UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For
the quarterly period ended
For the transition period from ___________ to ___________
Commission
file number
| (Exact name of registrant as specified in its charter) |
| (State or other jurisdiction of incorporation) | (I.R.S. Employer Identification No.) |
(Address of principal executive offices)
(
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer", "smaller reporting company", and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☐ | |||
| Smaller reporting company | Emerging Growth Company |
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in 12b-2 of the Exchange Act):
Yes
☐
Securities registered pursuant to Section 12(b) of the Act: None.
As of June 30, 2021, the Company has shares of common stock issued and outstanding.
| 1 |
APPLIED UV, INC. & SUBSIDIARIES
INDEX TO FORM 10-Q
| Page # | |
| PART I - FINANCIAL INFORMATION | |
| Item 1. Financial Statements (Unaudited) | |
| Condensed Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020 | 3 |
| Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2021 and 2020 | 4 |
| Condensed Consolidated Statements of Stockholders’ Equity for the Six Months Ended June 30, 2021 and 2020 | 5 |
| Condensed Consolidated Statements of Cash Flows for the Six months Ended June 30, 2021 and 2020 | 6 |
| Notes to Condensed Consolidated Financial Statements | 7 |
| Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations | 24 |
| Item 3. Quantitative and Qualitative Disclosures About Market Risk | 30 |
| Item 4. Controls and Procedures | 30 |
| PART II - OTHER INFORMATION | |
| Item 1. Legal Proceedings | 32 |
| Item 1A. Risk Factors | 32 |
| Item 2. Unregistered Sales of Equity Securities and Use of Proceeds | 32 |
| Item 3. Defaults Upon Senior Securities | 32 |
| Item 4. Mine Safety Disclosures | 32 |
| Item 5.Other Information | 32 |
| Item 6. Exhibits | 33 |
| Signatures | 34 |
| 2 |
PART I
Item 1. Financial Statements
Applied UV, Inc. and Subsidiaries
Unaudited Condensed Consolidated Balance Sheets
As of June 30, 2021 and December 31, 2020
| 2021 | 2020 | |||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable, net of allowance for doubtful accounts | ||||||||
| Inventory | ||||||||
| Vendor deposits | ||||||||
| Note receivable, related party | ||||||||
| Prepaid expense and other current assets | ||||||||
| Total Current Assets | ||||||||
| Machinery and equipment, net of accumulated depreciation | ||||||||
| Goodwill | ||||||||
| Other intangible assets, net of accumulated amortization | ||||||||
| Right of use asset | ||||||||
| Patents, net of accumulated amortization | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Stockholders' Equity | ||||||||
| Current Liabilities | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Deferred revenue | ||||||||
| Income tax payable | ||||||||
| Warrant liability | ||||||||
| Capital lease obligations | ||||||||
| Lease liability | ||||||||
| Payroll protection program loan | ||||||||
| Loan payable | ||||||||
| Total Current Liabilities | ||||||||
| Long-term Liabilities | ||||||||
| Capital lease obligations - less current portion | ||||||||
| Loan payable-less current portion | ||||||||
| Lease liability-less current portion | ||||||||
| Payroll protection program loan-less current portion | ||||||||
| Total Long-Term Liabilities | ||||||||
| Total Liabilities | ||||||||
| Stockholders' Equity | ||||||||
| Preferred stock, $ par value, shares authorized, shares issued and outstanding | ||||||||
| Preferred stock, Series X, $ par value, shares authorized, shares issued and outstanding at both June 30, 2021 and December 31, 2020 | ||||||||
| Common stock $ par value, shares authorized; shares issued and outstanding as of June 30, 2021, and shares issued and outstanding as of December 31, 2020 | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity | ||||||||
| Total Liabilities and Stockholders’ Equity | $ | $ | ||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
| 3 |
Applied UV, Inc. and Subsidiaries
Unaudited Condensed Interim Consolidated Statements of Operations
For the Three and Six Months Ended June 30, 2021 and 2020 (Restated)
| Three Months Ended June 30, |
Six Months Ended June 30, | |||||||||||||||
| 2021 | 2020 (Restated - Note 13) | 2021 | 2020 (Restated - Note 13) | |||||||||||||
| Net Sales | $ | $ | $ | $ | ||||||||||||
| Cost of Goods Sold | ||||||||||||||||
| Gross Profit | ||||||||||||||||
| Operating Expenses | ||||||||||||||||
| Research and development | ||||||||||||||||
| Stock based compensation | ||||||||||||||||
| Selling. General and Administrative Expenses | ||||||||||||||||
| Total Operating Expenses | ||||||||||||||||
| Operating Loss | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Other Income Loss | ||||||||||||||||
| Change in Fair Market Value of Warrant Liability | ( |
) | ||||||||||||||
| Other Income | ||||||||||||||||
| Total Other Income Loss | ( |
) | ||||||||||||||
| (Loss) Before Provision for Income Taxes | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Provision for Income Taxes | ||||||||||||||||
| Net (Loss) | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| Weighted average earnings per share: | ||||||||||||||||
| Basic and Diluted (Loss) Per Common Share | $ | ( |
) | $ | $ | ( |
) | $ | ( |
) | ||||||
| Average shares outstanding- basic and diluted | ||||||||||||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
| 4 |
Applied UV, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Changes in Stockholders' Equity
For the Three and Six Months Ended June 30, 2021 and 2020 (Restated)
| Preferred Stock Series A Voting | Common Stock | |||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Additional Paid-In Capital | Retained Earnings (Accumulated Deficit) | Total Stockholders Equity | ||||||||||||||||||||||
| Balance, January 1, 2020 | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Net loss (Restated) | — | — | ( |
) | ( |
|||||||||||||||||||||||
| Balance, March 31, 2020 (Restated) | ||||||||||||||||||||||||||||
| Shares issued to Carmel, Milazzo & Feil LLP | — | |||||||||||||||||||||||||||
| Stock-based compensation | — | |||||||||||||||||||||||||||
| Net loss (Restated) | — | — | ( |
) | ( |
) | ||||||||||||||||||||||
| Balance, June 30, 2020(Restated) | $ | $ | $ | $ | $ | |||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
| Balance, January 1, 2021 | $ | $ | $ | $ | ( |
) | $ | |||||||||||||||||||||
| Shares granted to settle previously recorded liability | — | |||||||||||||||||||||||||||
| Warrant liability recognized in connection with initial issuance of November offering (See Note 8) | — | — | ( |
) | ( |
) | ||||||||||||||||||||||
| Exercise of warrants | — | |||||||||||||||||||||||||||
| Common stock issued for acquisition | — | |||||||||||||||||||||||||||
| Stock-based compensation | — | |||||||||||||||||||||||||||
| Net loss | — | — | ( |
) | ( |
) | ||||||||||||||||||||||
| Balance, March 31, 2021 | ( |
) | ||||||||||||||||||||||||||
| Exercise of warrants | — | |||||||||||||||||||||||||||
| Stock-based compensation | — | |||||||||||||||||||||||||||
| Net loss | — | — | ( |
) | ( |
) | ||||||||||||||||||||||
| Balance, June 30, 2021 | $ | $ | $ | $ | ( |
) | $ | |||||||||||||||||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
| 5 |
Applied UV, Inc. and Subsidiaries
Unaudited Condensed Interim Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 2021 and 2020 (Restated)
| 2021 | 2020 (Restated) | |||||||
| Cash flows from Operating Activities | ||||||||
| Net (Loss) | $ | ( | ) | $ | ( | ) | ||
| Adjustments to Reconcile Net (Loss) to Net Cash (Used in) Provided by Operating Activities | ||||||||
| Stock based compensation | ||||||||
| Bad debt (recovery) | ( | ) | ||||||
| Change in fair market value of warrant liability | ||||||||
| Gain on settlement of loan payable | ( | ) | ||||||
| Depreciation and amortization | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ||||||||
| Inventory | ( | ) | ( | ) | ||||
| Vendor deposits | ( | ) | ||||||
| Prepaid expenses | ( | ) | ||||||
| Income taxes payable | ( | ) | ||||||
| Accounts payable and accrued expenses | ( | ) | ( | ) | ||||
| Deferred revenue | ( | ) | ||||||
| Net Cash (Used in) Provided by Operating Activities | ( | ) | ||||||
| Cash Flows From Investing Activities | ||||||||
| Cash paid for patent costs | ( | ) | ||||||
| Purchase of machinery and equipment | ( | ) | ||||||
| Cash paid for acquisition, net of cash acquired (Note 2) | ( | ) | ||||||
| Note receivable, related party | ( | ) | ||||||
| Net Cash Used in Investing Activities | ( | ) | ( | ) | ||||
| Cash Flows From Financing Activities | ||||||||
| Payments on capital leases | ( | ) | ( | ) | ||||
| Proceeds from warrant exercise | ||||||||
| Loan to officer | ( | ) | ||||||
| Payments on loans payable | ( | ) | ||||||
| Settlement of loan payable | ( | ) | ||||||
| Proceeds from payroll protection program | ||||||||
| Net Cash (Used In) Provided by Financing Activities | ( | ) | ||||||
| Net (decrease) increase in Cash | ( | ) | ||||||
| Cash at January 1, | ||||||||
| Cash at June 30, | $ | $ | ||||||
| Supplemental Disclosur or Cash Flow Information | ||||||||
| Cash paid during the year for: | ||||||||
| Interest | $ | $ | ||||||
| Income Taxes | $ | 185,105 | ||||||
| Supplemental Non-Cash Investing and Financing Activities | ||||||||
| Initial recognition of warrant liability | $ | $ | ||||||
| Shares granted to settle previously recorded liability | $ | $ | ||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
| 6 |
Applied UV, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
In February 2019, Applied UV, Inc. (the "Company") was formed and incorporated in the State of Delaware for the intended purpose of creating a legal holding company structure for SteriLumen, Inc. and Munnworks, LLC and any future potential mergers or acquisitions. The then-existing shareholders and members of SteriLumen, Inc. and Munnworks, LLC exchanged all of their interest for shares of Applied UV, Inc. with substantially similar economic voting interests for each shareholder immediately before and after the share exchange. As a result of the share exchange, SteriLumen, Inc. and Munnworks, LLC became wholly-owned subsidiaries of Applied UV, Inc and, collectively referred to as (the "Group").
SteriLumen, Inc. is engaged in the design, manufacture, assembly and distribution of automated disinfecting mirror systems for use in hospitals and other healthcare facilities. Munnworks, LLC is engaged in the manufacture of fine mirrors specifically for the hospitality industry.
In February of 2021, the Company acquired all the assets and assumed certain liabilities of Akida Holdings, LLC (“Akida”). Akida is the manufacturer of the Airocide™ system of air purification technologies, originally developed by NASA, with assistance from the University of Wisconsin at Madison, that uses a combination of UVC and a proprietary, titanium dioxide based photocatalyst that may help to accelerate the reopening of the global economy with applications in the hospitality, hotel, healthcare, nursing homes, grocer, wine, commercial buildings and retail sectors. The Airocide™ system has been used by brands and organizations such as NASA, Whole Foods, Dole, Chiquita, Opus One, Sub-Zero Refrigerators and Robert Mondavi Wines.
Principles of Consolidation
The consolidated financial statements include the accounts of Applied UV, Inc., Munnworks, LLC and SteriLumen, Inc. All significant intercompany transactions and balances are eliminated in consolidation.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, and with the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) set forth in Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim financial statements furnished reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented. Unaudited interim results are not necessarily indicative of the results for the full fiscal year. These financial statements should be read along with the Annual Report filed of the Company for the annual period ended December 31, 2020. The consolidated balance sheet as of December 31, 2020 was derived from the audited consolidated financial statements as of and for the year then ended.
Use of estimates
The preparation of unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, as of the date of the unaudited condensed consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include the valuation and accounting for equity awards related to warrants and stock-based compensation, determination of fair value for derivative instruments, the accounting for business combinations and allocating purchase price, estimating the useful life of intangible assets, as well as the estimates related to accruals and contingencies.
| 7 |
Applied UV, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Cash
Cash and cash equivalents include highly liquid investments that have original maturities less than 90 days at the time of their purchase. These investments are carried at cost, which approximates market value because of their short maturities. As of June 30, 2021 and December 31, 2020, the Company did not have any cash equivalents.
Accounts receivable
An allowance for uncollectible accounts receivable is recorded when management believes the collectability of the accounts receivable is confirmed. Subsequent recoveries, if any, are credited to the allowance. The allowance is determined based on management’s review of the debtor’s ability to repay and repayment history, aging history, and estimated value of collateral, if any.
Inventory
Inventories, which consists of raw materials and finished goods is valued at the lower of cost or net realizable value,
using the first-in, first-out (“FIFO”) valuation method. Inventory costs are comprised primarily of product, freight
and duty. The Company writes down inventory for estimated obsolescence equal to the difference between the cost of inventory and
the estimated market value based upon assumptions about future demand and market
conditions. The company did
Business Acquisition Accounting
The Company applies the acquisition method of accounting for those that meet the criteria of a business combination. The Company allocates the purchase price of its business acquisitions based on the fair value of identifiable tangible and intangible assets. The difference between the total cost of the acquisition and the sum of the fair values of acquired tangible and identifiable intangible assets less liabilities is recorded as goodwill. Transaction costs are expensed as incurred in general and administrative expenses.
Goodwill and Intangible Assets
The Company has recorded intangible assets, including goodwill, in connection with business combinations. Estimated useful lives of amortizable intangible assets are determined by management based on an assessment of the period over which the asset is expected to contribute to future cash flows.
In accordance with U.S. GAAP for goodwill and other indefinite-lived intangibles, the Company tests these assets for impairment annually and whenever events or circumstances make it more likely than not that impairment may have occurred. For the purposes of that assessment, the Company has determined to assign assets acquired in business combinations to a single reporting unit including all goodwill and indefinite-lived intangible assets acquired in business combinations.
Income Taxes
The Company files income tax returns using the cash basis of accounting. Income taxes are accounted for under the asset and liability method. Current income taxes are based on the year's income taxable for federal and state tax reporting purposes. Deferred income tax assets and liabilities are computed annually for differences between the financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable income will be available to allow all or part of the asset to be recovered.
| 8 |
Applied UV, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Derivative Instruments
The Company evaluates its warrants to determine if those contracts or embedded components of those contracts qualify as derivatives. The result of this accounting treatment is that the fair value of the embedded derivative is marked-to-market each balance sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statements of operations as other income or expense. The warrants issued in connection with the November offering contained a cash settlement feature which resulted in a warrant liability of $435,577 as of June 30, 2021. The fair market value of the warrant liability on the date of grant was $135,125 and was recorded as a reduction of Additional Paid in Capital. For the three and six months ended June 30, 2021, the Company recorded a gain (loss) on the change in fair value of warrant liability in the amount of $10,948 and ($300,452), respectively. See Note 8 for further information.
The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. The Company has concluded that there are no such reclassifications required to be made as of and for the periods ended June 30, 2021.
The Company marks to market the fair value of the warrant liabilities at each balance sheet date and records the change in the fair value of the warrant liabilities as other income or expense in the statements of operations.
The Company utilizes the Black-Scholes valuation model to value the derivative warrants as stipulated in the agreement for the warrant holders to receive cash based on that value.
Fair Value of Financial Instruments
The carrying amounts reported in the unaudited condensed consolidated balance sheets for loans payable approximate fair value because of the immediate or short-term maturity of the financial instruments. The Company's financial assets and liabilities are measured using inputs from the three levels of the fair value hierarchy.
Basic (loss) per share is computed by dividing net (loss) attributable to common shareholders (the numerator) by the weighted-average number of common shares outstanding (the denominator) for the period. In periods of losses, diluted loss per share is computed on the same basis as basic loss per share as the inclusion of any other potential shares outstanding would be anti-dilutive.
The following table sets forth the number of potential shares of common stock that have been excluded from diluted net loss per share because their effect was anti-dilutive:
| As of June 30, | ||||||||
| 2021 | 2020 | |||||||
| Common stock options | ||||||||
| Common stock warrants | ||||||||
| Total | ||||||||
The Company accounts for its stock-based compensation awards in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification Topic 718 ("ASC"), Compensation-Stock Compensation ("ASC 718"). ASC 718 requires all stock-based payments to employees, including grants of employee stock options and restricted stock and modifications to existing stock options, to be recognized in the statements of operations based on their fair values over the requisite service period.
| 9 |
Applied UV, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Research and Development
The Company accounts for research and development costs in accordance with Accounting Standards Codification subtopic 730-10, Research and Development (“ASC 730-10”). Under ASC 730-10, all research and development costs must be charged to expense as incurred. Accordingly, internal research and development costs are expensed as incurred.
