UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
For the Quarterly Period Ended
For the transition period from ____________ to _____________
Commission File Number:
(Exact name of registrant as specified in its charter)
|
(State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification No.) |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code:
Securities registered pursuant to Section 12(b) of the Exchange Act: None
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405
of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller and emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial statement standards provided pursuant to Section 13(a) of the Exchange Act ☐
Indicate by check mark whether the issuer is a
shell company (as defined in rule 12b-2 of the Exchange Act) Yes ☐
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required by Section 12, 13, or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court Yes ☐ No ☐
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
As of May 20, 2022, there were shares of the registrant’s Common Stock outstanding.
ADVANCED CONTAINER TECHNOLOGIES, INC.
QUARTERLY REPORT ON FORM 10-Q
for the Quarterly Period Ended March 31, 2022
TABLE OF CONTENTS
| Page | |||
| PART I - FINANCIAL INFORMATION | |||
| Item 1. | Financial Statements | 1 | |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 16 | |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 20 | |
| Item 4. | Controls and Procedures | 20 | |
| PART II - OTHER INFORMATION | |||
| Item 1. | Legal Proceedings | 21 | |
| Item 1A. | Risk Factors | 21 | |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 24 | |
| Item 3. | Defaults upon Senior Securities | 24 | |
| Item 4. | Mine Safety Disclosures | 24 | |
| Item 5. | Other Information | 24 | |
| Item 6. | Exhibits | 24 | |
| SIGNATURES | 25 | ||
FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements that involve a number of risks and uncertainties. The use of words such as “anticipates,” “expect,” “intend,” “strive,” “goals,” “plans,” “opportunity,” “future,” “achieve,” “grow,” “committed,” “believes,” “seeks,” “targets,” “estimated,” “continues,” “likely,” “possible,” “may,” “might,” “potentially,” “will,” “would,” “should,” “could,” “on track,” and variations of such words and similar expressions are intended to identify such forward-looking statements. In addition, any statements that refer to uncertain events or assumptions – such as future responses to and effects of COVID-19; projections of our future financial performance; future business, social, and environmental performance, goals, and measures; our anticipated growth and trends in our business and operations; projected growth and trends in markets relevant to our businesses and especially, the market for GrowPods and cannabis and related products; business and investment plans; future products and technology; laws and regulation, and especially those relating to cannabis; projected cost and yield trends; availability, uses, sufficiency, and cost of capital of capital resources; valuations; the future purchase, use, and availability of products, components, and services supplied by third parties – are based on management’s expectations as of the date of this report, unless an earlier date is specified, and involve many risks and uncertainties that could cause our actual results to differ materially from those expressed or implied in our forward-looking statements. Such risks and uncertainties include those described throughout this report and particularly, in Part II, Item 1A, Risk Factors. Given these risks and uncertainties, you are cautioned not to place undue reliance on forward-looking statements. You are urged to review and consider carefully the various disclosures made in this report and in other reports and documents that we file from time to time with the U.S. Securities and Exchange Commission (the “SEC”).
NOTE REGARDING THIRD-PARTY INFORMATION
This report may include information and estimates that are based on reports and other publications sources from industry analysts, market research firms and other independent sources that were generally available to the public and not commissioned by us, in addition to management’s own good faith estimates and analyses. We believe that such reports and publications, if included, are reliable, but have not independently verified them or their underlying data sources, methodologies or assumptions. They contain information and estimates that are based on estimates, forecasts, projections, market research, or similar methodologies, and are inherently subject to uncertainties. Actual events or circumstances may differ materially from events and circumstances reflected in these reports.
NOTE REGARDING DESCRIPTIONS OF CONTRACTS
This report may contain descriptions of contracts and instruments to which the Company or its officers and directors are parties or by which it is affected. Where such contracts or instruments are exhibits to this report, either because they are filed herewith or incorporated herein by reference, you are referred thereto and the descriptions herein are qualified by such reference. These contracts and instruments are identified in Item 6, Exhibits, Financial Statement Schedules.
NOTE REGARD TRADEMARK
“Medtainer” is a registered trademark owned by the Company. Its use in this report without the symbol “®” should not be considered as a disclaimer of such ownership or permission to any person to use “Medtainer” without such symbol.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
ADVANCED CONTAINER TECHNOLOGIES, INC.
(formerly named Medtainer, Inc.)
CONSOLIDATED BALANCE SHEETS
| March 31, 2022 | December 31,2021 | |||||||
| (Unaudited) | (Audited) | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable | ||||||||
| Inventories | ||||||||
| Prepaid expenses | ||||||||
| Prepaid inventories | ||||||||
| TOTAL CURRENT ASSETS | ||||||||
| Property and equipment, net of accumulated depreciation of
$ | ||||||||
| Intangible assets, net of accumulated amortization of $ | ||||||||
| Goodwill | ||||||||
| Security deposits | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Accrued interest | ||||||||
| Payroll liabilities | ||||||||
| Customer deposits | ||||||||
| Convertible notes | ||||||||
| Notes payable | ||||||||
| Loan payable - stockholder | ||||||||
| TOTAL CURRENT LIABILITIES | ||||||||
| Commitments and contingencies (Notes 3, 5, 9 and 11) | ||||||||
| STOCKHOLDERS' EQUITY | ||||||||
| Preferred stock, par value $ per share, issuable in series: shares authorized; shares designated Series A Convertible Preferred stock issued and outstanding at March 31, 2022 and December 31, 2021 | ||||||||
| Common Stock, par value $ per share: shares authorized; issued and outstanding at March 31, 2022, and at December 31, 2021 | ||||||||
| Additional paid in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| TOTAL STOCKHOLDERS' EQUITY | ||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | $ | ||||||
The accompanying notes are an integral part of these financial statements.
| 1 |
ADVANCED CONTAINER TECHNOLOGIES, INC.
(formerly named Medtainer, Inc.)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| Quarter Ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Revenues | $ | $ | ||||||
| Cost of goods sold | ||||||||
| Gross profit | ||||||||
| Operating expenses: | ||||||||
| Advertising and marketing | ||||||||
| Depreciation and amortization | ||||||||
| Professional fees | ||||||||
| Share-based compensation | ||||||||
| Payroll | ||||||||
| General and administrative | ||||||||
| Total operating expenses | ||||||||
| Operating loss | ( | ) | ( | ) | ||||
| Non-operating income (expense) | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Total non-operating income (expenses), net | ( | ) | ( | ) | ||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Basic loss per common share | $ | ( | ) | $ | ( | ) | ||
| Diluted loss per common share | $ | ( | ) | $ | ( | ) | ||
| Basic weighted average common shares outstanding | ||||||||
| Diluted weighted average common shares outstanding | ||||||||
The accompanying notes are an integral part of these financial statements.
| 2 |
ADVANCED CONTAINER TECHNOLOGIES, INC.
