserves for inventory obsolescence, and forecasted estimates and assumptions related to impairment analysis for goodwill and contingent
considerations related to Pro Farm, and assumptions and estimates associated with its going concern analysis.
Concentrations
of Credit Risks
Financial
instruments that potentially subject the Company to concentrations of credit risk consist principally of cash, cash equivalents, accounts
receivable and debt. The Company deposits its cash and cash equivalents with high credit quality domestic financial institutions with
locations in the U.S. and internationally. Such deposits may exceed federal or national deposit insurance limits. The Company believes
the financial risks associated with these financial instruments are minimal.
The
Company’s customer base is dispersed across many different geographic areas, and currently most customers are pest management distributors
in the U.S. Generally, receivables are due up to 120 days from the invoice date and are considered past due after this date, although
the Company may offer extended terms from time to time. The Company has provided extended payment terms on a case-by-case basis with
a certain customer as a result of COVID-19.
The
Company’s principal sources of revenues are its Regalia, Grandevo, Venerate and UPB-110 ST product lines. These four product lines
accounted for 77% and 89%, respectively, of the Company’s total revenues for each of the three months ended March 31, 2022 and
2021.
Revenues
generated from international customers were 13% and 7% for the three months ended March 31, 2022 and 2021, respectively. For the three
months ended March 31, 2022 international customers were primarily concentrated in the European Union and Latin Americas regions and
for the three months ended March 31, 2021, international customers were primarily concentrated in the European Union.
Customers
to which 10% or more of the Company’s total revenues are attributable for the three months ended March 31, 2022 and 2021 consist
of the following:
Schedule of Significant Customer's Revenues and Account Receivable Percentage
| | |
CUSTOMER | |
| | |
A | | |
B | | |
C | | |
D | |
| Three months ended March 31, | |
| | |
| | |
| | |
| |
| 2022 | |
| 22 | % | |
| 22 | % | |
| 11 | % | |
| 9 | % |
| 2021 | |
| 16 | % | |
| 30 | % | |
| 4 | % | |
| 11 | % |
Customers
to which 10% or more of the Company’s outstanding accounts receivable are attributable as of either March 31, 2022 or December
31, 2021, which may or may not correspond with any of the customers above, consist of the following:
| | |
CUSTOMER | |
| | |
A | | |
B | | |
C | | |
D | |
| March 31, 2022 | |
| 24 | % | |
| 19 | % | |
| 13 | % | |
| 4 | % |
| December 31, 2021 | |
| 7 | % | |
| 39 | % | |
| 13 | % | |
| 10 | % |
Concentrations
of Supplier Dependence
The
active ingredient in the Company’s Regalia product line is derived from the giant knotweed plant, which the Company obtains from
China. The Company currently relies on one supplier for this plant. Such single supplier acquires raw knotweed from numerous regional
sources and performs an extraction process on this plant, creating a dried extract that is shipped to the Company’s manufacturing
plant. While the Company does not have a long-term supply contract with this supplier, the Company does have a long-term business relationship
with this supplier. The Company endeavors to keep 6 to 12 months of knotweed extract on hand at any given time, but an unexpected disruption
in supply including disruptions resulting from the COVID-19 pandemic, could have an effect on Regalia supply and revenues. Although the
Company has identified additional sources of raw knotweed, there can be no assurance that the Company will continue to be able to obtain
dried extract from China at a competitive price.
The
Company continues to rely on third parties to formulate Grandevo into spray-dried powders, for all of its production of Venerate, Majestene/Zelto,
Stargus and Haven, and from time to time, third-party manufacturers for supplemental production capacity to meet excess seasonal demand
and for packaging. The Company’s products have been produced in quantities, and on timelines, sufficient to meet commercial demand
and for the Company to satisfy its delivery schedules. However, the Company’s dependence upon others for the production of a portion
of its products, or for a portion of the manufacturing process, particularly for drying and for all of its production of Venerate, may
adversely affect its ability to satisfy demand and meet delivery obligations, as well as to develop and commercialize new products, on
a timely and competitive basis. The Company has not entered into any long-term manufacturing or supply agreements for any of its products,
and it may need to enter into additional agreements for the commercial development, manufacturing and sale of its products. There can
be no assurance that it can do so on favorable terms, if at all.
Products
produced by the Company’s Pro Farm subsidiary, including UBP and Foramin, are partially sourced by suppliers from a
manufacturing plant in Russia, in which the Company owns a 12%
interest. The Company plans for enough inventory on hand to fill its revenue forecasts for 12 months at any given time, but an
unexpected disruption in supply could have an adverse effect on the supply and revenues related to the subsidiary. During the three
months ended March 31, 2022, the Company began increasing its inventory on hand. Although the Company has identified additional
manufacturers who may be capable of supplying the products, there can be no assurance that the Company will continue to be able to
obtain products at a competitive price. The Company’s 12%
interest is owned by the Company’s Pro Farm Technologies OY subsidiary and is recorded on the condensed consolidated balance
sheet in caption “Other assets” in the amount of $0.5
million. As of March 31, 2022 no impairment had been taken on the asset as the Company continues to assess the impact of the current
political conflict between Russia and Ukraine.