Revenue Recognition
The Company recognizes revenue when the performance obligations in the client contract has been achieved. A performance obligation is a contractual promise to transfer product to the customer. The transaction price of a contract is allocated to each distinct performance obligation and recognized as revenue when or as, the customer receives the benefit of the performance obligation. Under ASC 606, revenue is recognized when a customer obtains control of goods in an amount that reflects the consideration the Company expects to receive in exchange for those goods. To achieve this core principal, the Company applies the following five steps:
| 1) | Identify the contract with a customer |
| 2) | Identify the performance obligations in the contract |
| 3) | Determine the transaction price |
| 4) | Allocate the transaction price to performance obligations in the contract |
| 5) | Recognize revenue when or as the Company satisfies a performance obligation |
For projects, that are completed within the Company’s facility, the company designs, manufactures and sells custom mirrors for hotels and hospitals through contractual agreements. These sales require the company to deliver the products within three to six months from commencement of order acceptance. The Company recognizes revenue over time by using the input method based on costs incurred as it depicts our progress toward satisfaction of the performance obligation. Under this method, revenue arising from fixed price contracts is recognized as work is performed based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligations. Incurred costs include all direct material and labor costs and those indirect costs related to contract performance, such as indirect labor, supplies, tools, repairs and depreciation costs. Contract material costs are included in incurred costs when the project materials have been purchased or moved to work in process as required by the project’s engineering design. Cost based input methods of revenue recognition require us to make estimates of costs to complete the projects. In making such estimates, significant judgment is required to evaluate assumptions related to the costs to complete the projects, including materials, labor and other system costs. If the estimated total costs on any contract are greater than the net contract revenues, the Company recognizes the entire estimated loss in the period the loss becomes known and can be reasonably estimated. Deferred revenue represents amounts billed in excess of revenues recognized. Revenues recognized in excess of amounts billed typically does not occur as the Company will not perform any work in excess of the amount the company bills to its customers. If work is performed in excess of amounts billed, the Company will record an unbilled receivable.
| 10 |
Applied UV, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Revenue Recognition (Continued)
Each product or service delivered to a third-party customer that is manufactured by a third-party vendor is considered to satisfy a performance obligation. Performance obligations generally occur at a point in time and are satisfied when control of the goods passes to the customer. These sales are shipped from the manufacturer to the customer without our taking physical inventory possession. The Company reports direct sales on a gross basis, that is, the amounts billed to our customers are recorded as "Sales," and inventory purchased from manufacturers are recorded as cost of sales. The Company is the principal of direct sales because the Company has the risk of loss and we control the inventory before it is transferred to our customers. Our control is evidenced by us being primarily responsible for fulfilling the promise to our customers, taking on inventory risk of returned product, and having discretion in establishing pricing. The Company typically pay our vendors a portion of the total cost up front and the remaining balance is accrued for and paid within 30 to 60 days of when the products are shipped from the third-party warehouse. Deferred revenue represents amounts invoiced or deposits receeived from our customer for which the Company has not yet satisfied our performance obligation.
The company applied the five-step model to the sales of Akida Holdings, LLC's Airocide products. At contract inception and once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct. The Company sells Airocide air sterilization units to both consumer and commercial customers. These products are sold both domestically and internationally. The cycle from contract inception to shipment of products is typically one day to three months. The Company’s contracts for both its consumer and commercial customers each contain a single performance obligation (delivery of Airocide products), as the promise to transfer the individual goods or services is not separately identifiable from other promises in the contracts and, therefore, not distinct, as a result, the entire transaction price is allocated to this single performance obligation. The Company recognizes revenues at a point in time when the customer obtains control of the Company’s product, which typically occurs upon shipment of the product by the Company or upon customer pick-up via third party common carrier.
Revenue generated from work performed at our own facility and work performed by our third-party manufacturers for the three months ended:
| June 30, | June 30, | |||||||
| 2021 | 2020 | |||||||
| Companys own facility (recognized over time) | $ | $ | ||||||
| Third-party manufacturers (recognized at a point in time) | ||||||||
| $ | $ | |||||||
Revenue generated from work performed at our own facility and work performed by our third-party manufacturers for the six months ended:
| June 30, | June 30, | |||||||
| 2021 | 2020 | |||||||
| Companys own facility (recognized over time) | $ | $ | ||||||
| Third-party manufacturers (recognized at a point in time) | ||||||||
| $ | 4,196,934 | $ | ||||||
Deferred revenue was comprised of the following as of:
| June 30, | December 31, | |||||||
| 2021 | 2020 | |||||||
| Companys own facility (recognized over time) | $ | $ | ||||||
| Third-party manufacturers (recognized at a point in time) | ||||||||
| $ | $ | |||||||
All deferred revenue as of December 31, 2020 was recognized as revenue during the six months ended June 30, 2021.
Advertising
Advertising costs consist primarily of online search advertising and placement, trade shows, advertising fees, and other promotional expenses. Advertising costs are expensed as incurred and are included in sales and marketing on the unaudited condensed consolidated statements of operations. Advertising expense for the three months ended June 30, 2021 and 2020 was $281,258 and $19,406, respectively. Advertising expense for the six months ended June 30, 2021 and 2020 was $309,434 and $37,823, respectively.
Vendor deposits
Vendor payments to third
manufactures are capitalized until completion of the project and are recorded as vendor deposits. As of June 30, 2021 and December
31, 2020, the vendor deposit balance was $
Patent Costs
The Company capitalizes
costs consisting principally of outside legal costs and filing fees related to obtaining and maintaining patents. The Company
amortizes patent costs over the useful life of the patent which is typically
| 11 |
Applied UV, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Recent Accounting Pronouncements
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740) (“ASU 2019-12”): Simplifying the Accounting for Income Taxes. The new standard eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences related to changes in ownership of equity method investments and foreign subsidiaries. The guidance also simplifies aspects of accounting for franchise taxes and enacted changes in tax laws or rates, and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. For public business entities, it is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The adoption of this guidance did not have a material impact on the accompanying unaudited condensed consolidated financial statements.
In June 2020, the FASB issued ASU No. 2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40). This standard eliminates the beneficial conversion and cash conversion accounting models for convertible instruments. It also amends the accounting for certain contracts in an entity’s own equity that are currently accounted for as derivatives because of specific settlement provisions. In addition, the new guidance modifies how particular convertible instruments and certain contracts that may be settled in cash or shares impact the diluted EPS computation. For public business entities, it is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years using the fully retrospective or modified retrospective method. Early adoption is permitted but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company has not adopted this accounting pronouncement and is currently evaluating the potential impact of this standard on our consolidated financial statements.
From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that the Company adopts as of the specified effective date. The Company does not believe that the impact of recently issued standards that are not yet effective will have a material impact on the Company’s financial position or results of operations upon adoption.
| 12 |
Applied UV, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
NOTE 2 – BUSINESS ACQUISITION
The Company accounted for the acquisitions as a business combinations using the purchase method of accounting as prescribed in Accounting Standards Codification 805, Business Combinations (“ASC 805”) and ASC 820 – Fair Value Measurements and Disclosures (“ASC 820”). In accordance with ASC 805 and ASC 820, the Company used its best estimates and assumptions to accurately assign fair value to the tangible assets acquired, identifiable intangible assets and liabilities assumed as of the acquisition dates. Goodwill as of the acquisition date is measured as the excess of purchase consideration over the fair value of tangible and identifiable intangible assets acquired and liabilities assumed. The results of operations of the acquired businesses since the date of acquisition are included in the unaudited condensed consolidated financial statements of the Company for the three and six months ended June 30, 2021. The total purchase consideration was allocated to the assets acquired and liabilities assumed at their preliminary estimated fair values as of the date of acquisition, as determined by management. The purchase price allocations are preliminary and a final determination of purchase accounting adjustments, which may be material, will be made upon the finalization of the Company’s integration activities, which are expected to be completed during the year ended December 31, 2021. The excess of the purchase price over the amounts allocated to assets acquired and liabilities assumed has been recorded as goodwill. The value of the goodwill from the acquisitions described below can be attributed to a number of business factors including, but not limited to, cost synergies expected to be realized and a trained technical workforce. The preliminary purchase price allocation is based upon preliminary valuations and our estimates and assumptions are subject to change within the purchase price allocation period (generally one year from the acquisition date). The primary areas of the purchase price allocation that are not yet finalized relate to the valuation of the intangible assets acquired and the residual goodwill.
On February 8, 2021 Applied UV, Inc. (the “Company”), entered into an asset purchase agreement (the “APA”) by and among the Company, SteriLumen, Inc., a New York corporation and wholly-owned subsidiary of the Company (the “Purchaser”) and Akida Holdings LLC, a Florida limited liability company (the “Seller”) pursuant to which the Purchaser acquired substantially all of the assets of the Seller and assumed certain of its current liabilities and contract obligations, as set forth in the APA (the “Acquisition”). In the Acquisition, the Purchaser acquired all the Seller’s assets and was assigned its contracts related to the manufacturer and sale of the Airocide™ system, originally developed by NASA with assistance from the University of Wisconsin at Madison, that uses a combination of UV-C and a proprietary, titanium dioxide-based photocatalyst that has applications in the hospitality, hotel, healthcare, nursing homes, grocer, wine, commercial buildings, and retail sectors. On February 8, 2021 (the “Closing Date”) the transactions contemplated by the APA were completed.
The preliminary purchase price and purchase price allocation as of the acquisition completion date follows:
The following sets forth the components of the purchase price:
| Purchase Price: | ||||
| Cash | $ | |||
| Fair market value of common stock issued (1,375,000 shares) | ||||
| Total Purchase Price | ||||
| Assets Acquired: | ||||
| Accounts receivable | ||||
| Inventory | ||||
| Prepaid expenses | ||||
| Machinery and equipment | ||||
| Customer relationships | 539,000 | |||
| Trade names | 1,156,000 | |||
| Technology and know how | ||||
| Total Assets Acquired: | ||||
| Liabilities assumed | ||||
| Accounts payable | ( | ) | ||
| Deferred revenue | ( | ) | ||
| Total Liabilities Assumed | ( | ) | ||
| Net Assets Acquired | ||||
| Excess Purchase Price- “Goodwill” | $ | |||
| 13 |
Applied UV, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
NOTE 2 – BUSINESS ACQUISITION (Continued)
The
excess purchase price has been recorded as goodwill in the amount of approximately $
NOTE 3 – INVENTORY
Inventory
consists of raw materials and finished goods of $
Inventory
consists of raw materials of $
NOTE 4 – PROPERTY AND EQUIPMENT
Property and equipment (including machinery and equipment under capital leases) are summarized by major classifications as follows:
| June 30, | December 31, | |||||||
| 2021 | 2020 | |||||||
| Machinery and Equipment | $ | $ | ||||||
| Leasehold improvements | ||||||||
| Furniture and Fixtures | ||||||||
| Less: Accumulated Depreciation | ( | ) | ( | ) | ||||
| $ | $ | |||||||
Depreciation
expense, including amortization of assets under capital leases, for the six months ended June 30, 2021 and 2020 was $
| 14 |
Applied UV, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
NOTE 5 – INTANGIBLE ASSETS
Intangible assets as of June 30, 2021 and December 31, 2020 consists of the following:
| June 30, | December 31, | |||||||
| 2021 | 2020 | |||||||
| Intangible assets subject to amortization | ||||||||
| Customer Relationship | $ | $ | ||||||
| Trade Names | ||||||||
| Technology and Know How | ||||||||
| Less: Accumulated amortization | ( | ) | ||||||
| $ | $ | |||||||
During the three months ended June 30, 2021 and 2020, the Company recorded total amortization expense related to intangible assets of $134,850 and $0, respectively. During the six months ended June 30, 2021 and 2020, the Company recorded total amortization expense related to intangible assets of $224,750 and $0, respectively. The useful lives of tradenames and technology is 10 years and the useful life of customer relationships is 7 years.
NOTE 6 – CAPITAL LEASE OBLIGATION
The Company's future minimum principal and interest payments under a capital lease for machinery and equipment are as follows as of June 30, 2021:
| 2021 | $ | |||
| 2022 | ||||
| 2023 | ||||
| Less: Amount representing interest | ( | ) | ||
| Present value of future minimum lease payments | ||||
| Less: current portion | ( | ) | ||
| Capital lease obligations | $ |
| 15 |
Applied UV, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
NOTE 7 – LOANS PAYABLE
The Company entered into a
loan agreement in April of 2019 where the company was required to pay $
Minimum obligations under this loan agreement is as follows:
| For the twelve months ending June 30, | ||||
| 2021 | $ | |||
| 2022 | ||||
| 2023 | ||||
| 2024 | ||||
| Total | $ | |||
NOTE 8 – STOCKHOLDERS' EQUITY
Preferred Stock Series X
On June 17, 2021, the Company filed an amendment of the certificate of designation of Series A Preferred Stock. The Board of Directors, by unanimous written consent, duly adopted resolutions to amend the Series A Preferred Stock Certificate of Designations and changed the name from “Series A Preferred Stock” to “Series X Super Voting Preferred Stock”. All dividend, liquidation preference, voting, conversion, and redemption rights, did not change from the originally filed Certificate of Designation of Series A Preferred Stock.
Reverse Stock Split
In June of 2020, the
Company
| 16 |
Applied UV, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
NOTE 8 – STOCKHOLDERS' EQUITY (continued)
2020 Incentive Plan
On March 31, 2020, the Company adopted the Applied UV, Inc. 2020 Omnibus Incentive Plan (the “Plan”) with (post-split adjusted) shares of common stock available for issuance under the terms of the Plan. The Plan permits the granting of Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Shares, Performance Units and Other Awards. The objectives of the Plan are to optimize the profitability and growth of the Company through incentives that are consistent with the Company’s goals and that link the personal interests of Participants to those of the Company’s stockholders. The Plan is further intended to provide flexibility to the Company in its ability to motivate, attract and retain the services of Participants who make or are expected to make significant contributions to the Company’s success and to allow Participants to share in the success of the Company. From time to time, the Company may issue Incentive Awards pursuant to the Plan. Each of the awards will be evidenced by and issued under a written agreement.
If an incentive award
granted under the Plan expires, terminates, is unexercised or is forfeited, or if any shares are surrendered to the company in
connection with an incentive award, the shares subject to such award and the surrendered shares will become available for future
awards under the Plan. The number of shares subject to the Plan, and the number of shares and terms of any Incentive Award may
be adjusted in the event of any change in our outstanding common stock by reason of any stock dividend, spin-off, stock split,
reverse stock split, recapitalization, reclassification, merger, consolidation, liquidation, business combination or exchange of
shares, or similar transaction. There are shares available for future grants under the plan. The Company also granted an
additional
A summary of the Company’s option activity and related information follows:
| Shares Available for Grant | Number of Options | Weighted-Average Exercise Price | Weighted-Average Grant Date Fair Value | Weighted-Average Remaining Contractual Life (in years) | Aggregate intrinsic value | |||||||||||||||||||
| Balances, January 1, 2020 | $ | $ | $ | — | ||||||||||||||||||||
| Options granted | — | |||||||||||||||||||||||
| Options forfeited/cancelled | ( | ) | — | |||||||||||||||||||||
| Options exercised | — | |||||||||||||||||||||||
| Balances, December 31, 2020 | — | |||||||||||||||||||||||
| Options granted outside of the plan | — | |||||||||||||||||||||||
| Options granted | ( | ) | — | |||||||||||||||||||||
| Options forfeited/cancelled | ( | ) | — | |||||||||||||||||||||
| Options exercised | — | |||||||||||||||||||||||
| Balances, June 30, 2021 | $ | $ | $ | |||||||||||||||||||||
As of June 30, 2021, 10,357 options were vested at $7.33 per share for an intrinsic value of $25,717.
Share-based compensation expense for options totaling $176,374 and $196,890 was recognized for the three and six months ended June 30, 2021, respectively, based on awards vested. Share-based compensation expense for options totaling $711 and $711 was recognized in our results for the three and six months ended June 30, 2020 based on awards vested.
The valuation methodology used to determine the fair value of the options issued during the year was the Black-Scholes option-pricing model. The Black-Scholes model requires the use of a number of assumptions including volatility of the stock price, the average risk-free interest rate, and the weighted average expected life of the options.
| 17 |
Applied UV, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
NOTE 8 – STOCKHOLDERS' EQUITY (continued)
The risk-free interest rate assumption is based upon observed interest rates on zero coupon U.S. Treasury bonds whose maturity period is appropriate for the term of the options.
Estimated volatility is a measure of the amount by which the Company’s stock price is expected to fluctuate each year during the expected life of the award. The Company’s calculation of estimated volatility is based on historical stock prices of peer entities over a period equal to the expected life of the awards. The Company uses the historical volatility of peer entities due to the lack of sufficient historical data of its stock price.
As
of June 30, 2021, there was $
The weighted average fair value of options granted, and the assumptions used in the Black-Scholes model during the six months ended June 30, 2021 and year ended December 31, 2020 are set forth in the table below.
| 2021 | 2020 | |||||||
| Weighted average fair value of options granted | $ | $ | ||||||
| Risk-free interest rate | % to % | % to % | ||||||
| Volatility | % to % | % to % | ||||||
| Expected life (years) | - | |||||||
| Dividend yield | % | % | ||||||
Common Stock Warrants
A summary of the Company’s warrant activity and related information follows:
| Number of Shares | Weighted-Average Exercise Price | |||||||
| Warrants Outstanding at January 1, 2020 | ||||||||
| Granted | $ | |||||||
| Warrants Outstanding at December 31, 2020 | $ | |||||||
| Granted | $ | |||||||
| Exercised | ( | ) | ||||||
| Warrants Outstanding and exercisable, June 30, 2021 | $ | |||||||
Share-based compensation expense of $ for warrants granted was recognized for the six months ended June
30, 2020 based on awards vested. There was compensation expense related to warrants during the six months ended June 30, 2021.
