Document and Entity Information
Document and Entity Information - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2022 | Mar. 22, 2023 | Jun. 30, 2022 | |
Document and Entity Information [Abstract] | |||
Document Type | 10-K/A | ||
Document Annual Report | true | ||
Document Transition Report | false | ||
Document Period End Date | Dec. 31, 2022 | ||
Entity File Number | 001-41096 | ||
Entity Registrant Name | Molekule Group, Inc. | ||
Entity Incorporation, State or Country Code | DE | ||
Entity Tax Identification Number | 45-3213164 | ||
Entity Address State Or Province | FL | ||
Entity Address, Address Line One | 10455 Riverside Dr | ||
Entity Address, City or Town | Palm Beach Gardens | ||
Entity Address, Postal Zip Code | 33410 | ||
City Area Code | 833 | ||
Local Phone Number | 652-5326 | ||
Title of 12(b) Security | Common Stock, $0.01 Par Value | ||
Trading Symbol | MKUL | ||
Security Exchange Name | NASDAQ | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Interactive Data Current | Yes | ||
Entity Filer Category | Non-accelerated Filer | ||
Entity Small Business | true | ||
Entity Emerging Growth Company | true | ||
Entity Ex Transition Period | false | ||
Entity Shell Company | false | ||
Entity Public Float | $ 114.4 | ||
Entity Common Stock, Shares Outstanding | 30,427,750 | ||
Entity Central Index Key | 0001872356 | ||
Current Fiscal Year End Date | --12-31 | ||
Document Fiscal Year Focus | 2022 | ||
Document Fiscal Period Focus | FY | ||
Amendment Flag | true | ||
Amendment Description | Molekule Group, Inc. (the "Company") is filing this Amendment No. 1 on Form 10-K/A (this "Amendment") to amend its Annual Report on Form 10-K for the year ended December 31, 2022, which was originally filed with the Securities and Exchange Commission on March 31, 2023 (the "Original 10-K"), for the limited purpose of correcting a number of document processing errors under "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." This Amendment speaks as of the filing date of the Original 10-K and does not reflect any subsequent information or events. Except as noted above, no information included in the Original 10-K has been modified or updated in any way. In connection with the filing of this Amendment, as required by Rule 12b-15, we are including as exhibits currently dated certifications of our principal executive officer and principal financial officer. In addition, a newly dated Exhibit 23.1 (auditor consent) is being filed with this Amendment. | ||
Auditor Name | CITRIN COOPERMAN & COMPANY, LLP | ||
Auditor Firm ID | 2468 | ||
Auditor Location | New York, New York |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) | Dec. 31, 2022 | Dec. 31, 2021 |
Current assets: | ||
Cash | $ 22,062,657 | $ 19,629,649 |
Accounts receivable | 36,188 | 177,064 |
Prepaid expenses and other current assets | 665,395 | 1,124,998 |
Inventories | 2,020,713 | 645,942 |
Total current assets | 24,784,953 | 21,577,653 |
Property and equipment, net | 2,119,134 | 2,123,428 |
Operating lease right-of-use assets | 1,606,485 | |
Goodwill | 626,647 | |
Other assets | 21,667 | 21,667 |
Total assets | 29,158,886 | 23,722,748 |
Current liabilities: | ||
Accounts payable | 3,220,082 | 927,194 |
Accrued expenses and other current liabilities | 1,228,402 | 583,885 |
Current operating lease liability | 113,769 | |
Total current liabilities | 4,562,253 | 1,511,079 |
Long-term liabilities: | ||
Warrant liability | 3,372,000 | |
Long-term operating lease liability | 1,521,431 | |
Deferred tax liability | 501,254 | |
Total liabilities | 9,455,684 | 2,012,333 |
Stockholders' equity: | ||
Common stock, $0.01 par value per share; 110,000,000 shares authorized; 15,496,932 and 13,877,636 issued and outstanding as of December 31, 2022 and December 31, 2021, respectively | 154,969 | 138,776 |
Additional paid-in capital | 27,465,024 | 23,319,499 |
Accumulated deficit | (7,916,791) | (1,747,860) |
Total stockholders' equity | 19,703,202 | 21,710,415 |
Total liabilities and stockholders' equity | $ 29,158,886 | $ 23,722,748 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Dec. 31, 2022 | Dec. 31, 2021 |
CONSOLIDATED BALANCE SHEETS | ||
Preferred stock, par value | $ 0.01 | |
Preferred stock, shares authorized | 11,000,000 | |
Preferred stock, shares issued | 0 | |
Preferred stock, shares outstanding | 0 | |
Common stock, par value | $ 0.01 | |
Common stock, shares authorized | 110,000,000 | |
Common stock, shares issued | 15,496,932 | 13,877,636 |
Common stock, shares outstanding | 15,496,932 | 13,877,636 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
CONSOLIDATED STATEMENTS OF OPERATIONS | ||
Product revenues | $ 227,186 | $ 616,511 |
Cost of sales | 112,559 | 338,896 |
Gross profit | 114,628 | 277,615 |
Operating expenses: | ||
Selling, general and administrative | 15,453,261 | 4,327,998 |
Research and development | 1,954,552 | 4,193,362 |
Total operating expenses | 17,407,813 | 8,521,360 |
Loss from operations | (17,293,185) | (8,243,745) |
Change in fair value of warrant liability | (10,623,000) | |
Loss before income tax benefit | (6,670,185) | (8,243,745) |
Income tax benefit | (501,254) | (320,138) |
Net Loss | $ (6,168,931) | $ (7,923,607) |
Loss Per Common Share | ||
Basic | $ (0.42) | $ (0.74) |
Diluted | $ (0.42) | $ (0.74) |
Weighted-average common shares outstanding: | ||
Basic | 14,676,369 | 10,675,765 |
Diluted | 14,676,369 | 10,675,765 |
CONSOLIDATED STATEMENTS OF CHAN
CONSOLIDATED STATEMENTS OF CHANGES IN MEMBERS' STOCKHOLDERS' EQUITY - USD ($) | Common Stock Class A | Common Stock | Accumulated Deficit | Additional Paid-in Capital | Total |
Beginning balance at Dec. 31, 2020 | $ 10,751,274 | $ (8,223,407) | $ 2,527,867 | ||
Beginning balance (Shares) at Dec. 31, 2020 | 8,081,578 | ||||
Reclassification of accumulated deficit | $ (8,223,407) | 8,223,407 | |||
Issuance of equity units | $ 5,073,056 | 5,073,056 | |||
Issuance of equity units (shares) | 5,073,056 | ||||
Initial public offering of common stock, net of underwriting discounts, commissions and issuance costs | $ 25,140 | $ 21,641,265 | 21,666,404 | ||
Initial public offering of common stock, net of underwriting discounts, commissions and issuance costs (Shares) | 2,514,000 | ||||
Corporate conversion | $ (1,528,222) | $ 113,636 | 1,414,586 | ||
Corporate conversion (Shares) | (13,428,948) | 11,363,636 | |||
Corporate conversion tax-effect | (821,392) | (821,392) | |||
Stock compensation expense | $ 924,438 | 263,649 | 1,188,087 | ||
Stock compensation expense (Shares) | 274,314 | ||||
Net loss | $ (6,997,139) | (926,468) | (7,923,607) | ||
Ending balance at Dec. 31, 2021 | $ 138,776 | (1,747,860) | 23,319,499 | 21,710,415 | |
Ending balance (Shares) at Dec. 31, 2021 | 13,877,636 | ||||
Issuance of common stock and warrants | $ 15,312 | 894,458 | 909,770 | ||
Issuance of common stock and warrants (Shares) | 1,531,192 | ||||
Issuance of common stock for business acquisition | $ 881 | 275,766 | 276,647 | ||
Issuance of common stock for business acquisition (Shares) | 88,104 | ||||
Stock-based compensation | 2,975,301 | 2,975,301 | |||
Net loss | (6,168,931) | (6,168,931) | |||
Ending balance at Dec. 31, 2022 | $ 154,969 | $ (7,916,791) | $ 27,465,024 | $ 19,703,202 | |
Ending balance (Shares) at Dec. 31, 2022 | 15,496,932 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net income (loss) | $ (6,168,931) | $ (7,923,607) |
Adjustments to reconcile net loss to net cash flows used in operating activities | ||
Offering costs associated with warrant liability | 1,326,212 | |
Change in fair value of warrant liability | (10,623,000) | |
Deferred tax benefit | (501,254) | (320,138) |
Depreciation | 160,924 | 79,646 |
Equity-based compensation | 2,975,301 | 1,188,086 |
Non-cash lease expense | 125,420 | |
Changes in operating assets and liabilities: | ||
Accounts receivable | 140,876 | (177,064) |
Inventories | (1,374,771) | (645,942) |
Other current and non-current assets | 459,603 | (841,836) |
Accounts payable | 2,292,896 | 595,119 |
Accrued expenses and other liabilities | 644,517 | 250,649 |
Lease liabilities | (96,705) | |
Net cash flows used in operating activities | (10,638,912) | (7,795,087) |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Purchases of property and equipment | (156,631) | (1,748,392) |
Acquisitions, net of cash acquired | (350,000) | |
Net cash flows used in investing activities | (506,631) | (1,748,392) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Proceeds from issuance of common stock and warrants | 15,000,000 | 5,173,599 |
Proceeds from Issuance Initial Public Offering | 25,140,000 | |
Payment of issuance costs | (1,421,449) | (3,473,588) |
Proceeds from loan from related party | 1,000,000 | |
Repayment of loan from related party | (1,000,000) | |
Net cash flows provided by financing activities | 13,578,551 | 26,840,011 |
Net (decrease)/increase in cash | 2,433,008 | 17,296,532 |
Cash, beginning of period | 19,629,649 | 2,333,117 |
Cash, end of period | $ 22,062,657 | 19,629,649 |
Supplemental schedule of non-cash activities: | ||
Equity Units Issued To Related Party | $ 7,465 |
Description of Business
Description of Business | 12 Months Ended |
Dec. 31, 2022 | |
Description of Business | |
Description of Business | 1. Description of Business AeroClean Technologies, Inc. (the “Company”) was initially formed as CleanCo Bioscience Group LLC (“CBG”) in the State of Florida on September 2, 2011. Subsequent to its formation, CBG established a team of scientists, engineers and medical experts to provide solutions for the challenges posed by harmful airborne pathogens and resultant hospital acquired infections. On September 15, 2020, CBG converted into AeroClean Technologies, LLC as a Delaware limited liability company and is headquartered in Palm Beach Gardens, Florida. On November 23, 2021, AeroClean Technologies, LLC incorporated in the state of Delaware as AeroClean Technologies, Inc. See Note 3, Public Offering for a discussion of the Company’s recent initial public offering (the “Public Offering”). The Company is an interior space air purification technology company with an immediate objective of initiating full-scale commercialization of its high-performance interior air sterilization and disinfection products for the eradication of coronavirus and other harmful airborne pathogens. The Company was established to develop technology-driven, medical-grade air purification solutions for hospitals and other healthcare settings. The company also acquired GSI Germsweepusa Inc. (doing business as GSI Technology) as a wholly-owned subsidiary (See Note 14). On January 12, 2023, in connection with the acquisition of Molekule, Inc., the Company changed its name from AeroClean Technologies, Inc. to Molekule Group, Inc. (see Note 15). Liquidity and Going Concern The provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 205-40, Presentation of Financial Statements — Going Concern The Company incurred a net loss of $6,168,931, and its net cash used in operating activities was $10,638,912 for the year ended December 31, 2022. In addition, the Company’s accumulated deficit was $7,916,791 at December 31, 2022. The Company’s recurring losses from operations, recurring cash used in operating activities, accumulated deficit, expected working capital needs to fund its combined operations and new debt obligations as a result of the acquisition of Molekule, Inc. in January 2023 (see Note 15), raise substantial doubt about its ability to continue as a going concern. The Company’s ability to fund its operations is dependent upon management’s plans, which include raising capital, managing costs and generating sufficient revenues to offset costs. There can be no assurances that the Company will be able to secure any such additional financing on acceptable terms and conditions, or at all. Accordingly, management has concluded there is substantial doubt as to the Company’s ability to continue as a going concern within one year after the date the financial statements are issued. Please see note 15. Subsequent Events for additional information regarding the impact of the Company’s acquisition of Molekule, Inc. COVID-19 Pandemic The Company continues to monitor the outbreak of COVID-19 and its variants, which continue to spread throughout the world and adversely impact global commercial activity and contribute to significant declines and volatility in financial markets. The Company’s ongoing research and development activities, including development of product prototypes and manufacturing activities, are all conducted in the United States, and as a result, the Company has been able to mitigate some of the adverse impact of the COVID-19 pandemic on its global supply chain. The Company continues to actively monitor the situation and may take further actions that impact operations as may be required by federal, state or local authorities or that the Company determines is in the best interests of its employees, customers, suppliers and stockholders. As of the date of issuance of these financial statements, the pandemic presents uncertainty and risk as the Company cannot reasonably determine or predict the nature, duration or scope of the overall impact the COVID-19 pandemic will have on its business, results of operations, liquidity or capital resources. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2022 | |