(formerly named Medtainer, Inc.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| Quarter Ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation | ||||||||
| Share-based compensation | ||||||||
| Amortization | ||||||||
| Increase (decrease) in cash from changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Inventories | ( | ) | ||||||
| Prepaid expenses | ( | ) | ||||||
| Prepaid inventories | ||||||||
| Accounts payable and accrued expenses | ( | ) | ||||||
| Accrued interest | ( | ) | ||||||
| Payroll liabilities | ( | ) | ||||||
| Customer deposits | ( | ) | ( | ) | ||||
| NET CASH USED IN OPERATING ACTIVITIES | ( | ) | ( | ) | ||||
| FINANCING ACTIVITIES: | ||||||||
| Repayment of debt | ( | ) | ( | ) | ||||
| Proceeds from issuance of common stock | ||||||||
| Proceeds from stockholder loan | ||||||||
| Repayment of stockholder loan | ( | ) | ( | ) | ||||
| NET CASH PROVIDED BY FINANCING ACTIVITIES | ||||||||
| INCREASE IN CASH | ||||||||
| CASH - BEGINNING OF PERIOD | ||||||||
| CASH - END OF PERIOD | $ | $ | ||||||
| Supplemental disclosures of cash flow information: | ||||||||
| Interest paid | $ | $ | ||||||
The accompanying notes are an integral part of these financial statements.
| 3 |
ADVANCED CONTAINER TECHNOLOGIES, INC.
(formerly named Medtainer, Inc.)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE QUARTER ENDED MARCH 31, 2022 (Unaudited):
| Series A Preferred Stock | Common Stock | Paid-In | Accumulated | |||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||
| Balances – December 31, 2021 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Issuance of common stock in private placements | – | |||||||||||||||||||||||||||
| Net loss | – | – | ( | ) | ( | ) | ||||||||||||||||||||||
| Balances at March 31, 2022 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE QUARTER ENDED MARCH 31, 2021 (Unaudited):
| Series A Preferred Stock | Common Stock | Paid-In | Accumulated | |||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||
| Balances – December 31, 2020 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Issuance of common stock in private placements | – | |||||||||||||||||||||||||||
| Common stock issued in directors agreement | – | |||||||||||||||||||||||||||
| Net loss | – | – | ( | ) | ( | ) | ||||||||||||||||||||||
| Balances at March 31, 2021 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
The accompanying notes are an integral part of these financial statements.
| 4 |
ADVANCED CONTAINER TECHNOLOGIES, INC.
(formerly named Medtainer, Inc.)
Notes to Unaudited Consolidated Financial Statements
March 31, 2022
Note 1 – Description of Business and Organization
Advanced Container Technologies, Inc. (the “Company”) markets and sells two principal products: (i) beginning in the first quarter of 2021, GrowPods, which are specially modified insulated shipping containers manufactured by GP Solutions, Inc. (“GP”), in which plants, herbs and spices may be grown hydroponically in a controlled environment (“GrowPods”) and (ii) the Medtainer, which may be used to store pharmaceuticals, herbs, teas and other solids or liquids and can grind solids and shred herbs. The Company also markets and sells products related to GrowPods and the Medtainer. The Company also provides private labeling and branding for purchasers of Medtainers, lighters and other products.
The Company was incorporated under the laws of the state of Florida on September 5, 1997. It changed its corporate name to Acology, Inc. on January 9, 2014; to Medtainer, Inc. on August 28, 2018; and to its present name on October 3, 2020.
On October 9, 2020, the Company acquired all of the outstanding shares of Advanced Container Technologies, Inc., a California corporation (“ACT”), from its shareholders pursuant to an Exchange Agreement, dated August 14, 2020, and amended on September 9, 2020 (the “Exchange Agreement”), in exchange for 50,000,000 shares of the Company’s common stock (“Common Stock”). This exchange resulted in ACT’s becoming the wholly owned subsidiary of the Company. In connection with this exchange, the Company acquired a Distributorship Agreement, dated August 6, 2020, by and between ACT and GP (the “Distributorship Agreement”), under which ACT has the exclusive right to purchase GrowPods and related products from GP at prices to be agreed to from time to time and to sell and distribute them within the United States and its territories for an initial term that will expire on December 31, 2025. ACT may renew the Distributorship Agreement indefinitely as long as it purchases in the last calendar year of any term the lesser of (i) 100 GrowPods or (ii) GP’s total output of GrowPods.
On August 27, 2020, the Company incorporated Med X Technologies Inc. (“Med X”) in the State of California, and acquired all of its shares, such that it is the Company’s wholly owned subsidiary. The Company intends to transfer the assets used in its Medtainer and printing businesses to Med X, after which it will conduct all of its operations through Med X and ACT.
Note 2 – Summary of Significant Accounting Policies
Accounting Principles
The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial statements and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the U.S. Securities and Exchange Commission (the “SEC”). Accordingly, they do not contain all information and footnotes required by GAAP for annual financial statements. In the opinion of the Company’s management, the accompanying unaudited consolidated financial statements contain all the adjustments necessary (consisting only of normal recurring accruals) to present the financial position of the Company as of March 31, 2022, and the results of operations and cash flows for the periods presented. The results of operations for the three months ended March 31, 2022, are not necessarily indicative of the operating results for the full fiscal year or for any future period. These unaudited consolidated financial statements should be read in conjunction with the financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed with the U.S. Securities and Exchange Commission (the “SEC”) on April 18, 2022.
Principles of Consolidation
The unaudited consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly owned. All intercompany balances and transactions have been eliminated.
| 5 |
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make significant estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates. Certain of these estimates could be affected by external conditions, including those unique to the Company’s industries, and general economic conditions. These external conditions could have an effect on the Company’s estimates that could cause actual results to differ materially from its estimates. The Company re-evaluates all of its accounting estimates at least quarterly based on these conditions and records adjustments when necessary.
Significant estimates relied upon in preparing these consolidated financial statements include revenue recognition, accounts receivable reserves, inventory and related reserves, valuations and purchase price allocations related to business combinations, expected future cash flows used to evaluate the recoverability of long-lived assets, estimated fair values of long-lived assets used to record impairment charges related to intangible assets and goodwill, amortization periods, accrued expenses, share-based compensation, and recoverability of the Company’s net deferred tax assets and any related valuation allowance.
Cash and Cash Equivalents
The Company considers all short-term highly liquid
investments with an original maturity at the date of purchase of 3 months or less to be cash equivalents. The Company had
Accounts Receivable
Included in accounts receivable on the consolidated
balance sheets are amounts primarily related to customers. The Company estimates losses on receivables based on known troubled accounts
and historical experience of losses incurred. Receivables are considered impaired and written off when it is probable that all contractual
payments due will not be collected in accordance with the terms of the related agreement. Based upon experience and the judgment of management,
the allowance for doubtful accounts was $
Inventories
Inventories, which consist of products held for resale, are stated at the lower of cost (determined using the first-in first-out method) and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs to complete and dispose of the product. If the Company identifies excess, obsolete or unsalable items, its inventories are written down to their realizable value in the period in which the impairment is first identified. Shipping and handling costs incurred for inventory purchases and product shipments are recorded in cost of sales in the Company’s consolidated statements of operations.