The warrants granted in 2020 were issued in connection with the August and November offerings. The warrants issued in connection
with the November offering contained a cash settlement feature which resulted in a warrant liability of $
| 18 |
Applied UV, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
NOTE 8 – STOCKHOLDERS' EQUITY (continued)
The valuation methodology used to determine the fair value of the warrants issued during the periods was the Black-Scholes option-pricing model. The Black-Scholes model requires the use of a number of assumptions including volatility of the stock price, the average risk-free interest rate, and the weighted average expected life of the warrants.
The risk-free interest rate assumption is based upon observed interest rates on zero coupon U.S. Treasury bonds whose maturity period is appropriate for the term of the warrants.
Estimated volatility is a measure of the amount by which the Company’s stock price is expected to fluctuate each year during the expected life of the award. The Company’s calculation of estimated volatility is based on historical stock prices of peer entities over a period equal to the expected life of the awards. The Company uses the historical volatility of peer entities due to the lack of sufficient historical data of its stock price.
As of December 31, 2020, there was no unrecognized compensation expense related to unvested warrants granted under the Company’s share-based compensation plans.
The weighted average fair value of warrants granted, and the assumptions used in the Black-Scholes model during the six months ended June 30, 2021 are set forth in the table below.
| Weighted average fair value of warrants granted | $ | |||
| Risk-free interest rate | % | |||
| Volatility | ||||
| Expected life (years) | ||||
| Dividend yield | % | |||
On
August 31, 2020, the Company closed its offering (the “August Offering”) in which it sold common shares
at a public offering price of $ per share. In connection with the Offering, the Company (i) received $
On
November 13, 2020, the Company closed its second offering (the “November Offering”) in which it sold
common shares at a public offering price of $
per share. In connection with the Offering, the Company (i) received $
Restricted Stock Awards
The Company records compensation expense for restricted stock awards based on the quoted market price of our stock at the grant date and amortize the expense over the vesting period.
In July of 2020, the company granted restricted stock awards. Of these awards, 127,583 vests quarterly over an 18-month period with the first date of vesting being September 30, 2020. As of June 30, 2021, of these restricted stock awards were vested. The fair market value of these awards was $5 per share and the company expensed $106,319 and $212,638 of stock-based compensation related to these awards during the three and six months ended June 30, 2021, respectively.
| 19 |
Applied UV, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
NOTE 8 – STOCKHOLDERS' EQUITY (continued)
Restricted Stock Awards (Continued)
On July 9, 2020, restricted stock awards were granted. The restricted stock awards vest in full on January 1, 2021. As of June 30, 2021, all the restricted stock awards were vested. The fair market value of these awards was $ per share. expense was recorded related to these awards during the three and six months ended June 30, 2021.
On July 9, 2020, restricted stock awards were granted. The restricted stock awards vest evenly over a four-year period with the first vesting to occur on January 1, 2021. As of June 30, 2021, of these restricted stock awards were vested. The fair market value of these awards was $ per share and the company expensed $ and $ of stock-based compensation related to these awards during the three and six months ended June 30, 2021, respectively.
On January 1, 2021, restricted stock awards were granted. The restricted stock awards vest in full on January 1, 2022. As of June 30, 2021, none of the restricted stock awards were vested. The fair market value of these awards was $ per share. The company recorded $ and $ of compensation expense related to these awards during the three and six months ended June 30, 2021, respectively.
NOTE 9- LEASING ARRANGEMENTS
The Company determines whether an arrangement qualifies as a lease under ASC 842 at inception. The Company has operating leases for office space and office equipment. The Company’s leases have remaining lease terms of one year to seven years, some of which include options to extend the lease term for up to five years. The Company considered these options to extend in determining the lease term used to establish the Company’s right-of use assets and lease liabilities once reasonably certain of exercise. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.
ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and operating lease liabilities are recognized at the lease commencement date based on the present value of the future lease payments over the lease term. The operating lease ROU asset also includes any lease payments made in advance of lease commencement and excludes lease incentives. The lease terms used in the calculations of the operating ROU assets and operating lease liabilities include options to extend or terminate the lease when the Company is reasonably certain that it will exercise those options. Lease expense for lease payments is recognized on a straight-line basis over the lease term.
As the Company’s
leases do not provide an implicit rate, the Company uses an incremental borrowing rate of
| 20 |
Applied UV, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
NOTE 9 – LEASING ARRANGEMENTS (continued)
Munnworks, LLC entered into a lease agreement in Mount Vernon, New York for a term that commenced on April 1, 2019 and will expire on the 31st day of March 2024 at a monthly rate of $13,400. In March of 2021, the Company obtained additional lease space and the agreement was amended to increase rent expense to $15,000 per month. Rent expense for the six months ended June 30, 2021 and 2020 was $86,800 and $80,400, respectively. Rent expense for the three months ended June 30, 2021 and 2020 was $43,400 and $40,200, respectively. The lease can be cancelled by either party with 150 days of written notice.
Schedule maturities of operating lease liabilities outstanding as of June 30, 2021 are as follows:
| 2021 | $ | |||
| 2022 | ||||
| 2023 | ||||
| 2024 | ||||
| Total lease payments | ||||
| Less: Imputed Interest | ( | ) | ||
| Present value of future minimum lease payments | $ |
Consistent with ASC 842-20-50-4, the Company calculated its total lease cost based solely on its monthly rent obligation. The Company had no cash flows arising from its lease, no finance lease cost, short term lease cost, or variable lease costs. The Company’s lease does not produce any sublease income, or any net gain or loss recognized from sale and leaseback transactions. As a result, the Company did not need to segregate amounts between finance and operating leases for cash paid for amounts included in the measurement of lease liabilities, segregated between operating and financing cash flows; supplemental non-cash information on lease liabilities arising from obtaining right-of-use assets; weighted-average calculations for the remaining lease term; or the weighted-average discount rate.
NOTE 10 - PAYROLL PROTECTION PROGRAM
In April of 2020, the
Company submitted a Paycheck Protection Program (“PPP”) application to Chase Bank for a loan amount equal to $
| 21 |
Applied UV, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
NOTE 11 - NOTE RECEIVABLE- RELATED PARTY
In February of 2021, the Company entered into a non-interest bearing note receivable agreement whereby the Company loaned $
NOTE 12 - SEGMENT REPORTING
FASB Codification Topic 280, Segment Reporting, establishes standards for reporting financial and descriptive information about an enterprise’s reportable segments. The Company has two reportable segments: the design, manufacture, assembly and distribution of disinfecting systems for use in healthcare, hospitality, and commercial municipal and residential markets (disinfectant segment) and the manufacture of fine mirrors specifically for the hospitality industry (hospitality segment). The segments are determined based on several factors, including the nature of products and services, the nature of production processes, customer base, delivery channels and similar economic characteristics.
An operating segment’s performance is evaluated based on its pre-tax operating contribution, or segment income. Segment income is defined as net sales less cost of sales, segment selling, general and administrative expenses, research and development costs and stock-based compensation. It does not include other charges (income), net and interest and other, net.
For the three months
ended June 30, 2021, the company generated and incurred $
For the six months ended
June 30, 2021, the company generated and incurred $
For the three months
ended June 30, 2021, the hospitality segment of our business incurred $
For the six months ended
June 30, 2021, the hospitality segment of our business incurred $
| 22 |
Applied UV, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
NOTE 12 - SEGMENT REPORTING (CONTINUED)
For the three and six months ended June 30, 2021, all research and development costs was incurred from the disinfectant segment of our business.
For the three months ended June 30, 2021, the hospitality segment of our business incurred $ of stock-based compensation expense. For the three months ended June 30, 2021, the disinfectant segment of our business incurred $ of stock-based compensation expense.
For the six months ended June 30, 2021, the hospitality segment of our business incurred $ of stock-based compensation expense. For the six months ended June 30, 2021, the disinfectant segment of our business incurred $ of stock-based compensation expense.
For the six and three
months ended June 30, 2020, all net sales and cost of goods sold was generated or incurred from the hospitality segment of our
business. During the six months ended June 30, 2020, the hospitality segment of our business incurred $
As of June 30, 2021 and
December 31, 2020 assets from the hospitality segment of our business was $
As of June 30, 2021 and
December 31, 2020, total liabilities from the hospitality segment of our business was $
NOTE 13 – RESTATEMENT
While preparing its annual report for the year ended December 31, 2020 the Company identified an error in the timing of recognizing certain revenues. We erroneously recognized revenues in the amount of $234,570 in the fourth quarter of 2019 and $56,766 in the first quarter of 2020. These revenues should have been recognized during the three months ended June 30, 2020. The tables below summarize the impact of the restatements described above on financial information previously reported on the Company’s Forms 10-Q for the periods ended June 30, 2020:
| Three Months Ended June 30, 2020 | Six Months Ended June 30, 2020 | |||||||||||||||
| As Reported | As Restated | As Reported | As Restated | |||||||||||||
| Net Sales | $ | $ | $ | $ | ||||||||||||
| Cost of Goods Sold | ||||||||||||||||
| Gross Profit | ||||||||||||||||
| Operating Expenses | ||||||||||||||||
| Research and development | ||||||||||||||||
| Stock based compensation - general and administrative | ||||||||||||||||
| Selling. General and Administrative Expenses | ||||||||||||||||
| Total Operating Expenses | ||||||||||||||||
| Operating (Loss) Income | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other Income | ||||||||||||||||
| Gain on settlement | ||||||||||||||||
| Other Income | ||||||||||||||||
| Total Other Income | ||||||||||||||||
| (Loss) Income Before Provision for Income Taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Provision for Income Taxes | ||||||||||||||||
| Net (Loss) Income | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Basic and Diluted (Loss) Earnings Per Common Share | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||
These errors had a non-cash impact to cash flows from operations, as such, the statement of cash flows for the six months ended June 30, 2020 reflects an adjustment to net loss and a corresponding adjustment for the change in deferred revenue.
NOTE 14 – SUBSEQUENT EVENTS
Amendment to Certificate of Incorporation
Pursuant to the Company’s amended and restated certificate of incorporation, as amended, the Company is currently authorized to designate and issue up to 1,000,000 shares of preferred stock, par value $0.0001 per share, in one or more classes or series and, subject to the limitations prescribed by the Company’s amended and restated certificate of incorporation and Delaware corporate law, with such rights, preferences, privileges and restrictions of each class or series of preferred stock, including dividend rights, voting rights, terms of redemption, liquidation preferences and the number of shares constituting any class or series as the Company’s board of directors may determine, without any vote or action by the Company’s shareholders. As of July 6, 2021, we had 10,000 preferred shares designated as Super Voting Preferred Stock and 2,000 of such shares issued and outstanding and 990,000 shares of preferred stock authorized but undesignated and unissued. On July 13, 2021 the Company designated 990,000 shares of preferred stock to Series A Cumulative Perpetual Preferred Stock. Upon the Company may, subject to certain conditions, at the Company’s option, redeem the Series A Preferred Stock, in whole or in part within 90 days after the first date on which such Delisting Event occurred or within 120 days after the first date on which such Change of Control occurred, as applicable, by paying $25.00 per share, plus any accumulated and unpaid dividends up to, but not including, the redemption date.
Preferred Stock Offering
On July 13, 2021, Applied UV, Inc. (the “Company”) entered into an underwriting agreement (the “Underwriting Agreement”) with Ladenburg Thalmann & Co. Inc. as representative (“Representative”) of the underwriters (“Underwriters”), related to the offering of 480,000 shares (the “Shares”) of the Company’s 10.5% Series A Cumulative Perpetual Preferred Stock, par value $0.0001 per share (“Series A Preferred Stock”), at a public offering price of $25.00 per share, which excludes 72,000 shares of Series A Cumulative Perpetual Preferred Stock that may be purchased by the Underwriters pursuant to their overallotment option granted to the Underwriters under the terms of the Underwriting Agreement.
The Shares were offered and sold by the Company pursuant to the terms of the Underwriting Agreement and registered pursuant to the Company’s registration statement on (i) Form S-1 (File No. 333-257197), as amended, which was filed with the Securities and Exchange Commission (the “Commission”) and declared effective by the Commission on July 12, 2021 and (ii) the Company’s registration statement on Form S-1MEF (File No. 333-257862), which was filed with the Commission on July 13, 2021 and declared effective upon filing.
The closing of the offering for the Shares took place on July 16, 2021. The Shares have been approved for listing on Nasdaq under the trading symbol “AUVIP” and trading on Nasdaq began on July 14, 2021. Aggregate gross proceeds from the closing were $12.0 million before deducting underwriting discounts and commissions and fees and other estimated offering expenses. The Company intends to use the net proceeds from the offering to fund a segregated dividend account in an amount equal to the first 12 monthly dividend payments and the remaining net proceeds for general corporate purposes, including new investments and acquisitions.
On July 29, 2021, the Company issued a press release announcing that in connection with its previously announced public offering of its 10.5% Series A Cumulative Perpetual Preferred Stock, par value $0.0001 per share, it had closed the exercise of the underwriter’s overallotment option of 72,000 shares at $25.00 per share. The Company received aggregate gross proceeds of approximately $1.8 million, before deducting underwriting discounts and commissions and fees and other estimated offering expenses.
| 23 |
ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Certain statements made in this prospectus are “forward-looking statements” regarding the plans and objectives of management for future operations. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of the “Company” to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. The Company’s plans and objectives are based, in part, on assumptions involving the continued expansion of business. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the Company. Although the Company believes its assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and therefore, there can be no assurance the forward-looking statements included in this prospectus will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company or any other person that the objectives and plans of the Company will be achieved. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” and in other parts of this prospectus. Our fiscal year ends on December 31.
Overview
The Company was formed on February 26, 2019 for the purpose of acquiring all of the equity of SteriLumen and Munnworks. The Company acquired all of the capital stock of SteriLumen in March of 2019 pursuant to two exchange agreements in which all of the stockholders of SteriLumen exchanged their shares in SteriLumen for shares of common stock in the Company. The Company acquired all of the equity of Munnworks in July of 2019 pursuant to an exchange agreement in exchange for shares of common stock in the Company. The Company conducts all of its operations through SteriLumen and Munnworks.
Sterilumen was formed to engage in the design, manufacture, assembly and distribution of the SteriLumen Disinfecting System for use in hospitals and other healthcare facilities. The Company has received several patent approvals for the SteriLumen Disinfecting System from the United States and the European Union and is in the process of receiving approval from various countries including China, Japan, Taiwan, South Korea and the Gulf Cooperation Council. The technology of the SteriLumen Disinfecting System uses UVC LED embedded in various bathroom fixtures or as a stand-alone unit as a disinfection apparatus for use in inhabited facilities for killing airborne bacteria and other pathogens as well as killing bacteria and other pathogens residing on hard surfaces in proximity to the apparatus.
Following the Company’s initial public offering, product development efforts were accelerated. The system’s technology development roadmap, including connected and data-enabled capabilities has been refined and the Clarity D3 application will be launched along with the updated version of the SteriLumen Ribbon (now branded Lumicide™) in the fall of 2021. The Company has also achieved UL certification for both the stand-alone Ribbon, and integrated Drain products, ensuring that the Company meets requirements of commercial customers who rely on the UL mark as evidence of safety, quality, and reliability.
The Company works with distributors to sell both SteriLumen and Munnworks product lines, and is in the process of signing up new SteriLumen distributors of significant breadth and scale to introduce the SteriLumen products to new markets, including building management, commercial real estate, and environmental health and safety.
| 24 |
Munnworks is a manufacturer of custom designed fine mirrors specifically for the hospitality industry with one manufacturing facility in Mount Vernon, New York. Our goal is to contribute to the creation of what our design industry clients seek: manufacturing better framed mirrors on budget and on time. As part of our long-term strategy, the Company has instituted multi-site production for high-value items, complicated designs and finishes. Our headquarters in Mount Vernon, NY serves as the center for multi-country manufacturing. The Company works with a satellite network of artisans and craftsmen, including gilders, carvers, and old-world finishers.
In addition to our domestic partners, the Company maintains overseas production capability with on-site Munnworks employees. Moreover, as company policy, the Company conducts on-site factory visits for all in-process and outgoing orders, which are observed and checked by a project manager from our home office in Mount Vernon, NY before they leave our overseas partners’ facilities. The combination of quality, innovative, stylish merchandise, and value pricing has led us to develop a loyal customer base.
In February of 2021, the Company acquired all the assets and assumed certain liabilities of Akida Holdings, LLC (“Akida”). Akida is the manufacturer of the Airocide™ system of air purification technologies, originally developed by NASA with assistance from the University of Wisconsin at Madison, that uses a combination of UVC and a proprietary, titanium dioxide based photocatalyst that may help to accelerate the reopening of the global economy with applications in the hospitality, hotel, healthcare, nursing homes, grocery, wine, commercial buildings and retail sectors. The Airocide™ system has been used by brands such as NASA, Whole Foods, Dole, Chiquita, Opus One, Sub-Zero Refrigerators and Robert Mondavi Wines.