Cash
and Cash Equivalents
The
following table provides a reconciliation of cash, cash equivalents and restricted cash to amounts shown in the condensed consolidated
statements of cash flows (in thousands):
Schedule of Cash, Cash Equivalents and Restricted Cash
| | |
MARCH 31, | | |
DECEMBER 31, | |
| | |
2022 | | |
2021 | |
| Cash and cash equivalents | |
$ | 9,362 | | |
$ | 19,623 | |
| Restricted cash, less current portion | |
| 1,560 | | |
| 1,560 | |
| Total cash, cash equivalents and restricted cash | |
$ | 10,922 | | |
$ | 21,183 | |
Restricted
Cash
The
Company’s restricted cash consists of cash that the Company is contractually obligated to maintain in accordance with the terms
of its June 2014 Secured Promissory Note. (Refer to Note 6 of these condensed consolidated financial statements.)
Intangible
Assets
The
Company evaluates intangible assets for impairment at least annually and more often whenever events or changes in circumstances indicate
that the carrying value may not be recoverable. Whenever any such impairment exists, an impairment loss will be recognized for the amount
by which the carrying value exceeds the fair value. The Company’s intangible assets include customer relationships, patents, trademarks,
and in process research and development acquired in 2019 in connection with its asset acquisition of the Jet-Ag and Jet-Oxide product
lines and the Company’s acquisition of Pro Farm.
Long-Lived
Assets
Impairment
losses related to long-lived assets are recognized in the event the net carrying value of such assets is not recoverable and exceeds
fair value. The Company evaluates the recoverability of its long-lived assets whenever events or changes in circumstances indicate that
the carrying value of an asset may not be recoverable. The carrying amount of a long-lived asset (asset group) is not recoverable if
it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset (asset group).
If the carrying amount of a long-lived asset (asset group) is considered not recoverable, the impairment loss is measured as the amount
by which the carrying value of the asset or asset group exceeds its estimated fair value.
Goodwill
Goodwill
represents the excess of purchase price over the underlying net assets of businesses acquired. Goodwill is reviewed for impairment on
an annual basis as of the first day of the Company’s fiscal fourth quarter or more frequently if events or changes in circumstances
indicate that the carrying amount of goodwill may be impaired.
Fair
Value
Accounting
Standards Codification (“ASC”) 820, Fair Value Measurements (“ASC 820”), clarifies that fair value is an exit
price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants
would use in pricing an asset or liability.
ASC
820 requires that the valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use
of unobservable inputs. ASC 820 establishes a three-tier value hierarchy, which prioritizes inputs that may be used to measure fair value
as follows:
●
Level 1—Quoted prices in active markets for identical assets or liabilities.
●
Level 2—Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical
or similar assets or liabilities in inactive markets or other inputs that are observable or can be corroborated by observable market
data for substantially the full term of the assets or liabilities.
●
Level 3—Inputs that are generally unobservable and typically reflect management’s estimate of assumptions that market participants
would use in pricing the asset or liability.
Deferred
Revenue
When
the Company receives consideration, or such consideration is unconditionally due, from a customer prior to transferring control of goods
or services to the customer under the terms of a sales contract, the Company records deferred revenue, which represents a contract liability.
The Company recognizes deferred revenue as net sales after the Company has transferred control of the goods or services to the customer
and all revenue recognition criteria are met. The Company’s deferred revenue is broken out as follows (in thousands):
Schedule of Deferred Revenue
| | |
MARCH 31, | | |
DECEMBER 31, | |
| | |
2022 | | |
2021 | |
| Product revenues | |
$ | 12 | | |
$ | 87 | |
| Financing costs | |
| 459 | | |
| 477 | |
| License revenues | |
| 893 | | |
| 961 | |
| Total deferred revenues | |
| 1,364 | | |
| 1,525 | |
| Less current portion | |
| (285 | ) | |
| (360 | ) |
| Long term portion | |
$ | 1,079 | | |
$ | 1,165 | |
Research,
Development and Patent Expenses
Research
and development expenses include payroll-related expenses, field trial costs, toxicology costs, regulatory costs, consulting costs and
lab costs. Patent expenses include legal costs relating to the patents and patent filing costs. These costs are expensed to operations
as incurred. For the three months ended March 31, 2022 and 2021, research and development expenses totaled $2,867,000 and $2,295,000,
respectively, and patent expenses totaled $293,000 and $217,000, respectively.
Shipping
and Handling Costs
Amounts
billed for shipping and handling are included as a component of product revenues. Related costs for shipping and handling have been included
as a component of cost of product revenues. Shipping and handling costs for the three months ended March 31, 2022 and 2021 were $508,000
and $345,000, respectively.
Advertising
The
Company expenses advertising costs as incurred and has included these expenses as a component of selling, general and administrative
costs. Advertising costs for the three months ended March 31, 2022 and 2021 were $132,000 and $111,000, respectively.
Depreciation
and Amortization
The
Company depreciates and amortizes its capitalized property, plant, and equipment and intangible assets over the useful life of each asset
utilizing a straight-line method of expensing. All depreciation and amortization expenses are included in the “Selling, general,
and administrative” caption in the condensed consolidated statement of operations.
For
the three months ended March 31, 2022 and 2021, the total amount of depreciation expense was $300,000 and $288,000, respectively. For
the three months ended March 31, 2022 and 2021, the total amount of amortization expense was $585,000 and $586,000, respectively.