Property and Equipment
Property and equipment are stated at cost less
accumulated depreciation. Depreciation is provided for on a straight-line basis over the useful lives of the assets. Furniture and fixtures
are depreciated over the useful life of
Goodwill and Intangible Assets
Goodwill and intangible assets that have indefinite
useful lives are not amortized but are evaluated for impairment annually or whenever events or changes in circumstances indicate that
their carrying value may not be recoverable. The Company records intangible assets at fair value when they are acquired and they are tested
for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. The impairment
test consists of a comparison of the fair value of the indefinite-lived intangible asset with its carrying amount. If the carrying amount
of an intangible asset exceeds its fair value, an impairment loss will be recorded in the consolidated statements of operations in an
amount equal to that excess. The Company amortizes its intangible assets that have finite lives using either the straight-line method
or based upon estimated future cash flows to approximate the pattern in which the economic benefit of the assets will be utilized. Amortization
is recorded over estimated useful lives ranging from
| 6 |
The Company reviews intangible assets subject
to amortization at least annually to determine whether any adverse conditions exist or a change in circumstances has occurred that would
indicate impairment or a change in the remaining useful life. Conditions that would indicate impairment and trigger a more frequent than
quarterly impairment assessment include, but are not limited to, a significant adverse change in legal factors or business climate that
could affect the value of an asset or an adverse action or assessment by a regulator. If the carrying value of an intangible asset exceeds
its undiscounted cash flows, the Company will write down the carrying value to its fair value in the period identified. The Company generally
calculates fair value as the present value of estimated future cash flows to be generated by the asset using a risk-adjusted discount
rate. If the estimate of an intangible asset’s remaining useful life is changed, the Company will amortize its remaining carrying
value prospectively over its revised remaining useful life. The Company has conducted its annual impairment test of goodwill during the
fourth quarter of each year. The estimation of fair value requires significant judgment. There was
Any loss resulting from an impairment test will be reflected in operating income in the Company’s consolidated statements of operations. The annual impairment testing process is subjective and requires judgment at many points. If these estimates or their related assumptions change in the future, the Company may be required to record impairment charges for these assets not previously recorded.
Revenue Recognition
The Company follows the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606), as amended. This standard requires a company to recognize revenues when it transfers goods or services to customers in an amount that reflects the consideration that it expects to receive for them.
Under ASC 606, Company recognizes revenue when a customer obtains control of promised goods or services or when they are shipped to a customer, in an amount that reflects the consideration that it expects to receive in exchange for them. The Company recognizes revenues following the five-step model prescribed under ASC 606: (a) it identifies a contract with a customer; (b) it identifies the performance obligations in the contract; (c) it determines the transaction price; (d) it allocates the transaction price to the performance obligations in the contract; and (e) it recognizes revenues when (or as) it satisfies its performance obligation.
Revenues from product sales are recognized when a customer obtains control of the Company’s product, which occurs at a point in time, typically upon shipment to the customer. The Company expenses incremental costs of obtaining a contract as and when incurred if the expected amortization period of the asset that it would have been recognized is 1 year or less or the amount is immaterial.
Revenue from sales of items sold by the Company for the three months ended March 31, 2022, and March 31, 2021, and the percentage of sales allocable to each item to the Company’s total revenues were as follows:
| Three Months Ended March 31, | ||||||||||||||||
| 2022 | 2021 | |||||||||||||||
| Revenues | % | Revenues | % | |||||||||||||
| Lighters | $ | $ | ||||||||||||||
| Medtainers | ||||||||||||||||
| GrowPods and related items | ||||||||||||||||
| Humidity pack inserts | ||||||||||||||||
| Plastic lighter holders | ||||||||||||||||
| Printing | < | |||||||||||||||
| Mylar bags | < | |||||||||||||||
| Shipping charges | ||||||||||||||||
| Others | ||||||||||||||||
| Jars | < | < | ||||||||||||||
| Total revenues | $ | $ | ||||||||||||||
| 7 |
The table below presents the customer deposits payable balance and the significant activity affecting customer deposits during the quarterly period ended March 31, 2022:
| Balance at December 31, 2021 | $ | 361,230 | ||
| New customer deposits received | 197,093 | |||
| Revenue recognized from customer deposits | (299,653 | ) | ||
| Balance at March 31, 2022 | $ | 258,670 |
ASC 718, Compensation – Stock Compensation, prescribes accounting and reporting standards for all share-based payment transactions. The Company follows FASB guidance related to equity-based payments, for both employees and non-employees, which requires that equity-based compensation be accounted for using a fair value method and recognized as expense in the accompanying consolidated statements of operations. Equity-based compensation expense is recognized as compensation expense over the applicable service or vesting period (see Note 7).
Fair Value Measurements
The Company has adopted ASC Topic 820, Fair Value Measurements, which defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value and expands disclosure of fair value measurements.
The estimated fair value of certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses, is carried on an historical cost basis, which approximates their fair values because of the short-term nature of these instruments. The carrying amounts of the Company’s short- and long-term credit obligations approximate fair value because the effective yields on these obligations, which include contractual interest rates taken together with other features, such as concurrent issuances of warrants and/or embedded conversion options, are comparable to rates of returns for instruments of similar credit risk.
ASC Topic 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC Topic 820 also establishes a fair-value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC Topic 820 describes three levels of inputs that may be used to measure fair value:
Level 1 - Quoted prices in active markets for identical assets or liabilities.
Level 2 - Quoted prices for similar assets and liabilities in active markets or inputs that are observable.
Level 3 - Inputs that are unobservable (for example, cash flow modeling inputs based on assumptions).
Advertising
Advertising and marketing expenses are charged
to operations as incurred. These expenses totaled $
| 8 |
Income Taxes
The Company uses the asset and liability method of accounting for income taxes in accordance with ASC Topic 740, Income Taxes. Under this method, income tax expense is recognized for (a) taxes payable or refundable for the current year and (b) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in the consolidated statements of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if, based on the weight of the available positive and negative evidence, it is more likely than not that some portion or all the deferred tax assets will not be realized.
ASC Topic 740.10.30 clarifies accounting for uncertainty in income taxes recognized in an entity’s financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740.10.40 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Company has no material uncertain tax positions.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in financial institutions, which at times may exceed the federal deposit insurance coverage of $250,000. The Company has not experienced losses on these accounts and believes that it is not exposed to significant risks on such accounts. The Company has not experienced losses on accounts receivable and the Company believes that it is not exposed to significant risks with respect to them.
The basic loss per share is calculated by dividing the Company’s net loss attributable to common stockholders by the weighted average number of common shares outstanding during the year. The diluted loss per share is calculated by dividing the Company’s net loss attributable to common stockholders by the diluted weighted average number of shares outstanding during the year. The potentially dilutive stock options on the Company’s common stock were not considered in the computation of diluted net loss per share as they would be anti-dilutive. dilutive effective was calculated for the three months ended March 31, 2021, and March 31, 2020, as the Company reported a net loss for each period.
Recent Accounting Pronouncements
The Company follows ASU 2016-02, Leases (Topic 842), which requires recognition of lease liabilities, representing future minimum lease payments, on a discounted basis, and a corresponding right-of-use asset on a balance sheet for most leases, along with requirements for enhanced disclosures to enable the assessment of the amount, timing and uncertainty of cash flows arising from leasing arrangements. The Company and a related party entered into a building lease effective on September 1, 2018, which had a one-year term that expired on August 31, 2019, was renewed for a one-year term that expired on August 31, 2020, was renewed for a one-year term that expired on August 31, 2021, and has been renewed for a one-year term that expires August 31, 2022, at a monthly rent of $9,791. On March 23, 2021, the Company and an unrelated party entered into a lease of premises in Tulsa, Oklahoma, having a monthly rental of $5,500. The lease has a one-year term that expired on March 31, 2022, and was renewed for a one-year term at the same rent. The Company is obligated to pay all taxes, insurance, operating expenses, repairs and certain maintenance costs and utilities. Because each of these leases has a term of 12 months or less and there is no assurance the Company will remain in the building locations after the leases have expired, the Company has concluded that this ASU does not apply to these leases.
| 9 |
In August 2020, FASB issued ASU 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.” For convertible instruments, FASB reduced the number of accounting models for convertible debt instruments and convertible preferred stock. Limiting the accounting models results in fewer embedded conversion features being separately recognized from the host contract as compared with current GAAP. Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features that are not clearly and closely related to the host contract that meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting and (2) those issued with substantial premiums for which the premiums are recorded as paid-in capital. FASB decided to amend the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. FASB observed that the application of the derivatives scope exception guidance results in accounting for some contracts as derivatives while accounting for economically similar contracts as equity. FASB also decided to improve and amend the related earnings per share guidance. The amendments in this update are effective for public business entities that meet the definition of an SEC filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years.