Principal Factors Affecting Our Financial Performance
Our operating results are primarily affected by the following factors:
| • | our ability to acquire new customers or retain existing customers. |
| • | our ability to offer competitive product pricing. |
| • | our ability to broaden product offerings. |
| • | industry demand and competition; and |
| • | market conditions and our market positions |
| 25 |
Results of Operations
Six Months Ended June 30, 2021 Compared to the Six Months Ended June 30, 2020 (restated)
| Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 (restated) | |||||||||||||||
| Net Sales | $ | 4,196,934 | 100.0 | % | $ | 3,166,998 | 100.0 | % | ||||||||
| Cost of Goods Sold | 2,739,440 | 65.3 | % | 2,342,582 | 74.0 | % | ||||||||||
| Gross Profit | 1,457,494 | 34.7 | % | 824,416 | 26.0 | % | ||||||||||
| Research and development | 53,408 | 1.3 | % | — | 0.0 | % | ||||||||||
| Stock based compensation | 676,341 | 16.1 | % | 101,607 | 3.2 | % | ||||||||||
| Selling, General and Administrative Expenses | 3,623,658 | 86.3 | % | 814,875 | 25.7 | % | ||||||||||
| Total Operating expenses | 4,353,407 | 103.7 | % | 916,482 | 28.9 | % | ||||||||||
| Operating Loss | (2,895,913 | ) | (69.0 | %) | (92,066 | ) | (2.9 | %) | ||||||||
| Other (Expense) Income | ||||||||||||||||
| Change in Fair Market Value of Warrant Liability | (300,452 | ) | (7.2 | %) | — | 0.0 | % | |||||||||
| Other income | 25,182 | 0.6 | % | 7,497 | 0.2 | % | ||||||||||
| Total Other (Expense) Income | (275,270 | ) | (6.6 | %) | 7,497 | 0.2 | % | |||||||||
| Loss Before Provision for Income Taxes | (3,171,183 | ) | (75.6 | %) | (84,569 | ) | (2.7 | %) | ||||||||
| Provision for Income Taxes | — | 0.0 | % | — | 0.0 | % | ||||||||||
| Net Loss | $ | (3,171,183 | ) | (75.6 | %) | $ | (84,569 | ) | (2.7 | %) | ||||||
Net sales and gross profit are the most significant drivers of our operating performance. Net sales consist of all sales to customers, net of returns. Our net sales for the six months ended June 30, 2021 increased by 32.5% to $4,196,934 from $3,166,998 in the six months ended June 30, 2020. The net sales and financial results for the current period reflect the impact of our Akida asset acquisition that closed on February 8, 2021. All net sales for previous periods presented were generated entirely from our MunnWorks group. We are seeing an improvement in the hospitality industry as the economy rebounds from the COVID-19 pandemic, and as a result our MunnWorks revenues are returning to normal operating levels. We are experiencing some delays in one of our Sterilumen product lines that we anticipate will be resolved in the 2nd half of this year.
Accordingly, gross profit expressed as a percentage of net sales can be influenced by many factors including overall sales performance. For the six months ended June 30, 2021, gross profit increased to $1,457,494 from $824,416 for the six months ended June 30, 2020. Gross profit as a percentage of net sales increased to 34.7% for the six months ended June 30, 2021 from 26.0% in the six months ended June 30, 2020, primarily driven by the impact of our Akida asset acquisition and the sales recovery from our MunnWorks group. Throughout the pandemic the Company continued to retain direct labor employees to comply with payroll protection plan loan forgiveness criteria. The loan was forgiven on July 7, 2021. Additionally, major components and cost drivers of our cost of sales is influenced by the cost of materials, shipping, overhead, and labor costs, which has become more of a challenge during this current supply chain environment.
| 26 |
’s adoption of its incentive plan and issuance of options and warrants during the quarter. On March 31, 2020, the Company adopted the Applied UV, Inc. 2020 Omnibus Incentive Plan (the “Plan”) with 600,000 shares of common stock available for issuance under the terms of the Plan. The Plan permits the granting of Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Shares, Performance Units and Other Awards. Stock based compensation increased to $676,341 for the six months ended June 30, 2021, from $101,607 for the six months ended June 30, 2020, primarily due to the timing of the hiring of key staff members and the new employment agreement for the President of Applied UV effective Q2 2021.
Selling, General and Administrative expenses, including the costs of operating our corporate office, are also an important component of our operating performance. Compensation and benefits comprise most of our operating expenses. Selling, General and Administrative expenses contain fixed and variable costs and managing the operating expense ratio (operating expenses expressed as a percentage of net sales) is an important focus of management as we seek to increase our overall profitability. Operating expenses include cash costs as well as non-cash costs, such as depreciation and amortization associated with corporate property and equipment, and stock compensation expense. Operating expenses can also include certain costs that are of a one-time or non-recurring nature. For the six months ended June 30, 2021, Selling, General and Administrative expenses increased to $3,623,658 from $814,875 in the six months ended June 30, 2020. The increase was attributable to a variety of factors, including costs related to the Akida asset acquisition and the inclusion of additional expenses associated with that line of business, an increase in professional and consulting fees, office salaries, and the hiring of key personnel [Chief Executive Officer, Chief Operations Officer, Vice President of Global Sales, and Vice President of Product Marketing and Corporate Development], primarily focused on expanding the disinfection segment of our business.
The Company recorded a loss on the change in fair value of warrant liability in the amount of $300,452 for the six months ended June 30, 2021. Warrants that were issued in connection with the November 2020 public offering contained a cash settlement feature which resulted in a warrant liability of $435,577 as of June 30, 2021. The fair market value of the warrant liability on the date of grant was $135,125 and was recorded as a reduction of Additional Paid in Capital.
We recorded net loss of $3,171,183 in the six months ended June 30, 2021, compared to a net loss of $84,569 in the six months ended June 30, 2020. The net loss in 2021 was due primarily to an increase in SG&A costs to improve future operations and expand the disinfection segment of our business.
Three Months Ended June 30, 2021 Compared to the Three Months Ended June 30, 2020 (restated
| Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 (restated) | |||||||||||||||
| Net Sales | $ | 1,884,319 | 100.0 | % | $ | 1,695,364 | 100.0 | % | ||||||||
| Cost of Goods Sold | 1,351,091 | 71.7 | % | 1,180,769 | 69.6 | % | ||||||||||
| Gross Profit | 533,228 | 28.3 | % | 514,595 | 30.4 | % | ||||||||||
| Research and development | 9,763 | 0.5 | % | — | 0.0 | % | ||||||||||
| Stock based compensation - general and administrative | 465,600 | 24.7 | % | 101,607 | 6.0 | % | ||||||||||
| Selling. General and Administrative Expenses | 2,232,882 | 118.5 | % | 426,677 | 25.2 | % | ||||||||||
| Total Operating expenses | 2,708,245 | 143.7 | % | 528,284 | 31.2 | % | ||||||||||
| Operating Loss | (2,175,017 | ) | (115.4 | %) | (13,689 | ) | (0.8 | %) | ||||||||
| Other Expense | ||||||||||||||||
| Change in Fair Market Value of Warrant Liability | 10,948 | 0.6 | % | — | 0.0 | % | ||||||||||
| Other (expense) income | 25,837 | 1.4 | % | 7,497 | 0.4 | % | ||||||||||
| Total Other Expense | 36,785 | 2.0 | % | 7,497 | 0.4 | % | ||||||||||
| Loss Before Provision for Income Taxes | (2,138,232 | ) | (113.5 | %) | (6,192 | ) | (0.4 | %) | ||||||||
| Provision for Income Taxes | — | 0.0 | % | — | 0.0 | % | ||||||||||
| Net Loss | $ | (2,138,232 | ) | (113.5 | %) | $ | (6,192 | ) | (0.4 | %) | ||||||
| 27 |
Our net sales for the three months ended June 30, 2021 increased by 11.1% to $1,884,319 from $1,695,364 in the three months ended June 30, 2020. Due to the current supply chain/logistics environment, the Company experienced delays in fulfilling orders in Q2 that will now be pushed into the 2nd half.
For the three months ended June 30, 2021, gross profit increased to $533,228 from $514,595 for the three months ended June 30, 2020. Gross profit as a percentage of net sales decreased to 28.3% for the three months ended June 30, 2021 as compared to 30.4% in the three months ended June 30, 2020.
For the three months ended June 30, 2021, Selling, General and Administrative expenses increased to $2,232,882 from $426,677 in the three months ended June 30, 2020. The increase was attributable to a variety of factors, including costs related to the Akida asset acquisition and the inclusion of additional expenses associated with that line of business, an increase in professional and consulting fees office salaries, and the hiring of key personnel [Chief Executive Officer, Chief Operations Officer, Vice President of Global Sales, and Vice President of Product Marketing and Corporate Development], primarily focused on expanding the disinfection segment of our business.
The Company recorded a gain on the change in fair value of warrant liability in the amount of $10,948 for the three months ended June 30, 2021. Warrants that were issued in connection with the November 2020 public offering contained a cash settlement feature which resulted in a warrant liability of $435,577 as of June 30, 2021. The fair market value of the warrant liability on the date of grant was $135,125 and was recorded as a reduction of Additional Paid in Capital.
We recorded net loss of $2,138,232 in the three months ended June 30, 2021, compared to a net loss of $6,192 in the three months ended June 30, 2020. The net loss in 2021 was due primarily to an increase in SG&A costs to improve future operations and expand the disinfection segment of our business.
Liquidity and Capital Resources
Six Months Ended June 30, 2021 Compared to the Six Months Ended June 30, 2020 (restated)
| Net Cash (Used in) Provided by Operating Activities | $ | (3,398,543 | ) | $ | 303,148 | |||
| Net Cash Used in Investing Activities | (1,274,728 | ) | (98,244 | ) | ||||
| Net Cash (Used in) Provided by Financing Activities | (67,101 | ) | 220,783 | |||||
| Net (decrease) increase in cash | (4,740,372 | ) | 425,687 | |||||
| Cash at beginning of year | 11,757,930 | 1,029,936 | ||||||
| Cash at end of year | 7,017,558 | 1,455,623 |
For the six months ended June 30, 2021, cash used in operating activities was ($3,398,543) compared with cash provided by operating activities of $303,148 for the six months ended June 30, 2020. Our operating cash inflows include cash received primarily from sales of our product and collections of our accounts receivable. These cash inflows are offset largely by cash paid primarily to our suppliers for production materials and parts used in our manufacturing process, operation expenses, and employee compensation. Our net loss for the six months ended June 30, 2021 was ($3,171,183) compared to a net loss of ($84,569). Additionally, the major operating activities that further reduced cash was an increase in vendor deposits of ($1,148,564), offset primarily by non-cash expenses of $676,341 for stock compensation and $312,319 for depreciation and amortization. Vendor deposits increased as we secure the supply needed in support of our 2nd half sales forecast.
| 28 |
In the six months ended June 30, 2021, net cash used in investing activities was ($1,274,728) as compared to cash used in investing activities of ($98,244) in the six months ended June 30, 2020. The increase in cash used was mainly attributable to cash paid in connection with the Akida asset acquisition net of cash acquired ($760,293), and a loan of ($500,000) to a related party in the form of a secured note receivable.
In the six months ended June 30, 2021, cash used in financing activities was ($67,101), primarily due to a liability settlement of ($65,000), as compared to cash provided by financing activities of $220,783 in the six months ended June 30, 2020, primarily due to the proceeds from the Payroll Protection Program of $296,827.
Working Capital. We had working capital of $6,151,273 at June 30, 2021, a decrease of ($3,497,823) from a working capital of $9,649,096 as of December 31, 2020. The decrease in working capital is largely attributable to a decrease in cash of ($4,740,372), an increase in vendor deposits of $1,148,564, an increase in notes receivable-related party of $500,000, a decrease in accounts payable and accrued expenses of ($644,664), an increase in inventories of ($224,721), an increase in warrant liability of $435,577, and an increase in deferred revenue of $412,086. The changes in working capital were impacted by the net assets of Akida acquired on February 8, 2021, which totaled ($36,225).
Contractual Obligations and Other Commitments
| Payment due by period | ||||||||||||||||||||
| Total | 2021 | 2022-2024 | 2025-2026 | Thereafter | ||||||||||||||||
| Capital lease obligations | $ | 11,630 | 3,640 | 7,990 | — | — | ||||||||||||||
| Operating lease obligations (1) | 495,000 | 90,000 | 405,000 | — | — | |||||||||||||||
| Notes payable (2) | 157,500 | 67,500 | 90,000 | — | — | |||||||||||||||
| Total | 664,130 | 161,140 | 502,990 | — | — | |||||||||||||||
| (1) | The Company entered into a lease agreement in Mount Vernon, New York for a term that commenced on April 1, 2019 and expires on the 31st day of March 2024 at a monthly rate of $15,000. | |
| (2) | In March 2020, as part of the On-Deck Capital settlement, the Company issued a promissory note for the principal amount of $157,500 due within the next 5 years. The Company is required to pay $157,500 in five payments in the amount of $30,000 per year, with an additional $7,500 in year two. |
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
| 29 |
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, have evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of June 30, 2021. Based on that evaluation, the Company’s Chief Executive Officer and the Company’s Chief Financial Officer have concluded that as of June 30, 2021, due to the existence of the material weakness in the Company’s internal control over financial reporting described below, the Company’s disclosure controls and procedures were not effective.
Evaluation of Disclosure Controls and Procedures
Our chief financial officer is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, our principal executive and principal financial officers, or persons performing similar functions, and effected by our Board, senior management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. We continue to review our internal control over financial reporting and may from time to time make changes aimed at enhancing their effectiveness and to ensure that our systems evolve with our business.
Under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in “Internal Control — Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on the control deficiencies identified during this evaluation and set forth below, our senior management has concluded that we did not maintain effective internal control over financial reporting as of June 30, 2021 due to the existence of a material weakness in internal control over financial reporting as described below.
As set forth below, management will continue to take steps to remediate the control deficiencies identified below. Notwithstanding the control deficiencies described below, we have performed additional analyses and other procedures to enable management to conclude that our consolidated financial statements included in this Form 10-Q fairly present, in all material respects, our financial condition and results of operations as of and for the six months ended June 30, 2021.
| 30 |
A material weakness is a deficiency, or a combination of deficiencies, in internal controls over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.
The Company’s management has developed a remediation plan to address the material weakness and as of January 1, 2021 began using a new cloud-based software which tracks the progress of jobs and more accurately reflects the percentage of job completeness ensure such revenue is recognized in the appropriate period. In addition, the Company intends to further remediate the deficiency by performing the following:
| • | design and implement additional internal controls and policies to ensure that we routinely review and document our application of established significant accounting policies; and |
| • | implement additional systems and technologies to enhance the timeliness and reliability of financial data within the organization. |
| • | continue to engage third-party subject matter experts to aid in identifying and applying US GAAP rules related to complex financial instruments as well as to enhance the financial reporting function. |
Limitations on Effectiveness of Controls and Procedures
In designing and evaluating the disclosure controls and procedures and internal control over financial reporting, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures and internal control over financial reporting must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.
| 31 |
PART II – OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 1A. Risk Factors
The Company is a smaller reporting company and therefore not required to provide the information required by this item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None
Item 3. Defaults Upon Senior Securities.
None
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None
| 32 |
Item 6. Exhibits
| 33 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| APPLIED UV, INC. | ||
| (Registrant) | ||
| Date: August 16, 2021 | By: | /s/ Keyoumars Saeed |
| Keyoumars Saeed | ||
| Chief Executive Officer | ||
| Date: August 16, 2021 | By: | /s/ Michael Riccio |
| Michael Riccio | ||
| Chief Financial Officer | ||
| 34 |
Exhibit 31.1
CERTIFICATION
I, Keyoumars Saeed, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q for the period ended June 30, 2021 of Applied UV, Inc.
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: August 16, 2021 | By: | /s/ Keyoumars Saeed |
| Keyoumars Saeed | ||
| Chief Executive Officer |
Exhibit 31.2
CERTIFICATION
I, Michael Riccio, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q for the period ended June 30, 2021 of Applied UV, Inc.
