The accompanying unaudited notes are an integral
part of these unaudited condensed financial statements
The accompanying unaudited notes are an integral
part of these unaudited condensed financial statements
The accompanying unaudited notes are an integral
part of these unaudited condensed financial statements
The accompanying unaudited notes are an integral
part of these unaudited condensed financial statements
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(Unaudited)
1.
|
|
NATURE OF OPERATIONS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
Nature of Operations
Beam Global, a Nevada corporation
(hereinafter the “Company,” “us,” “we,” “our” or “Beam”) is a cleantech innovation
company based in San Diego, California. Beam develops, designs, engineers, manufactures and sells high-quality, renewably energized infrastructure
products for electric vehicle charging, outdoor media and energy security and disaster preparedness. Beam’s products enable vital
and highly valuable energy production in locations where it is either too expensive or too impactful to connect to the utility grid, or
where the requirements for electrical power are so important that grid failures, like blackouts, are intolerable. When competing with
utilities or typical solar companies, we rely on our products’ ease of deployment, reliability, accessibility, and total cost of
ownership, rather than producing the cheapest kilowatt hour with the help of subsidies.
Basis of Presentation
The interim unaudited condensed
financial statements included herein have been prepared in accordance with accounting principles generally accepted in the United States
(“GAAP”) for interim financial statements and are in the form prescribed by the Securities and Exchange Commission in instructions
to Form 10-Q and Rule 10-01 of Regulation S-X. In management’s opinion, all adjustments (consisting of normal recurring adjustments
and reclassifications) necessary to present fairly our results of operations and cash flows for the six months ended June 30, 2021 and
2020, and our financial position as of June 30, 2021, have been made. The results of operations for such interim periods are not necessarily
indicative of the operating results to be expected for the full year.
Certain information and disclosures
normally included in the notes to the annual financial statements have been condensed or omitted from these interim financial statements.
Accordingly, these interim unaudited condensed financial statements should be read in conjunction with the financial statements and notes
thereto for the year ended December 31, 2020. The December 31, 2020 balance sheet is derived from those statements.
Risks and Uncertainties
On March 11, 2020, the World Health Organization declared the outbreak
of a novel coronavirus (COVID-19) as a pandemic. The outbreak of COVID-19 resulted in travel restrictions, quarantines, “stay-at-home”
and “shelter-in-place” orders as well as the shutdown of many businesses around the world. To date, while we have seen some
delays and cancellations of opportunities in our pipeline as a result of funding issues, priority issues or temporary business closures,
the pandemic has not had a material adverse effect on the Company’s financial position or results of operations for the quarter
ended June 30, 2021. With the rollout of a COVID-19 vaccine, businesses and governments are beginning to return to pre-pandemic status.
However, it is difficult to predict what impact variants of the virus may have in the future or what impact these governmental actions
and the widespread economic disruption arising from the pandemic will have on our business in the future.
Use of Estimates
The preparation of financial
statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates in the accompanying
financial statements include the allowance for doubtful accounts receivable, valuation of inventory and standard cost allocations, depreciable
lives of property and equipment, valuation of intangible assets, estimates of loss contingencies, estimates of the valuation of lease
liabilities and the related right of use assets, valuation of share-based costs, and the valuation allowance on deferred tax assets.
Recent Accounting Pronouncements
In August 2020, the Financial
Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2020-06, Debt—Debt with Conversion and Other Options
(Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible
Instruments and Contracts in an Entity’s Own Equity to address the complexity in accounting for certain financial instruments
with characteristics of liabilities and equity. This ASU includes amendments that significantly change the guidance on convertible instruments
and the derivative scope exception for contracts in an entity's own equity and simplifies the accounting for convertible instruments which
include beneficial conversion features or cash conversion features by removing certain separation models in Subtopic 470-20. The prior
conditions were difficult to apply and resulted in circumstances where warrants may have been required to be accounted for as a liability
rather than as equity if issued under a registration statement. The Company, in consultation with legal counsel, determined that its outstanding
public warrants issued under a Registration Statement on Form S-1 met, and continues to meet, the criteria for equity based on the terms
of the warrant. Had the warrants been determined that liability treatment was required, the liability would have been approximately $64
million for the 953,595 public warrants at December 31, 2020 with a non-cash charge to the statement of operations of $61 million for
the year ended December 31, 2020.