In December 2019, FASB issued ASU 2019-12, Income Taxes, which simplifies the accounting for income taxes by eliminating certain exceptions to the guidance in ASC 740 related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The new guidance also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The guidance is effective for fiscal years beginning after December 31, 2021, and interim periods within that year. The adoption did not have any material impact on the Company’s consolidated financial statements.
In June 2016, FASB issued ASU 2016-13 regarding ASC Topic 326, “Measurement of Credit Losses on Financial Instruments.” This pronouncement changes the impairment model for most financial assets and will require the use of an “expected loss” model for instruments measured at amortized cost. Under this model, entities will be required to estimate the lifetime expected credit loss on such instruments and record an allowance to offset the amortized cost basis of the financial asset, resulting in a net presentation of the amount expected to be collected on the financial asset. Subsequently, FASB issued an amendment to clarify the implementation dates and items that fall within the scope of this pronouncement. This standard is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Management is currently evaluating the effect on the Company’s financial statements.
The Company does not believe there are any other recently issued, but not yet effective, accounting standards that would have a significant impact on the Company’s financial position or results of operations.
Note 3 – Going Concern
The consolidated financial statements have been
prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course
of business. At March 31, 2022, the Company had a working capital deficit of $
| 10 |
Note 4 – Intangible Assets and Goodwill
Intangible assets, including patents and patent applications, a trademark and an internet domain related to Medtainer and distribution rights under a Distributorship Agreement dated August 6, 2020, are recorded at cost or estimated fair value at the date of acquisition. Goodwill relates to an Asset Purchase Agreement, amended as of June 8, 2018. The Company tested intellectual property and goodwill for impairment in preparing its financial statements for the year ended December 31, 2021, and determined that no adjustment was required. As of March 31, 2022, and December 31, 2021, there was no impairment of these assets, which are included in the tables below:
| Intangible Assets and Goodwill at March 31, 2022 | ||||||||||||||
| Description | Weighted Average Estimated Useful Life | Gross Carrying Value | Accumulated Amortization | Net Amount | ||||||||||
| Distributorship Agreement | $ | $ | ( | ) | $ | | ||||||||
| U.S. patents | ( | ) | ||||||||||||
| U.S. patents | ( | ) | ||||||||||||
| Canadian patents | ( | ) | ||||||||||||
| European patents | ( | ) | ||||||||||||
| Molds | ( | ) | ||||||||||||
| Trademark | – | |||||||||||||
| Domain name | – | |||||||||||||
| Intangible totals | $ | $ | ( | ) | $ | |||||||||
| Goodwill | $ | $ | – | $ | ||||||||||
| Intangible Assets and Goodwill at December 31, 2021 | ||||||||||||||
Description | Weighted Average Estimated Useful Life | Gross
Carrying | Accumulated Amortization | Net | ||||||||||
| GP distribution agreement | $ | $ | ( | ) | $ | |||||||||
| U.S. patents | ( | ) | ||||||||||||
| U.S. patents | ( | ) | ||||||||||||
| Canadian patents | ( | ) | ||||||||||||
| European patents | ( | ) | ||||||||||||
| Molds | ( | ) | ||||||||||||
| Trademark | – | |||||||||||||
| Domain name | – | |||||||||||||
| Intangible totals | $ | $ | ( | ) | $ | |||||||||
| Goodwill | $ | $ | – | $ | ||||||||||
| 11 |
Note 5 – Convertible Notes Payable and Promissory Notes Payable
As of March 31, 2022, and December 31, 2021, the Company had outstanding the following convertible notes payable and notes payable:
| March 31, 2022 | December 31, 2021 | |||||||||||||||
| Accrued | Accrued | |||||||||||||||
| Principal | Interest | Principal | Interest | |||||||||||||
| Convertible Notes Payable | ||||||||||||||||
| July 2014 $75,000 note, convertible into common stock at $5.00 per share, 10% interest, in default (a) | $ | $ | $ | $ | ||||||||||||
| July 2014 $15,000 note, convertible into Common Stock at $5.00 per share, 10% interest, in default (a) | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
| Notes Payable | ||||||||||||||||
| February 2018 $298,959 note, due February 2019, 10% interest, in default (b) | $ | $ | $ | $ | ||||||||||||
| August 2015 $75,000 note, with one-time interest charge of $75,000 (c) | ||||||||||||||||
| Related party obligation (d) | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
| Total | $ | $ | 89,318 | $ | $ | |||||||||||
| (a) |
| (b) |
| (c) |
| (d) |
| 12 |
Note 6 – Stockholders’ Equity
On October 8, 2020, the Company combined the outstanding shares of its common stock on the basis of 1 share of common stock for each 59 shares of common stock. The effects of this combination have been retroactively applied to all periods presented in the unaudited consolidated financial statements.
On July 30, 2020, the Company filed articles of amendment with the Secretary of State of the State of Florida, pursuant to which, a series of 1,000,000 of its 10,000,000 authorized shares of preferred stock was created, which series is named Series A Convertible Preferred Stock (“Series A Preferred”). Each share of Series A Preferred is convertible into 0.3051 shares of Common Stock, has the dividend and distribution rights and redemption rights of the shares of Common Stock into which it is convertible, is not redeemable and has voting power equal to the combined voting power of all other of classes and series of the Company’s capital stock. On June 24, 2020, the Company issued all of the shares of this series to a related party in exchange for 305,085 shares of Common Stock.
On October 9, 2020, the Company issued 50,000,000 shares of Common Stock to the shareholders of ACT in exchange for their shares in ACT pursuant to the Exchange Agreement. See Note 1. As a result, ACT became the wholly owned subsidiary of the Company and the Company acquired the Distributorship Agreement, which has been valued as an intangible asset at $900,000 (see Note 4) and $86,293 in cash. Under the Distributorship Agreement, ACT has the exclusive right to purchase GrowPods and related products at prices to be agreed to from time to time and to sell and distribute them within the United States and its territories for an initial term that will expire on December 31, 2025. ACT may renew the Distributorship Agreement indefinitely as long as it purchases the lesser of (i) 100 GrowPods or (ii) GP’s total output of GrowPods in the last calendar year of any term.
On January 1, 2021, the Company issued shares of Common Stock to one of the Company’s directors, as compensation pursuant to a Director Agreement between the Company and him, dated as of that date.
During the three months ended March 31, 2022, the Company issued shares of Common Stock to four individuals. The aggregate purchase price of these shares was $. During the year ended December 31, 2021, the Company issued shares of Common Stock to eight individuals. The aggregate purchase price of these shares was $.
Note 7 – Share-Based Compensation
The Company’s 2018 Incentive Award Plan (the “2018 Plan”) became effective on December 1, 2018, under which the Company may issue up to shares of common stock as incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, and other forms of compensation to employees, directors and consultants. In addition, the 2018 Plan provides for the grant of performance cash awards to employees, directors and consultants.