Segment
Information
The
Company is organized as a single operating segment, whereby its chief operating decision maker assesses the performance of and allocates
resources to the business as a whole.
Net
Loss Per Share
Net
loss per share is computed by dividing the net loss by the weighted average number of common shares outstanding for the period. The calculation
of basic and diluted net loss per share is the same for all periods presented as the effect of certain potential common stock equivalents,
which consist of stock options and warrants to purchase common stock and restricted stock units, and contingent shares to be issued in
the future are anti-dilutive due to the Company’s net loss position. Anti-dilutive common stock equivalents are excluded from diluted
net loss per share. The following table sets forth the potential shares of common stock as of the end of each period presented that are
not included in the calculation of diluted net loss per share because to do so would be anti-dilutive (in thousands):
Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share
| | |
MARCH 31, | | |
MARCH 31, | |
| | |
2022 | | |
2021 | |
| Stock options outstanding | |
| 13,614 | | |
| 13,572 | |
| Warrants to purchase common stock | |
| 152 | | |
| 6,814 | |
| Restricted stock units outstanding | |
| 5,509 | | |
| 4,772 | |
| Common shares to be issued in lieu of agent fees | |
| 498 | | |
| 498 | |
| Employee stock purchase plan | |
| 102 | | |
| 84 | |
| Maximum contingent consideration shares to be issued | |
| 5,415 | | |
| 5,972 | |
| | |
| 25,290 | | |
| 31,712 | |
Recently
Adopted Accounting Pronouncements
In
June 2016, the FASB issued Accounting Standards Update No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement
of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 introduces a new forward-looking approach, based on
expected losses, to estimate credit losses on certain types of financial instruments, including trade receivables. The estimate of expected
credit losses will require entities to incorporate considerations of historical information, current information and reasonable and supportable
forecasts. ASU 2016-13 also expands the disclosure requirements to enable users of consolidated financial statements to understand the
entity’s assumptions, models and methods for estimating expected credit losses. For public business entities that meet the definition
of an SEC filer, ASU 2016-13 is effective for annual and interim reporting periods beginning after December 15, 2019, and the guidance
is to be applied using the modified-retrospective approach. Earlier adoption is permitted for annual and interim reporting periods beginning
after December 15, 2018. In November 2018, the FASB issued ASU No. 2018-19, “Codification Improvements to Topic 326, Financial
Instruments – Credit Losses,” (“ASU No. 2018-19”), in April 2019, the FASB issued Accounting Standards Update
No. 2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and
Topic 825, Financial Instruments (“ASU 2019-04”), in May 2019, the FASB issued Accounting Standards Update No. 2019-05, Financial
Instruments—Credit Losses (Topic 326) (“ASU 2019-05”), in November 2019, the FASB issued Accounting Standards Update
No. 2019-10, Financial Instruments—Credit Losses, (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective
Date (“ASU 2019-10”) and Accounting Standards Update No. 2019-11, Financial Instruments—Credit Losses (“ASU 2019-11”),
and in February 2020, the FASB issued Accounting Standards Update No. 2020-02, Financial Instruments—Credit Losses, (Topic 326)
and Leases (Topic 842) (“ASU 2020-02”). ASU 2020-02, delayed the effective date for certain entities including entities meeting
the SEC’s definition of a Smaller Reporting Company. The Company adopted the ASU on January 1, 2022 on a prospective basis. The
adoption of ASU 2016-13 had no significant impact on the Company’s condensed consolidated financial statements.
In
May 2021, the FASB issued Accounting Standards Update No. 2021-04, “Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments
(Subtopic 470-50), Compensation – Stock Based Compensation (Topic 718), and Derivatives and Hedging – Contracts in Entity’s
Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written
Call Options” (“ASU No. 2021-04”), which clarified an issuer’s accounting for modification or exchanges of freestanding
equity-classified written call options that remain equity classified after modification or exchange. The provisions of ASU No. 2021-04
are effective for annual reporting periods beginning after December 15, 2021, and interim reporting periods within those annual periods,
with early adoption permitted, including adoption in any interim period for public business entities for periods for which consolidated
financial statements have not yet been issued or made available for issuance. The Company adopted the ASU on January 1, 2022 on a prospective
basis. The adoption of ASU 2021-04 had no significant impact on the Company’s condensed consolidated financial statements.
3.
Inventory
Inventories
consist of the following (in thousands):
Schedule of Inventory
| | |
MARCH 31, | | |
DECEMBER 31, | |
| | |
2022 | | |
2021 | |
| Raw materials | |
$ | 4,230 | | |
$ | 3,311 | |
| Work in progress | |
| 1,439 | | |
| 671 | |
| Finished goods | |
| 4,453 | | |
| 4,651 | |
| Inventories | |
$ | 10,122 | | |
$ | 8,633 | |
As
of March 31, 2022 and December 31, 2021, the Company had $506,000 and $422,000, respectively, in reserves against its inventories. For
the three months ended March 31, 2022 and 2021, the Company recorded an adjustment of $365,000 and $228,000, respectively, as a result
of actual utilization of the Company’s manufacturing plant being less than what is considered normal capacity.
4.