The ASU is effective for smaller
reporting companies in fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, although early
adoption is permitted, as early as fiscal years beginning after December 15, 2020. As such, the Company adopted ASU 2020-06 effective
January 1, 2021, on a full retrospective basis, which will allow the Company to continue to classify the warrants as equity, and as a
result, had no effect on its condensed financial statements and related disclosures. If the Company had recorded the warrants as a liability
in prior periods, with the full retrospective adoption on January 1, 2021, the liability would have been recast as equity and retained
earnings adjusted to reverse the effect of the liability entries and as a result, there would be no impact on the financial statements
for any periods presented.
In June 2016, the FASB issued
ASU 2016-13, Financial Instruments – Credit Losses (ASC Topic 326) requiring initial recognition of credit
losses, as well as any subsequent change in the estimate, when it is probable that a loss has been incurred. The standard eliminates the
threshold for initial recognition in current U.S. GAAP and it covers a broad range of financial instruments, including trade and other
receivables at each reporting date. The measurement of expected credit losses is based on historical experience, current conditions, and
reasonable and supportable forecasts that affect the collectability of the financial assets. The standard is effective for the Company
beginning January 1, 2023. The adoption of this guidance is not expected to have a material effect on our consolidated financial statements.
Concentrations
Credit Risk
Financial instruments that
potentially subject us to concentrations of credit risk consist of cash and accounts receivable.
The Company maintains its cash in banks and financial institution deposits that at times may exceed federally insured limits. The Company has not experienced any losses in such accounts from inception through June 30, 2021. As of June 30, 2021, $25,173,457 of the Company’s cash deposits were greater than the federally insured limits.
Major Customers
For the three months ended
June 30, 2021, revenues from four customers accounted for 22%, 18%, 16% and 10% of total revenues, and for the six months ended June 30,
2021, revenues from three customers accounted for 13%, 13% and 11% of total revenues, with no other single customer accounting for more
than 10% of revenues. At June 30, 2021, accounts receivable from four customers accounted for 18%, 14%, 14% and 11% of total accounts
receivable, with no other single customer accounting for more than 10% of the accounts receivable balance.
For the three months ended
June 30, 2020, revenues from four customers accounted for 39%, 18%, 12% and 11% of total revenues, and for the six months ended June 30,
2020, revenues from two customers accounted for 20% and 12% of total revenues, with no other single customer accounting for more than
10% of revenues. At June 30, 2020, accounts receivable from six customers accounted for 28%, 11%, 10%, 10%, 10% and 10% of total accounts
receivable, with no other single customer accounting for more than 10% of the accounts receivable balance.
For the six months ended June
30, 2021 and 2020, we had a heavy concentration of sales to federal, state and local governments which represented 78% and 75% of revenues,
respectively.
Cash and Cash Equivalents
For the purposes of the unaudited
condensed statements of cash flows, the Company considers all liquid investments with an original maturity of three months or less when
purchased to be cash equivalents. There were no cash equivalents at June 30, 2021 and December 31, 2020, respectively.
Fair Value of Financial Instruments
The Company’s financial
instruments, including accounts receivable, accounts payable, accrued expenses, and short-term loans, are carried at historical cost basis.
At June 30, 2021, the carrying amounts of these instruments approximated their fair values because of the short-term nature of these instruments.
Accounts Receivable
Accounts receivable are customer
obligations due under normal trade terms. Management reviews accounts receivable on a periodic basis to determine if any receivables may
become uncollectible. Management’s evaluation includes several factors including the aging of the accounts receivable balances,
a review of significant past due accounts, dialogue with the customer, the financial profile of a customer, our historical write-off experience,
net of recoveries, and economic conditions. The Company includes any accounts receivable balances that are determined to be uncollectible
in its overall allowance for doubtful accounts. After all attempts to collect a receivable have failed, the receivable is written off
against the allowance.