On December 1, 2018, 22,882 shares of common stock were awarded to employees in the form of restricted shares and 5,678 shares of common stock were awarded to consultants as compensation. The fair value of these shares on the grant date was $0.59 per share. As of December 31, 2020, all of these shares had vested. The following table shows vesting for financial reporting purposes under GAAP of the shares issued under the 2018 Plan:
| Shares of Common Stock | ||||||||
| Vesting Dates | Employees | Consultants | ||||||
| December 31, 2018 | ||||||||
| January 1, 2019 | ||||||||
| March 31, 2019 | ||||||||
| June 30, 2019 | ||||||||
| June 30, 2020 | ||||||||
| Total vested at March 31, 2021 | ||||||||
| 13 |
The Company made no awards in any other form during the three months ended March 31, 2022, and March 31, 2021.
The Company expensed $ for share-based compensation under the 2018 Plan in the three months ended March 31, 2022, and March 31, 2021, respectively, for its employees and consultants in the accompanying consolidated statements of operations.
On January 1, 2021, the Company issued
shares of Common Stock to one of its directors, as compensation pursuant to a Director Agreement, dated as of that date and, in the three
months ended March 31, 2021, the Company expensed $
Note 8 – Income Taxes
As of December 31, 2021, the Company had approximately
$
On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the “2017 Tax Act”) was enacted, making significant changes to the Internal Revenue Code. Changes include a federal corporate tax rate decrease from 35% to 21% for tax years beginning after December 31, 2017, the transition of U.S. international taxation from a worldwide tax system to a territorial system and a one-time transition tax on the mandatory deemed repatriation of foreign earnings. The Company has estimated its provision for income taxes in accordance with the 2017 Tax Act and the guidance available and, based thereon, has determined that the 2017 Tax Act does not change the determination that it is more likely than not that the deferred tax assets will not be realized. Accordingly, the Company has kept the full valuation allowance. As a result, the Company recorded no income tax expense during the three months ended March 31, 2022, and March 31, 2021.
Note 9 – Related-Party Transactions
Loans
The Company has received loans from its officers
and directors from time to time since its inception. During the three months ended March 31, 2022, the Company received $
Contracts
The Company makes building lease payments and purchases products for resale from entities owned by a related party, who is also one of its executive officers.
Payments made to related parties for the three months ended March 31, 2022, and March 31, 2021, were as follows:
| Three Months Ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Building lease payments | $ | $ | ||||||
| Purchase of products for resale | ||||||||
| Total | $ | $ | ||||||
| 14 |
Director Compensation
On January 1, 2021, the Company issued 120,000 shares of Common Stock to one of its directors, as compensation pursuant to a Director Agreement, dated as of that date. (See Note 7.)
Note 10 – Concentrations
For the three months ended March 31, 2022,
two of the Company's customers accounted for approximately
For the three months ended March 31, 2022, and
March 31, 2021, the Company purchased approximately
As of March 31,
2022, two of the Company's customers accounted for
Note 11 – Commitments
On September 1, 2018, the Company entered into an operating lease with an entity owned by a related party calling for monthly payments of $8,641, plus 100% of operating expenses, for a term expiring on August 31, 2019. On September 1, 2019, this lease was amended such that it expired on August 31, 2020, and the rent thereunder was increased to $8,967 per month. On September 1, 2020, this lease was amended such that its term will expire on August 31, 2021, and the rent thereunder was increased to $9,007 per month. On September 1, 2021, the lease was amended such that its term will expire on August 31, 2022, and the rent thereunder was increased to $9,791 per month.
The Company leases premises of 6,000 square feet, which it uses as a showroom, in Tulsa, Oklahoma, at a monthly rental of $5,500 for a term that will expire on March 31, 2023.
Under an agreement with the supplier of Medtainers entered into in 2018, the Company agreed to purchase a minimum of 30,000 units of product per month. Under the terms of this agreement, the minimum purchase quantity increases by 1% on every anniversary of its effective date and is now 30,909 units per month. The purchase price for units is subject to periodic adjustment for changes in the consumer price index. This agreement will expire on April 30, 2031; however, it can be terminated upon payment of $400,000.
Note 12 – Subsequent Events
Management has evaluated all other subsequent events when the consolidated financial statements were issued and determined that none of them requires this disclosure herein.
| 15 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE COMPANY’S UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS, THE NOTES THERETO AND THE OTHER FINANCIAL INFORMATION APPEARING IN THIS REPORT.
Introduction
The financial data discussed below are derived from the unaudited consolidated financial statements of the Company as of March 31, 2022, which were prepared and presented in accordance with United States generally accepted accounting principles for interim financial statements. These financial data are only a summary and should be read in conjunction with the unaudited financial statements and related notes contained herein, which more fully present the Company’s financial condition and operations as at that date, and with its audited financial statements and notes thereto contained in its Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on April 18, 2021. Further, the Company urges caution regarding the forward-looking statements which are contained in this report because they involve risks, uncertainties and other factors affecting its operations, market growth, service, products and licenses that may cause the Company’s actual results and achievements, whether expressed or implied, to differ materially from the expectations the Company describes in its forward-looking statements. The occurrence of any of the events described in Part II, Item 1A, Risk Factors, or other events, could have a material adverse effect on the Company’s business, results of operations and financial position.
General Statement of Business
The Company was incorporated under the laws of the state of Florida on September 5, 1997, under the corporate name Synthetic Flowers of America, Inc. It changed its corporate name to Acology, Inc. on January 9, 2014; on August 28, 2018, to Medtainer, Inc.; and on October 3, 2020, to its present name.
The Company is in the businesses of (i) selling and distributing hydroponic containers called “GrowPods” and related products and (ii) designing, branding and selling proprietary plastic medical-grade containers that can store pharmaceuticals, herbs, teas and other solids or liquids and can grind solids and shred herbs, as well as selling other products such as humidity control inserts, smell-proof bags, lighters, and plastic lighter holders, and providing private labeling and branding for purchasers of the Company’s containers and the other products.
The Company markets its products directly to businesses through its phone room and to the retail public through internet sales. The Company also markets directly to wholesalers and other businesses that resell them to other businesses and end users.
On October 9, 2020, the Company acquired all of the outstanding shares of Advanced Container Technologies, Inc., a California corporation (“Advanced”), from its shareholders pursuant to an Exchange Agreement, dated August 14, 2020, which was amended on September 9, 2020 (as so amended, the “Exchange Agreement”), in exchange for 50,000,000 shares of the Company’s Common Stock. This exchange resulted in Advanced’s becoming a wholly owned subsidiary of the Company.
The acquisition of ACT represented a material change in the business strategy of the Company and an expansion of its product base. Since the inception of the Company in 2014, its intended growth strategy was to concentrate on increasing sales of Medtainers, while introducing related products and services, such as humidity control inserts and printing. This approach resulted in relatively flat revenues, increasing expenses and a history of losses. Management believes that this acquisition offered the prospect of substantially increased revenues, without a comparable increase in expenses an opportunity to expand its profits significantly. The Company has announced that it is exploring with GP the acquisition of its assets and the assumption of some or all of its liabilities in exchange for shares of Common Stock (the “GP Acquisition”). Discussions are in their preliminary stages and none of the terms and conditions of the acquisition has been determined, including the number of shares of Common Stock to be issued to GP in exchange for its assets or the liabilities of GP that the Company would assume. The Company intends to structure any transaction such that its board of directors and executive officers would not be changed and that voting control of the Company would not be affected.