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: August 16, 2021 | By: | /s/ Michael Riccio |
| Michael Riccio | ||
| Chief Financial Officer |
Exhibit 32.1
CERTIFICATIONS
Pursuant to Section 906 of the Public Company Accounting Reform and Investor Protection Act of 2002 (18 U.S.C. ss. 1350, as adopted), Keyoumars Saeed, Chief Executive Officer of Applied UV, Inc. (the "Company"), hereby certifies that, to the best of their knowledge:
1. The Company's Quarterly Report on Form 10-Q for the period ended June 30, 2021 to which this Certification is attached as Exhibit 32 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the end of the period covered by the Report.
| Date: August 16, 2021 | By: | /s/ Keyoumars Saeed |
| Keyoumars Saeed | ||
| Chief Executive Officer |
Exhibit 32.2
CERTIFICATIONS
Pursuant to Section 906 of the Public Company Accounting Reform and Investor Protection Act of 2002 (18 U.S.C. ss. 1350, as adopted), Michael Riccio, Chief Financial Officer of Applied UV, Inc. (the "Company"), hereby certifies that, to the best of their knowledge:
1. The Company's Quarterly Report on Form 10-Q for the period ended June 30, 2021 to which this Certification is attached as Exhibit 32 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the end of the period covered by the Report.
| Date: August 16, 2021 | By: | /s/ Michael Riccio |
| Michael Riccio | ||
| Chief Financial Officer |
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares |
Jun. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Preferred stock, par value | $ 0.0001 | $ 0.0001 |
| Preferred stock, shares authorized | 990,000 | 990,000 |
| Preferred stock, shares issued | 0 | 0 |
| Preferred stock, shares outstanding | 0 | 0 |
| Common stock, par value | $ 0.0001 | $ 0.0001 |
| Common stock, shares authorized | 150,000,000 | 150,000,000 |
| Common stock, shares issued | 9,415,386 | 7,945,034 |
| Common stock, shares outstanding | 9,415,386 | 7,945,034 |
| Series X Preferred Stock [Member] | ||
| Preferred stock, par value | $ 0.0001 | $ 0.0001 |
| Preferred stock, shares authorized | 10,000 | 10,000 |
| Preferred stock, shares issued | 2,000 | 2,000 |
| Preferred stock, shares outstanding | 2,000 | 2,000 |
Condensed Interim Consolidated Statements of Operations (Unaudited) - USD ($) |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
Jun. 30, 2021 |
Jun. 30, 2020 |
|
| Income Statement [Abstract] | ||||
| Net Sales | $ 1,884,320 | $ 1,695,364 | $ 4,196,935 | $ 3,166,998 |
| Cost of Goods Sold | 1,351,091 | 1,180,769 | 2,739,440 | 2,342,582 |
| Gross Profit | 533,229 | 514,595 | 1,457,495 | 824,416 |
| Operating Expenses | ||||
| Research and development | 9,763 | 0 | 53,408 | 0 |
| Stock based compensation | 465,600 | 101,607 | 676,341 | 101,607 |
| Selling. General and Administrative Expenses | 2,232,882 | 426,677 | 3,623,658 | 814,875 |
| Total Operating Expenses | 2,708,245 | 528,284 | 4,353,407 | 916,482 |
| Operating Loss | (2,175,016) | (13,689) | (2,895,912) | (92,066) |
| Other Income Loss | ||||
| Change in Fair Market Value of Warrant Liability | 10,948 | 0 | (300,452) | 0 |
| Other Income | 25,837 | 7,497 | 25,182 | 7,497 |
| Total Other Income Loss | 36,785 | 7,497 | (275,270) | 7,497 |
| (Loss) Before Provision for Income Taxes | (2,138,231) | (6,192) | (3,171,182) | (84,569) |
| Provision for Income Taxes | (0) | 0 | (0) | 0 |
| Net (Loss) | $ (2,138,231) | $ (6,192) | $ (3,171,182) | $ (84,569) |
| Weighted average earnings per share: | ||||
| Basic and Diluted (Loss) Per Common Share | $ (0.23) | $ 0.00 | $ (0.35) | $ (0.02) |
| Average shares outstanding- basic and diluted | 9,407,367 | 5,023,684 | 9,102,677 | 5,012,468 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
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| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Business In February 2019, Applied UV, Inc. (the "Company") was formed and incorporated in the State of Delaware for the intended purpose of creating a legal holding company structure for SteriLumen, Inc. and Munnworks, LLC and any future potential mergers or acquisitions. The then-existing shareholders and members of SteriLumen, Inc. and Munnworks, LLC exchanged all of their interest for shares of Applied UV, Inc. with substantially similar economic voting interests for each shareholder immediately before and after the share exchange. As a result of the share exchange, SteriLumen, Inc. and Munnworks, LLC became wholly-owned subsidiaries of Applied UV, Inc and, collectively referred to as (the "Group"). SteriLumen, Inc. is engaged in the design, manufacture, assembly and distribution of automated disinfecting mirror systems for use in hospitals and other healthcare facilities. Munnworks, LLC is engaged in the manufacture of fine mirrors specifically for the hospitality industry. In February of 2021, the Company acquired all the assets and assumed certain liabilities of Akida Holdings, LLC (“Akida”). Akida is the manufacturer of the Airocide™ system of air purification technologies, originally developed by NASA, with assistance from the University of Wisconsin at Madison, that uses a combination of UVC and a proprietary, titanium dioxide based photocatalyst that may help to accelerate the reopening of the global economy with applications in the hospitality, hotel, healthcare, nursing homes, grocer, wine, commercial buildings and retail sectors. The Airocide™ system has been used by brands and organizations such as NASA, Whole Foods, Dole, Chiquita, Opus One, Sub-Zero Refrigerators and Robert Mondavi Wines. Principles of Consolidation The consolidated financial statements include the accounts of Applied UV, Inc., Munnworks, LLC and SteriLumen, Inc. All significant intercompany transactions and balances are eliminated in consolidation. Basis of Presentation The accompanying unaudited condensed consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, and with the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) set forth in Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim financial statements furnished reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented. Unaudited interim results are not necessarily indicative of the results for the full fiscal year. These financial statements should be read along with the Annual Report filed of the Company for the annual period ended December 31, 2020. The consolidated balance sheet as of December 31, 2020 was derived from the audited consolidated financial statements as of and for the year then ended. Use of estimates The preparation of unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, as of the date of the unaudited condensed consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include the valuation and accounting for equity awards related to warrants and stock-based compensation, determination of fair value for derivative instruments, the accounting for business combinations and allocating purchase price, estimating the useful life of intangible assets, as well as the estimates related to accruals and contingencies.
Cash Cash and cash equivalents include highly liquid investments that have original maturities less than 90 days at the time of their purchase. These investments are carried at cost, which approximates market value because of their short maturities. As of June 30, 2021 and December 31, 2020, the Company did not have any cash equivalents.
Accounts receivable An allowance for uncollectible accounts receivable is recorded when management believes the collectability of the accounts receivable is confirmed. Subsequent recoveries, if any, are credited to the allowance. The allowance is determined based on management’s review of the debtor’s ability to repay and repayment history, aging history, and estimated value of collateral, if any.
Inventory
Inventories, which consists of raw materials and finished goods is valued at the lower of cost or net realizable value, using the first-in, first-out (“FIFO”) valuation method. Inventory costs are comprised primarily of product, freight and duty. The Company writes down inventory for estimated obsolescence equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions. The company did not have any reserves for inventory as of June 30, 2021 and December 31, 2020.
Business Acquisition Accounting The Company applies the acquisition method of accounting for those that meet the criteria of a business combination. The Company allocates the purchase price of its business acquisitions based on the fair value of identifiable tangible and intangible assets. The difference between the total cost of the acquisition and the sum of the fair values of acquired tangible and identifiable intangible assets less liabilities is recorded as goodwill. Transaction costs are expensed as incurred in general and administrative expenses. Goodwill and Intangible Assets The Company has recorded intangible assets, including goodwill, in connection with business combinations. Estimated useful lives of amortizable intangible assets are determined by management based on an assessment of the period over which the asset is expected to contribute to future cash flows. In accordance with U.S. GAAP for goodwill and other indefinite-lived intangibles, the Company tests these assets for impairment annually and whenever events or circumstances make it more likely than not that impairment may have occurred. For the purposes of that assessment, the Company has determined to assign assets acquired in business combinations to a single reporting unit including all goodwill and indefinite-lived intangible assets acquired in business combinations. Income Taxes The Company files income tax returns using the cash basis of accounting. Income taxes are accounted for under the asset and liability method. Current income taxes are based on the year's income taxable for federal and state tax reporting purposes. Deferred income tax assets and liabilities are computed annually for differences between the financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable income will be available to allow all or part of the asset to be recovered. Derivative Instruments The Company evaluates its warrants to determine if those contracts or embedded components of those contracts qualify as derivatives. The result of this accounting treatment is that the fair value of the embedded derivative is marked-to-market each balance sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statements of operations as other income or expense. The warrants issued in connection with the November offering contained a cash settlement feature which resulted in a warrant liability of $435,577 as of June 30, 2021. The fair market value of the warrant liability on the date of grant was $135,125 and was recorded as a reduction of Additional Paid in Capital. For the three and six months ended June 30, 2021, the Company recorded a gain (loss) on the change in fair value of warrant liability in the amount of $10,948 and ($300,452), respectively. See Note 8 for further information. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. The Company has concluded that there are no such reclassifications required to be made as of and for the periods ended June 30, 2021. The Company marks to market the fair value of the warrant liabilities at each balance sheet date and records the change in the fair value of the warrant liabilities as other income or expense in the statements of operations.
The Company utilizes the Black-Scholes valuation model to value the derivative warrants as stipulated in the agreement for the warrant holders to receive cash based on that value. Fair Value of Financial Instruments The carrying amounts reported in the unaudited condensed consolidated balance sheets for loans payable approximate fair value because of the immediate or short-term maturity of the financial instruments. The Company's financial assets and liabilities are measured using inputs from the three levels of the fair value hierarchy. Basic (loss) per share is computed by dividing net (loss) attributable to common shareholders (the numerator) by the weighted-average number of common shares outstanding (the denominator) for the period. In periods of losses, diluted loss per share is computed on the same basis as basic loss per share as the inclusion of any other potential shares outstanding would be anti-dilutive. The following table sets forth the number of potential shares of common stock that have been excluded from diluted net loss per share because their effect was anti-dilutive:
The Company accounts for its stock-based compensation awards in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification Topic 718 ("ASC"), Compensation-Stock Compensation ("ASC 718"). ASC 718 requires all stock-based payments to employees, including grants of employee stock options and restricted stock and modifications to existing stock options, to be recognized in the statements of operations based on their fair values over the requisite service period. Research and Development The Company accounts for research and development costs in accordance with Accounting Standards Codification subtopic 730-10, Research and Development (“ASC 730-10”). Under ASC 730-10, all research and development costs must be charged to expense as incurred. Accordingly, internal research and development costs are expensed as incurred. Revenue Recognition The Company recognizes revenue when the performance obligations in the client contract has been achieved. A performance obligation is a contractual promise to transfer product to the customer. The transaction price of a contract is allocated to each distinct performance obligation and recognized as revenue when or as, the customer receives the benefit of the performance obligation. Under ASC 606, revenue is recognized when a customer obtains control of goods in an amount that reflects the consideration the Company expects to receive in exchange for those goods. To achieve this core principal, the Company applies the following five steps:
For projects, that are completed within the Company’s facility, the company designs, manufactures and sells custom mirrors for hotels and hospitals through contractual agreements. These sales require the company to deliver the products within three to six months from commencement of order acceptance. The Company recognizes revenue over time by using the input method based on costs incurred as it depicts our progress toward satisfaction of the performance obligation. Under this method, revenue arising from fixed price contracts is recognized as work is performed based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligations. Incurred costs include all direct material and labor costs and those indirect costs related to contract performance, such as indirect labor, supplies, tools, repairs and depreciation costs. Contract material costs are included in incurred costs when the project materials have been purchased or moved to work in process as required by the project’s engineering design. Cost based input methods of revenue recognition require us to make estimates of costs to complete the projects. In making such estimates, significant judgment is required to evaluate assumptions related to the costs to complete the projects, including materials, labor and other system costs. If the estimated total costs on any contract are greater than the net contract revenues, the Company recognizes the entire estimated loss in the period the loss becomes known and can be reasonably estimated. Deferred revenue represents amounts billed in excess of revenues recognized. Revenues recognized in excess of amounts billed typically does not occur as the Company will not perform any work in excess of the amount the company bills to its customers. If work is performed in excess of amounts billed, the Company will record an unbilled receivable. Each product or service delivered to a third-party customer that is manufactured by a third-party vendor is considered to satisfy a performance obligation. Performance obligations generally occur at a point in time and are satisfied when control of the goods passes to the customer. These sales are shipped from the manufacturer to the customer without our taking physical inventory possession. The Company reports direct sales on a gross basis, that is, the amounts billed to our customers are recorded as "Sales," and inventory purchased from manufacturers are recorded as cost of sales. The Company is the principal of direct sales because the Company has the risk of loss and we control the inventory before it is transferred to our customers. Our control is evidenced by us being primarily responsible for fulfilling the promise to our customers, taking on inventory risk of returned product, and having discretion in establishing pricing. The Company typically pay our vendors a portion of the total cost up front and the remaining balance is accrued for and paid within 30 to 60 days of when the products are shipped from the third-party warehouse. Deferred revenue represents amounts invoiced or deposits receeived from our customer for which the Company has not yet satisfied our performance obligation. The company applied the five-step model to the sales of Akida Holdings, LLC's Airocide products. At contract inception and once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct. The Company sells Airocide air sterilization units to both consumer and commercial customers. These products are sold both domestically and internationally. The cycle from contract inception to shipment of products is typically one day to three months. The Company’s contracts for both its consumer and commercial customers each contain a single performance obligation (delivery of Airocide products), as the promise to transfer the individual goods or services is not separately identifiable from other promises in the contracts and, therefore, not distinct, as a result, the entire transaction price is allocated to this single performance obligation. The Company recognizes revenues at a point in time when the customer obtains control of the Company’s product, which typically occurs upon shipment of the product by the Company or upon customer pick-up via third party common carrier. Revenue generated from work performed at our own facility and work performed by our third-party manufacturers for the three months ended:
Revenue generated from work performed at our own facility and work performed by our third-party manufacturers for the six months ended:
Deferred revenue was comprised of the following as of:
All deferred revenue as of December 31, 2020 was recognized as revenue during the six months ended June 30, 2021. Advertising Advertising costs consist primarily of online search advertising and placement, trade shows, advertising fees, and other promotional expenses. Advertising costs are expensed as incurred and are included in sales and marketing on the unaudited condensed consolidated statements of operations. Advertising expense for the three months ended June 30, 2021 and 2020 was $281,258 and $19,406, respectively. Advertising expense for the six months ended June 30, 2021 and 2020 was $309,434 and $37,823, respectively. Vendor deposits Vendor payments to third manufactures are capitalized until completion of the project and are recorded as vendor deposits. As of June 30, 2021 and December 31, 2020, the vendor deposit balance was $1,189,364 and $40,800, respectively. Patent Costs The Company capitalizes costs consisting principally of outside legal costs and filing fees related to obtaining and maintaining patents. The Company amortizes patent costs over the useful life of the patent which is typically 20 years, beginning with the date the patent is filed with the U.S. Patent and Trademark Office, or foreign equivalent. As of June 30, 2021 and December 31, 2020, capitalized patent costs net of accumulated amortization was $187,595 and $178,088, respectively. For the six months ended June 30, 2021 and 2020, the Company recorded $4,927 and $0, respectively, of amortization expense for these patents. For the three months ended June 30, 2021 and 2020, the Company recorded $2,463 and $0, respectively, of amortization expense for these patents. Recent Accounting Pronouncements In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740) (“ASU 2019-12”): Simplifying the Accounting for Income Taxes. The new standard eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences related to changes in ownership of equity method investments and foreign subsidiaries. The guidance also simplifies aspects of accounting for franchise taxes and enacted changes in tax laws or rates, and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. For public business entities, it is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The adoption of this guidance did not have a material impact on the accompanying unaudited condensed consolidated financial statements. In June 2020, the FASB issued ASU No. 2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40). This standard eliminates the beneficial conversion and cash conversion accounting models for convertible instruments. It also amends the accounting for certain contracts in an entity’s own equity that are currently accounted for as derivatives because of specific settlement provisions. In addition, the new guidance modifies how particular convertible instruments and certain contracts that may be settled in cash or shares impact the diluted EPS computation. For public business entities, it is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years using the fully retrospective or modified retrospective method. Early adoption is permitted but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company has not adopted this accounting pronouncement and is currently evaluating the potential impact of this standard on our consolidated financial statements. From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that the Company adopts as of the specified effective date. The Company does not believe that the impact of recently issued standards that are not yet effective will have a material impact on the Company’s financial position or results of operations upon adoption. |
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BUSINESS ACQUISITION |
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| Business Combination and Asset Acquisition [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| BUSINESS ACQUISITION | NOTE 2 – BUSINESS ACQUISITION