Inventory
Inventory is stated at the
lower of cost and net realizable value. Cost is determined using the first-in, first-out method of accounting. Inventory costs primarily
relate to purchased raw materials and components used in the manufacturing of our products, work in process for products being manufactured,
and finished goods. Included in these costs are direct labor and certain manufacturing overhead costs associated with the manufacturing
process. The Company regularly reviews inventory components and quantities on hand and performs annual physical inventory counts. A reserve
is established if this review process determines the net realizable value of such inventory may be below the carrying value.
Patents
The Company believes it will achieve future economic value benefits for its patents. All administrative costs for obtaining patents are accumulated on the balance sheet as a patent asset until such time as a patent is issued. The costs of these intangible assets are classified as a long-term asset and amortized on a straight-line basis over the legal life of such asset, which is typically 20 years. In the event a patent is denied or abandoned, all accumulated administrative costs will be expensed in the period in which the patent was denied or abandoned. Patent amortization expense was $9,977 and $2,182 in the six months ended June 30, 2021 and 2020, respectively.
Leases
In February 2016, the Financial
Accounting Standards Board issued Accounting Standards Update No. 2016-02: “Leases (Topic 842)” whereby lessees need to recognize
almost all leases on the balance sheet as a right of use asset and a corresponding lease liability. The Company adopted this standard
as of January 1, 2019 using the effective date method and applying the package of practical expedients to leases that commenced before
the effective date whereby the Company elected not to reassess the following: (i) whether any expired or existing contracts contain leases,
and (ii) initial direct costs for any existing leases. For contracts entered into after the effective date, at the inception of a contract
the Company assesses whether the contract is, or contains, a lease. The Company’s assessment is based on: (1) whether the contract
involves the use of a distinct identified asset, (2) whether we obtain the right to substantially all the economic benefit from the use
of the asset throughout the period, and (3) whether it has the right to direct the use of the asset. The Company allocates the consideration
in the contract to each lease component based on its relative stand-alone price to determine the lease payments. The Company has elected
to not recognize right of use assets and lease liabilities for short term leases that have a term of 12 months or less.
Revenue Recognition
Beam follows the revenue standards
of Financial Accounting Standards Board Update No. 2014-09: “Revenue from Contracts with Customers (Topic 606).” The core
principle of this Topic is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount
that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Revenue is recognized
in accordance with that core principle by applying the following five steps: 1) identify the contracts with a customer; 2) identify the
performance obligations in the contract; 3) determine the transaction price; 4) allocate the transaction price to the performance obligations;
and 5) recognize revenue when (or as) we satisfy a performance obligation.
Revenues are primarily derived
from the direct sales of manufactured products. Revenues may also consist of maintenance fees for the maintenance of previously sold products
and revenues from sales of professional services.
Revenues from inventoried
product are recognized upon the final delivery of such product to the customer or when legal transfer of ownership takes place. Revenue
values are fixed price arrangements determined at the time an order is placed or a contract is entered into. The customer is typically
obligated to make payment for such products within a 30-45 day period after delivery.
Revenues from maintenance
fees for services provided by the Company are recognized equally over the period of the maintenance term. Revenue values are fixed price
arrangements determined at the time an order is placed or a contract is entered into. The customer is typically obligated to make payment
for the service in advance of the maintenance period.
Extended maintenance or warranty
services, where the customer has the option to purchase this extension as a separate purchase option, are considered a separate performance
obligation. If the Company does not control the extended services, in terms of having the responsibility for fulfillment of the obligation
or the option to choose who will perform the services, the Company is acting as an agent and would report the revenues on a net basis.
Revenues from professional
services are recognized when services are performed. Revenue values are based upon fixed fee arrangements or hourly fee-based arrangements
with agreed to hourly rates of service categories in line with expertise requirements. These services are billed to a customer as such
services are provided and the customer will be obligated to make payments for such services typically within a 30-45 day period.