The Company’s authorized capital is 100,000,000 shares of Common Stock and 10,000,000 shares of preferred stock, par value $0.00001 per share. On October 3, 2020, the Company combined the outstanding shares of its Common Stock on the basis of one share for every 59 shares then outstanding; the number of authorized shares of Common Stock and preferred stock was unaffected. The effect of this combination has been applied to all periods covered by this report. The Company has also designated 1,000,000 shares of its preferred stock as Series A Convertible Preferred Stock (“Series A Preferred”) and, on July 31, 2020, issued them to its chief executive officer in exchange for 305,085 shares of his Common Stock; these shares, together with the shares of Common Stock owned by him, confer voting control of the Company on him. See Item 10, Employment Agreement.
| 16 |
The Company’s principal place of business is located at 1620 Commerce St., Corona, CA 92878. The Company’s telephone number is (951) 381-2555. The Company has two corporate websites: www.advancedcontainertechnologies.com for GrowPods and related items and www.medtainer.com for Medtainers and related products and services. Common Stock is quoted on the OTC Pink tier of OTC Link, a quotation system operated by OTC Markets Group Inc. (“OTC Link”), under the trading symbol ACTX.
Going Concern
As indicated in Note 3 of the Notes to Consolidated Financial Statements, there is substantial doubt as to the ability of the Company to continue as a going concern. The Company has generated material operating losses since inception and its ability to continue as a going concern depends on the successful execution of its operating plan, which includes increasing sales of existing products – and in particular GrowPods and related products – while introducing additional products and services, controlling cost of goods sold and operation expenses, negotiating extensions of existing loans, and raising either debt or equity financing.
Need for Capital
The Company needs a substantial amount of additional capital to fund its business, including expansion of its operations, and for repayment of its debts. No assurance can be given that any additional capital can be obtained or, if obtained, will be adequate to meet its needs. If adequate capital cannot be obtained on a timely basis and on satisfactory terms, the Company’s operations could be materially negatively impacted it may need to take certain measures to remain a going concern, or it could be forced to terminate operating.
Impact of the Covid-19 Pandemic
The Covid-19 pandemic, its disruption of the Company’s business and its effect on the economy generally have not adversely impacted the Company, due principally to its cost-saving measures. See Item 1A, Risk Factors – The Company’s business, financial condition, results of operations and liquidity may be substantially and adversely affected by this pandemic for a detailed discussion of matters relating to this pandemic.
Also, in connection with the pandemic:
| · | The Company’s chief executive officer has waived current payment of his salary since June 1, 2020; however, the Company is accruing it and is obligated to pay the deferred amount, which was $325,000 as of March 31, 2022, at some future time. |
| · | The Company has purchased from Polymation fewer Medtainers than required under the Production Contract; while doing so has enabled the Company to preserve cash by reducing expenses, it also subjects it to claims for breach of that agreement. |
| · | On May 4, 2020, the Company made a note in favor of Customers Bank in the principal amount of $137,690 pursuant to the terms of the CARES Act and pursuant to all regulations and guidance promulgated or provided by the Small Business Administration and other Federal agencies that are now or may become applicable to the loan. The loan bore interest at the rate of 1% per annum and, as provided in the CARES Act, no interest was accrued during the first 6 months after the loan amount was disbursed. On August 5, 2021, this note was fully forgiven. |
The Company believes that, owing to the effect of the pandemic on its customers, receivables have been and may continue to be collected more slowly than prescribed by their payment terms and some may prove to be uncollectible.
The Company tested intellectual property and goodwill for impairment in preparing its financial statements for the year ended December 31, 2021, and determined that no adjustment was required.
| 17 |
Results of Operations
Comparison of the Three Months Ended March 31, 2022, and March 31, 2021
The following table sets forth information from the consolidated statements of operations for the three months ended March 31, 2022, and March 31, 2021.
| Three Months Ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Revenues | $ | 926,148 | $ | 1,872,958 | ||||
| Cost of goods sold | 607,965 | 1,550,041 | ||||||
| Gross profit | 318,183 | 322,917 | ||||||
| Operating expenses | 486,668 | 614,886 | ||||||
| Loss from operations | (168,485 | ) | (291,969 | ) | ||||
| Non-operating expense: | ||||||||
| Interest expense | (4,632 | ) | (5,004 | ) | ||||
| Net loss | $ | (173,117 | ) | $ | (296,973 | ) | ||
Revenues and Cost of Goods Sold
Revenue for the three months ended March 31, 2022, was $926,148, from which the Company earned a gross profit of $318,183, or 34% of sales. Revenues for the three months ended Mach 31, 2021, were $1,872,958, from which the Company earned a gross profit of $322,917, or 17% of sales. The decrease was primarily due to a $1,127,850 decrease in sales from GrowPods, a $70,720 decrease in revenues from sales of humidity pack inserts and a $2,589 decrease in sales of Medtainers. The decrease was partially offset by a $187,802 increase in sales of lighters, an increase of $27,075 increase in sales of mylar bags, a $23,607 increase in printing and a $10,872 increase in sales of plastic lighter holders. Cost of goods sold for the three months ended March 31,2022, and March 31, 2021, were $607,965 and $1,550,041, respectively. This decrease was primarily due to a $1,045,880 decrease in the cost of GrowPods, a $49,722 decrease in the cost of humidity pack inserts and a $10,853 in the cost of other products. This decrease in cost of goods sold was partially offset by a $124,101 increase in the cost of lighters and a $15,374 increase in the cost of Mylar bags. Overall, gross profit increased from 17% for the three months ended March 31, 2021, to 34% in 2022, because, in the later period, gross profit for GrowPods and related products were 21%, based upon revenues of $197,150, while gross profit for Medtainers and related products and services was 79%, based upon revenues of $728,998.
Operating Expenses
Operating expenses for the three months ended March 31, 2022, and March 31, 2021, consisted of the following:
| Three Months Ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Advertising and marketing | $ | 48,469 | $ | 14,827 | ||||
| Depreciation and amortization | 69,023 | 70,440 | ||||||
| Professional fees | 94,795 | 77,073 | ||||||
| Share-based compensation | – | 270,000 | ||||||
| Payroll | 183,552 | 114,818 | ||||||
| General and administrative | 90,829 | 67,728 | ||||||
| Total operating expenses | $ | 486,668 | $ | 614,886 | ||||
| 18 |
Operating expenses for the three months ended March 31, 2022, and March 31, 2021, were $486,668 and $614,886, respectively. The decrease was attributable to a $270,000 decrease in share-based compensation, which was partially offset by a $68,734 increase in payroll expense, a $33,642 increase in advertising and marketing and a $23,101 increase in general and administrative expense.
Loss from Operations
The Company's operating loss for the three months ended March 31, 2022, was $168,485 ($69,023 of which was non-cash expense for depreciation and amortization). Compared with $291,969 for the three months ended March 31, 2021 ($270,000 of which was non-cash expense for share-based compensation and $70,440 of which was non-cash expense for depreciation and amortization). The Company believes that, owing to the effect of the pandemic on its customers, receivables have been and may continue to be collected more slowly than prescribed by their payment terms and some may prove to be uncollectible.
Interest Expense
For the three months ended March 31,2022, and March 31, 2021, interest expense was $4,632 and $5,004, respectively.
Net Loss
The net loss for the three months ended March 31, 2022, was $173,117 ($69,023 of which was non-cash expense for depreciation and amortization) versus a net loss of $296,973 for the three months ended March 31, 2021 ($270,000 of which was non-cash expense for share-based compensation and $70,440 of which was non-cash expense for depreciation and amortization). As described above, the principal reason for this difference was the $270,000 decrease in share-based compensation.
Liquidity and Capital Resources
As of March 31, 2022, the Company had $117,478 in cash and accounts receivable of $210,462. As of March 31, 2022, and December 31, 2021, the Company had negative working capital of $967,003 and $1,073,722, respectively. As of March 31, 2022, the Company had no commitments for capital expenditures. As of March 31, 2022, the Company had inventory of approximately 102,000 Medtainer units, approximately 87,771 units of other products and one GrowPod.