Summary of Significant Accounting Policies | |
Summary of Significant Accounting Policies | 2. Basis of Presentation The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the accounting and disclosure rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) and include its wholly owned subsidiary, Germsweepusa, Inc. (“GSI Technology”). All significant intercompany accounts and transactions have been eliminated in consolidation. The Company is an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. The Company has elected to avail itself of this exemption from new or revised accounting standards and, therefore, the financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of the public company effective dates. Use of Estimates The preparation of the Company’s financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and expenses and related disclosure of contingent assets and liabilities. Significant estimates in these financial statements include those related to the fair value of equity-based compensation, revenue recognition, the incremental borrowing rate for leases, warrant liability, and deferred tax valuation allowance. On an ongoing basis, the Company evaluates its estimates, judgments and methodologies. The Company bases its estimates on historical experience and on various other assumptions believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Due to the inherent uncertainty involved in making estimates, actual results could differ materially from those estimates. Cash and Cash Equivalents The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash and cash equivalents. The Company did not have any cash equivalents as of December 31, 2022 and 2021. Revenue Recognition The Company recognizes revenues related to sales of products upon the customer obtaining control of promised goods, in an amount that reflects the consideration that is expected to be received in exchange for those goods. To determine revenue recognition for arrangements within the scope of ASC Topic 606, Revenue from Contracts with Customers, Warranty Costs The Company provides a three-year warranty on its Pūrgo device from the date of sale to its customers. The Company’s policy is to record a provision for estimated future costs related to warranty expense when they are probable and reasonably estimable, which is when revenue is recognized. There was no warranty accrual as of December 31, 2022 and 2021, respectively. Research & Development Expenses Research and development expenses are expensed as incurred and consist principally of contract labor and third-party engineering, product development and testing costs related to the development of medical grade air purification devices and related components as well as concepts for future product development. Income Taxes Prior to the Public Offering, the Company was a limited liability company and was treated as a partnership for federal and state income tax purposes. Therefore, no provision for income taxes had been included in the financial statements since taxable income or loss was allocated to members, who were responsible for any taxes thereon, in accordance with the provisions of the operating agreement. On November 23, 2021 in conjunction with the Public Offering, the Company incorporated in the State of Delaware. The Company recognizes and measures its unrecognized tax benefit in accordance with FASB ASC 740, Income Taxes. The Company provides deferred income taxes for temporary differences between the amounts of assets and liabilities recognized for financial reporting purposes and such amounts recognized for income tax purposes. Deferred income taxes are computed using enacted tax rates that are expected to be in effect when the temporary differences reverse. Under that guidance, management assesses the likelihood that tax positions will be sustained upon examination based on the facts, circumstances and information available at the end of each period, including the technical merits of those positions. The measurement of unrecognized tax benefits is adjusted when new information is available or when an event occurs that requires a change. For the years ended December 31, 2022, and 2021, the Company did not identify any uncertain tax positions taken or expected to be taken in an income tax return that would require adjustment to, or disclosure in, its financial statements. Accounts Receivable Trade accounts receivable are stated net of an allowance for doubtful accounts. The Company estimates the allowance for doubtful accounts based on review and analysis of specific customer balances that may not be collectible and how recently payments have been received. Accounts are considered for write-off when they become past due and when it is determined that the probability of collection is remote. As of December 31, 2022 and 2021, there was no allowance for doubtful accounts. Inventories The Company values inventories at the lower of cost or net realizable value using the first-in, first-out or weighted average cost method. Net realizable value is the estimated selling price in the ordinary course of business, less reasonable predictable costs of completion, disposal and transportation. Inventories on hand at December 31, 2022 and 2021 consisted primarily of spare parts and finished goods. Property and Equipment Property and equipment are stated at cost and depreciated generally under the straight-line method over their estimated useful lives (or the lesser of the term of the lease for leasehold improvements, as appropriate), except for tooling, which is depreciated utilizing the units-of-production and straight-line method. The Company periodically reviews long-lived assets including the right-of-use assets for impairment whenever events or changes in business circumstance indicate that the carrying value of the assets may not be recoverable. Under those circumstances, if the fair value were less than the carrying amount of the asset, the Company would recognize a loss for the difference. The Company has determined that long-lived assets were not impaired during the years ended December 31, 2022 and 2021. Offering Costs The Company capitalizes certain legal, accounting and other third-party fees directly associated with in-process equity financing as deferred offering costs. Deferred offering costs were offset against the proceeds from the Public Offering. Common Stock Equivalents The Company has potential common stock equivalents related to its outstanding restricted stock units and warrants. These potential common stock equivalents are not included in diluted loss per share for any period presented in which there is a net loss because the effect would have been anti-dilutive. Share-based Payments The Company accounts for share-based payments to employees and non-employees in accordance with the provisions of FASB ASC 718, Compensation — Stock Compensation (“ASC 718”). Under ASC 718, the Company measures the share-based compensation cost on the date of grant, based on the fair value of the award, and expense is recognized over the requisite service period. The fair value of the restricted stock units granted under the 2021 Long-Term Incentive Plan is the quoted closing price per share on the date of grant. Fair Value Measurements Certain assets and liabilities are carried at fair value in accordance with U.S. GAAP. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants at the measurement date. A three-tier fair value hierarchy that prioritizes the inputs used in the valuation methodologies, is as follows: Level 1 Level 2 Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs observable or that can be corroborated by observable market data. Level 3 Valuations based on unobservable inputs reflecting the Company’s own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment. At December 31, 2022 and 2021, the carrying amounts of the Company’s financial instruments, including cash, prepaid expenses and other current assets, accounts payable and accrued liabilities approximated their respective fair value due to the short-term nature of these instruments. Financial Instruments – Derivatives Operating Segment The Company operates in one segment. All of the Company’s assets are in the United States of America. Concentrations of Credit Risk The Company maintains its cash at a major financial institution with high credit quality, and at times, the balance in its cash deposits may exceed the Federal Deposit Insurance Corporation (the “FDIC”) limits of $250,000. The Company has not experienced and does not anticipate any losses on deposits with commercial banks and financial institutions that exceed federally insured limits. On March 10, 2023, Silicon Valley Bank (“SVB”) was closed by the California Department of Financial Protection and Innovation, which appointed the FDIC as receiver. At the time of the closure and as of the date of this financial statemetns, the Company held assets in securities in sweep accounts purchased through SVB but managed in segregated custodial accounts by a third-party asset manager. On March 13, 2023, the (“ FDIC”) announced that all of SVB’s deposits and substantially all of its assets had been transferred to a newly created, full-service FDIC-operated bridge bank, Silicon Valley Bridge Bank, N.A (“SVBB”). SVBB assumed all loans that were previously held by SVB. On March 27, 2023, First-Citizens Bank & Trust Company assumed all of SVBB’s customer deposits and certain other liabilities and acquired substantially all of SVBB’s loans and certain other assets from the FDIC. The Company has had full access to the assets in the sweep accounts since March 13, 2023. The uncertainty of the situation has the potential to have a financial impact to the Company that cannot be reasonably estimated at this time. The Company’s suppliers and vendors include engineering firms and consultants, research and development companies, testing laboratories, contract manufacturers and other suppliers required to design, test and manufacture its products. The Company obtains some of its services from a limited group of vendors; however, the Company has neither experienced any significant disruptions nor expects any significant disruptions to its operations due to supplier concentration. There were no expenditures with any vendor that exceeded 10% of total expenditures for the year ended December 31, 2022. The Company’s largest and second supplier accounted for 13% and 11% of total expenditures, respectively for the years ended December 31, 2022 and 2021, respectively, while its second largest supplier accounted for 11% and 33% of total expenditures for the year ended December 31, 2021. Significant customers may change from year to year depending on the overall level of activity and the sales of the Company’s products to each customer. During the year ended December 31, 2022, the Company’s largest and second largest customers accounted for approximately 13% and 12% of the Company’s revenues, respectively. During the year ended December 31, 2022, the Company’s largest and second largest customers accounted for approximately 45% and 12% of the Company’s revenues, respectively. Business Combinations and Acquisitions The Company accounts for acquisitions as business combinations using the acquisition method of accounting in accordance with ASC 805, Business Combinations. The Company accounts for acquisitions in which it obtains control of one or more businesses as a business combination. The purchase price of the acquired businesses is allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values at the acquisition date. The excess of the purchase price over those fair values is recognized as goodwill. During the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments, in the period in which they are determined, to the