Revenues on a bill-and-hold
arrangement are recognized when control of the product is transferred to the customer, but physical possession of the product transfers
at a point in time in the future. To determine this, the reason for the arrangement must be substantive, the product must be separately
identified and ready for physical transfer, the customer has the ability to direct the use of the product and the product cannot be directed
to another customer.
The Company has a policy of
recording sales incentives as a contra revenue.
The Company includes shipping
and handling fees billed to customers as revenues.
Any deposits received from
a customer prior to delivery of the purchased product or monies paid prior to the period for which a service is provided are accounted
for as deferred revenue on the balance sheet.
Sales tax is recorded on a
net basis and excluded from revenue.
The Company generally provides
a standard one-year warranty on its products for materials and workmanship but may provide multiple year warranties as negotiated, and
it will pass on the warranties from its vendors, if any, which generally covers this one-year period. In accordance with ASC 450-20-25,
the Company accrues for product warranties when the loss is probable and can be reasonably estimated. At June 30, 2021, the Company
has no product warranty accrual given the Company’s historical financial warranty expense.
Cost of Revenues
The Company records direct material and component costs, direct labor
and associated benefits, and manufacturing overhead costs such as supervision, manufacturing equipment depreciation, rent, and utility
costs, all of which are included in inventory prior to a sale, as costs of revenues. The Company further includes shipping and handling
costs as cost of revenues.
Stock-Based Compensation
The Company follows ASC 718,
“Compensation – Stock Compensation.” ASC 718 requires companies to estimate and recognize the fair value of stock-based
awards to employees and directors. The fair value of the portion of an award that is ultimately expected to vest is recognized as an expense
over the shorter of the service periods or vesting periods using the straight-line attribution method.
The Company adopted ASU 2018-07
and accounts for non-employee share-based awards in accordance with the measurement criteria of ASC 718 and recognizes the fair value
of such awards over the service period. The Company used the modified prospective method of adoption.
The Company estimates the
fair value of each stock option at the grant date by using the Black-Scholes option pricing model.
Net Loss Per Share
Basic net loss per share is computed by dividing the net loss by the weighted average number of shares of common stock outstanding during the periods presented. Diluted net loss per common share is computed using the weighted average number of common stock outstanding for the period, and, if dilutive, potential common stock outstanding during the period. Potential common stock consist of the incremental shares of common stock issuable upon the exercise of stock options, stock warrants, convertible debt instruments or other common stock equivalents. Potentially dilutive securities are excluded from the computation if their effect is anti-dilutive.
Options to purchase 333,980
shares of common stock and warrants to purchase 549,335 shares of common stock were outstanding at June 30, 2021. These shares were not included in the computation of diluted loss per share for the three or six months ended June 30, 2021 because the effects would have been anti-dilutive. These options and warrants may dilute future earnings per share.
Reclassifications
Where necessary, the prior
year’s information has been reclassified to conform to the current period’s statement presentation. On the Condensed Statements
of Cash Flows, the amortization of operating lease right of use asset of $24,578 at June 30, 2020 was reclassified from accrued expenses
to conform to the June 30, 2021 presentation.
Segments
The Company follows ASC 280-10
"Disclosures about Segments of an Enterprise and Related Information." During the six months ended June 30, 2021 and 2020, the
Company only operated in one segment; therefore, segment information has not been presented.
As reflected in the accompanying
unaudited condensed financial statements for the six months ended June 30, 2021, the Company had a net loss and net cash used in operating
activities of $2,892,597 (which includes $495,368 of non-cash compensation expense) and $3,750,649, respectively. Additionally, at June
30, 2021, the Company had an accumulated deficit of $53,915,203. The Company has incurred significant losses from operations since inception,
and such losses are expected to continue.