In addition to the Cares Loan, the Company received $10,000 from sales of shares of Common Stock to individuals during the year ended December 31, 2020, and received $615,000 from sales of Common Stock to individuals during 2021; it has received $210,000 from such sales in 2022. The Company believes that it will require approximately $765,000 in additional funding for the next 12 months, including approximately $600,000 to repay loans and interest that are past due, assuming that the Company’s operating loss remains at the same level and that it does not acquire the assets of GP, as it announced it may on February 28, 2022; if it does consummate this acquisition, the Company believes that it would require approximately $2,300,000 in additional funding for the next 12 months, owing to increased expenses associated with operating and integrating the acquired business. The Company is seeking extensions of its overdue loans, and if it is successful in doing so, the amount of such funding will be reduced, but no assurance can be given as to the extent to which it will be successful. The Company plans to fund its activities principally through the sale of debt or equity securities to private investors. There is no assurance that such funding will be available on acceptable terms or available at all. If the Company is unable to raise sufficient funds when required or on acceptable terms, it may have to reduce its operations significantly or discontinue them. To the extent that funds are raised by issuing equity securities or securities that are convertible into the Company’s equity securities, its stockholders may experience significant dilution.
The Company had no material commitments for capital expenditures as of March 31, 2022, or as of the date of this report.
The Company intends to devote its manpower and capital resources to increasing revenues while working to reduce the cost of goods sold and operating expenses. Doing so depends on the successful execution of its operating plan, which includes increasing sales of existing products, introducing additional products and services, controlling cost of goods sold and operating expenses, negotiating extensions of existing loans, raising either debt or equity financing and, if the GP Acquisition were consummated, integrating the related business into the Company. The Company intends to devote its manpower and capital resources to increasing revenues, while working to reduce the cost of goods sold and operating expenses. Doing so depends on the successful execution of its operating plan, which includes increasing sales of existing products, introducing additional products and services, controlling cost of goods sold and operation expenses, negotiating extensions of existing loans and raising either debt or equity financing.
| 19 |
Off-Balance-Sheet Arrangements
The Company has no off-balance-sheet arrangements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
The Company is a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and is not required to provide information under this item.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
The Company’s management has evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of March 31, 2022. Based on this evaluation, the principal executive officer and the principal accounting officer concluded that these disclosure controls and procedures were not effective as of such date, at a reasonable level of assurance, in ensuring that the information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is: (i) accumulated and communicated to management (including its principal executive officer and principal accounting officer) in a timely manner and (ii) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.
Changes in Internal Control Over Financial Reporting
There were no changes in internal control over financial reporting during the three months ended March 31, 2022, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
| 20 |
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
ITEM 1A. Risk Factors.
While the Company is a smaller reporting company as defined by Rule 12b-2 promulgated under the Securities Exchange Act of 1934 (the “Exchange Act”) and is not required to provide information under this item, it calls attention to the following risks, which it believes are especially significant:
If the Company cannot raise capital, it may have to curtail its operations or could fail.
As described in Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources, the Company requires substantial additional capital for its existing operations and would require a greater amount if the GP Acquisition were consummated. In the event that it cannot raise such capital, it may have to curtail its operations or it could fail.
The Company’s business, financial condition, results of operations and liquidity may be substantially and adversely affected by the Covid-19 pandemic.
Due to the Company’s measures to reduce operating expenses, principally payroll costs, the COVID-19 pandemic did not have a material impact on its results of operations in 2020, 2021 and the first quarter of 2022. Nevertheless, the federal and local governmental restrictions that were implemented to control the spread of the virus, including quarantines, travel restrictions, business shutdowns and restrictions on the movement and gathering of people, affected the Company during these periods. During these periods, the cost-saving actions that the Company took to address and mitigate the effects of COVID-19 among other things reduced its ability to market its products at trade shows, led to disruptions in its business, reduced its ability to grow, resulted in the termination of many employees and increased the workload for the employees that were retained. These measures may have affected the ability of the Company to raise capital and may have created risks to the effectiveness of the Company’s internal controls. Although many restrictions are being lifted or decreased, remaining restrictions may continue to affect the Company. The Company has resumed normal operations and expects to operate normally as long as infections continue to remain at their current level. If, however, the pandemic were to intensify, the risks to which the Company is subject, including, but not limited to, those arising because of its inability to raise capital, the ability of its customers to pay the Company on a timely basis or at all and the execution of its strategy, could increase.
See Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operation – Impact of the Covid-19 Pandemic for further information.
The Company sells products that may be used for cannabis-related purposes.
Cannabis is a Schedule I controlled substance under the Controlled Substances Act and accordingly, its cultivation, sale, or possession is unlawful under federal law, as is its advertisement for sale and the sale of paraphernalia designed or intended primarily for its use, unless such paraphernalia is authorized by federal, state, or local law. The Controlled Substances Act is enforced by the Drug Enforcement Administration (the “DEA”). The United States Supreme Court has ruled that the federal government has the right to regulate and criminalize cannabis, even for medical purposes. The illegality of cannabis under federal law preempts state laws that legalize its use and therefore, federal law and enforcement may adversely impact the implementation and effect of state laws permitting adult use of cannabis or its use for medical purposes.
| 21 |
Because cannabis is illegal under federal law, certain of our customers and suppliers involved in the cannabis business (collectively, “Cannabis Industry Participants) and we are subject to a number of risks. If any of the events described below in connection with these risks were to occur, our business, results of operations and financial condition could be materially and adversely affected. We do not believe that we are a Cannabis Industry Participant.
While we are not engaged in the cultivation or sale of cannabis, we sell our products to persons who may be Cannabis Industry Participants. Accordingly, laws and regulations governing the cultivation, sale and possession of cannabis and related products could affect our business. Such laws and regulations have been enacted on both the state and federal government levels and are subject to change. New laws and regulations and enforcement actions by state and federal authorities could indirectly reduce demand for our products and could materially and adversely affect our business, results of operations and financial condition.
State laws permitting the cultivation, possession, and of cannabis for adult and medical uses conflict with federal laws that prohibit such activities for any purpose. Many states have legalized or decriminalized the cultivation, use and possession of cannabis for adult use, while other states have enacted legislation specifically permitting the cultivation, use and possession of cannabis for medicinal purposes only If cannabis were to become legal under federal law, its cultivation, use and possession could be regulated by the FDA and the DEA (which now licenses cannabis research and drugs containing active ingredients derived from cannabis) or other federal agencies, either exclusively or in addition to state authorities.
Federal and state laws and regulations affecting the U.S. cannabis industry, which are broad in scope and subject to evolving interpretations, are continually changing, and these changes could adversely affect our growth, revenues, results of operations and success generally. As a result, users of our products and certain of our suppliers could incur substantial costs associated with compliance, which could in turn materially and adversely affect our business, results of operations and financial condition. In addition, violations of these laws by these users and suppliers, or allegations of such violations, could have a like effect. Demand for our products may be negatively impacted, depending on how laws, regulations, administrative practices, enforcement approaches, judicial interpretations and consumer perceptions develop. We cannot predict the nature of such developments or the effect, if any, that they could have on our business, results of operations and financial condition.