assets acquired and liabilities assumed with the corresponding offset to goodwill. If the assets acquired are not a business, the Company accounts for the transaction or other event as an asset acquisition. Under both methods, the Company recognizes the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquired entity. In addition, for transactions that are business combinations, the Company evaluates the existence of goodwill as gain from a bargain purchase. Goodwill Goodwill represents the excess of the aggregate consideration paid for an acquisition over the fair value of the assets acquired and liabilities assumed. The Company has recorded goodwill in connection with its business combination with GSI Technology on October 1, 2022 (See Note 14). In accordance with U.S. GAAP, the Company will test goodwill for impairment annually in October each year or whenever events or circumstances make it more likely than not that impairment may have occurred. Such events and circumstances may be a significant change in business climate, economic and industry trends, legal factors, negative performance indicators, or significant competition or changes in strategy. For the purposes of that assessment, the Company has determined to assign the goodwill acquired in the business combination to a single reporting unit. JOBS Act Accounting Election The Company is an “emerging growth company,” as defined in the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. The Company has elected to avail itself of this exemption from new or revised accounting standards and, therefore, the financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of the public company effective dates. Recent Accounting Standards The Company has reviewed recent accounting pronouncements and, with the exception of the below, concluded they are either not applicable to the business or no material effect is expected on the financial statements as a result of future adoption. In June 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments - Credit Losses, which was subsequently amended by ASU No. 2018-19 and ASU No. 2019-10, and which requires the measurement of expected credit losses for financial instruments carried at amortized cost held at the reporting date based on historical experience, current conditions and reasonable forecasts. The updated guidance also amends the current other-than-temporary impairment model for available-for-sale debt securities by requiring the recognition of impairments relating to credit losses through an allowance account and limits the amount of credit loss to the difference between a security’s amortized cost basis and its fair value. In addition, the length of time a security has been in an unrealized loss position will no longer impact the determination of whether a credit loss exists. The main objective of this ASU is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The standard is effective for the fiscal year beginning after December 15, 2022. The Company will continue to assess the possible impact of this standard, but it currently does not expect that the adoption of this standard will have a significant impact on its financial statements and its limited history of bad debt expense relating to trade accounts receivable. Recent Accounting Standards Adopted In February 2016, the FASB issued ASU 2016-02, Leases (“Topic 842”), which supersedes ASC Topic 840, Leases. Topic 842 requires lessees to recognize most leases on their balance sheets as a right-of use asset with a corresponding lease liability. The update also expands the required quantitative and qualitative disclosures surrounding leases. The Company adopted ASC 842 on January 1, 2022 using the modified retrospective transition approach under ASC 842 to not restate comparative periods in transition and use the effective date of ASC 842 as the date of initial adoption. The Company only has one operating lease in place related to its warehouse, distribution facility and corporate headquarters for a 10-year term. At the date of adoption, the Company’s remaining lease payments of $2,696,254 will be discounted using its incremental borrowing rate to record the right of use asset and corresponding lease liability. Refer to Note 8, Leases. |
Public Offering
Public Offering | 12 Months Ended |
Dec. 31, 2022 | |
Public Offering | |
Public Offering | 3. On November 29, 2021, the Company completed the Public Offering of 2,514,000 shares of its common stock, which included the partial exercise of the underwriters’ overallotment option, at a public offering price of $10.00 per share for aggregate gross proceeds of $25,140,000 and net proceeds of approximately $21,640,000 after deducting underwriting fees of approximately $2,200,000 and other offering costs of approximately $1,300,000.The Company issued a purchase option to the underwriters (“UPO”) exercisable within five years of the Public Offering for 5.0% of the shares of common stock issued, or 125,700 shares of common stock, at an exercise price of $12.50 per share. The Company’s common stock is listed on The Nasdaq Capital Market under the symbol “MKUL.” In connection with the Public Offering, on November 23, 2021, the Company converted from a Delaware limited liability company into a Delaware corporation (the “Corporate Conversion”) and changed its name to AeroClean Technologies, Inc. In connection with the Corporate Conversion, the outstanding member units of 13,428,948 were converted into 11,363,636 shares of common stock at a conversion ratio of 0.8462. The Corporate Conversion has been adjusted retroactively for the purposes of calculating basis and diluted earnings per share. The Company’s certificate of incorporation authorizes 110,000,000 shares of common stock and 11,000,000 shares of preferred stock. |
Prepaid Expenses and Other Curr
Prepaid Expenses and Other Current Assets | 12 Months Ended |
Dec. 31, 2022 | |
Prepaid Expenses and Other Current Assets | |
Prepaid Expenses and Other Current Assets | 4. Prepaid expenses and other current assets consist primarily of prepaid insurance premiums and amounts paid to suppliers and vendors for inventories and retainers for engineering, product development, testing and other services to be performed. Prepaid expenses and other current assets were $665,395 and $1,124,998 |
Inventories
Inventories | 12 Months Ended |
Dec. 31, 2022 | |
Inventories | |
Inventories | 5. Inventories Inventory consisted of the following: December 31, 2022 2021 Raw materials $ 712,752 $ 475,767 Finished goods 1,307,961 170,175 Total inventories $ 2,020,713 $ 645,942 |
Property and Equipment
Property and Equipment | 12 Months Ended |
Dec. 31, 2022 | |
Property and Equipment | |
Property and Equipment | 6. Property and equipment consisted of the following: Useful Life December 31, (Years) 2022 2021 Leasehold improvements Lesser of useful life or lease term $ 847,217 $ 847,217 Machinery and tooling 7 1,270,652 1,123,391 Furniture and equipment 3 - 10 241,835 232,466 2,359,704 2,203,074 Less: accumulated depreciation 240,570 79,646 $ 2,119,134 $ 2,123,428 Property and equipment are stated at cost and depreciated generally under the straight-line method over their estimated useful lives (or the lesser of the term of the lease for leasehold improvements, as appropriate), except for tooling, which is depreciated utilizing the units-of-production and straight-line method. Depreciation expenses were $160,924 and $79,646 for the years ended December 31, 2022 and 2021, respectively. |
Accrued Expenses and Other Curr
Accrued Expenses and Other Current Liabilities | 12 Months Ended |
Dec. 31, 2022 | |
Accrued Expenses and Other Current Liabilities | |
Accrued Expenses and Other Current Liabilities | 7. Accrued Expenses and Other Current Liabilities Accrued expenses and other current liabilities consisted of the following as of: December 31, 2022 2021 Accrued wages and bonus $ 514,169 $ 408,418 Research and development 47,547 35,708 Professional and consulting fees 16,876 13,120 Accrued legal fees 439,901 29,512 Other accrued liabilities 209,909 97,127 Total accrued expenses and other current liabilities $ 1,228,402 $ 583,885 |
Leases
Leases | 12 Months Ended |
Dec. 31, 2022 | |
Leases | |
Leases | 8. Leases The Company adopted ASU No. 2016-02, Leases ASC Topic 842 effective January 1, 2022. The Company elected the modified retrospective transition method under ASC Topic 842 and as such information prior to January 1, 2022 has not been restated and continues to be reported under the accounting standards in effect for the period (ASC Topic 840-Leases). The Company elected the package of practical expedients which allows the Company to carry forward its historical lease classification assessment of whether a contract is or contains a lease and initial direct costs for leases that exist prior to adoption. The Company used its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. On February 1, 2021, the Company entered into a lease with Gardens Bio Science Partners, LLC, an entity under common control of the Company’s co-founder and Chairman of the Board. The leased premises consist of 20,000 square feet of office and warehouse space and has a lease term of 10 years at an annual base rent of $260,000 subject to escalation of 2.5% on an annual basis. Future minimum lease payments under noncancellable operating leases as of December 31, 2022 were as follows: Years ending December 31, 2023 $ 272,058 2024 278,858 2025 285,829 2026 292,975 2027 300,299 Thereafter 1,000,801 Total Lease Payments $ 2,430,820 Less: Imputed Interest (795,620) Total Lease Liability $ 1,635,200 For the year ended December 31, 2022, the operating cash outflows for lease payments totaled $265,421 and the operating lease cost, recognized on a straight-line basis totaled $294,137. At December 31, 2022, the remaining lease term was 98 months. |
Commitments and Contingencies
Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2022 | |
Commitments and Contingencies. | |
Commitments and Contingencies | 9. Commitments and Contingencies Legal Proceedings From time to time, the Company is subject to legal proceedings in the normal course of operating its business. The outcome of litigation, regardless of the merits, is inherently uncertain. In August 2022, the Company received notice of a complaint filed in the U.S. District Court for the Southern District of New York (the “Court”) by Sterilumen, Inc. (“Sterilumen”), a wholly-owned subsidiary of Applied UV, Inc., in connection with the marketing and sale of the Company’s patented air purification products. In the complaint, the plaintiff alleged trademark infringement, violation of fair competition practices and damages to Sterilumen. On March 13, 2023, the Court dismissed Sterilumen’s claims with prejudice and ruled that the Company’s counterclaims remained extant. The Company subsequently agreed with Sterilumen that Sterilumen will not challenge the Court’s dismissal and will not bring any future claim against the Company alleging infringement from the use of SteriDuct or AeroClean and that the Company will file a notice to dismiss its counterclaims without prejudice. The Company did not establish a contingency reserve related to this matter. The Company is not currently party to any legal proceedings, the adverse outcome of which, individually or in the aggregate, it believes will have a material adverse effect on its business, financial condition or results of operations. Indemnities, Commitments and Guarantees six employment agreements were amended in connection with the merger with Molekule Inc. See Note 15. Subsequent Events. Accordingly, the executives were granted an aggregate of 705,090 restricted stock units. Guaranteed Payment one five Registration Rights Agreement |
Related Party Transactions
Related Party Transactions | 12 Months Ended |
Dec. 31, 2022 | |
Related Party Transactions | |
Related Party Transactions | 10. Related Party Transactions The Company recorded an aggregate of $16,889 and $80,000 of revenues for units sold to related parties for the years ended December 31, 2022 and 2021, respectively. At December 31, 2022 and 2021 amounts included in accounts receivable were $9,616 and $63,290, respectively. Bridge Loans – |
Stockholders' Equity
Stockholders' Equity | 12 Months Ended |
Dec. 31, 2022 | |
Stockholders' Equity | |