In April 2019, the Company issued shares of its common stock in a public offering that generated gross proceeds of $13,201,000, which was used to pay off the Company’s debt and to fund business operations. The Company issued shares in two additional public offerings generating gross proceeds of $11,499,675 in July 2020 and $7,500,000 in November 2020. In addition, the company issued warrants as part of the April 2019 public offering which has generated an additional $11,053,338 during fiscal 2020 through June 30, 2021. At June 30, 2021, there are warrants outstanding to
purchase up to 549,335 shares of common stock, which if fully exercised would generate an additional $3,465,410.
At June 30, 2021, our cash
balance was $25,308,606 and our working capital was $28,177,437. Management believes it has sufficient cash to fund its liabilities and
operations for at least the next twelve months from the issue date of this report.
Inventory consists of the following:
Schedule of Inventory
|
|
|
|
|
|
|
|
|
June
30,
|
|
|
December
31,
|
|
|
|
2021
|
|
|
2020
|
|
Finished
goods
|
|
$
|
–
|
|
|
$
|
–
|
|
Work
in process
|
|
|
337,847
|
|
|
|
559,582
|
|
Raw materials
|
|
|
1,598,813
|
|
|
|
533,181
|
|
Total
net inventory
|
|
$
|
1,936,660
|
|
|
$
|
1,092,763
|
|
The major components of accrued expenses are summarized
as follows:
Accrued expense schedule
|
|
|
|
|
|
|
|
|
June
30,
|
|
|
December
31,
|
|
|
|
2021
|
|
|
2020
|
|
Accrued vacation
|
|
$
|
236,731
|
|
|
$
|
205,809
|
|
Accrued salaries
|
|
|
110,708
|
|
|
|
178,449
|
|
Other
accrued expense
|
|
|
48,210
|
|
|
|
7,309
|
|
Total
accrued expenses
|
|
$
|
395,649
|
|
|
$
|
391,567
|
|
5.
|
CONVERTIBLE NOTE PAYABLE - RELATED PARTY AND NOTE PAYABLE
|
On October 18, 2016, the Company
entered into a five-year employment agreement, effective as of January 1, 2016, with Mr. Desmond Wheatley, the Chief Executive Officer,
President, and Chairman of the Company (the “Agreement”). Pursuant to the Agreement, Mr. Wheatley received an annual deferred
salary of $50,000 which Mr. Wheatley deferred until such time as Mr. Wheatley and the Board of Directors agreed that payment of the deferred
salary and/or cessation of the deferral was appropriate. In August 2018, the Agreement was amended to provide that his salary shall defer
until the earliest to occur of the following: (i) a permissible event specified in Section 409A of the Code, (ii) December 31, 2020, (iii)
a change of control as defined in the Agreement, or (iv) a sale of all or substantially all of the assets of the Company.
All deferred amounts were
evidenced by an unsecured convertible promissory note payable by the Company to Mr. Wheatley bearing simple interest at the rate of 10%
per annum, accruing until paid, convertible into shares of the Company’s common stock at $7.50 per share at any time in whole or
in part at Mr. Wheatley’s discretion. As the conversion price was equivalent to the fair value of the common stock at various salary
deferral dates prior to June 30, 2018, there was no beneficial conversion feature to this note through such date. Subsequent to June 30,
2018 through December 31, 2018, and based on the average daily closing price of our common stock, the Company recorded $8,672 of debt
discount for the beneficial conversion feature value which is being amortized to interest expense over the term of the note. For the three
months ended March 31, 2019 and based on the average daily closing price of our common stock, the Company recorded $3,967 of debt discount
for the beneficial conversion feature value which is also being amortized to interest expense over the term of the note. There was no
beneficial conversion value and therefore, no debt discount was recorded for any other periods subsequent to March 31, 2019. Additionally,
on March 29, 2017, the Board of Directors granted Mr. Wheatley a $35,000 bonus for which Mr. Wheatley agreed to defer such bonus under
the same terms of his salary deferral.