Right-Of-Use Assets and Lease Liability
The
components of lease expense were as follows for each of the comparative three months ended March 31, 2022 and 2021 (in thousands):
Schedule of Components of Lease Expense
| | |
THREE MONTHS ENDED
MARCH 31, | | |
THREE MONTHS ENDED
MARCH 31, | |
| | |
2022 | | |
2021 | |
| | |
| | |
| |
| | |
| | |
| |
| Operating lease cost | |
$ | 381 | | |
$ | 290 | |
| Short-term lease cost | |
| 20 | | |
| 41 | |
| Total operating lease costs: | |
$ | 401 | | |
$ | 331 | |
Maturities
of lease liabilities for each future calendar year as of March 31, 2022 are as follows (in thousands):
Schedule of Maturities of Lease Liabilities
| | |
OPERATING | |
| | |
LEASES | |
| 2022 | |
$ | 1,186 | |
| 2023 | |
| 1,513 | |
| 2024 | |
| 1,048 | |
| 2025 | |
| 169 | |
| Total lease payments | |
| 3,916 | |
| Less: imputed interest | |
| 330 | |
| Total lease obligation | |
| 3,586 | |
| Less lease obligation, current portion | |
| 1,433 | |
| Lease obligation, non-current portion | |
$ | 2,153 | |
5.
Accrued Liabilities
Accrued
liabilities consist of the following (in thousands):
Schedule of Accrued Liabilities
| | |
MARCH 31, | | |
DECEMBER 31, | |
| | |
2022 | | |
2021 | |
| Accrued compensation | |
$ | 4,413 | | |
$ | 3,922 | |
| Accrued warranty costs | |
| 456 | | |
| 440 | |
| Accrued customer incentives | |
| 2,579 | | |
| 6,758 | |
| Accrued liabilities, acquisition related | |
| 19 | | |
| 30 | |
| Loan-related fees | |
| 508 | | |
| 707 | |
| Accrued liabilities, other | |
| 4,379 | | |
| 2,994 | |
| Accrued Liabilities | |
$ | 12,354 | | |
$ | 14,851 | |
Contingent
Consideration
As
of March 31, 2022, the contingent consideration in connection with the Company’s acquisition of Pro Farm was accounted for as a
liability at its fair value. The following table provides a reconciliation of the activity for the contingent consideration measured
between the most recent reporting period and as of the balance sheet date based on the fair value using significant inputs including
the unobservable inputs (Level 3) (in thousands):
Schedule of Liability Measured at Fair Value Using Unobservable Inputs
| | |
CONTINGENT | |
| | |
CONSIDERATION | |
| | |
LIABILITY | |
| Fair value at December 31, 2021 | |
$ | 539 | |
| Change in estimated fair value recorded of contingent consideration | |
| (32 | ) |
| Fair value at March 31, 2022 | |
| 507 | |
The
change in fair value for the reporting period was driven by the result of the unobservable fair value model, a Monte Carlo simulation
in a risk-neutral framework assuming Geometric Browning Motion. The most significant input to the model was the estimated results of
the Pro Farm subsidiary for the periods specified in the share purchase agreement of 2022 – 2023. The following represents other
inputs used in determining the fair value of the contingent consideration liability:
Schedule of Significant Assumptions Utilized in the Fair Value of Liabilities
| | |
MARCH 31, | |
| | |
2022 | |
| Discount Rate | |
| 14.9 | % |
| Volatility | |
| 55.0 | % |
| Credit spread | |
| 9.7 | % |
| Risk-free rate | |
| 2.1 | % |
Discount
Rate. Discount rate is based on an adjusted weighted cost of capital contribution considering an estimated operational leverage ratio
and a risk-free rate, each (other than the risk-free rate) determined by publicly traded peer group median.
Estimated
Volatility Factor. Volatility factor is based on the adjusted weighted cost of capital, operating asset volatility, operating leverage
ratio and risk-free interest rate, each (other than the risk-free rate) determined by publicly traded peer group median.
Credit
Spread. Credit spread based on the Company’s financial ratio in comparison with those of publicly traded peer group.
Interest
Rate. Interest rate based on US Constant Maturity Treasury rates for the same period as the period of performance of 2022 to 2023.
The
change in the fair value estimate is recognized in the Company’s condensed consolidated statement of operations in Other Income
(expense) under caption Change in fair value of contingent consideration. The contingent consideration will be determined at each reporting
period and will be settled with the issuance of the Company’s common shares. As of March 31, 2022, the total maximum amount of
contingent consideration shares that can be issued in the future is 5,415,000,
the fair value of which the Company recorded in
“other liabilities” on the Company’s condensed consolidated balance sheets.
6.