Stockholders' Equity | 11. Stockholders’ Equity Common Stock The Company is authorized to issue up to 110,000,000 shares of common stock with a par value of $0.01. In November 2021, the Company completed its Public Offering and sold 2,514,000 shares of common stock for net proceeds of approximately $21,640,000. See Note 3, Public Offering. Dividend Rights Voting Rights Liquidation Other Rights Preference Shares The Company is authorized to issue up to 11,000,000 shares of preferred stock with a par value of $0.01. Under the Company’s certificate of incorporation and subject to the limitations prescribed by law, the Board may issue the Company’s preferred stock in one or more series and may establish from time to time the number of shares to be included in such series and may fix the designation, the voting powers, if any, and preferences and relative participating, optional or other rights, if any, of the shares of each such series and any qualifications, limitations or restrictions thereof. When and if the Company issues any shares of preferred stock, the Board will establish the number of shares and designation of such series and the voting powers, if any, and preferences and relative participating, optional or other special rights, and the qualifications, limitations and restrictions thereof, for the particular preferred stock series. Long-Term Incentive Plan In conjunction with the Public Offering, on November 23, 2021, the Company adopted the Employee Stock Purchase Plan, the 2021 Incentive Award Plan (as amended, the “Long-Term Incentive Plan” or the “LTIP”), and the Non-Employee Directors Stock and Deferred Compensation Plan (collectively, the “Plans”). During 2022, the Company increased the number of shares available for issuance under the LTIP from 1,386,364 to 3,963,916. The Company reserved 4,379,825 shares, collectively, for issuance or sale under the Plans. On November 29, 2021, at the closing of the Public Offering, the Company granted 443,269 restricted stock units to members of management (See Note 9, Commitments and Contingencies) and 182,999 restricted stock units to members of the Board under the Long-Term Incentive Plan. The Company maintains an LTIP under which the Company’s Compensation Committee has the authority to grant stock options; stock appreciation rights; restricted stock; restricted stock units; performance stock; performance units; and other forms of equity-based or equity-related awards. During the year ended December 31, 2022, the Company granted restricted stock units to members of the Board and certain members of management. Restricted stock units grants vest over periods ranging from two Stock-based compensation expense of $2,975,301 and $263,648 was recorded in selling, general and administrative expense for the years ended December 31, 2022 and 2021, respectively. Unrecognized compensation cost related to restricted stock awards made by the Company was $4,956,120 at December 31, 2022, which is expected to be recognized over the weighted average remaining life of 2.15 years at the weighted average grant date fair value of $4.65 per restricted stock unit. The following is the restricted stock unit activity for the year ended December 31, 2022: Number of Shares Weighted Average Grant Date Fair Value per Share Weighted Average Remaining vesting Period (in years) Outstanding January 1, 2022 626,268 10.00 Awarded 825,180 2.34 Vested (268,335) 10.00 Forfeited - Outstanding December 31, 2022 1,183,113 4.65 2.15 Members’ Units Prior to the completion of the Public Offering (See Note 3, Public Offering), the Board was authorized to issue Class A Units (“Units”), which entitled unitholders to allocations of profits and losses and other items and distributions of cash and other property as was set forth in the Company’s operating agreement, as amended. The Board had the right at any time and from time to time to authorize and cause the Company to create and/or issue equity securities to any person, in which event, all units of a class, group or series would have been diluted in an equal manner as to the other units of such class, group or series, and the Board had the power to amend the operating agreement to allow for such additional issuances and dilution and to make any such other amendments necessary or desirable to reflect such issuances. The holder of each Unit had the right to one vote per Unit on all matters to be voted on by the Members. Between January 1, 2021 and the Public Offering, the Company sold an additional 5,073,056 Units to existing members resulting in gross proceeds of $5,073,056. Effective April 1, 2021, the Board approved the issuance of an aggregate of 274,314 Units, of which 140,085 Units were issued to independent contractors and 134,229 Units were issued to Board members as compensation for services provided. Certain of the Units were issued to independent contractors as consideration for services pursuant to existing agreements, which provided for payment of fifty percent in cash and fifty percent in equity (See Note 9, Commitments and Contingencies). The subscription agreements issued to the contractors included a provision that no payments for services rendered after March 31, 2021 will be in the form of equity. Non-cash stock compensation of $924,438 was recognized from these units. Private Placement On June 29, 2022, the Company completed the private placement in connection with a securities purchase agreement dated June 26, 2022 (the “Private Placement”). In the Private Placement, the Company received gross cash proceeds of $15,000,000 in connection with the issuance of (i) 1,500,000 shares of common stock and (ii) a warrant to purchase up to 1,500,000 shares of common stock. The Warrant has an exercise price of $11.00 per share and is exercisable until July 21, 2027. Net proceeds amounted to $13,578,551 after issuance costs of $1,421,449. The Warrant was classified as a liability, and as such, the gross proceeds and issuance costs were allocated to the Warrant liability based on its fair value with the residual being allocated to the common stock, resulting in the allocation of gross proceeds of $13,995,000 and $1,005,000 to the Warrant liability and common stock, respectively, and issuance costs of $1,326,212 and $95,237 were charged to expense and additional paid-in-capital respectively. On July 21, 2022, the Company’s registration statement on Form S-1 relating to the resale of 3,000,000 shares of common stock by the selling stockholder listed in the prospectus (including 1,500,000 shares of common stock issued in the Private Placement and 1,500,000 shares of common stock issuable upon the exercise of the outstanding Warrant acquired in the Private Placement) was declared effective by the SEC. The Company will not receive any proceeds in connection with the sale of common stock by the selling stockholder but will receive the exercise price of the Warrant to the extent the Warrant is exercised by the selling stockholder. In conjunction with the Private Placement, the Company entered into a registration rights agreement whereby the Company is required to register for resale and maintain the effectiveness of the registration statement which registers the resale of shares of common stock held by the selling stockholder. Pursuant to the registration rights agreement, the Company is liable for certain liquidated damages upon failure to comply with such registration rights. The Company measures the warrant at fair value by using the Black-Scholes model in each reporting period until it is exercised or expired, with changes in the fair values being recognized in the Company’s statement of operations .The Company performed a valuation of the new warrant and determined its fair value at issuance to be $13,995,000, expected term 5.26 years, equity volatility 90% and risk-free rate of return 3.2%. The fair value, as of December 31, 2022, was $3,372,000, expected term 4.74 years, equity volatility 125% and risk-free rate of return 4%. The Company issued a purchase option to the underwriters (the “Underwriter Option”) exercisable within five |
Loss Per Common Share
Loss Per Common Share | 12 Months Ended |
Dec. 31, 2022 | |
Loss Per Common Share | |
Loss Per Common Share | 12. Loss Per Common Share Basic net loss per common share is computed using the weighted average common shares outstanding during the year. Diluted net loss per common share reflects the potential dilution from assumed conversion of all dilutive securities such as unvested restricted stock units and warrants using the treasury stock method. When the effects of the outstanding restricted stock units and warrants are anti-dilutive, they are not included in the calculation of diluted net loss per common share. The following table sets forth the computation of basic and diluted net loss per share for the years ended December 31, 2022 and 2021: 2022 2021 Net loss $ (6,168,931) $ (7,923,607) Basic weighted average common shares 14,676,369 10,675,765 Diluted weighted average common shares 14,676,369 10,675,765 Basic net loss per common share $ (0.42) $ (0.74) Year Ended December 31, 2022 2021 Outstanding Warrants 1,500,000 — Restricted stock units, including market based RSUs 1,451,448 626,268 Total 2,951,448 626,268 |
Income Taxes
Income Taxes | 12 Months Ended |
Dec. 31, 2022 | |
Income Taxes. | |
Income Taxes | 13. Income Taxes Income tax benefit consisted of the following: December 31, 2022 December 31, 2021 Current Expense: Federal $ — $ — State — — — — Deferred Benefit: Federal 414,299 266,278 State 86,955 53,860 501,254 320,138 Total Income Tax Benefit $ 501,254 $ 320,138 The significant components of the Company’s deferred tax assets and liabilities at December 31, 2022 and at December 31, 2021 are as follows: December 31, 2022 December 31, 2021 Federal Net Operating Loss $ 1,938,600 $ 205,018 State Net Operating Loss 219,293 42,419 Capitalized R&D 501,533 — Fixed Assets (506,458) (536,567) Tax Credits 67,911 5,968 Stock Compensation 782,991 66,822 Accrued Compensation and Other Expenses 94,811 Right of Use Assets (388,355) — Lease Liability 395,297 — Other 547 217 Prepaid Expenses (160,854) (285,131) Total gross deferred tax assets/(liabilities) 2,945,316 (501,254) Less valuation allowance (2,945,316) — Net deferred tax assets/(liabilities) $ — $ (501,254) A reconciliation of the statutory U.S. federal income tax rate to the Company's effective tax rate is as follows: December 31, 2022 December 31, 2021 Federal Statutory Rate 21.0% 21.00% Permanent Differences (0.07)% (0.10)% Transaction Costs (9.69)% - State Taxes 6.06% 4.32% Credits 0.93% 0.48% Valuation Allowance (44.16)% - Change in Fair Value of Warrant Liability 33.4% - Effective Tax Rate 7.51% 25.70% At December 31, 2022, the Company had federal and state net operating loss (NOL) carryforwards of approximately $9,231,000 and $6,908,000, respectively. The federal and state net operating losses (“NOL's”) were generated after 2017 and can be carried forward indefinitely. At December 31, 2022, the Company had federal research and development (R&D) credit carryforwards of approximately $68,000. If not utilized, the federal R&D credits will begin to expire in 2041 In assessing the realizability of the net deferred tax assets, the Company considers all relevant positive and negative evidence to determine whether it is more likely than not that some portion of the deferred income tax will not be realized. The realization of the gross deferred tax assets is dependent on several factors, including the generation of sufficient taxable income prior to expiration of the net operation loss carryforwards. At December 31, 2022, the Company has recorded a full valuation allowance against its net deferred tax assets of approximately $2,945,000 . The change in the valuation allowance during the year ended 2022 was approximately $2,945,000 . Sections 382 and 383 of the Internal Revenue Code, and similar state regulations, contain provisions that may limit the NOL carryforwards available to be used to offset income in any given year upon the occurrence of certain events, including changes in the ownership interests of significant stockholders. In the event of a cumulative change in ownership in excess of 50% over a three-year period, the amount of the NOL carryforwards that the Company may utilize in any one year may be limited. The Company has not undertaken a formal analysis to determine if a change in ownership occurred during 2022 or 2021. Entities are also required to evaluate, measure, recognize and disclose any uncertain income tax provisions taken on their income tax returns. The Company has analyzed its tax positions and has concluded that as of December 31, 2022, there were no uncertain positions. The Company's U.S. federal and state net operating losses have occurred since its inception in 2009 and as such, tax years subject to potential tax examination could apply from that date because the utilization of net operating losses from prior years opens the relevant year to audit by the IRS and/or state taxing authorities. Interest and penalties, if any, as they relate to income taxes assessed, are included in the income tax provision. The Company did no t have any unrecognized tax benefits and has not accrued any interest or penalties for the 12 months ended December 31, 2022 and 2021. |