On September 17, 2019, the
Board of Directors adopted a resolution to pay off the convertible promissory note issued to Mr. Wheatley for his deferred compensation
in the near future (subject to a recommendation on timing from Mr. Wheatley), and no additional salary was deferred after September 15,
2019. In February 2020, the remaining debt discount of $5,990 was recorded as interest expense, additional interest of $3,442 was accrued,
and the total note of $220,417 and interest of $52,326 was paid to Mr. Wheatley.
On May 1, 2020, the Company
received a U.S. Small Business Administration Paycheck Protection Program loan of $339,262 which was offered through the Coronavirus Aid,
Relief, and Economic Security Act (CARES Act). This loan was recorded as a note payable, is subject to a 1% annual interest rate and has
a two year term. This low interest loan was intended to support short term cash flow in the event we were more heavily impacted by the
COVID-19 virus. In July 2020, we were able to raise capital and no longer required the loan. The full amount of the loan was repaid on
November 13, 2020 in addition to $1,847 of interest.
In October 2015, the Company
purchased a new vehicle and financed the purchase through a dealer auto loan. The loan has a term of 60 months, requires minimum monthly
payments of approximately $950, and bears interest at a rate of 5.99 percent. The final payment was made on this loan in October 31, 2020.
7.
|
COMMITMENTS AND CONTINGENCIES
|
Legal Matters:
From time to time, we may
be involved in litigation relating to claims arising out of our operations in the normal course of business. As of June 30, 2021, there
were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of our operations.
Leases:
In August 2016, the Company
entered into a sublease for its current corporate headquarters and manufacturing facility. The sublease expired in August 2020 which was
the same term of the master lease for which the Company was the subtenant. In September 2020, the Company initiated a new five year master
lease agreement, with two optional one year renewals. Monthly lease payments will range from $52,000 to $58,526 per month over the term
of the lease.
Other Commitments:
The Company enters into various
contracts or agreements in the normal course of business whereby such contracts or agreements may contain commitments. Since inception,
the Company entered into agreements to act as a reseller for certain vendors; joint development contracts with third parties; referral
agreements where the Company would pay a referral fee to the referrer for business generated; sales agent agreements whereby sales agents
would receive a fee equal to a percentage of revenues generated by the agent; business development agreements and strategic alliance agreements
where both parties agree to cooperate and provide business opportunities to each other and in some instances, provide for a right of first
refusal with respect to certain projects of the other parties; agreements with vendors where the vendor may provide marketing, investor
relations, public relations, technical consulting or subcontractor services, vendor arrangements with non-binding minimum purchasing provisions,
and financial advisory agreements where the financial advisor would receive a fee and/or commission for raising capital for the Company.
All expenses and liabilities relating to such contracts were recorded in accordance with GAAP during the periods.
The Company evaluates new
leases at inception based on the criteria defined in Leases (Topic 842). On September 1, 2020, the Company entered into a new five year
operating lease with payments ranging from $52,000 to $58,526. The lease has two one-year options to extend the term of the lease. At
this time, it is not reasonably certain that we will extend the term of the lease and therefore the renewal periods have been excluded
from the right-of-use (“ROU”) asset. We calculated the present value of the lease payment stream using our effective borrowing
rate of 10% and recorded a ROU asset and operating lease liability each of $2,605,032 at September 1, 2020. The ROU asset and the corresponding
lease liability are being equally amortized on a straight-line basis over the term of the lease which expires on August 31, 2025.
The tables below show the
operating ROU assets and liabilities as of December 31, 2020 and the balance as of June 30, 2021, including the changes during the periods.