Debt
Debt,
including debt due to related parties, consists of the following (in thousands):
Schedule of Debt Including Debt to Related Parties
| | |
MARCH 31, | | |
DECEMBER 31, | |
| | |
2022 | | |
2021 | |
| Secured promissory notes (“October 2012 and April 2013 Secured Promissory Notes”) bearing interest at 8.00% per annum, interest and principal due at maturity (December 31, 2022), collateralized by substantially all of the Company’s assets. | |
$ | 3,425 | | |
$ | 3,425 | |
| Secured promissory note (“June 2014 Secured Promissory Note”) bearing interest at prime plus 2% (5.25% as of March 31, 2022) per annum, payable monthly through June 2036, collateralized by certain of the Company’s deposit accounts and MMM LLC’s inventories, chattel paper, accounts, equipment and general intangibles, net of unamortized debt discount as of March 31, 2022 of $143 and December 31, 2021 of $147. | |
| 7,686 | | |
| 7,774 | |
| Secured revolving borrowing (“LSQ Financing”) bearing interest at (12.80% annually) payable through the lenders direct collection of certain accounts receivable through May 2022, collateralized by substantially all of the Company’s personal property. | |
| 13,195 | | |
| 14,829 | |
| Senior secured promissory notes (“August 2015 Senior Secured Promissory Notes”) bearing interest at 8% per annum, interest and principal payable at maturity (December 31, 2022), collateralized by substantially all of the Company’s assets. | |
| 7,300 | | |
| 7,300 | |
| Research loan facility (“2018 Research Facility”) bearing interest at 1.00% per annum, interest payments are due annually on the anniversary date of the facility with principal payable in 25% increments on the anniversary date of the facility beginning on the fourth anniversary of the loan (September 2022), net of imputed interest as of March 31, 2022 $37K and December 31, 2021 of $38K, respectively. | |
| 266 | | |
| 272 | |
| Debt | |
$ | 31,872 | | |
$ | 33,600 | |
| Less current portion | |
| (24,280 | ) | |
| (25,909 | ) |
| Debt, non-current | |
$ | 7,592 | | |
$ | 7,691 | |
As
of March 31, 2022, aggregate contractual future principal payments on the Company’s debt are due as follows (in thousands):
Schedule of Contractual Future Payments to Related Parties
| PERIOD ENDING DECEMBER 31, | |
| |
| 2022 (remaining nine months) | |
$ | 20,920 | |
| 2023 | |
| 471 | |
| 2024 | |
| 491 | |
| 2025 | |
| 514 | |
| 2026 | |
| 537 | |
| Thereafter | |
| 5,844 | |
| Total future principal payments | |
| 28,777 | |
| Interest payments included in debt balance (1) | |
| 3,275 | |
| Total future debt payments | |
$ | 32,052 | |
| |
1) |
Due
to the debt extinguishment requirements, the Company has included both accrued interest and future interest in the debt balance for
certain outstanding debt. |
October
2012 and April 2013 Secured Promissory Notes
As
of March 31, 2022, there have been no changes to the previously reported total principal amount outstanding under the October 2012 and
April 2013 Secured Promissory Note, which continues to be $2,450,000. Due to the historical accounting for the promissory note the amount
recorded on the condensed consolidated balance sheet of $3,425,000 includes $975,000 in accrued interest, of which as of March 31, 2022
and 2021, a total of $827,000 and $631,000, respectively, had been incurred.
As
of March 31, 2022, the Company is in compliance with all financial covenants.
June
2014 Secured Promissory Note
In
June 2014, the Company borrowed $10,000,000 pursuant to a business loan agreement and promissory note (“June 2014 Secured Promissory
Note”) with Five Star Bank that bears an interest of 5.25% (per annum) as of March 31, 2022. The interest rate is subject to change
and is based on the prime rate plus 2.00% per annum. The Company is required to maintain a deposit balance with the Five Star Bank of
$1,560,000, which is recorded as restricted cash included in non-current assets.
Under
this note the Company is required to maintain a current ratio of not less than 1.25-to-1.0, a debt-to-worth ratio of no greater than
4.0-to-1.0 and a loan-to-value ratio of no greater than 70% as determined by Five Star Bank. In the event of default on the debt, Five
Star Bank may declare the entire unpaid principal and interest immediately due and payable. As of March 31, 2022, the Company was not
in compliance with certain of these covenants and therefore the Company had obtained a waiver from the lender for any non-compliance
through March 31, 2023.
The
following table reflects the activity under this note (in thousands):
Schedule of Debt Activity
| | |
2022 | | |
2021 | |
| Principal balance, net at January 1, | |
$ | 7,774 | | |
$ | 8,106 | |
| Principal payments | |
| (196 | ) | |
| (196 | ) |
| Interest | |
| 104 | | |
| 109 | |
| Debt discount amortization | |
| 4 | | |
| 5 | |
| Principal balance, net at March 31, | |
$ | 7,686 | | |
$ | 8,024 | |
August
2015 Senior Secured Promissory Notes
As
of March 31, 2020, there have been no changes to the previously reported total principal amount outstanding under the August 2015 Senior
Secured Promissory Notes, which continues to be $5,000,000. Due to the historical accounting for the promissory note the amount recorded
on the condensed consolidated balance sheet of $7,300,000 includes $2,300,000 in accrued interest, of which as of March 31, 2022 and
2021, a total of $1,999,000 and $1,600,000, respectively, had been incurred.
The
August 2015 Senior Secured Promissory Notes provide for various events of default, including, among others, default in payment of principal
or interest, breach of any representation or warranty by the Company or any subsidiary under any agreement or document delivered in connection
with the notes, a continued breach of any other condition or obligation under any loan document, certain bankruptcy, liquidation, reorganization
or change of control events, the acquisition by any person or persons acting as group, other than the lenders, of beneficial ownership
of 40% or more of the outstanding voting stock of the Company. Upon an event of default, the entire principal and interest may be declared
immediately due and payable. As of March 31, 2022, the Company was in compliance with its covenants under the August 2015 Senior Secured
Promissory Notes.