The Company accounted for the acquisitions as a business combinations using the purchase method of accounting as prescribed in Accounting Standards Codification 805, Business Combinations (“ASC 805”) and ASC 820 – Fair Value Measurements and Disclosures (“ASC 820”). In accordance with ASC 805 and ASC 820, the Company used its best estimates and assumptions to accurately assign fair value to the tangible assets acquired, identifiable intangible assets and liabilities assumed as of the acquisition dates. Goodwill as of the acquisition date is measured as the excess of purchase consideration over the fair value of tangible and identifiable intangible assets acquired and liabilities assumed. The results of operations of the acquired businesses since the date of acquisition are included in the unaudited condensed consolidated financial statements of the Company for the three and six months ended June 30, 2021. The total purchase consideration was allocated to the assets acquired and liabilities assumed at their preliminary estimated fair values as of the date of acquisition, as determined by management. The purchase price allocations are preliminary and a final determination of purchase accounting adjustments, which may be material, will be made upon the finalization of the Company’s integration activities, which are expected to be completed during the year ended December 31, 2021. The excess of the purchase price over the amounts allocated to assets acquired and liabilities assumed has been recorded as goodwill. The value of the goodwill from the acquisitions described below can be attributed to a number of business factors including, but not limited to, cost synergies expected to be realized and a trained technical workforce. The preliminary purchase price allocation is based upon preliminary valuations and our estimates and assumptions are subject to change within the purchase price allocation period (generally one year from the acquisition date). The primary areas of the purchase price allocation that are not yet finalized relate to the valuation of the intangible assets acquired and the residual goodwill. On February 8, 2021 Applied UV, Inc. (the “Company”), entered into an asset purchase agreement (the “APA”) by and among the Company, SteriLumen, Inc., a New York corporation and wholly-owned subsidiary of the Company (the “Purchaser”) and Akida Holdings LLC, a Florida limited liability company (the “Seller”) pursuant to which the Purchaser acquired substantially all of the assets of the Seller and assumed certain of its current liabilities and contract obligations, as set forth in the APA (the “Acquisition”). In the Acquisition, the Purchaser acquired all the Seller’s assets and was assigned its contracts related to the manufacturer and sale of the Airocide™ system, originally developed by NASA with assistance from the University of Wisconsin at Madison, that uses a combination of UV-C and a proprietary, titanium dioxide-based photocatalyst that has applications in the hospitality, hotel, healthcare, nursing homes, grocer, wine, commercial buildings, and retail sectors. On February 8, 2021 (the “Closing Date”) the transactions contemplated by the APA were completed. The preliminary purchase price and purchase price allocation as of the acquisition completion date follows: The following sets forth the components of the purchase price:
The excess purchase price has been recorded as goodwill in the amount of approximately $2,728,279. The estimated useful life of the identifiable intangible assets (see note 5) is seven to ten years. The goodwill is not amortizable for book purposes. |
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INVENTORY |
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| Inventory Disclosure [Abstract] | |
| INVENTORY | NOTE 3 – INVENTORY Inventory consists of raw materials and finished goods of $100,179 and $491,938, respectively, at June 30, 2021. Inventory consists of raw materials of $156,290 at December 31, 2020. |
PROPERTY AND EQUIPMENT |
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| Property, Plant and Equipment [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| PROPERTY AND EQUIPMENT | NOTE 4 – PROPERTY AND EQUIPMENT Property and equipment (including machinery and equipment under capital leases) are summarized by major classifications as follows:
Depreciation expense, including amortization of assets under capital leases, for the six months ended June 30, 2021 and 2020 was $82,642 and $4,346, respectively. Depreciation expense, including amortization of assets under capital leases, for the three months ended June 30, 2021 and 2020 was $74,896 and $2,183, respectively. |
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INTANGIBLE ASSETS |
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| Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| INTANGIBLE ASSETS | NOTE 5 – INTANGIBLE ASSETS Intangible assets as of June 30, 2021 and December 31, 2020 consists of the following:
During the three months ended June 30, 2021 and 2020, the Company recorded total amortization expense related to intangible assets of $134,850 and $0, respectively. During the six months ended June 30, 2021 and 2020, the Company recorded total amortization expense related to intangible assets of $224,750 and $0, respectively. The useful lives of tradenames and technology is 10 years and the useful life of customer relationships is 7 years. |
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CAPITAL LEASE OBLIGATION |
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| CAPITAL LEASE OBLIGATION | NOTE 6 – CAPITAL LEASE OBLIGATION The Company's future minimum principal and interest payments under a capital lease for machinery and equipment are as follows as of June 30, 2021:
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LOANS PAYABLE |
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| Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||
| LOANS PAYABLE | NOTE 7 – LOANS PAYABLE The Company entered into a loan agreement in April of 2019 where the company was required to pay $157,500 in five 5 payments in the amount of $30,000 per year, with an additional $7,500, representing interest, in year two to a loan holder. As of June 30, 2021 and December 31, 2020, the company has an outstanding balance of $157,500, respectively. Minimum obligations under this loan agreement is as follows:
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NOTE 8 – STOCKHOLDERS' EQUITY |
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| Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| NOTE 8 – STOCKHOLDERS' EQUITY | NOTE 8 – STOCKHOLDERS' EQUITY Preferred Stock Series X On June 17, 2021, the Company filed an amendment of the certificate of designation of Series A Preferred Stock. The Board of Directors, by unanimous written consent, duly adopted resolutions to amend the Series A Preferred Stock Certificate of Designations and changed the name from “Series A Preferred Stock” to “Series X Super Voting Preferred Stock”. All dividend, liquidation preference, voting, conversion, and redemption rights, did not change from the originally filed Certificate of Designation of Series A Preferred Stock. Reverse Stock Split In June of 2020, the Company effected a 5:1 reverse stock split (the “Reverse Stock Split”) by filing an amendment to the Company’s Amended and Restated Certificate Incorporation with the Delaware Secretary of State. The Reverse Stock Split combined every five shares of Common Stock issued and outstanding immediately prior to effecting the Reverse Stock Split into one share of Common Stock. As a result, the number of issued and outstanding shares of Common Stock was retroactively adjusted in the consolidated financial statements. 2020 Incentive Plan On March 31, 2020, the Company adopted the Applied UV, Inc. 2020 Omnibus Incentive Plan (the “Plan”) with (post-split adjusted) shares of common stock available for issuance under the terms of the Plan. The Plan permits the granting of Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Shares, Performance Units and Other Awards. The objectives of the Plan are to optimize the profitability and growth of the Company through incentives that are consistent with the Company’s goals and that link the personal interests of Participants to those of the Company’s stockholders. The Plan is further intended to provide flexibility to the Company in its ability to motivate, attract and retain the services of Participants who make or are expected to make significant contributions to the Company’s success and to allow Participants to share in the success of the Company. From time to time, the Company may issue Incentive Awards pursuant to the Plan. Each of the awards will be evidenced by and issued under a written agreement. If an incentive award granted under the Plan expires, terminates, is unexercised or is forfeited, or if any shares are surrendered to the company in connection with an incentive award, the shares subject to such award and the surrendered shares will become available for future awards under the Plan. The number of shares subject to the Plan, and the number of shares and terms of any Incentive Award may be adjusted in the event of any change in our outstanding common stock by reason of any stock dividend, spin-off, stock split, reverse stock split, recapitalization, reclassification, merger, consolidation, liquidation, business combination or exchange of shares, or similar transaction. There are shares available for future grants under the plan. The Company also granted an additional 309,564 options outside of the plan during the six months ended June 30, 2021. A summary of the Company’s option activity and related information follows:
As of June 30, 2021, 10,357 options were vested at $7.33 per share for an intrinsic value of $25,717. Share-based compensation expense for options totaling $176,374 and $196,890 was recognized for the three and six months ended June 30, 2021, respectively, based on awards vested. Share-based compensation expense for options totaling $711 and $711 was recognized in our results for the three and six months ended June 30, 2020 based on awards vested. The valuation methodology used to determine the fair value of the options issued during the year was the Black-Scholes option-pricing model. The Black-Scholes model requires the use of a number of assumptions including volatility of the stock price, the average risk-free interest rate, and the weighted average expected life of the options. The risk-free interest rate assumption is based upon observed interest rates on zero coupon U.S. Treasury bonds whose maturity period is appropriate for the term of the options. Estimated volatility is a measure of the amount by which the Company’s stock price is expected to fluctuate each year during the expected life of the award. The Company’s calculation of estimated volatility is based on historical stock prices of peer entities over a period equal to the expected life of the awards. The Company uses the historical volatility of peer entities due to the lack of sufficient historical data of its stock price. As of June 30, 2021, there was $1,814,191 of total unrecognized compensation expense related to unvested employee options granted under the Company’s share-based compensation plans that is expected to be recognized over a weighted average period of approximately year. The weighted average fair value of options granted, and the assumptions used in the Black-Scholes model during the six months ended June 30, 2021 and year ended December 31, 2020 are set forth in the table below.
Common Stock Warrants A summary of the Company’s warrant activity and related information follows:
Share-based compensation expense of $ for warrants granted was recognized for the six months ended June 30, 2020 based on awards vested. There was compensation expense related to warrants during the six months ended June 30, 2021. The warrants granted in 2020 were issued in connection with the August and November offerings. The warrants issued in connection with the November offering contained a cash settlement feature which resulted in a warrant liability of $435,577 as of June 30, 2021. In connection with the preparation of our consolidated financial statements for the three months ended March 31, 2021, we identified an error relating to the recognition of the initial warrant liability in November of 2020. The error caused additional paid in capital to be overstated by approximately $135,000, warrant liability to be understated by approximately $110,000, and net loss to be overstated by approximately $25,000 as of and for the year ended December 31, 2020. We concluded the impact on the interim financial statements was immaterial and corrected the balances as of June 30, 2021. For the three and six months ended June 30, 2021, the Company recorded a gain (loss) on the change in fair value of warrant liability in the amount of $10,948 and ($300,452), respectively. The Company valued the warrant using the Black-Scholes option pricing model with the following terms on date of grant of: (a) exercise price of $6.5625, (b) volatility rate of 50.39%, (c) risk free rate of 0.26%, (d) term of five years, and (e) dividend rate of 0%. The Company valued the warrant using the Black-Scholes option pricing model with the following terms on June 30, 2021: (a) exercise price of $6.5625, (b) volatility rate of 71.69%, (c) risk free rate of 0.65%, (d) term of 4.37 years, and (e) dividend rate of 0%.
The valuation methodology used to determine the fair value of the warrants issued during the periods was the Black-Scholes option-pricing model. The Black-Scholes model requires the use of a number of assumptions including volatility of the stock price, the average risk-free interest rate, and the weighted average expected life of the warrants. The risk-free interest rate assumption is based upon observed interest rates on zero coupon U.S. Treasury bonds whose maturity period is appropriate for the term of the warrants. Estimated volatility is a measure of the amount by which the Company’s stock price is expected to fluctuate each year during the expected life of the award. The Company’s calculation of estimated volatility is based on historical stock prices of peer entities over a period equal to the expected life of the awards. The Company uses the historical volatility of peer entities due to the lack of sufficient historical data of its stock price. As of December 31, 2020, there was no unrecognized compensation expense related to unvested warrants granted under the Company’s share-based compensation plans. The weighted average fair value of warrants granted, and the assumptions used in the Black-Scholes model during the six months ended June 30, 2021 are set forth in the table below.
On August 31, 2020, the Company closed its offering (the “August Offering”) in which it sold common shares at a public offering price of $ per share. In connection with the Offering, the Company (i) received $5,750,000 less underwriting fees of $517,500 and write-off of capitalized IPO Costs in the amount of $341,145, resulting in net proceeds of $4,891,355. Additionally, the Company issued shares to Ross Carmel of Carmel, Milazzo & Feil LLP for the Offering. In addition, the underwriters were granted a 45-day option to purchase up to an additional 150,000 shares of Common Stock or any combination thereof, to cover over-allotments, if any (the “Over-Allotment Option”). The shares were offered and sold to the public pursuant to the Company’s registration statement on Form S-1, filed by the Company with the Securities and Exchange Commission on August 26, 2020, as amended, which became effective on August 28, 2020. On November 13, 2020, the Company closed its second offering (the “November Offering”) in which it sold common shares at a public offering price of $ per share. In connection with the Offering, the Company (i) received $7,360,000 less underwriting fees of $625,600 and write-off of previously related capilatlized IPO Costs in the amount of $316,246, resulting in net proceeds of $6,418,155. Restricted Stock Awards The Company records compensation expense for restricted stock awards based on the quoted market price of our stock at the grant date and amortize the expense over the vesting period. In July of 2020, the company granted restricted stock awards. Of these awards, 127,583 vests quarterly over an 18-month period with the first date of vesting being September 30, 2020. As of June 30, 2021, of these restricted stock awards were vested. The fair market value of these awards was $5 per share and the company expensed $106,319 and $212,638 of stock-based compensation related to these awards during the three and six months ended June 30, 2021, respectively. On July 9, 2020, restricted stock awards were granted. The restricted stock awards vest in full on January 1, 2021. As of June 30, 2021, all the restricted stock awards were vested. The fair market value of these awards was $ per share. expense was recorded related to these awards during the three and six months ended June 30, 2021. On July 9, 2020, restricted stock awards were granted. The restricted stock awards vest evenly over a four-year period with the first vesting to occur on January 1, 2021. As of June 30, 2021, of these restricted stock awards were vested. The fair market value of these awards was $ per share and the company expensed $ and $ of stock-based compensation related to these awards during the three and six months ended June 30, 2021, respectively. On January 1, 2021, restricted stock awards were granted. The restricted stock awards vest in full on January 1, 2022. As of June 30, 2021, none of the restricted stock awards were vested. The fair market value of these awards was $ per share. The company recorded $ and $ of compensation expense related to these awards during the three and six months ended June 30, 2021, respectively. |
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LEASING ARRANGEMENTS |
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| Leasing Arrangements | |||||||||||||||||||||||||||||||||||||||||
| LEASING ARRANGEMENTS | NOTE 9- LEASING ARRANGEMENTS The Company determines whether an arrangement qualifies as a lease under ASC 842 at inception. The Company has operating leases for office space and office equipment. The Company’s leases have remaining lease terms of one year to seven years, some of which include options to extend the lease term for up to five years. The Company considered these options to extend in determining the lease term used to establish the Company’s right-of use assets and lease liabilities once reasonably certain of exercise. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and operating lease liabilities are recognized at the lease commencement date based on the present value of the future lease payments over the lease term. The operating lease ROU asset also includes any lease payments made in advance of lease commencement and excludes lease incentives. The lease terms used in the calculations of the operating ROU assets and operating lease liabilities include options to extend or terminate the lease when the Company is reasonably certain that it will exercise those options. Lease expense for lease payments is recognized on a straight-line basis over the lease term. As the Company’s leases do not provide an implicit rate, the Company uses an incremental borrowing rate of 5% based on the information available at commencement date in determining the present value of lease payments. Munnworks, LLC entered into a lease agreement in Mount Vernon, New York for a term that commenced on April 1, 2019 and will expire on the 31st day of March 2024 at a monthly rate of $13,400. In March of 2021, the Company obtained additional lease space and the agreement was amended to increase rent expense to $15,000 per month. Rent expense for the six months ended June 30, 2021 and 2020 was $86,800 and $80,400, respectively. Rent expense for the three months ended June 30, 2021 and 2020 was $43,400 and $40,200, respectively. The lease can be cancelled by either party with 150 days of written notice. Schedule maturities of operating lease liabilities outstanding as of June 30, 2021 are as follows:
Consistent with ASC 842-20-50-4, the Company calculated its total lease cost based solely on its monthly rent obligation. The Company had no cash flows arising from its lease, no finance lease cost, short term lease cost, or variable lease costs. The Company’s lease does not produce any sublease income, or any net gain or loss recognized from sale and leaseback transactions. As a result, the Company did not need to segregate amounts between finance and operating leases for cash paid for amounts included in the measurement of lease liabilities, segregated between operating and financing cash flows; supplemental non-cash information on lease liabilities arising from obtaining right-of-use assets; weighted-average calculations for the remaining lease term; or the weighted-average discount rate. |
PAYROLL PROTECTION PROGRAM |
6 Months Ended |
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Jun. 30, 2021 | |
| Debt Disclosure [Abstract] | |
| PAYROLL PROTECTION PROGRAM | NOTE 10 - PAYROLL PROTECTION PROGRAM In April of 2020, the Company submitted a Paycheck Protection Program (“PPP”) application to Chase Bank for a loan amount equal to $296,827. The amount was approved and the Company has received the funds. The PPP Loan, which is in the form of a PPP promissory note and agreement, matures in April of 2025 and bears interest at a rate of 1.00% per annum. The Lender will have 90 days to review borrower’s forgiveness application and the SBA will have an additional 60 days to review the Lender’s decision as to whether the borrower’s loan may be forgiven. Under the CARES Act, loan forgiveness is available for the sum of documented payroll costs, covered rent payments, covered utilities, and certain covered mortgage interest payments during the twenty four-week period beginning on the date of first disbursement of the PPP Loan. For purposes of the CARES Act, payroll costs exclude compensation of an individual employee earning more than $100,000, prorated annually. Not more than 40% of the forgiven amount may be for non-payroll costs. Forgiveness is reduced if full-time headcount declines, or if salaries and wages for employees with salaries of $100,000 or less annually are reduced by more than 25%. The loan was forgiven in July of 2021 and in accordance with ASC 470, the amount will be recorded as forgiveness of debt income on the date the amount is forgiven.