Schedule of Operating right-of use asset
|
|
|
|
|
|
Operating
|
|
|
|
right-of
|
|
|
|
use asset
|
|
|
|
|
|
Operating lease ROU asset as of December 31, 2020
|
|
$
|
2,418,503
|
|
Less amortization of operating lease ROU assets
|
|
|
(164,651
|
)
|
Operating lease ROU asset as of June 30, 2021
|
|
$
|
2,253,852
|
|
As of June 30, 2021 and December
31, 2020, the current and non-current portions of the lease liability were recorded to the Balance Sheet as follows:
Schedule of lease liability
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2021
|
|
|
2020
|
|
Operating lease
liabilities, current
|
|
$
|
435,813
|
|
|
$
|
521,006
|
|
Operating
lease liabilities, noncurrent
|
|
|
1,850,189
|
|
|
|
1,910,357
|
|
Total
lease liability
|
|
$
|
2,286,002
|
|
|
$
|
2,431,363
|
|
The future minimum rental
commitments for our operating leases reconciled to the lease liability as of June 30, 2021 is as follows:
Schedule of future minimum rental commitments
|
|
|
|
|
|
June 30, 2021
|
|
2021
|
|
$
|
318,240
|
|
2022
|
|
|
649,147
|
|
2023
|
|
|
668,622
|
|
2024
|
|
|
688,680
|
|
2025
|
|
|
468,211
|
|
Total undiscounted future minimum payments
|
|
|
2,792,900
|
|
Less imputed interest
|
|
|
(506,898
|
)
|
Total lease liability
|
|
$
|
2,286,002
|
|
There was no Federal income
tax expense for the six months ended June 30, 2021 or 2020 due to the Company’s net losses. Income tax expense represents minimum
state taxes due. As a result of the Company’s history of incurring operating losses, a full valuation allowance has been established
to offset all deferred tax assets as of June 30, 2021 and no benefit has been provided for the year to date loss. On a quarterly basis,
the company evaluates the positive and negative evidence to assess whether the more likely than not criteria has been satisfied in determining
whether there will be further adjustments to the valuation allowance.
Director Annual Restricted Stock Grants
On April 1, 2021, the Board
approved two restricted stock grants to Mr. Wheatley under the 2011 Stock Incentive Plan. The total number of shares granted was determined
based on an award of $112,500, divided by the per share closing trading price on April 1, 2021. On the grant date, the shares had a per
share fair value of $40.10 and 2,806 shares were granted, half of which will vest quarterly over three equal installments and half of
which will vest quarterly over 11 equal installments. During the quarter ended June 30, 2021, 596 of these shares vested generating
an expense of $23,864. At June 30, 2021, 2,210 shares are unvested representing $88,636 of unrecognized restricted stock grant expense
which will be recognized through the quarter ending December 31, 2023.
On April 16, 2021, the Board
appointed Nancy Floyd to the Company’s board of directors. Concurrent with her appointment, the Company, upon recommendation of
the Compensation Committee, granted Ms. Floyd 5,592 shares of restricted stock which had a per share fair value of $33.34 on the date
of grant and will vest quarterly through September 30, 2021. During the quarter ended June 30, 2021, 2,542 of these shares vested generating
an expense of $84,739. At June 30, 2021, 3,050 shares are unvested representing $101,687 of unrecognized restricted stock grant expense
which will be recognized in the quarter ending September 30, 2021.
On April 16, 2021, the Board appointed Mr. Posawatz as the Lead Independent Director. With this appointment, the Company, upon recommendation of the Compensation Committee, granted Mr. Posawatz 2,246 shares of restricted stock for this role which had a per share fair value of $33.34 on the date of grant and will vest quarterly through September 30, 2021. During the quarter ended June 30, 2021, 1,021 of these shares vested generating an expense of $34,035. At June 30, 2021, 1,225 shares are unvested representing $40,841 of unrecognized restricted stock grant expense which will be recognized in the quarter ending September 30, 2021.
On October 20, 2020, the Company granted each of our two non-employee directors annual restricted stock grants of 12,200 shares of our common stock and our then lead independent director an annual restricted stock grant of 17,100 shares of common stock, which vest quarterly in four (4) equal installments. On the grant date, these shares had a per share fair value of $14.95 based on the closing trading price of our common stock, or $620,425. During the three months ended March 31, 2021, upon the death of our lead independent director, 12,825 unvested shares of restricted stock were forfeited and returned to the Company, and 6,100 shares of restricted stock relating to the other two directors vested, generating an expense of $91,196. During the three months ended June 30, 2021, 6,100 of these shares vested generating an expense of $91,196. At June 30, 2021, there were 6,100 unvested shares of restricted stock representing $91,192 of unrecognized restricted stock grant expense which will be recognized through the quarter ending September 30, 2021.