LSQ
Financing
In
January 2020, the Company entered into a Second Amendment to the Company’s Invoice Purchase Agreement with LSQ. The amendment,
among other things, (i) increased the amount of eligible customer invoices which LSQ may elect to purchase from the Company to up to
$20,000,000 of eligible customer invoices from the Company from $7,000,000; (ii) increased the advance rate to 90% from 85% and 70% from
60%, respectively, of the face value of domestic and international receivables being sold; (iii) decreased the invoice purchase fee rate
from 0.40% to 0.25%; (iv) increased the funds usage fee from 0.020% to 0.025%; (v) extended the 0% aging and collection fee percentage
charged at the time when the purchased invoice is collected from 90 days to 120 days, and increased the fee percentage charged thereafter
from 0.35% to 0.75%; and (vi) decreased the early termination fee from 0.75% to 0.50%.
In
addition to the Amendment, the Company simultaneously entered into an Amended Inventory Financing Addendum (the “Addendum”)
with LSQ. The Addendum allows the Company to request an advance up to the lesser of (i) 100% of the Company’s unpaid finished goods
inventory; (ii) 65% of the appraised value of the Company’s inventory performed on or on behalf of LSQ; or (iii) $3,000,000. Funds
advance under the Addendum are subject to a monthly inventory management fee of 0.5% on the average monthly inventory funds available
and a daily interest rate of 0.025%. In December 2021, the Addendum was amended to increase the maximum funds advance to $4,500,000.
As
of March 31, 2022, the Company was in compliance with all financial covenants of the agreement. For the three months ended March 31,
2022 and 2021, the Company recorded interest expense of approximately $396,000 and $232,000, respectively, in connection with the LSQ
arrangement. As of March 31, 2022, $13,195,000 was outstanding under the LSQ Financing.
7.
Share-Based Plans
As
of March 31, 2022, there were options to purchase 13,614,000
shares of common stock outstanding, 5,509,000
restricted stock units outstanding and 13,915,000
share-based awards available for grant under
the outstanding equity incentive plans.
For
the three months ended March 31, 2022 and 2021, the Company recognized share-based compensation of $822,000 and $915,000, respectively.
In
February 2022, the Company granted awards under a newly implemented long-term incentive program (“LTIP”). Under the LTIP,
grants to certain executive officers in a total aggregate amount of 609,350
restricted stock units and, options to purchase
1,455,556
shares of the Company’s common stock were
issued under the 2013 Plan. The awards vest in equal monthly installments over three years, subject to the recipient’s continued
employment by the Company through the applicable vesting date, provided that, in lieu of the terms of any change in control agreement
in place between the Company and the recipient, in the event that any recipient is terminated without Cause (as defined in the applicable
recipient’s Change In Control Agreement) or resigns for Good Reason (as defined in the applicable recipient’s Change In Control
Agreement) within twelve months of a Change in Control (as defined in the recipient’s Change In Control Agreement), 50%
of the unvested portion of each Executive Award will become immediately vested. The options to purchase common stock were granted
at an exercise price of $0.89
and with a fair value of $843,000.
The Company’s fair value of these grants was estimated utilizing a Black Scholes option pricing model based on the assumptions
which have determined consistent with the Company’s historical methodology for such assumptions with the exception of the strike
price given consideration to the previously announced merger agreement (See Note 8 to these condensed consolidated financial statements).
The
following table summarizes the activity of stock options from December 31, 2021 to March 31, 2022 (in thousands, except weighted average
exercise price):
Summary of Stock Options Activity
| | |
| | |
WEIGHTED- | |
| | |
| | |
AVERAGE | |
| | |
SHARES | | |
EXERCISE | |
| | |
OUTSTANDING | | |
PRICE | |
| Balances at December 31, 2021 | |
| 12,677 | | |
$ | 2.35 | |
| Options granted | |
| 1,645 | | |
$ | 0.64 | |
| Options exercised | |
| - | | |
$ | - | |
| Options cancelled | |
| (708 | ) | |
$ | 1.90 | |
| Balances at March 31, 2022 | |
| 13,614 | | |
$ | 2.17 | |
Also
under the LTIP, in February 2022, the Company granted 1,032,639 restricted stock units to certain other employees at
a grant date market value of $0.63. The awards were issued under the 2013 Plan and vest as to 1/3 of the total number of shares
subject to the awards on the six month anniversary of the grant date and, with respect to 2/3 of the total shares, monthly thereafter
for 30 months such that all shares will be fully vested upon the third anniversary of the grant date, subject to recipients continued
employment with the Company. Further, upon a Change in Control (as defined in the 2013 Plan), 1/3 of these awards become immediately
vested.