Business Combination
Business Combination | 12 Months Ended |
Dec. 31, 2022 | |
Business Combination | |
Business Combination | 14. Business Combination On October 1, 2022 The most valuable asset acquired was the assembled workforce (two founders) and subsumed as part of the transaction. The intent of acquiring GSI Technology was to support and drive the Company’s Public Sector and Enterprise IAQ sales and business development efforts. Historical revenues of GSI Technology were minimal and its customer base was not comprised of long-term contracts with high percentages of renewals to which value could be placed upon customer contracts. By the time the transaction closed, the Company had already concluded that GSIs underlying technology was still in alpha stage and unproven. Additionally, the Company completed the merger with Molekule Inc. whereby that underlying technology would be the foundation of the Company prospectively. GSI Inc. hasn’t generated any revenue since acquisition. |
Subsequent Events
Subsequent Events | 12 Months Ended |
Dec. 31, 2022 | |
Subsequent Events | |
Subsequent Events | 15. Subsequent Events Acquisition of Molekule Inc. January 12, 2023 The Company’s mission is to establish itself as the leader in creating a safe indoor environment, free of dangerous pathogens, particles, allergens, mold and fungi, for the healthcare, commercial office, educational and transportation marketplaces. The Company’s goal is to become the leading provider of airborne pathogen-eradication solutions, through the application of air sanitization using its UV-C LED and UV light and filtration media technologies, and to create comprehensive solutions for at-risk enclosed spaces across hospitals, outpatient treatment facilities, universities and schools, senior living and nursing homes, non-hospital healthcare facilities, commercial buildings and the human transport and travel industries. Upon closing of the acquisition of Molekule, Inc. on January 12, 2023, the Company assumed indebtedness under (1) a Loan and Security Agreement with Silicon Valley Bank, (2) a Mezzanine Loan and Security Agreement with Silicon Valley Bank and (3) a Facility Term Loan with Trinity Capital. Senior Term Loan . April 1, 2026 Mezzanine Term Loan March 2027 March 2028 Facility Term Loan April 1, 2026 On March 10, 2023, SVB was closed by the California Department of Financial Protection and Innovation, which appointed the FDIC as receiver. At the time of the closure and as of the date of this Annual Report, the Company held assets in securities in sweep accounts purchased through SVB but managed in segregated custodial accounts by a third-party asset manager. On March 13, 2023, the FDIC announced that all of SVB’s deposits and substantially all of its assets had been transferred to a newly created, full-service FDIC-operated bridge bank, SVBB. SVBB assumed all loans that were previously held by SVB. On March 27, 2023, First-Citizens Bank & Trust Company assumed all of SVBB’s customer deposits and certain other liabilities and acquired substantially all of SVBB’s loans and certain other assets from the FDIC. While the Company has had full access to the assets in its sweep accounts since March 13, 2023, it may be impacted by other disruptions to the U.S. banking system caused by the recent developments involving SVB, including potential delays in its ability to transfer funds and potential delays in making payments to vendors while new banking relationships are established Acquisition of Aura Smart Air On February 26, 2023 The Agreement provides that, upon the terms and subject to the conditions set forth in the Agreement, and in accordance with the Israeli Companies Law, Merger Sub shall be merged with and into Aura, and Aura will continue as a wholly owned subsidiary of the Company (the “Merger”). At the closing of the Merger, upon the terms and subject to the conditions set forth in the Agreement, each ordinary share of Aura issued and outstanding immediately prior to the closing of the Merger will be converted into the right to receive from Molekule a number of validly issued, fully paid and nonassessable shares of Molekule common stock equal to (A) 3,519,105, divided by Each of Molekule, Merger Sub and Aura has provided customary representations, warranties and covenants in the Agreement. The completion of the Merger is subject to various closing conditions, including Aura obtaining the requisite shareholder approval and an Israeli tax ruling regarding withholding tax, Molekule’s registration statement on Form S-4 being declared effective by the U.S. Securities and Exchange Commission (the “SEC”) and the Israel Securities Authority (the “ISA”) and the listing of the Molekule common stock on the TASE. The Agreement contains customary termination rights for both the Company and Aura. Both the Company and Aura have the right to terminate the Agreement if the closing of the Merger does not occur on or before September 30, 2023. The Merger is expected to close early in the second half of 2023. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2022 | |
Summary of Significant Accounting Policies | |
Basis of Presentation | Basis of Presentation The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the accounting and disclosure rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) and include its wholly owned subsidiary, Germsweepusa, Inc. (“GSI Technology”). All significant intercompany accounts and transactions have been eliminated in consolidation. The Company is an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. The Company has elected to avail itself of this exemption from new or revised accounting standards and, therefore, the financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of the public company effective dates. |
Use of Estimates | Use of Estimates The preparation of the Company’s financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and expenses and related disclosure of contingent assets and liabilities. Significant estimates in these financial statements include those related to the fair value of equity-based compensation, revenue recognition, the incremental borrowing rate for leases, warrant liability, and deferred tax valuation allowance. On an ongoing basis, the Company evaluates its estimates, judgments and methodologies. The Company bases its estimates on historical experience and on various other assumptions believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Due to the inherent uncertainty involved in making estimates, actual results could differ materially from those estimates. |
Revenue Recognition | Revenue Recognition The Company recognizes revenues related to sales of products upon the customer obtaining control of promised goods, in an amount that reflects the consideration that is expected to be received in exchange for those goods. To determine revenue recognition for arrangements within the scope of ASC Topic 606, Revenue from Contracts with Customers, |
Income Taxes | Income Taxes Prior to the Public Offering, the Company was a limited liability company and was treated as a partnership for federal and state income tax purposes. Therefore, no provision for income taxes had been included in the financial statements since taxable income or loss was allocated to members, who were responsible for any taxes thereon, in accordance with the provisions of the operating agreement. On November 23, 2021 in conjunction with the Public Offering, the Company incorporated in the State of Delaware. The Company recognizes and measures its unrecognized tax benefit in accordance with FASB ASC 740, Income Taxes. The Company provides deferred income taxes for temporary differences between the amounts of assets and liabilities recognized for financial reporting purposes and such amounts recognized for income tax purposes. Deferred income taxes are computed using enacted tax rates that are expected to be in effect when the temporary differences reverse. Under that guidance, management assesses the likelihood that tax positions will be sustained upon examination based on the facts, circumstances and information available at the end of each period, including the technical merits of those positions. The measurement of unrecognized tax benefits is adjusted when new information is available or when an event occurs that requires a change. For the years ended December 31, 2022, and 2021, the Company did not identify any uncertain tax positions taken or expected to be taken in an income tax return that would require adjustment to, or disclosure in, its financial statements. |
Research & Development Expenses | Research & Development Expenses Research and development expenses are expensed as incurred and consist principally of contract labor and third-party engineering, product development and testing costs related to the development of medical grade air purification devices and related components as well as concepts for future product development. |
Share-based Payments | Share-based Payments The Company accounts for share-based payments to employees and non-employees in accordance with the provisions of FASB ASC 718, Compensation — Stock Compensation (“ASC 718”). Under ASC 718, the Company measures the share-based compensation cost on the date of grant, based on the fair value of the award, and expense is recognized over the requisite service period. The fair value of the restricted stock units granted under the 2021 Long-Term Incentive Plan is the quoted closing price per share on the date of grant. |
Accounts Receivable | Accounts Receivable Trade accounts receivable are stated net of an allowance for doubtful accounts. The Company estimates the allowance for doubtful accounts based on review and analysis of specific customer balances that may not be collectible and how recently payments have been received. Accounts are considered for write-off when they become past due and when it is determined that the probability of collection is remote. As of December 31, 2022 and 2021, there was no allowance for doubtful accounts. |
Inventories | Inventories The Company values inventories at the lower of cost or net realizable value using the first-in, first-out or weighted average cost method. Net realizable value is the estimated selling price in the ordinary course of business, less reasonable predictable costs of completion, disposal and transportation. Inventories on hand at December 31, 2022 and 2021 consisted primarily of spare parts and finished goods. |
Warranty Costs | Warranty Costs The Company provides a three-year warranty on its Pūrgo device from the date of sale to its customers. The Company’s policy is to record a provision for estimated future costs related to warranty expense when they are probable and reasonably estimable, which is when revenue is recognized. There was no warranty accrual as of December 31, 2022 and 2021, respectively. |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash and cash equivalents. The Company did not have any cash equivalents as of December 31, 2022 and 2021. |
Property and Equipment | Property and Equipment Property and equipment are stated at cost and depreciated generally under the straight-line method over their estimated useful lives (or the lesser of the term of the lease for leasehold improvements, as appropriate), except for tooling, which is depreciated utilizing the units-of-production and straight-line method. The Company periodically reviews long-lived assets including the right-of-use assets for impairment whenever events or changes in business circumstance indicate that the carrying value of the assets may not be recoverable. Under those circumstances, if the fair value were less than the carrying amount of the asset, the Company would recognize a loss for the difference. The Company has determined that long-lived assets were not impaired during the years ended December 31, 2022 and 2021. |
Offering Costs | Offering Costs The Company capitalizes certain legal, accounting and other third-party fees directly associated with in-process equity financing as deferred offering costs. Deferred offering costs were offset against the proceeds from the Public Offering. |