On June 17, 2020, the
Board approved two restricted stock grants to Mr. Wheatley under the 2011 Stock Incentive Plan. The total number of shares granted
was determined based on an award of $150,000 divided by the per share quoted trading price on June 17, 2020. On the grant date, the
shares had a per share fair value of $7.35 and 20,408 shares
were granted, half of which vest quarterly over four equal installments and half vest quarterly over 12 equal installments. During
the six months ended June 30, 2021, 4,251 of
shares from this grant vested and 2,094 shares
from an October 1, 2019 grant vested generating a total expense of $43,750.
At June 30, 2021, 9,093 shares for these 2 grants are unvested representing $62,500 of
unrecognized restricted stock grant expense which will be recognized through the quarter ending March 31, 2023.
11.
|
STOCK OPTIONS AND WARRANTS
|
Stock Options
During the six months ended
June 30, 2021, there were no stock options granted.
During the six months ended
June 30, 2021 and 2020, the Company recorded non-cash stock option based compensation expense of $126,588 and $54,136, respectively. As
of June 30, 2021, there was $646,242 of unrecognized stock option-based compensation expense that will be recognized over the next 3.25
years.
During the six months ended June 30, 2021, 5,953 stock options were exercised on a cashless basis for 2,380 shares of common stock at a weighted average exercise price of $14.38. The Company withheld shares to cover income and payroll taxes totaling $81,039, which was charged to additional paid in capital.
There were stock options outstanding
to purchase 333,980 shares of common stock at a weighted average exercise price of $11.09 at June 30, 2021. During the six months ended
June 30, 2021, 1,875 stock options terminated.
Warrants
During the six months ended
June 30, 2021, warrants to purchase 416,249
shares of the Company’s common stock were exercised generating $2,643,493.
At June 30, 2021, there were warrants outstanding to purchase up to 549,335
shares of the Company’s common stock at a weighted average exercise price of $6.31.
For each of the identified
periods, revenues can be categorized into the following:
Schedule of revenues
|
|
|
|
|
|
|
|
|
For the Six
Months Ended
|
|
|
|
June 30,
|
|
|
|
2021
|
|
|
2020
|
|
Product sales
|
|
$
|
3,240,498
|
|
|
$
|
2,656,056
|
|
Maintenance fees
|
|
|
22,610
|
|
|
|
41,281
|
|
Professional services
|
|
|
56,525
|
|
|
|
10,565
|
|
Shipping and handling
|
|
|
185,119
|
|
|
|
69,373
|
|
Discounts
and allowances
|
|
|
(11,262
|
)
|
|
|
(5,065
|
)
|
Total
revenues
|
|
$
|
3,493,490
|
|
|
$
|
2,772,210
|
|
At June 30, 2021 and December
31, 2020, deferred revenue was $155,747 and $107,489, respectively. The June 30, 2021 balance consists of deferred maintenance fees of
$152,447 pertaining to services to be provided through the second quarter of 2027 and a $3,300 prepayment from a customer.
Subsequent to June 30, 2021,
warrants to purchase 504 shares of common stock were exercised generating proceeds of $3,175.
In August 2021, stock options
to purchase 89,800 shares of common stock were exercised on a cashless basis at a weighted average exercise price of $13.27 resulting
in the issuance of 33,142 shares of common stock, after reducing the shares to cover the cost of the shares and taxes. The Company withheld
shares to cover income and payroll taxes totaling $543,937, which was charged to additional paid in capital.
On July 19, 2021, we filed
a Certificate of Amendment to the Articles of Incorporation to increase our number of authorized common stock from 9,800,000 to 350,000,000.
The stockholders of the Company approved the amendment at the Company’s annual stockholders meeting on July 14, 2021.