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NOTE RECEIVABLE- RELATED PARTY |
6 Months Ended |
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Jun. 30, 2021 | |
| Note Receivable- Related Party | |
| NOTE RECEIVABLE- RELATED PARTY | NOTE 11 - NOTE RECEIVABLE- RELATED PARTY In February of 2021, the Company entered into a non-interest bearing note receivable agreement whereby the Company loaned $500,000 to a related party. All obligations under this note will be secured by a security interest in The collateral as defined in the security agreement. The collateral is comprised of the entirety of the assets of the related party. The non-interest bearing note receivable was recorded at cost basis which approximates fair value because of the short-term maturity of the instrument. Certain directors of the Company are also directors of the related party. The loan matures on the earlier of (i) 180 days from the issuance date or (ii) the closing of the transactions set forth in a definitive acquisition entered into between the lender and the borrower. In the event the loan is paid in full on or before the maturity date, there shall be no interest accrued or payable on the outstanding principal amount. If an acquisition occurs, the $500,000 will be applied against the total acquisition price. If the company decides not to execute a definitive agreement within 180 days from the issuance date, the maturity date shall be the one-year anniversary of the issuance date. In the event of default, the interest shall accrue and be payable on the outstanding principal amount at a fixed rate of interest equal to 16% per annum. |
SEGMENT REPORTING |
6 Months Ended |
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Jun. 30, 2021 | |
| Segment Reporting [Abstract] | |
| SEGMENT REPORTING | NOTE 12 - SEGMENT REPORTING FASB Codification Topic 280, Segment Reporting, establishes standards for reporting financial and descriptive information about an enterprise’s reportable segments. The Company has two reportable segments: the design, manufacture, assembly and distribution of disinfecting systems for use in healthcare, hospitality, and commercial municipal and residential markets (disinfectant segment) and the manufacture of fine mirrors specifically for the hospitality industry (hospitality segment). The segments are determined based on several factors, including the nature of products and services, the nature of production processes, customer base, delivery channels and similar economic characteristics. An operating segment’s performance is evaluated based on its pre-tax operating contribution, or segment income. Segment income is defined as net sales less cost of sales, segment selling, general and administrative expenses, research and development costs and stock-based compensation. It does not include other charges (income), net and interest and other, net. For the three months ended June 30, 2021, the company generated and incurred $964,618 of net sales and $746,451 of cost of goods sold from the hospitality segment of our business. For the three months ended June 30, 2021, the company generated and incurred $919,701 of net sales and $604,640 of cost of goods sold from the disinfectant segment of our business. For the six months ended June 30, 2021, the company generated and incurred $2,532,469 of net sales and $1,817,775 of cost of goods sold from the hospitality segment of our business. For the six months ended June 30, 2021, the company generated and incurred $1,664,465 of net sales and $921,665 of cost of goods sold from the disinfectant segment of our business. For the three months ended June 30, 2021, the hospitality segment of our business incurred $670,215 of selling, general and administrative expense. The disinfectant segment of our business incurred $1,562,667 of selling, general and administrative expense. For the six months ended June 30, 2021, the hospitality segment of our business incurred $1,220,230 of selling, general and administrative expense. The disinfectant segment of our business incurred $2,403,428 of selling, general and administrative expense. For the three and six months ended June 30, 2021, all research and development costs was incurred from the disinfectant segment of our business. For the three months ended June 30, 2021, the hospitality segment of our business incurred $ of stock-based compensation expense. For the three months ended June 30, 2021, the disinfectant segment of our business incurred $ of stock-based compensation expense. For the six months ended June 30, 2021, the hospitality segment of our business incurred $ of stock-based compensation expense. For the six months ended June 30, 2021, the disinfectant segment of our business incurred $ of stock-based compensation expense. For the six and three months ended June 30, 2020, all net sales and cost of goods sold was generated or incurred from the hospitality segment of our business. During the six months ended June 30, 2020, the hospitality segment of our business incurred $762,761 of selling, general and administrative expenses. The disinfectant segment of our business incurred $52,114 of selling, general and administrative expenses. During the three months ended June 30, 2020, the hospitality segment of our business incurred $386,795 of selling, general and administrative expenses. The disinfectant segment of our business incurred $39,882 of selling, general and administrative expenses. As of June 30, 2021 and December 31, 2020 assets from the hospitality segment of our business was $1,211,523 and $12,655,779, respectively. As of June 30, 2021 and December 31, 2020, total assets from the disinfectant segment of our business was $10,078,639 and $463,042, respectively. As of June 30, 2021 and December 31, 2020, total assets allocated to our corporate segment was $7,150,572 and $0, respectively. As of June 30, 2021 and December 31, 2020, total liabilities from the hospitality segment of our business was $2,245,768 and $2,430,349, respectively. As of June 30, 2021 and December 31, 2020, total liabilities from the disinfectant segment of our business amounted to $1,304,952 and $642,669, respectively. As of June 30, 2021 and December 31, 2020, total liabilities allocated to our corporate segment was $435,577 and $0, respectively. |
RESTATEMENT |
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| RESTATEMENT | NOTE 13 – RESTATEMENT While preparing its annual report for the year ended December 31, 2020 the Company identified an error in the timing of recognizing certain revenues. We erroneously recognized revenues in the amount of $234,570 in the fourth quarter of 2019 and $56,766 in the first quarter of 2020. These revenues should have been recognized during the three months ended June 30, 2020. The tables below summarize the impact of the restatements described above on financial information previously reported on the Company’s Forms 10-Q for the periods ended June 30, 2020:
These errors had a non-cash impact to cash flows from operations, as such, the statement of cash flows for the six months ended June 30, 2020 reflects an adjustment to net loss and a corresponding adjustment for the change in deferred revenue. |
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SUBSEQUENT EVENTS |
6 Months Ended |
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Jun. 30, 2021 | |
| Subsequent Events [Abstract] | |
| SUBSEQUENT EVENTS | NOTE 14 – SUBSEQUENT EVENTS Amendment to Certificate of Incorporation Pursuant to the Company’s amended and restated certificate of incorporation, as amended, the Company is currently authorized to designate and issue up to 1,000,000 shares of preferred stock, par value $0.0001 per share, in one or more classes or series and, subject to the limitations prescribed by the Company’s amended and restated certificate of incorporation and Delaware corporate law, with such rights, preferences, privileges and restrictions of each class or series of preferred stock, including dividend rights, voting rights, terms of redemption, liquidation preferences and the number of shares constituting any class or series as the Company’s board of directors may determine, without any vote or action by the Company’s shareholders. As of July 6, 2021, we had 10,000 preferred shares designated as Super Voting Preferred Stock and 2,000 of such shares issued and outstanding and 990,000 shares of preferred stock authorized but undesignated and unissued. On July 13, 2021 the Company designated 990,000 shares of preferred stock to Series A Cumulative Perpetual Preferred Stock. Upon the Company may, subject to certain conditions, at the Company’s option, redeem the Series A Preferred Stock, in whole or in part within 90 days after the first date on which such Delisting Event occurred or within 120 days after the first date on which such Change of Control occurred, as applicable, by paying $25.00 per share, plus any accumulated and unpaid dividends up to, but not including, the redemption date. Preferred Stock Offering On July 13, 2021, Applied UV, Inc. (the “Company”) entered into an underwriting agreement (the “Underwriting Agreement”) with Ladenburg Thalmann & Co. Inc. as representative (“Representative”) of the underwriters (“Underwriters”), related to the offering of 480,000 shares (the “Shares”) of the Company’s 10.5% Series A Cumulative Perpetual Preferred Stock, par value $0.0001 per share (“Series A Preferred Stock”), at a public offering price of $25.00 per share, which excludes 72,000 shares of Series A Cumulative Perpetual Preferred Stock that may be purchased by the Underwriters pursuant to their overallotment option granted to the Underwriters under the terms of the Underwriting Agreement. The Shares were offered and sold by the Company pursuant to the terms of the Underwriting Agreement and registered pursuant to the Company’s registration statement on (i) Form S-1 (File No. 333-257197), as amended, which was filed with the Securities and Exchange Commission (the “Commission”) and declared effective by the Commission on July 12, 2021 and (ii) the Company’s registration statement on Form S-1MEF (File No. 333-257862), which was filed with the Commission on July 13, 2021 and declared effective upon filing. The closing of the offering for the Shares took place on July 16, 2021. The Shares have been approved for listing on Nasdaq under the trading symbol “AUVIP” and trading on Nasdaq began on July 14, 2021. Aggregate gross proceeds from the closing were $12.0 million before deducting underwriting discounts and commissions and fees and other estimated offering expenses. The Company intends to use the net proceeds from the offering to fund a segregated dividend account in an amount equal to the first 12 monthly dividend payments and the remaining net proceeds for general corporate purposes, including new investments and acquisitions. On July 29, 2021, the Company issued a press release announcing that in connection with its previously announced public offering of its 10.5% Series A Cumulative Perpetual Preferred Stock, par value $0.0001 per share, it had closed the exercise of the underwriter’s overallotment option of 72,000 shares at $25.00 per share. The Company received aggregate gross proceeds of approximately $1.8 million, before deducting underwriting discounts and commissions and fees and other estimated offering expenses. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) |
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| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Nature of Business | Nature of Business In February 2019, Applied UV, Inc. (the "Company") was formed and incorporated in the State of Delaware for the intended purpose of creating a legal holding company structure for SteriLumen, Inc. and Munnworks, LLC and any future potential mergers or acquisitions. The then-existing shareholders and members of SteriLumen, Inc. and Munnworks, LLC exchanged all of their interest for shares of Applied UV, Inc. with substantially similar economic voting interests for each shareholder immediately before and after the share exchange. As a result of the share exchange, SteriLumen, Inc. and Munnworks, LLC became wholly-owned subsidiaries of Applied UV, Inc and, collectively referred to as (the "Group"). SteriLumen, Inc. is engaged in the design, manufacture, assembly and distribution of automated disinfecting mirror systems for use in hospitals and other healthcare facilities. Munnworks, LLC is engaged in the manufacture of fine mirrors specifically for the hospitality industry. In February of 2021, the Company acquired all the assets and assumed certain liabilities of Akida Holdings, LLC (“Akida”). Akida is the manufacturer of the Airocide™ system of air purification technologies, originally developed by NASA, with assistance from the University of Wisconsin at Madison, that uses a combination of UVC and a proprietary, titanium dioxide based photocatalyst that may help to accelerate the reopening of the global economy with applications in the hospitality, hotel, healthcare, nursing homes, grocer, wine, commercial buildings and retail sectors. The Airocide™ system has been used by brands and organizations such as NASA, Whole Foods, Dole, Chiquita, Opus One, Sub-Zero Refrigerators and Robert Mondavi Wines. |
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| Principles of Consolidation | Principles of Consolidation The consolidated financial statements include the accounts of Applied UV, Inc., Munnworks, LLC and SteriLumen, Inc. All significant intercompany transactions and balances are eliminated in consolidation. |
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| Basis of Presentation | Basis of Presentation The accompanying unaudited condensed consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, and with the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) set forth in Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim financial statements furnished reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented. Unaudited interim results are not necessarily indicative of the results for the full fiscal year. These financial statements should be read along with the Annual Report filed of the Company for the annual period ended December 31, 2020. The consolidated balance sheet as of December 31, 2020 was derived from the audited consolidated financial statements as of and for the year then ended. |
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| Use of estimates | Use of estimates The preparation of unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, as of the date of the unaudited condensed consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include the valuation and accounting for equity awards related to warrants and stock-based compensation, determination of fair value for derivative instruments, the accounting for business combinations and allocating purchase price, estimating the useful life of intangible assets, as well as the estimates related to accruals and contingencies.
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| Cash | Cash Cash and cash equivalents include highly liquid investments that have original maturities less than 90 days at the time of their purchase. These investments are carried at cost, which approximates market value because of their short maturities. As of June 30, 2021 and December 31, 2020, the Company did not have any cash equivalents.
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| Accounts receivable | Accounts receivable An allowance for uncollectible accounts receivable is recorded when management believes the collectability of the accounts receivable is confirmed. Subsequent recoveries, if any, are credited to the allowance. The allowance is determined based on management’s review of the debtor’s ability to repay and repayment history, aging history, and estimated value of collateral, if any.
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| Inventory | Inventory
Inventories, which consists of raw materials and finished goods is valued at the lower of cost or net realizable value, using the first-in, first-out (“FIFO”) valuation method. Inventory costs are comprised primarily of product, freight and duty. The Company writes down inventory for estimated obsolescence equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions. The company did not have any reserves for inventory as of June 30, 2021 and December 31, 2020.
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| Business Acquisition Accounting | Business Acquisition Accounting The Company applies the acquisition method of accounting for those that meet the criteria of a business combination. The Company allocates the purchase price of its business acquisitions based on the fair value of identifiable tangible and intangible assets. The difference between the total cost of the acquisition and the sum of the fair values of acquired tangible and identifiable intangible assets less liabilities is recorded as goodwill. Transaction costs are expensed as incurred in general and administrative expenses. |
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| Goodwill and Intangible Assets | Goodwill and Intangible Assets The Company has recorded intangible assets, including goodwill, in connection with business combinations. Estimated useful lives of amortizable intangible assets are determined by management based on an assessment of the period over which the asset is expected to contribute to future cash flows. In accordance with U.S. GAAP for goodwill and other indefinite-lived intangibles, the Company tests these assets for impairment annually and whenever events or circumstances make it more likely than not that impairment may have occurred. For the purposes of that assessment, the Company has determined to assign assets acquired in business combinations to a single reporting unit including all goodwill and indefinite-lived intangible assets acquired in business combinations. |
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| Income Taxes | Income Taxes The Company files income tax returns using the cash basis of accounting. Income taxes are accounted for under the asset and liability method. Current income taxes are based on the year's income taxable for federal and state tax reporting purposes. Deferred income tax assets and liabilities are computed annually for differences between the financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable income will be available to allow all or part of the asset to be recovered. |
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| Derivative Instruments | Derivative Instruments The Company evaluates its warrants to determine if those contracts or embedded components of those contracts qualify as derivatives. The result of this accounting treatment is that the fair value of the embedded derivative is marked-to-market each balance sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statements of operations as other income or expense. The warrants issued in connection with the November offering contained a cash settlement feature which resulted in a warrant liability of $435,577 as of June 30, 2021. The fair market value of the warrant liability on the date of grant was $135,125 and was recorded as a reduction of Additional Paid in Capital. For the three and six months ended June 30, 2021, the Company recorded a gain (loss) on the change in fair value of warrant liability in the amount of $10,948 and ($300,452), respectively. See Note 8 for further information. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. The Company has concluded that there are no such reclassifications required to be made as of and for the periods ended June 30, 2021. The Company marks to market the fair value of the warrant liabilities at each balance sheet date and records the change in the fair value of the warrant liabilities as other income or expense in the statements of operations.