Common Stock Equivalents | Common Stock Equivalents The Company has potential common stock equivalents related to its outstanding restricted stock units and warrants. These potential common stock equivalents are not included in diluted loss per share for any period presented in which there is a net loss because the effect would have been anti-dilutive. |
Fair Value Measurements | Fair Value Measurements Certain assets and liabilities are carried at fair value in accordance with U.S. GAAP. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants at the measurement date. A three-tier fair value hierarchy that prioritizes the inputs used in the valuation methodologies, is as follows: Level 1 Level 2 Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs observable or that can be corroborated by observable market data. Level 3 Valuations based on unobservable inputs reflecting the Company’s own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment. At December 31, 2022 and 2021, the carrying amounts of the Company’s financial instruments, including cash, prepaid expenses and other current assets, accounts payable and accrued liabilities approximated their respective fair value due to the short-term nature of these instruments. |
Financial Instruments - Derivatives | Financial Instruments – Derivatives |
Operating Segment | Operating Segment The Company operates in one segment. All of the Company’s assets are in the United States of America. |
Concentrations of Credit Risk | Concentrations of Credit Risk The Company maintains its cash at a major financial institution with high credit quality, and at times, the balance in its cash deposits may exceed the Federal Deposit Insurance Corporation (the “FDIC”) limits of $250,000. The Company has not experienced and does not anticipate any losses on deposits with commercial banks and financial institutions that exceed federally insured limits. On March 10, 2023, Silicon Valley Bank (“SVB”) was closed by the California Department of Financial Protection and Innovation, which appointed the FDIC as receiver. At the time of the closure and as of the date of this financial statemetns, the Company held assets in securities in sweep accounts purchased through SVB but managed in segregated custodial accounts by a third-party asset manager. On March 13, 2023, the (“ FDIC”) announced that all of SVB’s deposits and substantially all of its assets had been transferred to a newly created, full-service FDIC-operated bridge bank, Silicon Valley Bridge Bank, N.A (“SVBB”). SVBB assumed all loans that were previously held by SVB. On March 27, 2023, First-Citizens Bank & Trust Company assumed all of SVBB’s customer deposits and certain other liabilities and acquired substantially all of SVBB’s loans and certain other assets from the FDIC. The Company has had full access to the assets in the sweep accounts since March 13, 2023. The uncertainty of the situation has the potential to have a financial impact to the Company that cannot be reasonably estimated at this time. The Company’s suppliers and vendors include engineering firms and consultants, research and development companies, testing laboratories, contract manufacturers and other suppliers required to design, test and manufacture its products. The Company obtains some of its services from a limited group of vendors; however, the Company has neither experienced any significant disruptions nor expects any significant disruptions to its operations due to supplier concentration. There were no expenditures with any vendor that exceeded 10% of total expenditures for the year ended December 31, 2022. The Company’s largest and second supplier accounted for 13% and 11% of total expenditures, respectively for the years ended December 31, 2022 and 2021, respectively, while its second largest supplier accounted for 11% and 33% of total expenditures for the year ended December 31, 2021. Significant customers may change from year to year depending on the overall level of activity and the sales of the Company’s products to each customer. During the year ended December 31, 2022, the Company’s largest and second largest customers accounted for approximately 13% and 12% of the Company’s revenues, respectively. During the year ended December 31, 2022, the Company’s largest and second largest customers accounted for approximately 45% and 12% of the Company’s revenues, respectively. |
Business Combinations and Acquisitions | Business Combinations and Acquisitions The Company accounts for acquisitions as business combinations using the acquisition method of accounting in accordance with ASC 805, Business Combinations. The Company accounts for acquisitions in which it obtains control of one or more businesses as a business combination. The purchase price of the acquired businesses is allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values at the acquisition date. The excess of the purchase price over those fair values is recognized as goodwill. During the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments, in the period in which they are determined, to the assets acquired and liabilities assumed with the corresponding offset to goodwill. If the assets acquired are not a business, the Company accounts for the transaction or other event as an asset acquisition. Under both methods, the Company recognizes the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquired entity. In addition, for transactions that are business combinations, the Company evaluates the existence of goodwill as gain from a bargain purchase. |
Goodwill | Goodwill Goodwill represents the excess of the aggregate consideration paid for an acquisition over the fair value of the assets acquired and liabilities assumed. The Company has recorded goodwill in connection with its business combination with GSI Technology on October 1, 2022 (See Note 14). In accordance with U.S. GAAP, the Company will test goodwill for impairment annually in October each year or whenever events or circumstances make it more likely than not that impairment may have occurred. Such events and circumstances may be a significant change in business climate, economic and industry trends, legal factors, negative performance indicators, or significant competition or changes in strategy. For the purposes of that assessment, the Company has determined to assign the goodwill acquired in the business combination to a single reporting unit. |
JOBS Act Accounting Election | JOBS Act Accounting Election The Company is an “emerging growth company,” as defined in the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. The Company has elected to avail itself of this exemption from new or revised accounting standards and, therefore, the financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of the public company effective dates. |
Recent Accounting Standards | Recent Accounting Standards The Company has reviewed recent accounting pronouncements and, with the exception of the below, concluded they are either not applicable to the business or no material effect is expected on the financial statements as a result of future adoption. In June 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments - Credit Losses, which was subsequently amended by ASU No. 2018-19 and ASU No. 2019-10, and which requires the measurement of expected credit losses for financial instruments carried at amortized cost held at the reporting date based on historical experience, current conditions and reasonable forecasts. The updated guidance also amends the current other-than-temporary impairment model for available-for-sale debt securities by requiring the recognition of impairments relating to credit losses through an allowance account and limits the amount of credit loss to the difference between a security’s amortized cost basis and its fair value. In addition, the length of time a security has been in an unrealized loss position will no longer impact the determination of whether a credit loss exists. The main objective of this ASU is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The standard is effective for the fiscal year beginning after December 15, 2022. The Company will continue to assess the possible impact of this standard, but it currently does not expect that the adoption of this standard will have a significant impact on its financial statements and its limited history of bad debt expense relating to trade accounts receivable. Recent Accounting Standards Adopted In February 2016, the FASB issued ASU 2016-02, Leases (“Topic 842”), which supersedes ASC Topic 840, Leases. Topic 842 requires lessees to recognize most leases on their balance sheets as a right-of use asset with a corresponding lease liability. The update also expands the required quantitative and qualitative disclosures surrounding leases. The Company adopted ASC 842 on January 1, 2022 using the modified retrospective transition approach under ASC 842 to not restate comparative periods in transition and use the effective date of ASC 842 as the date of initial adoption. The Company only has one operating lease in place related to its warehouse, distribution facility and corporate headquarters for a 10-year term. At the date of adoption, the Company’s remaining lease payments of $2,696,254 will be discounted using its incremental borrowing rate to record the right of use asset and corresponding lease liability. Refer to Note 8, Leases. |
Inventories (Tables)
Inventories (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Inventories | |
Schedule of Inventories | Inventory consisted of the following: December 31, 2022 2021 Raw materials $ 712,752 $ 475,767 Finished goods 1,307,961 170,175 Total inventories $ 2,020,713 $ 645,942 |
Property and Equipment (Tables)
Property and Equipment (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Property and Equipment | |
Schedule of Property and Equipment | Property and equipment consisted of the following: Useful Life December 31, (Years) 2022 2021 Leasehold improvements Lesser of useful life or lease term $ 847,217 $ 847,217 Machinery and tooling 7 1,270,652 1,123,391 Furniture and equipment 3 - 10 241,835 232,466 2,359,704 2,203,074 Less: accumulated depreciation 240,570 79,646 $ 2,119,134 $ 2,123,428 |
Accrued Expenses and Other Cu_2
Accrued Expenses and Other Current Liabilities (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Accrued Expenses and Other Current Liabilities | |
Schedule of Accrued Expenses and Other Current Liabilities | Accrued expenses and other current liabilities consisted of the following as of: December 31, 2022 2021 Accrued wages and bonus $ 514,169 $ 408,418 Research and development 47,547 35,708 Professional and consulting fees 16,876 13,120 Accrued legal fees 439,901 29,512 Other accrued liabilities 209,909 97,127 Total accrued expenses and other current liabilities $ 1,228,402 $ 583,885 |
Leases (Tables)
Leases (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Leases | |
Schedule of Future Minimum Lease Payments Under Non-Cancellable Operating Leases | Future minimum lease payments under noncancellable operating leases as of December 31, 2022 were as follows: Years ending December 31, 2023 $ 272,058 2024 278,858 2025 285,829 2026 292,975 2027 300,299 Thereafter 1,000,801 Total Lease Payments $ 2,430,820 Less: Imputed Interest (795,620) Total Lease Liability $ 1,635,200 |
Stockholders' Equity (Tables)
Stockholders' Equity (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Stockholders' Equity | |
Schedule of Restricted Stock Unit Activity | The following is the restricted stock unit activity for the year ended December 31, 2022: Number of Shares Weighted Average Grant Date Fair Value per Share Weighted Average Remaining vesting Period (in years) Outstanding January 1, 2022 626,268 10.00 Awarded 825,180 2.34 Vested (268,335) 10.00 Forfeited - Outstanding December 31, 2022 1,183,113 4.65 2.15 |
Loss Per Common Share (Tables)
Loss Per Common Share (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Loss Per Common Share | |
Schedule of Basic and Diluted Net Loss Per Share | The following table sets forth the computation of basic and diluted net loss per share for the years ended December 31, 2022 and 2021: 2022 2021 Net loss $ (6,168,931) $ (7,923,607) Basic weighted average common shares 14,676,369 10,675,765 Diluted weighted average common shares 14,676,369 10,675,765 Basic net loss per common share $ (0.42) $ (0.74) |
