NOTE 9 - SUBSEQUENT EVENTS

Independent audit firm

On November 1, 2020, the Company was notified that the audit practice of Squar Milner, LLP (“Squar Milner”) an independent registered public accounting firm, was combined with Baker Tilly US, LLP (“Baker Tilly”) in a transaction pursuant to which Squar Milner combined its operations with Baker Tilly and certain of the professional staff and partners of Squar Milner joined Baker Tilly either as employees or partners of Baker Tilly. In connection therewith, on November 1, 2020, Squar Milner resigned as auditors of the Company and with the approval of the Audit Committee of the Company’s Board of Directors, Baker Tilly was engaged as its independent registered public accounting firm.

Credit facility

On November 4, 2020, certain holders of the Company’s outstanding convertible debt exercised their rights to convert approximately $2,161,000 in principal and accrued interest outstanding into 540,347 shares of common stock, at $4.00 per share (the “Conversion Shares”). After giving effect to the issuance of the Conversion Shares, as of November 10, 2020, there was approximately $2,403,000 outstanding under the LOC and approximately $9,597,000 available for future draws. Following such conversion, the Company had 11,960,084 shares of common stock outstanding.

Adoption of compensation plans

On November 5, 2020, the Company’s Board of Directors approved an amendment to the Company’s 2014 Equity Incentive Plan, as amended (the “2014 Plan”), to include the right to grant Restricted Stock Units (“RSUs”) under the 2014 Plan, and (ii)  an annual cash bonus plan (the “Annual Bonus Plan”).  All of the Company’s executive officers are eligible to participate in the 2014 Plan.

In addition, on November 5, 2020, the Compensation Committee established and approved (i)  the  performance criteria for the Annual Bonus Plan for fiscal year 2021 (“2021 Annual Bonus Plan”), (ii) the maximum bonus pool at approximately $1,299,000 and the target bonus pool of approximately $866,000 for the 2021 Annual Bonus Plan (based on a percentage of current salary of the participants), (iii)  an equity pool of 48,000 shares under the 2014 Plan for the issuance of RSUs to “salary staff” employee, (iv) the grant of 43,525 RSUs for one-time retention awards to its executive officers, and (v) the grant of 67,785 RSUs under the 2014 Plan to certain employees of the Company, of which (a) 27,114 RSUs are based on time, and (b) 40,671 RSUs based on performance.  The RSUs are subject to vesting requirements.

New bank revolving credit facility

On November 9, 2020, the Company entered into a certain Loan and Security Agreement (“Agreement”) with Silicon Valley Bank (“SVB”). The Agreement provides the Company with a senior secured revolving credit facility for up to $4.0 million available on a revolving basis (“Credit Facility”) which matures on November 8, 2021. Outstanding principal under the Credit Facility accrues interest at a floating per annum rate equal to the greater of either (i) prime rate plus two and one-half of one percent (2.50%) or (ii) five and three-quarters percent (5.75%). Interest payment is due monthly on the last day of the month. In the event of default, the amounts due under the Agreement will bear interest at a rate per annum equal to five percent (5.0%) above the rate that is otherwise applicable to such amounts. The Company paid a non-refundable commitment fee of $15,000 upon execution of the Loan Agreement. In addition, the Company is required to pay a quarterly unused facility fee equal to one-quarter of one percent (0.25%) per annum of the average daily unused portion of the commitments under the Credit Facility, depending upon availability of borrowings under the Credit Facility. The loans and other obligations of the Company under the Credit Facility are secured by substantially all of the tangible and intangible assets of the Company (including, without limitation, intellectual property) pursuant to the terms of the Agreement and the Intellectual Property Security Agreement dated as of November 9, 2020.