Restatement of Previously Issued 2021 Unaudited Quarterly Financial Statements

12 Months Ended

Dec. 31, 2021

Restatement of Previously Issued 2021 Unaudited Quarterly Financial Statements

Restatement of Previously Issued 2021 Unaudited Quarterly Financial Statements

Note 2 – Restatement of Previously Issued 2021 Unaudited Quarterly Financial Statements

During the fourth quarter of 2021 and just before the original 10-K was filed, the Company reviewed its estimate for future expenses related to its Long-Term Incentive Plan for the potential achievement of market capitalization awards, which resulted in increased fair market values on this portion of the new LTIP, first put into place in March 2021. The Company’s Audit Committee concluded, on March 1, 2022, that previously issued unaudited financial statements for all quarterly periods previously filed on Form 10-Q for 2021 should no longer be relied upon. The Audit Committee discussed this matter with the Company’s independent accountant.

As a result, the total fair market value under of the market capitalization awards at that time of grant increased to approximately $33.6 million from $12.1 million as of March 31, 2021. This change was a result of management’s determination that the initial fair market value model’s inputs that were utilized were ultimately considered unacceptable according to U.S. GAAP guidance and as a result were revised by management and subsequently updated in its current model for determining the fair market of these market capitalization awards. This error correction was made in the fourth quarter of 2021.

The Company’s previously filed unaudited quarterly financial statements for the first three quarters of 2021 filed under Forms 10-Q were affected by the correction of this error. The quarterly periods ending March 31, 2021, June 30, 2021, and September 2021 were restated in the Company’s Annual Form 10-K.

Impact of the Restatements

The impact of the restatement on the unaudited consolidated balance sheets, statements of changes in stockholders’ equity, statements of operations and statements of cash flows for the 2021 affected quarterly periods is presented below.

The change in the amount of stock-based compensation expenses related to the LTIP resulted in the correction of an error in accumulated deficit and additional paid-in capital. The impact of the restatement to the Consolidated Balance Sheets for the three quarters is as follows:

	March 31, 2021 (Unaudited)
	As Previously
Balance Sheet	Reported		Adjustment		As Restated
Additional paid-in capital	$	316,208,276	$	2,512,007	$	318,720,283
Accumulated deficit	$	(169,334,346)	$	(2,512,007)	$	(171,846,353)

	June 30, 2021 (Unaudited)
	As Previously
Balance Sheet	Reported		Adjustment		As Restated
Additional paid-in capital	$	333,792,844	$	2,978,022	$	336,770,866
Accumulated deficit	$	(178,113,803)	$	(2,978,022)	$	(181,091,825)

	September 30, 2021 (Unaudited)
	As Previously
Balance Sheet	Reported		Adjustment		As Restated
Additional paid-in capital	$	337,125,126	$	5,519,504	$	342,644,630
Accumulated deficit	$	(186,059,869)	$	(5,519,504)	$	(191,579,373)

The Company’s statements of stockholders’ equity has been restated to reflect the changes to the impacted stockholders’ equity accounts described above:

	For the Three Months Ended March 31, 2021 (Unaudited)
	As Previously
Condensed Statement of Changes in Stockholders' Equity	Reported		Adjustment		As Restated
Stock-Based Compensation Expense	$	2,047,378	$	2,512,007	$	4,559,385
Additional Paid-In Capital		316,208,276		2,512,007		318,720,283
Net Loss		(6,639,363)		(2,512,007)		(9,151,370)
Accumulated Deficit	$	(169,334,346)	$	(2,512,007)	$	(171,846,353)

	For the Six Months Ended June 30, 2021 (Unaudited)
	As Previously
Condensed Statement of Changes in Stockholders' Equity	Reported		Adjustment		As Restated
Stock-Based Compensation Expense	$	5,566,124	$	2,978,022	$	8,544,146
Additional Paid-In Capital		333,792,844		2,978,022		336,770,866
Net Loss		(15,418,820)		(2,978,022)		(18,396,842)
Accumulated Deficit	$	(178,113,803)	$	(2,978,022)	$	(181,091,825)

	For the Nine Months Ended September 30, 2021 (Unaudited)
	As Previously
Condensed Statement of Changes in Stockholders' Equity	Reported		Adjustment		As Restated
Stock-Based Compensation Expense	$	8,858,814	$	5,519,504	$	14,378,318
Additional Paid-In Capital		337,125,126		5,519,504		342,644,630
Net Loss		(23,364,886)		(5,519,504)		(28,884,390)
Accumulated Deficit	$	(186,059,869)	$	(5,519,504)	$	(191,579,373)

The impact of the restatement to the previously reported quarterly Consolidated Statements of Operations for each of the quarters ended in 2021 is presented below:

	For the Three Months Ended March 31, 2021 (Unaudited)
	As Previously
Condensed Statement of Operations	Reported		Adjustment		As Restated
Total Sales	$	3,915,389	$	—	$	3,915,389
Total Cost of Sales		2,835,798		—		2,835,798
Gross Profit (exclusive of depreciation shown separately below)		1,079,591		—		1,079,591
Operating Expenses:
Research and Development		2,079,927		125,391		2,205,318
Selling and Marketing		1,240,734		62,696		1,303,430
General and Administrative		3,703,837		2,323,920		6,027,757
Depreciation and Amortization		517,412		—		517,412
Loss on Fixed Asset Disposal		83,908		—		83,908
Impairment of Patents and Trademarks		27,731		—		27,731
Total Operating Expenses		7,653,549		2,512,007		10,165,556
Loss From Operations		(6,573,958)		(2,512,007)		(9,085,965)
Total Other Expense		(65,405)		—		(65,405)
Net Loss	$	(6,639,363)	$	(2,512,007)	$	(9,151,370)
Basic and Diluted Loss per Common Share	$	(0.12)	$	(0.05)	$	(0.17)

	For the Three Months Ended June 30, 2021 (Unaudited)
	As Previously
Condensed Statement of Operations	Reported		Adjustment		As Restated
Total Sales	$	2,916,538	$	—	$	2,916,538
Total Cost of Sales		2,337,166		—		2,337,166
Gross Profit (exclusive of depreciation shown separately below)		579,372		—		579,372
Operating Expenses:
Research and Development		2,700,732		23,262		2,723,994
Selling and Marketing		1,337,558		11,631		1,349,189
General and Administrative		4,749,920		431,122		5,181,042
Depreciation and Amortization		501,678		—		501,678
Loss on Fixed Asset Disposal		—		—		—
Impairment of Patents and Trademarks		30,765		—		30,765
Total Operating Expenses		9,320,653		466,015		9,786,668
Loss From Operations		(8,741,281)		(466,015)		(9,207,296)
Total Other Expense		(38,176)		—		(38,176)
Net Loss	$	(8,779,457)	$	(466,015)	$	(9,245,472)
Basic and Diluted Loss per Common Share	$	(0.14)	$	(0.01)	$	(0.15)

	For the Three Months Ended September 30, 2021 (Unaudited)
	As Previously
Condensed Statement of Operations	Reported		Adjustment		As Restated
Total Sales	$	3,018,774	$	—	$	3,018,774
Total Cost of Sales		2,435,437		—		2,435,437
Gross Profit (exclusive of depreciation shown separately below)		583,337		—		583,337
Operating Expenses:
Research and Development		3,270,255		126,863		3,397,118
Selling and Marketing		1,589,582		63,431		1,653,013
General and Administrative		3,112,059		2,351,188		5,463,247
Depreciation and Amortization		434,277		—		434,277
Loss on Fixed Asset Disposal		—		—		—
Impairment of Patents and Trademarks		7,544		—		7,544
Total Operating Expenses		8,413,717		2,541,482		10,955,199
Loss From Operations		(7,830,380)		(2,541,482)		(10,371,862)
Total Other Expense		(115,686)		—		(115,686)
Net Loss	$	(7,946,066)	$	(2,541,482)	$	(10,487,548)
Basic and Diluted Loss per Common Share	$	(0.13)	$	(0.04)	$	(0.17)

The impact of the restatement to the previously reported quarterly Consolidated Statements of Cash Flows in 2021 is presented below:

	For the Three Months Ended March 31, 2021 (Unaudited)
	As Previously
Condensed Statement of Cash Flows	Reported		Adjustment		As Restated
Net Loss	$	(6,639,363)	$	(2,512,007)	$	(9,151,370)
Stock-Based Compensation		2,106,206		2,512,007		4,618,213
Net Cash Flows Used in Operating Activities	$	(5,921,629)	$	—	$	(5,921,629)

	For the Six Months Ended June 30, 2021 (Unaudited)
	As Previously
Condensed Statement of Cash Flows	Reported		Adjustment		As Restated
Net Loss	$	(15,418,820)	$	(2,978,022)	$	(18,396,842)
Stock-Based Compensation		5,683,591		2,978,022		8,661,613
Net Cash Flows Used in Operating Activities	$	(13,108,703)	$	—	$	(13,108,703)

	For the Nine Months Ended September 30, 2021 (Unaudited)
	As Previously
Condensed Statement of Cash Flows	Reported		Adjustment		As Restated
Net Loss	$	(23,364,886)	$	(5,519,504)	$	(28,884,390)
Stock-Based Compensation		7,311,278		5,519,504		12,830,782
Net Cash Flows Used in Operating Activities	$	(18,909,428)	$	—	$	(18,909,428)