Schedule of Anti-Dilutive Shares Excluded From EPS | Year Ended December 31, 2022 2021 Outstanding Warrants 1,500,000 — Restricted stock units, including market based RSUs 1,451,448 626,268 Total 2,951,448 626,268 |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Income Taxes. | |
Schedule of Income Tax Benefit | Income tax benefit consisted of the following: December 31, 2022 December 31, 2021 Current Expense: Federal $ — $ — State — — — — Deferred Benefit: Federal 414,299 266,278 State 86,955 53,860 501,254 320,138 Total Income Tax Benefit $ 501,254 $ 320,138 |
Schedule of Deferred Tax Assets and Liabilities | The significant components of the Company’s deferred tax assets and liabilities at December 31, 2022 and at December 31, 2021 are as follows: December 31, 2022 December 31, 2021 Federal Net Operating Loss $ 1,938,600 $ 205,018 State Net Operating Loss 219,293 42,419 Capitalized R&D 501,533 — Fixed Assets (506,458) (536,567) Tax Credits 67,911 5,968 Stock Compensation 782,991 66,822 Accrued Compensation and Other Expenses 94,811 Right of Use Assets (388,355) — Lease Liability 395,297 — Other 547 217 Prepaid Expenses (160,854) (285,131) Total gross deferred tax assets/(liabilities) 2,945,316 (501,254) Less valuation allowance (2,945,316) — Net deferred tax assets/(liabilities) $ — $ (501,254) |
Schedule of Effective Income Tax | A reconciliation of the statutory U.S. federal income tax rate to the Company's effective tax rate is as follows: December 31, 2022 December 31, 2021 Federal Statutory Rate 21.0% 21.00% Permanent Differences (0.07)% (0.10)% Transaction Costs (9.69)% - State Taxes 6.06% 4.32% Credits 0.93% 0.48% Valuation Allowance (44.16)% - Change in Fair Value of Warrant Liability 33.4% - Effective Tax Rate 7.51% 25.70% |
Description of Business (Detail
Description of Business (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Description of Business | ||
Net income (loss) | $ (6,168,931) | $ (7,923,607) |
Accumulated deficit | (7,916,791) | (1,747,860) |
Net cash used in operating activities | $ (10,638,912) | $ (7,795,087) |
Description of Business - Addit
Description of Business - Additional Information (Details) - USD ($) | 12 Months Ended | |
Nov. 29, 2021 | Dec. 31, 2021 | |
Subsidiary, Sale of Stock [Line Items] | ||
Proceeds from public offering | $ 25,140,000 | |
Initial public offering | ||
Subsidiary, Sale of Stock [Line Items] | ||
Proceeds from public offering | $ 25,140,000 | |
Net Proceeds From Issuance Initial Public Offering | $ 21,640,000 |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Details) | 12 Months Ended | |
Dec. 31, 2022 USD ($) | Dec. 31, 2021 | |
Number of operating segments | 1 | |
FDIC insured cash | $ 250,000 | |
Number of operating leases | 1 | |
Operating leases, weighted-average remaining lease term | 10 years | |
Operating leases, current and non-current payments due | $ 2,696,254 | |
Significant Supplier One | Total Expenditures | Supplier Concentration Risk | ||
Concentration risk percentage | 13% | 11% |
Significant Supplier Two | Total Expenditures | Supplier Concentration Risk | ||
Concentration risk percentage | 11% | 33% |
Significant Customer One | Total Revenue | Customer Concentration Risk | ||
Concentration risk percentage | 13% | 45% |
Significant Customer Two | Total Revenue | Customer Concentration Risk | ||
Concentration risk percentage | 12% | 12% |
Purgo air purification devices | ||
Product warranty term | 3 years |
Initial Public Offering (Detail
Initial Public Offering (Details) | 12 Months Ended | |||
Nov. 29, 2021 USD ($) $ / shares shares | Nov. 23, 2021 shares | Dec. 31, 2021 USD ($) | Dec. 31, 2022 shares | |
Subsidiary, Sale of Stock [Line Items] | ||||
Proceeds from public offering | $ | $ 25,140,000 | |||
Common stock, shares authorized | 110,000,000 | |||
Preferred stock, shares authorized | 11,000,000 | |||
Initial public offering | ||||
Subsidiary, Sale of Stock [Line Items] | ||||
Number of common stock shares issued | 2,514,000 | |||
Offering price per share | $ / shares | $ 10 | |||
Underwriting fees | $ | $ 2,200,000 | |||
Other underwriting fees payable | $ | 1,300,000 | |||
Proceeds from public offering | $ | 25,140,000 | |||
Net Proceeds From Issuance Initial Public Offering | $ | $ 21,640,000 | |||
Number of member units outstanding | 13,428,948 | |||
Number of common shares issued in conversion | 11,363,636 | |||
Member shares to common shares, conversion ratio | 0.8462 | |||
Common stock, shares authorized | 110,000,000 | |||
Preferred stock, shares authorized | 11,000,000 | |||
Underwriters purchase option | ||||
Subsidiary, Sale of Stock [Line Items] | ||||
Exercisable term | 5 years | |||
Percentage of common shares exercisable | 5% | |||
Common stock, shares exercisable | 125,700 | |||
Exercise price | $ / shares | $ 12.50 |
Prepaid Expenses and Other Cu_2
Prepaid Expenses and Other Current Assets (Details) - USD ($) | Dec. 31, 2022 | Dec. 31, 2021 |
Prepaid Expenses and Other Current Assets | ||
Prepaid expenses and other current assets | $ 665,395 | $ 1,124,998 |
Inventories (Details)
Inventories (Details) - USD ($) | Dec. 31, 2022 | Dec. 31, 2021 |
Inventories | ||
Raw materials | $ 712,752 | $ 475,767 |
Finished goods | 1,307,961 | 170,175 |
Total inventories | $ 2,020,713 | $ 645,942 |
Property and Equipment (Details
Property and Equipment (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Property and Equipment, Net | ||
Property and equipment, gross | $ 2,359,704 | $ 2,203,074 |
Less accumulated depreciation | 240,570 | 79,646 |
Property and equipment, net | 2,119,134 | 2,123,428 |
Depreciation | 160,924 | 79,646 |
Leasehold improvements | ||
Property and Equipment, Net | ||
Property and equipment, gross | $ 847,217 | 847,217 |
Machinery and tooling | ||
Property, Plant and Equipment [Line Items] | ||
Useful life (in years) | 7 years | |
Property and Equipment, Net | ||
Property and equipment, gross | $ 1,270,652 | 1,123,391 |
Furniture and equipment | ||
Property and Equipment, Net | ||
Property and equipment, gross | $ 241,835 | $ 232,466 |
Furniture and equipment | Minimum | ||
Property, Plant and Equipment [Line Items] | ||
Useful life (in years) | 3 years | |
Furniture and equipment | Maximum | ||
Property, Plant and Equipment [Line Items] | ||
Useful life (in years) | 10 years |
Accrued Expenses and Other Cu_3
Accrued Expenses and Other Current Liabilities (Details) - USD ($) | Dec. 31, 2022 | Dec. 31, 2021 |
Accrued Expenses and Other Current Liabilities | ||
Accrued wages and bonus | $ 514,169 | $ 408,418 |
Research and development | 47,547 | 35,708 |
Professional and consulting fees | 16,876 | 13,120 |
Accrued Legal Fees | 439,901 | 29,512 |
Other accrued liabilities | 209,909 | 97,127 |
Total accrued expenses and other current liabilities | $ 1,228,402 | $ 583,885 |
Leases (Details)
Leases (Details) | Feb. 01, 2021 USD ($) ft² | Dec. 31, 2022 USD ($) | Jan. 01, 2022 USD ($) |
Lessee, Lease, Description [Line Items] | |||
Operating lease right-of-use assets | $ 1,606,485 | ||
Operating lease liability | $ 1,635,200 | ||
Gardens Bio Science Partners, LLC | |||
Lessee, Lease, Description [Line Items] | |||
Operating lease term of contract | 10 years | ||
Area of leased premises | ft² | 20,000 | ||
Operating lease payments | $ 260,000 | ||
Operating lease escalation rate | 2.50% | ||
Company's incremental borrowing rate | 9.99% | ||
Operating lease right-of-use assets | $ 1,731,905 |
Leases - Components of Lease Ex
Leases - Components of Lease Expense (Details) | 12 Months Ended |
Dec. 31, 2022 USD ($) | |
Leases | |
Operating Lease Cost | $ 294,137 |
Operating cash flows from operating leases | $ 265,421 |
Operating lease remaining lease term | 98 months |
Leases - Schedule of Future Min
Leases - Schedule of Future Minimum Lease Payments (Details) | Dec. 31, 2022 USD ($) |
Leases | |
2023 | $ 272,058 |
2024 | 278,858 |
2025 | 285,829 |
2026 | 292,975 |
2027 | 300,299 |
Thereafter | 1,000,801 |
Total Lease Payments | 2,430,820 |
Less: Imputed Interest | (795,620) |
Total Lease Liability | $ 1,635,200 |
Commitments and Contingencies (
Commitments and Contingencies (Details) | 12 Months Ended | ||||
Oct. 03, 2022 shares | Aug. 10, 2022 USD ($) | May 01, 2021 shares | Nov. 01, 2020 | Dec. 31, 2022 USD ($) | |
Legal Proceedings | |||||
Other Commitments [Line Items] | |||||
Estimated litigation liability | $ 0 | ||||
Indemnities, Commitments and Guarantees | Executives | |||||
Other Commitments [Line Items] | |||||
Number of contingent employment agreements | 2 | ||||
Executive management severance period in the event of termination | 6 months | ||||
Restricted stock units granted to executives in IPO | shares | 705,090 | ||||
Indemnities, Commitments and Guarantees | Independent contractors | |||||
Other Commitments [Line Items] | |||||
Cash compensation, percentage | 50% | ||||
Equity compensation, percentage | 50% | ||||
Indemnities, Commitments and Guarantees | Initial public offering | Executives | |||||
Other Commitments [Line Items] | |||||
Restricted stock units granted to executives in IPO | shares | 443,269 | ||||
Sales Agency Agreement | |||||
Other Commitments [Line Items] | |||||
Sales Agency Agreement term | 1 year | ||||
Guaranteed payments expensed | $ 350,000 | ||||
Sales Agency Agreement | Minimum | |||||
Other Commitments [Line Items] | |||||
Guaranteed minimum monthly payments | $ 502,500 | ||||
Sales Agency Agreement | Maximum | |||||
Other Commitments [Line Items] | |||||
Sales Agency Agreement renewal term | 5 years | ||||
Guaranteed minimum monthly payments | $ 667,500 | ||||
Registration Rights Agreement | Minimum | |||||
Other Commitments [Line Items] | |||||
Common stock ownership threshold for parties subject to the Registration Rights Agreement | 10% |
Related Party Transactions (Det
Related Party Transactions (Details) - USD ($) | 1 Months Ended | 12 Months Ended | |
Nov. 05, 2021 | Dec. 31, 2022 | Dec. 31, 2021 | |
Related Party Transactions | |||
Accounts receivable | $ 36,188 | $ 177,064 | |
Affiliated Related Parties | |||
Related Party Transactions | |||
Product revenues | 16,889 | 80,000 | |
Accounts receivable | $ 9,616 | $ 63,290 | |
Affiliated Related Parties | Bridge Loans | |||
Related Party Transactions | |||
Related party borrowings | $ 500,000 | ||
Related party borrowings, variable rate on notes | 3% | ||
Related party borrowings, base rate on notes | 6.25% |
Stockholders' Equity - Common S
Stockholders' Equity - Common Stock and Preference Shares (Details) | Nov. 29, 2021 USD ($) shares | Dec. 31, 2022 item $ / shares shares | Nov. 23, 2021 shares |
Common stock, shares authorized | 110,000,000 | ||
Common stock, par value | $ / shares | $ 0.01 | ||
Number of votes per share | item | 1 | ||
Preferred Stock, Shares Authorized | 11,000,000 | ||
Preferred Stock, Par or Stated Value Per Share | $ / shares | $ 0.01 | ||
Initial public offering | |||
Common stock, shares authorized | 110,000,000 | ||
Number of common stock shares issued | 2,514,000 | ||
Net proceeds from public offering | $ | $ 21,640,000 | ||
Preferred Stock, Shares Authorized | 11,000,000 | ||
Maximum | |||
Common stock, shares authorized | 110,000,000 |
Stockholders' Equity - Long-ter
Stockholders' Equity - Long-term Incentive Plan (Details) - USD ($) | 12 Months Ended | |||
Nov. 29, 2021 | Dec. 31, 2022 | Dec. 31, 2021 | Nov. 23, 2021 | |
Restricted stock units, granted | 825,180 | |||
Vesting period | 2 years 1 month 24 days | |||
Equity-based compensation | $ 2,975,301 | $ 1,188,086 | ||
LTIP | ||||
Common stock shares reserved for future issuance | 3,963,916 | 1,386,364 | 4,379,825 | |
Unrecognized compensation cost | $ 4,956,120 | |||
Weighted Average Remaining Life, Stock Awards | 2 years 1 month 24 days | |||
Share Price, Stock Awards | $ 4.65 | |||
LTIP | Maximum | ||||
Vesting period | 3 years | |||
LTIP | Minimum | ||||
Vesting period | 2 years | |||
LTIP | Selling, general and administrative expense. | ||||
Equity-based compensation | $ 2,975,301 | $ 263,648 | ||
LTIP | Members of management | ||||
Restricted stock units, granted | 443,269 | |||
LTIP | Members of the Board | ||||
Restricted stock units, granted | 182,999 |
Stockholders' Equity - Restrict
Stockholders' Equity - Restricted stock unit activity (Details) | 12 Months Ended |
Dec. 31, 2022 $ / shares shares | |
Restricted stock unit activity | |
RSU's, beginning balance | shares | 626,268 |
RSU's granted | shares | 825,180 |
RSU's vested | shares | (268,335) |
RSU's, ending balance | shares | 1,183,113 |
Weighted-average grant date FV per share, beginning balance | $ / shares | $ 10 |
Weighted-average grant date FV per share, granted | $ / shares | 2.34 |