The
following table summarizes the activity of restricted stock units from December 31, 2021 to March 31, 2022 (in thousands, except weighted
average grant date fair value):
Summary of Restricted Stock Units Activity
| | |
| | |
WEIGHTED | |
| | |
| | |
AVERAGE | |
| | |
| | |
GRANT | |
| | |
SHARES | | |
DATE FAIR | |
| | |
OUTSTANDING | | |
VALUE | |
| Outstanding at December 31, 2021 | |
| 3,980 | | |
$ | 1.17 | |
| Granted | |
| 1,642 | | |
| 0.63 | |
| Settled | |
| (50 | ) | |
| 1.66 | |
| Forfeited | |
| (63 | ) | |
| 0.63 | |
| Outstanding at March 31, 2022 | |
| 5,509 | | |
$ | 1.01 | |
The
following table summarizes the activity of non-vested restricted stock units from December 31, 2021 to March 31, 2022 (in thousands,
except weighted average grant date fair value):
Summary of Non-vested Restricted Stock Units Activity
| | |
| | |
WEIGHTED | |
| | |
| | |
AVERAGE | |
| | |
| | |
GRANT | |
| | |
SHARES | | |
DATE FAIR | |
| | |
OUTSTANDING | | |
VALUE | |
| Nonvested at December 31, 2021 | |
| 996 | | |
$ | 1.21 | |
| Granted | |
| 1,642 | | |
| 0.63 | |
| Vested | |
| (54 | ) | |
| 1.30 | |
| Forfeited | |
| (63 | ) | |
| 0.63 | |
| Nonvested at March 31, 2022 | |
| 2,521 | | |
$ | 0.84 | |
8.
Merger Agreement
On
March 16, 2022, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Bioceres Crop Solutions
Corp., a Cayman Islands exempted company (“Bioceres”), and BCS Merger Sub, Inc., a Delaware corporation and wholly owned
subsidiary of Bioceres (“Merger Sub”). The Merger Agreement provides that, upon the terms and subject to the conditions set
forth therein, Merger Sub will merge with and into the Company (the “Merger”), with the Company surviving the Merger as a
wholly owned subsidiary of Bioceres (“NewCo”). Consummation of the Merger is subject to the approval of the Company’s
stockholders, the receipt of required regulatory approvals and satisfaction of other customary closing conditions.
The
board of directors of the Company (the “Board”) has unanimously (i) determined that the Merger Agreement and the transactions
contemplated thereby, including the Merger, are advisable, (ii) determined that the Merger Agreement and the transactions contemplated
thereby, including the Merger, are fair to and in the best interests of the Company and its stockholders, (iii) approved the Merger Agreement
and the transactions contemplated thereby, including the Merger, and (iv) resolved to recommend adoption of the Merger Agreement by the
Company’s stockholders. The Merger Agreement was also unanimously approved by the board of directors of Bioceres.
On
the terms and subject to the conditions set forth in the Merger Agreement, at the effective time of the Merger (the “Effective
Time”), each share of common stock, par value $0.00001 per share, of the Company (the “Company Common Stock”) issued
and outstanding immediately prior to the Effective Time, other than shares of Company Common Stock owned by Bioceres, the Company or
any direct or indirect wholly owned subsidiary of Bioceres or the Company, in each case immediately prior to the Effective Time, shall
be cancelled and extinguished and automatically converted into the right to receive 0.088 (the “Exchange Ratio”) validly
issued, fully paid and nonassesable ordinary shares, par value $0.0001 per share, of Bioceres and, if applicable, cash in lieu of fractional
Bioceres ordinary shares (the “Merger Consideration”).
The
Merger Agreement also specifies the treatment of the Company’s outstanding equity awards in connection with the Merger, which shall
be treated as follows at the Effective Time:
(i)
each outstanding restricted stock unit award relating to shares of Company Common Stock (a “Company RSU”) (that is not a
Company RSU that provides for settlement and issuance of shares of Company Common Stock in connection with a change in control of the
Company (a “Change in Control Settled RSU”) that is unvested immediately prior to the Effective Time and does not vest as
a result of the consummation of the transactions contemplated by the Merger Agreement shall be assumed by Bioceres (each, an “Assumed
RSU”), with each such Assumed RSU being subject to substantially the same terms and conditions, except that the number of Bioceres
ordinary shares subject to each Assumed RSU Award shall be equal to the product of (x) the number of shares of Company Common Stock underlying
such unvested Company RSU as of immediately prior to the Effective Time (with any performance milestones deemed achieved based on maximum
level of performance) multiplied by (y) the Exchange Ratio;
(ii)
each outstanding Company RSU that is vested immediately prior to the Effective Time (taking into account any acceleration of vesting
as a result of the consummation of the transactions contemplated by the Merger Agreement), each Change in Control Settled RSU (whether
or not vested) and each unvested Company RSU held by a non-employee director of the Company will be settled immediately before the Effective
Time by way of the issuance of one share of Company Common Stock for each such Company RSU and such shares of Company Common Stock will
be converted into the right to receive the Merger Consideration;
(iii)
each outstanding option to purchase Company Common Stock (a “Company Option”) that is unvested as of immediately prior to
the Effective Time (and does not vest as a result of the consummation of the transactions contemplated by the Merger Agreement) and each
Company Option that is outstanding and vested as of immediately prior to the Effective Time (or vests as a result of the consummation
of the transactions contemplated by the Merger Agreement) for which the exercise price per share is equal to or greater than the Cash
Equivalent Consideration (as defined in the Merger Agreement) (a “Rolled Vested Option”), shall be assumed by Bioceres (each,
an “Assumed Option”), with each such Assumed Option being subject to substantially the same terms and conditions, except
that (A) the number of Bioceres ordinary shares subject to each Assumed Option shall be equal to the product of (x) the number of shares
of Company Common Stock underlying such Company Option as of immediately prior to the Effective Time multiplied by (y) the Exchange Ratio,
and (B) the per share exercise price of each Assumed Option shall be equal to the quotient determined by dividing (x) the exercise price
per share at which such Company Option was exercisable immediately prior to the Effective Time by (y) the Exchange Ratio;
(iv)
each Company Option, other than a Rolled Vested Option, that is outstanding and vested as of immediately prior to the Effective Time
(or vests as a result of the consummation of the transactions contemplated by the Merger Agreement) shall be cancelled and converted
into the right to receive the Merger Consideration in respect of each “net” share underlying such Company Option, which is
the quotient obtained by dividing (A) the product of (x) the excess of the Cash Equivalent Consideration (as defined in the Merger Agreement)
over the per share exercise price of such Company Option multiplied by (y) the number of shares subject to such Company Option by (B)
the Cash Equivalent Consideration (as defined in the Merger Agreement); and
(v)
with respect to the employee stock purchase plan (the “ESPP”), the Company shall make any pro rata adjustments necessary
to reflect a shortened offer period under the ESPP and treat any shortened offer period as a fully effective and completed offer period
for all purposes pursuant to the ESPP, cause the exercise, no later than one business day, prior to the date on which the Effective Time
occurs, of each outstanding purchase right pursuant to the ESPP, and then terminate the ESPP.
