Restatement of Financial Results as of and for the Nine Months Ended September 30, 2021 (Unaudited) | Note 16 – RESTATEMENT OF FINANCIAL RESULTS AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021 (UNAUDITED) The Company has restated its financial statements as of and for the nine-month period ended September 30, 2021 in the Current Report on Form 8-K/A • The Company identified that it recorded revenue in the third quarter of 2021 prior to the criteria for revenue recognition under U.S. generally accepted accounting principles being satisfied. Specifically, certain transactions were recorded as revenue for which the Company could not assert that collection from the customer was probable under the requirements of Accounting Standard Codification (“ASC”) 606. Accordingly, for the subject revenue transactions, revenue and accounts receivable balances were reduced by $2.1 million in the period that the sale was originally recorded as revenue and will be deferred to a future date until the requirements for revenue recognition under ASC 606 have been satisfied. As a result of the adjustment to revenue, the Company also adjusted its sales and marketing expense by $132 thousand related to its agreement with UPS that requires the Company to compensate UPS for services performed based on a percentage of the Company’s revenues. • The Company identified that it had capitalized certain costs related to the development of internal-use • The Company identified that it over accrued certain expenses related to the Business Combination as of September 30, 2021. Accordingly, accrued and other liabilities was reduced by $1.1 million with an offsetting decrease to general and administrative expense. • The Company identified that it classified certain cash payments related to direct and incremental equity issuance-related transaction costs within operating cash flows rather than financing cash flows on the condensed consolidated statement of cash flows for the nine months ended September 30, 2021. Accordingly, operating cash flows increased and financing cash flows decreased by $500 thousand. The following summarizes the effect of the restatement on each financial statement line item for the period presented: CONDENSED CONSOLIDATED BALANCE SHEET As of September 30, 2021 As Restatement As Restated Assets Current assets Cash and cash equivalents $ 11,453,360 $ $ 11,453,360 Accounts receivable, net of allowances for doubtful accounts of $610,001 8,208,471 (2,062,892 ) 6,145,579 Inventories 550,174 550,174 Prepaid production costs 1,325,861 1,325,861 Prepaid expenses and other current assets 3,296,696 3,296,696 Total current assets $ 24,834,562 $ (2,062,892 ) $ 22,771,670 Non-current Property and equipment, net 9,487,287 (1,642,828 ) 7,844,459 Other non-current 357,953 357,953 Total assets $ 34,679,802 $ (3,705,720 ) $ 30,974,082 Liabilities, temporary equity and stockholders’ deficit Current liabilities Accounts payable $ 2,213,089 $ $ 2,213,089 Accrued compensation 1,462,200 1,462,200 Accrued and other liabilities 9,753,335 (1,238,380 ) 8,514,955 Advances from customers 215,399 215,399 Accrued liabilities – related parties 2,242,776 2,242,776 Warrant liability 2,713,024 2,713,024 Current portion of long-term debt 13,590,029 13,590,029 Total current liabilities $ 32,189,852 $ (1,238,380 ) $ 30,951,472 Other long-term liabilities 230,630 230,630 Term loans - net of current portion and debt issuance costs 7,940,386 7,940,386 Related party convertible notes and derivative liabilities 9,244,326 9,244,326 Total liabilities $ 49,605,194 $ (1,238,380 ) $ 48,366,814 Commitments and contingencies (Note 11) — Temporary equity Series Seed Preferred stock; par value $0.0001, 400,000 shares authorized; 400,000 shares issued and outstanding as of September 30, 2021, aggregate liquidation preference of $1,892,812 as of September 30, 2021 $ 1,892,812 $ 1,892,812 Series Seed - 1 Preferred stock; par value $0.0001, 515,779 shares authorized; 515,779 shares issued and outstanding as of September 30, 2021; aggregate liquidation preference of $2,892,300 as of September 30, 2021 2,892,300 2,892,300 Series A - 1 Preferred stock; par value $0.0001, 5,706,349 shares authorized; 5,706,349 shares issued and outstanding as of September 30, 2021; aggregate liquidation preference of $5,714,281 as of September 30, 2021 5,714,281 5,714,281 Series A - 2 Preferred stock; par value $0.0001, 2,574,478 shares authorized; 2,574,478 shares issued and outstanding as of September 30, 2021; aggregate liquidation preference of $2,778,882 as of September 30, 2021 2,778,882 2,778,882 Series A - 3 Preferred stock; par value $0.0001, 2,713,324 shares authorized; 2,621,569 shares issued and outstanding as of September 30, 2021; aggregate liquidation preference of $4,285,715 as of September 30, 2021 4,285,715 4,285,715 Series B Preferred stock; par value $0.0001, 5,131,673 shares authorized; 4,205,059 shares issued and outstanding as of September 30, 2021; aggregate liquidation preference of $56,726,260 as of September 30, 2021 56,726,260 56,726,260 Total temporary equity $ 74,290,250 $ $ 74,290,250 Stockholders’ deficit Common Stock, $0.0001 par value, 