The Company utilizes the Black-Scholes valuation model to value the derivative warrants as stipulated in the agreement for the warrant holders to receive cash based on that value. |
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| Fair Value of Financial Instruments | Fair Value of Financial Instruments The carrying amounts reported in the unaudited condensed consolidated balance sheets for loans payable approximate fair value because of the immediate or short-term maturity of the financial instruments. The Company's financial assets and liabilities are measured using inputs from the three levels of the fair value hierarchy. |
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| Loss Per Share |
Basic (loss) per share is computed by dividing net (loss) attributable to common shareholders (the numerator) by the weighted-average number of common shares outstanding (the denominator) for the period. In periods of losses, diluted loss per share is computed on the same basis as basic loss per share as the inclusion of any other potential shares outstanding would be anti-dilutive. The following table sets forth the number of potential shares of common stock that have been excluded from diluted net loss per share because their effect was anti-dilutive:
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| Stock- Based Compensation |
The Company accounts for its stock-based compensation awards in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification Topic 718 ("ASC"), Compensation-Stock Compensation ("ASC 718"). ASC 718 requires all stock-based payments to employees, including grants of employee stock options and restricted stock and modifications to existing stock options, to be recognized in the statements of operations based on their fair values over the requisite service period. |
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| Research and Development | Research and Development The Company accounts for research and development costs in accordance with Accounting Standards Codification subtopic 730-10, Research and Development (“ASC 730-10”). Under ASC 730-10, all research and development costs must be charged to expense as incurred. Accordingly, internal research and development costs are expensed as incurred. |
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| Revenue Recognition | Revenue Recognition The Company recognizes revenue when the performance obligations in the client contract has been achieved. A performance obligation is a contractual promise to transfer product to the customer. The transaction price of a contract is allocated to each distinct performance obligation and recognized as revenue when or as, the customer receives the benefit of the performance obligation. Under ASC 606, revenue is recognized when a customer obtains control of goods in an amount that reflects the consideration the Company expects to receive in exchange for those goods. To achieve this core principal, the Company applies the following five steps:
For projects, that are completed within the Company’s facility, the company designs, manufactures and sells custom mirrors for hotels and hospitals through contractual agreements. These sales require the company to deliver the products within three to six months from commencement of order acceptance. The Company recognizes revenue over time by using the input method based on costs incurred as it depicts our progress toward satisfaction of the performance obligation. Under this method, revenue arising from fixed price contracts is recognized as work is performed based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligations. Incurred costs include all direct material and labor costs and those indirect costs related to contract performance, such as indirect labor, supplies, tools, repairs and depreciation costs. Contract material costs are included in incurred costs when the project materials have been purchased or moved to work in process as required by the project’s engineering design. Cost based input methods of revenue recognition require us to make estimates of costs to complete the projects. In making such estimates, significant judgment is required to evaluate assumptions related to the costs to complete the projects, including materials, labor and other system costs. If the estimated total costs on any contract are greater than the net contract revenues, the Company recognizes the entire estimated loss in the period the loss becomes known and can be reasonably estimated. Deferred revenue represents amounts billed in excess of revenues recognized. Revenues recognized in excess of amounts billed typically does not occur as the Company will not perform any work in excess of the amount the company bills to its customers. If work is performed in excess of amounts billed, the Company will record an unbilled receivable. Each product or service delivered to a third-party customer that is manufactured by a third-party vendor is considered to satisfy a performance obligation. Performance obligations generally occur at a point in time and are satisfied when control of the goods passes to the customer. These sales are shipped from the manufacturer to the customer without our taking physical inventory possession. The Company reports direct sales on a gross basis, that is, the amounts billed to our customers are recorded as "Sales," and inventory purchased from manufacturers are recorded as cost of sales. The Company is the principal of direct sales because the Company has the risk of loss and we control the inventory before it is transferred to our customers. Our control is evidenced by us being primarily responsible for fulfilling the promise to our customers, taking on inventory risk of returned product, and having discretion in establishing pricing. The Company typically pay our vendors a portion of the total cost up front and the remaining balance is accrued for and paid within 30 to 60 days of when the products are shipped from the third-party warehouse. Deferred revenue represents amounts invoiced or deposits receeived from our customer for which the Company has not yet satisfied our performance obligation. The company applied the five-step model to the sales of Akida Holdings, LLC's Airocide products. At contract inception and once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct. The Company sells Airocide air sterilization units to both consumer and commercial customers. These products are sold both domestically and internationally. The cycle from contract inception to shipment of products is typically one day to three months. The Company’s contracts for both its consumer and commercial customers each contain a single performance obligation (delivery of Airocide products), as the promise to transfer the individual goods or services is not separately identifiable from other promises in the contracts and, therefore, not distinct, as a result, the entire transaction price is allocated to this single performance obligation. The Company recognizes revenues at a point in time when the customer obtains control of the Company’s product, which typically occurs upon shipment of the product by the Company or upon customer pick-up via third party common carrier. Revenue generated from work performed at our own facility and work performed by our third-party manufacturers for the three months ended:
Revenue generated from work performed at our own facility and work performed by our third-party manufacturers for the six months ended:
Deferred revenue was comprised of the following as of:
All deferred revenue as of December 31, 2020 was recognized as revenue during the six months ended June 30, 2021. |
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| Advertising | Advertising Advertising costs consist primarily of online search advertising and placement, trade shows, advertising fees, and other promotional expenses. Advertising costs are expensed as incurred and are included in sales and marketing on the unaudited condensed consolidated statements of operations. Advertising expense for the three months ended June 30, 2021 and 2020 was $281,258 and $19,406, respectively. Advertising expense for the six months ended June 30, 2021 and 2020 was $309,434 and $37,823, respectively. |
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| Vendor deposits | Vendor deposits Vendor payments to third manufactures are capitalized until completion of the project and are recorded as vendor deposits. As of June 30, 2021 and December 31, 2020, the vendor deposit balance was $1,189,364 and $40,800, respectively. |
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| Patent Costs | Patent Costs The Company capitalizes costs consisting principally of outside legal costs and filing fees related to obtaining and maintaining patents. The Company amortizes patent costs over the useful life of the patent which is typically 20 years, beginning with the date the patent is filed with the U.S. Patent and Trademark Office, or foreign equivalent. As of June 30, 2021 and December 31, 2020, capitalized patent costs net of accumulated amortization was $187,595 and $178,088, respectively. For the six months ended June 30, 2021 and 2020, the Company recorded $4,927 and $0, respectively, of amortization expense for these patents. For the three months ended June 30, 2021 and 2020, the Company recorded $2,463 and $0, respectively, of amortization expense for these patents. Recent Accounting Pronouncements In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740) (“ASU 2019-12”): Simplifying the Accounting for Income Taxes. The new standard eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences related to changes in ownership of equity method investments and foreign subsidiaries. The guidance also simplifies aspects of accounting for franchise taxes and enacted changes in tax laws or rates, and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. For public business entities, it is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The adoption of this guidance did not have a material impact on the accompanying unaudited condensed consolidated financial statements. In June 2020, the FASB issued ASU No. 2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40). This standard eliminates the beneficial conversion and cash conversion accounting models for convertible instruments. It also amends the accounting for certain contracts in an entity’s own equity that are currently accounted for as derivatives because of specific settlement provisions. In addition, the new guidance modifies how particular convertible instruments and certain contracts that may be settled in cash or shares impact the diluted EPS computation. For public business entities, it is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years using the fully retrospective or modified retrospective method. Early adoption is permitted but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company has not adopted this accounting pronouncement and is currently evaluating the potential impact of this standard on our consolidated financial statements. From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that the Company adopts as of the specified effective date. The Company does not believe that the impact of recently issued standards that are not yet effective will have a material impact on the Company’s financial position or results of operations upon adoption. |
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) |
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| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Anti dilutive Securities Excluded from Computation of Earnings Per Share |
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| Schedule of revenue |
Revenue generated from work performed at our own facility and work performed by our third-party manufacturers for the six months ended:
Deferred revenue was comprised of the following as of:
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BUSINESS ACQUISITION (Tables) |
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| Business Combination and Asset Acquisition [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Recognized Identified Assets Acquired and Liabilities Assumed |
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PROPERTY AND EQUIPMENT (Tables) |
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| Property, Plant and Equipment [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of property and equipment |
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INTANGIBLE ASSETS (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Intangible Assets |
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CAPITAL LEASE OBLIGATION (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||
| Capital Lease Obligation | |||||||||||||||||||||||||||||||||||||||||
| Schedule of future minimum principal and interest payments under capital lease arrangements |
|
LOANS PAYABLE (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2021 | ||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||
| Schedule of minimum obligations under loan agreement |
|
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NOTE 8 – STOCKHOLDERS' EQUITY (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of the Company's option activity |
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| Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block] |
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| Schedule of the Company's warrant activity |
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| Defined Benefit Plan, Assumptions [Table Text Block] |
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LEASING ARRANGEMENTS (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||
| Leasing Arrangements | |||||||||||||||||||||||||||||||||||||||||
| Schedule of maturities of operating lease liabilities |
|
RESTATEMENT (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Restatement | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of financial information |
|
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details - Anti-dilutive shares) - shares |
6 Months Ended | |
|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
|
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
| Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 771,733 | 0 |
| Options Held [Member] | ||
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
| Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 579,314 | 0 |
| Warrant [Member] | ||
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
| Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 192,419 | 0 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details - Revenue) - USD ($) |
3 Months Ended | 6 Months Ended | |||
|---|---|---|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
Jun. 30, 2021 |
Jun. 30, 2020 |
Dec. 31, 2020 |
|
| Disaggregation of Revenue [Line Items] | |||||
| Revenues | $ 1,884,319 | $ 1,695,364 | $ 3,166,998 | ||
| Deferred revenue | 1,745,424 | $ 1,745,424 | $ 841,636 | ||
| Transferred over Time [Member] | |||||
| Disaggregation of Revenue [Line Items] | |||||
| Revenues | 331,600 | 298,504 | 775,137 | 877,902 | |
| Deferred revenue | 235,685 | 235,685 | 233,080 | ||
| Transferred at Point in Time [Member] | |||||
| Disaggregation of Revenue [Line Items] | |||||
| Revenues | 1,552,719 | $ 1,396,860 | 3,421,797 | $ 2,289,096 | |
| Deferred revenue | $ 1,509,739 | $ 1,509,739 | $ 608,556 | ||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) |
3 Months Ended | 6 Months Ended | |||
|---|---|---|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
Jun. 30, 2021 |
Jun. 30, 2020 |
Dec. 31, 2020 |
|
| Accounting Policies [Abstract] | |||||
| Inventory | $ 0 | $ 0 | $ 0 | ||
| Vendor deposit balance | 1,189,364 | $ 1,189,364 | 40,800 | ||
| Patent life | 20 years | ||||
| Patent costs | 187,595 | $ 187,595 | $ 178,088 | ||
| Amortization expense | $ 2,463 | $ 0 | $ 4,927 | $ 0 | |
BUSINESS ACQUISITION - Recognized Identified Assets Acquired and Liabilities Assumed (Details) - Steri Lumen [Member] |
Feb. 08, 2021
USD ($)
|
|---|---|
| Business Acquisition [Line Items] | |
| Cash | $ 760,293 |
| Fair market value of common stock issued | 7,122,500 |
| Total Purchase Price | 7,882,793 |
| Accounts receivable | 233,241 |
| Inventory | 211,105 |
| Prepaid expenses | 285,490 |
| Machinery and equipment | 168,721 |
| Intangible assets | 3,468,000 |
| Total Assets Acquired: | 6,061,557 |
| Accounts payable | (415,341) |
| Deferred revenue | (491,702) |
| Total Liabilities Assumed | (907,043) |
| Net Assets Acquired | 5,154,514 |
| Excess Purchase Price | $ 2,728,279 |
BUSINESS ACQUISITION (Details Narrative) |
Feb. 08, 2021
USD ($)
|
|---|---|
| Steri Lumen [Member] | |
| Business Acquisition [Line Items] | |
| Excess Purchase Price | $ 2,728,279 |
INVENTORY (Details Narrative) - USD ($) |
Jun. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Inventory Disclosure [Abstract] | ||
| Inventory, raw materials | $ 100,179 | $ 156,290 |
| Inventory, finished goods | $ 491,938 |
PROPERTY AND EQUIPMENT (Details) - USD ($) |
Jun. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Property, Plant and Equipment [Line Items] | ||
| Property and equipment, gross | $ 323,412 | $ 154,691 |
| Less: Accumulated Depreciation | (124,529) | (41,887) |
| Property and equipment, net | 198,883 | 112,804 |
| Machinery and Equipment [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Property and equipment, gross | 229,804 | 61,083 |
| Leasehold Improvements [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Property and equipment, gross | 60,223 | 60,223 |
| Furniture and Fixtures [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Property and equipment, gross | $ 33,385 | $ 33,385 |
PROPERTY AND EQUIPMENT (Details Narrative) - USD ($) |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
Jun. 30, 2021 |
Jun. 30, 2020 |
|
| Property, Plant and Equipment [Abstract] | ||||
| Depreciation expense | $ 74,896 | $ 2,183 | $ 82,642 | $ 4,346 |
INTANGIBLE ASSETS (Details) - USD ($) |
Jun. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Finite-Lived Intangible Assets [Line Items] | ||
| Intangible assets gross | $ 5,163,000 | |
| Less: Accumulated Depreciation | (224,750) | |
| Less: Accumulated Depreciation | 224,750 | |
| Intangible assets net | 4,938,250 | |
| Customer Relationships [Member] | ||
| Finite-Lived Intangible Assets [Line Items] | ||
| Intangible assets gross | 539,000 | |
| Trade Names [Member] | ||
| Finite-Lived Intangible Assets [Line Items] | ||
| Intangible assets gross | 1,156,000 | |
| Technology [Member] | ||
| Finite-Lived Intangible Assets [Line Items] | ||
| Intangible assets gross | $ 3,468,000 |
CAPITAL LEASE OBLIGATION - Future minimum principal and interest payments under capital lease arrangements (Details) - USD ($) |
Jun. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Capital Lease Obligation | ||
| 2021 | $ 3,640 | |
| 2022 | 7,280 | |
| 2023 | 1,214 | |
| Less: Amount representing interest | (504) | |
| Present value of future minimum lease payments | 11,630 | |
| Less: current portion | (6,648) | |
| Capital lease obligations | $ 4,982 | $ 8,240 |
LOANS PAYABLE - Minimum obligations under this loan agreement (Details) - USD ($) |
Jun. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Debt Disclosure [Abstract] | ||
| 2021 | $ 67,500 | |
| 2022 | 30,000 | |
| 2023 | 30,000 | |
| 2024 | 30,000 | |
| Total | $ 157,500 | $ 157,500 |
LOANS PAYABLE (Details Narrative) |
6 Months Ended | ||
|---|---|---|---|
|
Jun. 30, 2020
USD ($)
Integer
|
Jun. 30, 2021
USD ($)
|
Dec. 31, 2020
USD ($)
|
|
| Debt Disclosure [Abstract] | |||
| Repayments of Debt | $ 157,500 | ||
| [custom:DebtInstrumentNumberOfEqualInstallments] | Integer | 5 | ||
| Debt Instrument, Periodic Payment | $ 30,000 | ||
| [custom:DebtInstrumentAdditionalAmountPayableInYearTwo] | $ 7,500 | ||
| Long-term Debt | $ 157,500 | $ 157,500 |
STOCKHOLDERS' EQUITY - Weighted average fair value of options granted, and the assumptions used in the Black-Scholes model (Details) - Share-based Payment Arrangement, Option [Member] - $ / shares |
6 Months Ended | 12 Months Ended |
|---|---|---|
Jun. 30, 2021 |
Dec. 31, 2020 |
|
| Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
| Weighted average fair value of options granted | $ 6.54 | $ 2.27 |
| Expected life (years) | 5 years 6 months | |
| Dividend yield | 0.00% | 0.00% |
| Minimum [Member] | ||
| Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
| Risk-free interest rate | 1.23% | 0.31% |
| Volatility | 75.04% | 41.40% |
| Expected life (years) | 6 years 29 days | |
| Maximum [Member] | ||
| Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
| Risk-free interest rate | 1.54% | 0.37% |
| Volatility | 85.00% | 51.45% |
| Expected life (years) | 10 years |
STOCKHOLDERS' EQUITY - Summary of Warrant activity (Details) - Warrant [Member] - $ / shares |
6 Months Ended | 12 Months Ended |
|---|---|---|
Jun. 30, 2021 |
Dec. 31, 2020 |
|
| Class of Warrant or Right [Line Items] | ||
| Options Outstanding at the beginning | 235,095 | 0 |
| Options Outstanding at the beginning (in dollars per share) | $ 5 | |
| Granted | 235,095 | |
| Granted (in dollars per share) | $ 6.40 | $ 5 |
| Exercised | (42,676) | |
| Options Outstanding at the end | 192,419 | 235,095 |
| Options Outstanding at the end (in dollars per share) | $ 5.84 | $ 5 |
STOCKHOLDERS' EQUITY - Weighted average fair value of warrants granted, and the assumptions used in the Black-Scholes model (Details) |
6 Months Ended |
|---|---|
Jun. 30, 2021 | |
| Measurement Input, Share Price [Member] | |
| Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |
| Warrants measurement input | 1.87 |
| Measurement Input, Risk Free Interest Rate [Member] | |
| Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |
| Warrants measurement input | 0.26 |
| Measurement Input, Price Volatility [Member] | |
| Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |
| Warrants measurement input | 50.13-50.39% |
| Measurement Input, Expected Term [Member] | |
| Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |
| Warrants measurement input | 5 |
| Dividend Yield [Member] | |
| Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |
| Warrants measurement input | 0.00 |
LEASING ARRANGEMENTS - Maturities of Operating lease laibilities (Details) |
Jun. 30, 2021
USD ($)
|
|---|---|
| Leasing Arrangements | |
| 2021 | $ 90,000 |
| 2022 | 180,000 |
| 2023 | 180,000 |
| 2024 | 45,000 |
| Total lease payments | 495,000 |
| Less: Imputed Interest | (33,420) |
| Present value of future minimum lease payments | $ 461,580 |
LEASING ARRANGEMENTS (Details Narrative) |
Jun. 30, 2021 |
|---|---|
| Leasing Arrangements | |
| Incremental borrowing rate | 5.00% |
PAYROLL PROTECTION PROGRAM (Details Narrative) - Payroll Protection Plan Loan Cares Act [Member] |
1 Months Ended |
|---|---|
|
Apr. 30, 2020
USD ($)
| |
| Short-term Debt [Line Items] | |
| Loan borrowed under CARES Act | $ 296,827 |
| Payroll costs | $ 100,000 |
| Long term debt, description | Not more than 40% of the forgiven amount may be for non-payroll costs. Forgiveness is reduced if full-time headcount declines, or if salaries and wages for employees with salaries of $100,000 or less annually are reduced by more than 25%. The loan was forgiven in July of 2021 and in accordance with ASC 470, the amount will be recorded as forgiveness of debt income on the date the amount is forgiven |
NOTE RECEIVABLE- RELATED PARTY (Details Narrative) - Related Party [Member] |
1 Months Ended |
|---|---|
|
Feb. 28, 2021
USD ($)
| |
| Discounted Future Net Cash Flows Relating to Proved Oil and Gas Reserves [Line Items] | |
| Principal amount | $ 500,000 |
| Total acquisition price | $ 500,000 |
| Interest rate | 16.00% |
SEGMENT REPORTING (Details Narrative) - USD ($) |
3 Months Ended | 6 Months Ended | |||
|---|---|---|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
Jun. 30, 2021 |
Jun. 30, 2020 |
Dec. 31, 2020 |
|
| Segment Reporting Information [Line Items] | |||||
| Revenues | $ 1,884,319 | $ 1,695,364 | $ 3,166,998 | ||
| Selling. general and administrative expenses | 2,232,882 | 426,677 | $ 3,623,658 | 814,875 | |
| Stock based compensation expense | 676,341 | 101,607 | |||
| Total assets | 18,440,734 | 18,440,734 | $ 13,118,821 | ||
| Total liabilities | 4,170,868 | 4,170,868 | 3,364,065 | ||
| Hospitality Segment [Member] | |||||
| Segment Reporting Information [Line Items] | |||||
| Revenues | 964,618 | 2,532,469 | |||
| Cost of goods sold | 746,451 | 1,817,775 | |||
| Selling. general and administrative expenses | 670,215 | 386,795 | 1,220,230 | 762,761 | |
| Stock based compensation expense | 237,144 | 343,130 | |||
| Total assets | 1,211,523 | 1,211,523 | 12,655,779 | ||
| Total liabilities | 2,245,768 | 2,245,768 | 2,430,349 | ||
| Disinfectant Segment [Member] | |||||
| Segment Reporting Information [Line Items] | |||||
| Revenues | 919,701 | 1,664,465 | |||
| Cost of goods sold | 604,640 | 921,665 | |||
| Selling. general and administrative expenses | 1,562,667 | $ 39,882 | 2,403,428 | $ 52,114 | |
| Stock based compensation expense | 228,456 | 333,211 | |||
| Total assets | 10,078,639 | 10,078,639 | 463,042 | ||
| Total liabilities | 1,304,952 | 1,304,952 | 642,669 | ||
| Corporate Segment [Member] | |||||
| Segment Reporting Information [Line Items] | |||||
| Total assets | 7,150,572 | 7,150,572 | 0 | ||
| Total liabilities | $ 435,577 | $ 435,577 | $ 0 | ||