Weighted-average grant date FV per share, vested | $ / shares | 10 |
Weighted-average grant date FV per share, ending balance | $ / shares | $ 4.65 |
Vesting period | 2 years 1 month 24 days |
Stockholders' Equity - Members'
Stockholders' Equity - Members' Units (Details) - Members' units | 11 Months Ended | 12 Months Ended | 21 Months Ended | |
Apr. 01, 2021 shares | Nov. 29, 2021 shares | Dec. 31, 2022 USD ($) Vote | Dec. 31, 2022 USD ($) Vote | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Non-Cash Stock Compensation Expense | $ | $ 924,438 | |||
Class A | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Number of share units authorized | 274,314 | |||
Class A | Board Members | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Member shares, number of votes per unit | Vote | 1 | 1 | ||
Number of units issued | 5,073,056 | |||
Gross proceeds from units issued | $ | $ 5,073,056 | |||
Board members | Class A | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Number of units issued | 134,229 | |||
Independent contractor | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Cash compensation, percentage | 50% | |||
Independent contractor | Class A | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Number of units issued | 140,085 | |||
Equity compensation, percentage | 50% |
Stockholders' Equity - Private
Stockholders' Equity - Private Placement (Details) - USD ($) | 12 Months Ended | ||||
Jul. 21, 2022 | Jun. 29, 2022 | Jun. 21, 2022 | Nov. 29, 2021 | Dec. 31, 2022 | |
Amount charged to expense | $ 1,326,212 | ||||
Private placement | |||||
Gross proceeds from private placement | $ 15,000,000 | ||||
Net proceeds | 13,578,551 | ||||
Issuance costs | 1,421,449 | ||||
Gross proceeds allocated to warrant liability | 13,995,000 | ||||
Gross proceeds allocated to common stock | 1,005,000 | ||||
Amount charged to expense | 1,326,212 | ||||
Amount charged to additional paid-in capital | $ 95,237 | ||||
Resale of common stock held by selling stocksholder | 3,000,000 | ||||
Private placement | Warrants | |||||
Resale of common stock held by selling stocksholder | 1,500,000 | ||||
Fair value of warrants issued | $ 13,995,000 | $ 3,372,000 | |||
Equity volatility input, fair value warrants | 90% | 125% | |||
Risk-free rate input, fair value warrants | 3.20% | 4% | |||
Expected term, warrants | 5 years 3 months 3 days | 4 years 8 months 26 days | |||
Private placement | Common Stock | |||||
Number of common stock shares issued | 1,500,000 | ||||
Resale of common stock held by selling stocksholder | 1,500,000 | ||||
Private placement | Common Stock | Warrants | |||||
Number of warrants issued | 1,500,000 | ||||
Exercise price of warrants | $ 11 | ||||
Initial public offering | |||||
Number of common stock shares issued | 2,514,000 | ||||
Initial public offering | Underwriters Purchase Option | |||||
Exercisable term | 5 years | ||||
Percentage of common shares exercisable | 5% | ||||
Common stock, shares exercisable | 125,700 | ||||
Exercise price | $ 12.50 | ||||
Common shares issued on cashless basis | 31,192 |
Loss Per Common Share (Details)
Loss Per Common Share (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Loss Per Common Share | ||
Net income (loss) | $ (6,168,931) | $ (7,923,607) |
Basic weighted average common shares | 14,676,369 | 10,675,765 |
Diluted weighted average common shares | 14,676,369 | 10,675,765 |
Basic net loss per common share | $ (0.42) | $ (0.74) |
Diluted net loss per common share | $ (0.42) | $ (0.74) |
Loss Per Common Share - Anti-di
Loss Per Common Share - Anti-dilutive Securities (Details) - shares | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Class of Stock [Line Items] | ||
Anti-dilutive shares | 2,951,448 | 626,268 |
Warrants | ||
Class of Stock [Line Items] | ||
Anti-dilutive shares | 1,500,000 | |
Restricted Stock Units (RSUs) | ||
Class of Stock [Line Items] | ||
Anti-dilutive shares | 1,451,448 | 626,268 |
Income Taxes (Details)
Income Taxes (Details) | 12 Months Ended |
Dec. 31, 2022 USD ($) | |
Operating Loss Carryforwards [Line Items] | |
Gross deferred tax assets | $ 2,945,316 |
Deferred tax assets before valuation allowance | 2,945,000 |
Change in deferred tax asset valuation allowance | $ 2,945,000 |
Threshold change in ownership percentage that limits utilization of tax carryforwards | 50% |
Cumulative change in ownership, period threshold | 3 years |
Uncertain and unusual tax positions | $ 0 |
Unrecognized accrued interest and penalties | 0 |
Federal taxes | |
Operating Loss Carryforwards [Line Items] | |
NOL tax carryforwards | 9,231,000 |
Federal taxes | R&D tax credit carryforwards | |
Operating Loss Carryforwards [Line Items] | |
NOL tax carryforwards | $ 68,000 |
NOL tax carryforwards, expiration date | Dec. 31, 2041 |
State taxes | |
Operating Loss Carryforwards [Line Items] | |
NOL tax carryforwards | $ 6,908,000 |
Income Taxes - Income Tax Benef
Income Taxes - Income Tax Benefit (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Deferred Tax Benefit: | ||
Federal | $ 414,299 | $ 266,278 |
State | 86,955 | 53,860 |
Total Deferred Tax Benefit | 501,254 | 320,138 |
Total Income Tax Benefit | $ 501,254 | $ 320,138 |
Income Taxes - Components of De
Income Taxes - Components of Deferred Tax Assets and Liabilities (Details) - USD ($) | Dec. 31, 2022 | Dec. 31, 2021 |
Income Taxes. | ||
Federal Net Operating Loss | $ 1,938,600 | $ 205,018 |
State Net Operating Loss | 219,293 | 42,419 |
Capitalized R&D | 501,533 | |
Fixed Assets | (506,458) | (536,567) |
Tax Credits | 67,911 | 5,968 |
Stock Compensation | 782,991 | 66,822 |
Accrued Compensation and Other Expenses | 94,811 | |
Right of Use Assets | (388,355) | |
Lease Liability | 395,297 | |
Other | 547 | 217 |
Prepaid Expenses | (160,854) | (285,131) |
Total gross deferred tax liabilities | (501,254) | |
Total gross deferred tax assets | 2,945,316 | |
Less valuation allowance | $ (2,945,316) | |
Net deferred tax assets/(liabilities) | $ (501,254) |
Income Taxes - Effective Income
Income Taxes - Effective Income Tax (Details) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Effective Income Tax Rate Reconciliation, Amount [Abstract] | ||
Federal Statutory Rate | 21% | 21% |
Permanent Differences | (0.07%) | (0.10%) |
Transaction Costs | (9.69%) | |
State Taxes | 6.06% | 4.32% |
Tax Credits | 0.93% | 0.48% |
Valuation allowance | (44.16%) | |
Change in Fair Value of Warrant Liability | 33.40% | |
Effective Tax Rate | 7.51% | 25.70% |
Business Combination (Details)
Business Combination (Details) - Acquisition of GSI Technology | Oct. 01, 2022 USD ($) shares |
Business Acquisition [Line Items] | |
Effective date of acquisition | Oct. 01, 2022 |
Cash paid to acquire business | $ 350,000 |
Shares issued at effective time of acquisition | shares | 88,104 |
Value of shares issued at effective time of acquisition | $ 276,647 |
Total consideration transferred | 626,647 |
Transaction costs | $ 87,865 |
Subsequent Events (Details)
Subsequent Events (Details) - USD ($) | Feb. 26, 2023 | Jan. 12, 2023 | Oct. 01, 2022 | Dec. 31, 2022 | Dec. 31, 2021 |
Subsequent Events | |||||
Common stock, par value | $ 0.01 | ||||
Common stock, shares outstanding | 15,496,932 | 13,877,636 | |||
Acquisition of GSI Technology | |||||
Subsequent Events | |||||
Effective date of acquisition | Oct. 01, 2022 | ||||
Shares issued at effective time of acquisition | 88,104 | ||||
Cash paid to acquire business | $ 350,000 | ||||
Value of shares issued at effective time of acquisition | 276,647 | ||||
Transaction costs | $ 87,865 | ||||
Agreement to Acquire Aura Smart Air Ltd. | |||||
Subsequent Events | |||||
Effective date of acquisition | Feb. 26, 2023 | ||||
Subsequent event | Acquisition of Molekule | |||||
Subsequent Events | |||||
Effective date of acquisition | Jan. 12, 2023 | ||||
Subsequent event | Acquisition of Molekule | AeroClean Technologies, Inc. | |||||
Subsequent Events | |||||
Common stock, par value | $ 0.0001 | ||||
Subsequent event | Acquisition of Molekule | Molekule, Inc. | Common Stock | |||||
Subsequent Events | |||||
Equity ownership in outstanding shares | 49.50% | ||||
Common stock, shares outstanding | 30,427,750 | ||||
Subsequent event | Acquisition of Molekule | Molekule, Inc. | Non-Assessable Common Stock | |||||
Subsequent Events | |||||
Common stock, par value | $ 0.01 | ||||
Shares issued at effective time of acquisition | 14,907,210 | ||||
Subsequent event | Agreement to Acquire Aura Smart Air Ltd. | Molekule, Inc. | Non-Assessable Common Stock | |||||
Subsequent Events | |||||
Shares issued at effective time of acquisition | 3,519,105 |
Subsequent Events - Loan Agreem
Subsequent Events - Loan Agreements (Details) - Subsequent event - USD ($) $ in Millions | Apr. 01, 2025 | Apr. 01, 2024 | May 01, 2023 | Jan. 12, 2023 |
Silicon Valley Bank | Loan and Security Agreement | Senior Term Loan | ||||
Debt Instrument [Line Items] | ||||
Outstanding principal balance | $ 4.4 | |||
Duration of remaining monthly payments | 36 months | |||
Debt Instrument, Maturity Date | Apr. 01, 2026 | |||
Silicon Valley Bank | Loan and Security Agreement | Senior Term Loan | Annual Interest Rate (Greater of Prime +1% or 4.75%) | Base Rate | ||||
Debt Instrument [Line Items] | ||||
Debt Instrument, Interest Rate, Stated Percentage | 4.25% | |||
Silicon Valley Bank | Loan and Security Agreement | Senior Term Loan | Annual Interest Rate (Greater of Prime +1% or 4.75%) | Prime Rate | ||||
Debt Instrument [Line Items] | ||||
Debt Instrument, Basis Spread on Variable Rate | 1% | |||
Silicon Valley Bank | Loan and Security Agreement | Senior Term Loan | Financial Covenants | Minimum | ||||
Debt Instrument [Line Items] | ||||
Cash balance to maintain | $ 2 | |||
Annual revenue target | $ 50 | |||
Silicon Valley Bank | Loan and Security Agreement | Senior Term Loan | As of 12/31/2022 | ||||
Debt Instrument [Line Items] | ||||
Long-Term Debt, Weighted Average Interest Rate, at Point in Time | 9% | |||
Silicon Valley Bank | Loan and Security Agreement | Mezzanine Term Loan | ||||
Debt Instrument [Line Items] | ||||
Debt Instrument, Face Amount | $ 30 | |||
Silicon Valley Bank | Loan and Security Agreement | Mezzanine Term Loan | Annual Interest Rate (Greater of Prime +6% or 9.25%) | Base Rate | ||||
Debt Instrument [Line Items] | ||||
Debt Instrument, Interest Rate, Stated Percentage | 9.25% | |||
Silicon Valley Bank | Loan and Security Agreement | Mezzanine Term Loan | Annual Interest Rate (Greater of Prime +6% or 9.25%) | Prime Rate | ||||
Debt Instrument [Line Items] | ||||
Debt Instrument, Basis Spread on Variable Rate | 6% | |||
Silicon Valley Bank | Loan and Security Agreement | Mezzanine Term Loan | Financial Covenants | Minimum | ||||
Debt Instrument [Line Items] | ||||
Cash balance to maintain | $ 2 | |||
Annual revenue target | $ 50 | |||
Silicon Valley Bank | Loan and Security Agreement | Mezzanine Term Loan | As of 12/31/2022 | ||||
Debt Instrument [Line Items] | ||||
Long-Term Debt, Weighted Average Interest Rate, at Point in Time | 14% | |||
Outstanding principal balance | $ 30 | |||
Silicon Valley Bank | Loan and Security Agreement | Mezzanine Term Loan Tranche A | ||||
Debt Instrument [Line Items] | ||||
Duration of remaining monthly payments | 36 months | |||
Debt Instrument, Maturity Date | Mar. 31, 2027 | |||
Debt Instrument, Face Amount | $ 15 | |||
Silicon Valley Bank | Loan and Security Agreement | Mezzanine Term Loan Tranche B | ||||
Debt Instrument [Line Items] | ||||
Duration of remaining monthly payments | 36 months | |||
Debt Instrument, Maturity Date | Mar. 31, 2028 | |||
Debt Instrument, Face Amount | $ 15 | |||
Trinity | Facility Term Debt Agreement | Facility Term Loan | ||||
Debt Instrument [Line Items] | ||||
Outstanding principal balance | 2.6 | |||
Additional payment due on loan draw downs | 0.4 | |||
Reclassification of term loan payment to long-term debt | $ 0.3 | |||
Debt Instrument, Maturity Date | Apr. 01, 2026 | |||
Fee percentage on total amount drawn, end of loan term | 10% | |||
Trinity | Facility Term Debt Agreement | Facility Term Loan | June 2020 | ||||
Debt Instrument [Line Items] | ||||
Draws on term loan | $ 2.9 | |||
Trinity | Facility Term Debt Agreement | Facility Term Loan | September 2020 | ||||
Debt Instrument [Line Items] | ||||
Draws on term loan | 0.6 | |||
Trinity | Facility Term Debt Agreement | Facility Term Loan | December 2020 | ||||
Debt Instrument [Line Items] | ||||
Draws on term loan | 0.9 | |||
Trinity | Facility Term Debt Agreement | Facility Term Loan | August 2021 | ||||
Debt Instrument [Line Items] | ||||
Draws on term loan | $ 0.5 |