The
Merger Agreement contains representations and warranties of the Company and Bioceres relating to their respective businesses and public
filings, in each case generally subject to a materiality qualifier. Additionally, the Merger Agreement provides for pre-closing covenants
of the Company, including (i) covenants relating to conducting its business in the ordinary course consistent with past practice and
refraining from taking certain types of actions without Bioceres’s consent, (ii) covenants relating to removing certain inventory
from certain jurisdictions and (iii) certain restrictions on the Company’s ability to solicit alternative acquisition proposals
from third parties, and/or to provide information to third parties and to engage in discussions with third parties, in each case, in
connection with alternative acquisition proposals, subject to certain exceptions (the “No-Shop”).
The
consummation of the Merger is subject to certain closing conditions, including (i) the approval of the Company’s stockholders (the
“Company Stockholder Approval”), (ii) the expiration or termination of all waiting periods under the Hart-Scott Rodino Antitrust
Improvements Act of 1976 and receipt of any other specified merger control consents or clearances, (ii) the effectiveness of the registration
statement to be filed by Bioceres with the SEC pursuant to the Merger Agreement, (iii) the approval for listing on Nasdaq of Bioceres’s
ordinary shares to be issued as Merger Consideration in connection with the Merger, subject to official notice of issuance, (iv) the
absence of any judgment or law issued by any governmental entity enjoining or otherwise prohibiting the consummation of the Merger, and
(vii) other customary conditions specified in the Merger Agreement.
Pursuant
to the terms of the Merger Agreement, each of the Company and Bioceres is required to use reasonable best efforts to consummate the Merger,
including with respect to satisfaction of the relevant closing conditions.
Prior
to obtaining the Company Stockholder Approval, the Board may, in certain limited circumstances, withdraw or modify its recommendation
that the Company’s stockholders adopt the Merger Agreement or recommend or otherwise declare advisable any Superior Proposal (as
defined in the Merger Agreement) (a “Company Recommendation Change”), subject to complying with notice and other specified
conditions, including giving Bioceres the opportunity to propose revisions to the terms of the transaction contemplated by the Merger
Agreement during a matching right period. Notwithstanding a Company Recommendation Change, unless Bioceres terminates the Merger Agreement,
the Company is still required to convene the meeting of its stockholders.
The
Merger Agreement also provides for certain termination rights of Bioceres and the Company, including the right of either party to terminate
the Merger Agreement if the Merger is not consummated by the date that is eight (8) months following the date of the Merger Agreement.
Either party may also terminate the Merger Agreement if the Company Stockholder Approval has not been obtained at a duly convened meeting
of the Company’s stockholders or a judgment enjoining or otherwise prohibiting consummation of the Merger becomes final and non-appealable.
In
addition, Bioceres may terminate the Merger Agreement if the Board effects a Company Recommendation Change, fails to include its recommendation
to vote in favor of the Merger in the proxy statement/prospectus to be filed with the SEC in connection with the transaction or willfully
breaches the provisions of the No-Shop in any material respect prior to the Company Stockholder Approval having been obtained. If the
Merger Agreement is terminated by Bioceres in connection with such actions, then the Company shall be obligated to pay Bioceres a fee
equal to $9,700,000.
Prior
to the Effective Time, Bioceres is required to take all necessary corporate action so that upon and after the Effective Time, (x) if
the size of the board of directors of Bioceres is 8 or less members, then 2 members thereof shall have been designated by the Board and
(y) if the size of the board of directors of Bioceres is more than 8 members, then 3 members thereof shall have been designated by the
Board.
9.
Subsequent Events
The
Company has evaluated its subsequent events from March 31, 2022 through the date these condensed consolidated financial statements were
issued, and has determined that there are no additional subsequent events required to be disclosed.