31,000,000 authorized; 3,955,279 shares issued and outstanding as of September 30, 2021 396 396 Treasury Stock, held at cost; 650,000 shares outstanding as of September 30, 2021 (221,000 ) (221,000 ) Additional paid-in 8,910,554 8,910,554 Accumulated deficit (97,905,592 ) (2,467,340 ) (100,372,932 ) Total stockholders’ deficit (89,215,642 ) (2,467,340 ) (91,682,982 ) Total liabilities, temporary equity and stockholders’ deficit $ 34,679,802 $(3,705,720) $ 30,974,082 CONDENSED CONSOLIDATED STATEMENT OF NET LOSS AND COMPREHENSIVE LOSS For the nine months ended September 30, 2021 As previously Restatement As Restated Revenues $ 15,642,101 $ (2,062,892 ) $ 13,579,209 Cost of revenues 14,089,162 (11,830 ) 14,077,332 Gross profit 1,552,939 (2,051,062 ) (498,123 ) Operating expenses Sales and marketing 15,520,744 (185,133 ) 15,335,611 General and administrative 23,605,547 (1,104,451 ) 22,501,096 Research and development 1,441,856 1,705,862 3,147,718 Total operating expenses 40,568,147 416,278 40,984,425 Loss from operations (39,015,208 ) (2,467,340 ) (41,482,548 ) Change in fair value of warrants (1,525,870 ) — (1,525,870 ) Change in fair value of derivative liability (189,000 ) — (189,000 ) Interest income and other income 418 — 418 Interest expense, including amortization of debt issuance costs (1,787,457 ) — (1,787,457 ) Loss before income taxes (42,517,117 ) (2,467,340 ) (44,984,457 ) Income tax expense (benefit) — — Net loss and comprehensive loss $ (42,517,117 ) $ (2,467,340 ) $ (44,984,457 ) Net loss per share Basic and diluted $ (10.41 ) (0.60 ) $ (11.01 ) Weighted average shares outstanding: Basic and diluted 4,085,640 4,085,640 CONDENSED CONSOLIDATED STATEMENT OF TEMPORARY EQUITY AND STOCKHOLDERS’ DEFICIT Convertible 1 Common Stock Treasury Stock Additional paid- Accumulated Total As previously Shares Amount Shares Amount Shares Amount Amount Amount Amount Balance at January 1, 2021 16,023,234 $ 74,290,250 3,427,555 $ 343 (650,000 ) $ (221,000 ) $ 3,724,208 $ (55,388,475 ) $ (51,884,924 ) Net loss (42,517,117 ) (42,517,117 ) Issuance of equity warrants to related party 2,200,658 2,200,658 Issuance of equity warrants 2,245,000 2,245,000 Exercise of stock options and release of notes’ recourse provision 527,724 53 40,528 40,581 Stock-based compensation 700,160 700,160 Balance at September 30, 2020 16,023,234 $ 74,290,250 3,955,279 $ 396 (650,000 ) $ (221,000 ) $ 8,910,554 $ (97,905,592 ) $ (89,215,642 ) Restatement impact Net income $ $ $ $ $ (2,467,340 ) $ (2,467,340 ) As Restated Balance at January 1, 2021 16,023,234 $ 74,290,250 3,427,555 $ 343 (650,000 ) $ (221,000 ) $ 3,724,208 $ (55,388,475 ) $ (51,884,924 ) Net loss (44,984,457 ) (44,984,457 ) Issuance of equity warrants to related party 2,200,658 2,200,658 Issuance of equity warrants 2,245,000 2,245,000 Exercise of stock options and release of notes’ recourse provision 527,724 53 40,528 40,581 Stock-based compensation 700,160 700,160 Balance at September 30, 2021 16,023,234 $ 74,290,250 3,955,279 $ 396 (650,000 ) $ (221,000 ) $ 8,910,554 $ (100,372,932 ) $ (91,682,982 ) CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS For the nine months ended September 30, 2021 As previously Restatement As Restated Cash flows from operating activities Net loss $ (42,517,117 ) $ (2,467,340 ) $ (44,984,457 ) Adjustments to reconcile net loss to net cash used in operating activities Depreciation and amortization 1,092,227 (63,034 ) 1,029,193 Amortization of deferred financing fees and convertible debt discount 1,232,320 1,232,320 Stock-based compensation 700,160 700,160 Loss on disposal of assets 227,800 227,800 Change in fair value of warrants 1,525,870 1,525,870 Change in fair value of derivative liability 189,000 189,000 Provision for doubtful accounts 241,638 241,638 Other (110,911 ) (110,911 ) Changes in operating assets and liabilities Accounts receivable (3,403,613 ) 2,062,892 (1,340,721 ) Inventories (275,863 ) (275,863 ) Prepaid production costs (1,042,308 ) (1,042,308 ) Prepaid expenses and other current assets (2,686,314 ) 500,000 (2,186,314 ) Accounts payable 684,300 684,300 Accrued compensation and other liabilities 10,857,955 (1,238,380 ) 9,619,575 Advances from customers 190,387 190,387 Deferred revenue (5,350 ) (5,350 ) Cash used in operating activities $ (33,099,819 ) $ (1,205,862 ) $ (34,305,681 ) Cash flows from investing activities Additions to property, plant and equipment (8,142,947 ) 1,705,862 (6,437,085 ) Cash used in investing activities $ (8,142,947 ) $ 1,705,862 $ (6,437,085 ) Cash flows from financing activities Proceeds from term loans $ 24,486,824 24,486,824 Repayment of term loans (803,372 ) (803,372 ) Proceeds from convertible notes and warrants with related parties 10,600,000 10,600,000 Convertible notes issuance costs (122,155 ) (122,155 ) Deferred financing fees — (500,000 ) (500,000 ) Proceeds from exercise of stock options 40,581 40,581 Cash provided by financing activities $ 34,201,878 $ (500,000 ) $ 33,701,878 Change in cash and cash equivalents (7,040,888 ) (7,040,888 ) Cash and cash equivalents, beginning of period 18,494,248 18,494,248 Cash and cash equivalents, end of period $ 11,453,360 $ $ 11,453,360 |