Other laws that could affect us directly, if, contrary to our belief, we were found to be a Cannabis Industry Participant, or indirectly through Cannabis Industry Participants with whom we do business, include:
| · | Under federal law and the laws of some states, it is unlawful to sell or offer for sale, to use the mails or any other facility of interstate commerce to transport or to import or export drug paraphernalia. The term “drug paraphernalia” includes any equipment, product or material of any kind which is primarily intended or designed for use in manufacturing, compounding, converting, concealing, producing, processing, preparing, injecting, ingesting, inhaling, or otherwise introducing into the human body a controlled substance. One of the factors that these authorities may consider in determining whether the Company’s products are drug paraphernalia is its national and local advertising concerning their use. The Company is aware that its products may be used for the above purposes and believes that some of its customers may so use them; however, it does not believe that any of its products were designed or are intended for cannabis-related purposes or that any of its products are drug paraphernalia. The Company and its officers could be subject to prosecution by federal and state authorities if they were to determine otherwise. Such prosecution could have an immediate and materially adverse effect on the Company. |
| · | Businesses trafficking in cannabis may not take federal tax deductions for costs beyond costs of goods sold. We cannot predict how the federal government may treat cannabis business from a taxation standpoint in the future. |
| · | Because the cultivation, sale, possession and use of cannabis is illegal under federal law, cannabis businesses may have restricted intellectual property and proprietary rights, particularly with respect to obtaining and enforcing patents and trademarks. |
| · | Cannabis businesses may face court action by third parties under the Racketeer Influenced and Corrupt Organizations Act. |
| · | Some courts have ruled that the federal bankruptcy courts cannot provide relief for parties who engage in the cannabis business. Such rulings have denied bankruptcies for cannabis dispensaries upon the justification that businesses cannot violate federal law and then claim the benefits of federal bankruptcy for the same activity or that courts cannot ask a bankruptcy trustee to take possession of and distribute cannabis assets as such action would violate the Controlled Substances Act. |
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| · | Since cannabis is illegal under federal law, many banks do not accept funds from businesses involved in the cannabis industry. Consequently, because some banks have believed that we are involved in the cannabis industry, we have had, and could continue to have, difficulty finding banks willing to accept or continue our business. Under the Bank Secrecy Act, banks must report to the federal government any suspected illegal activity, which includes any transaction associated with the cannabis business. These reports must be filed even though the business is operating legitimately under state law. On February 14, 2014, the Financial Crimes Enforcement Network of the Treasury Department issued a memorandum (the “FinCEN Memo”) providing guidance respecting Bank-Secrecy-Act-compliant ways for financial institutions to service state-sanctioned cannabis businesses. The FinCEN Memo refers to supplementary guidance that was issued to U.S. federal prosecutors relating to the prosecution of U.S. money laundering offenses predicated on cannabis violations of the Controlled Substances Act and outlines extensive due diligence and reporting requirements, which most banks have viewed as onerous (the “Cole Memorandum”). Although the Cole Memorandum has been rescinded, the FinCEN Memo remains in place, but if it were rescinded, it would be more difficult for Cannabis Industry Participants – and for us, if we were determined to be a Cannabis Industry Participant – to access the U.S. banking systems and conduct financial transactions, which would adversely affect our operations. |
| · | Investments in the U.S. cannabis industry are subject to a variety of laws and regulations that involve money laundering, financial recordkeeping and proceeds of crime, including the Bank Secrecy Act, as amended by the Patriot Act, other anti-money laundering laws, and any related or similar rules, regulations or guidelines, issued administered or enforced by governmental authorities in the United States. |
| · | Insurance that is otherwise readily available, such as general liability and directors and officer’s insurance, may be more difficult to find and more expensive to the extent that a company is deemed to operate in the cannabis industry. |
We believe that most US. attorneys are not prioritizing the prosecution of cannabis-related offenses and medical cannabis is currently protected against enforcement by enacted legislation, which, if true, lowers, but does not eliminate, our cannabis-related risk. However, changes in the federal approach to enforcement could negatively affect the industry, potentially ending it entirely or causing significant direct or indirect financial damage to us. The legal uncertainty and possible future changes in law could negatively and substantially affect our business, results of operations and financial condition.
Violations of laws relating to cannabis could result in significant fines, penalties, administrative sanctions, convictions or settlements, including, but not limited to, disgorgement of profits, cessation of business activities or divestiture, arising from civil proceedings or criminal charges. This could have a material and materially adverse effect on our business, including our reputation and ability to conduct business, the listing or quotation of our securities on stock exchanges and quotation services, the settlement of trades of our securities, our ability to obtain banking services, our financial position, operating results, profitability or liquidity or the market price of our publicly traded shares. It is difficult for us to estimate the time, expenditures and resources that would be required in the event of such a proceeding.
We have encountered, and may continue to encounter, difficulty in marketing and selling GrowPods and related products.
The Company began selling GrowPods and related products in 2021 and has not yet acquired internal and external personnel in the quantity and with the skills and capacity necessary to market GrowPods, nor has it raised the capital necessary acquire such staff and to market and sell GrowPods. The extent of the Company’s difficulty in marketing and selling GrowPods is indicated by the fact that its revenues from sales of GrowPods diminished from $1,325,000 in the three-month period ended March 31, 2021, to $197,150 in the three-month period ended March 31, 2022. If funds are available, the Company intends to hire additional staff, but cannot assure that it will be able to manage and retain it. Further, if the GP Acquisition is completed, difficulties could arise in integrating GP’s operations with those of the Company that could adversely affect sales of GrowPods. If the Company is unable to market and sell GrowPods successfully, it may have to curtail its operations in this area, which could have a material and adverse impact on the Company, its financial results and its reputation.
| 23 |
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
During the three months ended March 31, 2022, the Company sold 280,001 shares of Common Stock to eight individuals for an aggregate purchase price of $210,000, without registration under the Securities Act, in reliance upon the exemptions from registration afforded by Section 4(a)(2) thereof and Rule 506(b) or (c) promulgated thereunder. During the three months ended March 31, 2021, the Company sold 485,000 shares of Common Stock to eight individuals for an aggregate purchase price of $615,000, without registration under the Securities Act, in reliance upon the exemptions from registration afforded by Section 4(a)(2) thereof and Rule 506(b) or (c) promulgated thereunder.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
Item 6. Exhibits.
| 24 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| ADVANCED CONTAINER TECHNOLOGIES, INC. | ||
| Date: May 20, 2022 | BY: | /s/ Douglas P. Heldoorn |
| Douglas P. Heldoorn | ||
| Principal Executive Officer | ||
| Date: May 20, 2022 | BY: | /s/ Jeffory A. Carlson |
| Jeffory A. Carlson | ||
| Principal Accounting Officer | ||
| 25 |
Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO EXCHANGE ACT RULE 13a-14(a)/15d-14(a)
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Douglas P. Heldoorn, certify that:
| 1. | I have reviewed this Form 10-Q of Advanced Container Technologies, Inc. for the three months ended March 31, 2022; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report; |
| 4. | The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d- 15(f)) for the Registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| (d) | Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and |
| 5. | The Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer’s auditors and the audit committee of the small business issuer’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer’s ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer’s internal control over financial reporting. |
Date: May 20, 2022
/s/ Douglas P. Heldoorn
Douglas P. Heldoorn
Principal Executive Officer
Exhibit 31.2
CERTIFICATION OF PRINCIPAL ACCOUNTING OFFICER
PURSUANT TO EXCHANGE ACT RULE 13a-14(a)/15d-14(a)
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Jeffory A. Carlson, certify that:
| 1. | I have reviewed this Form 10-Q of Advanced Container Technologies, Inc. for the three months ended March 31, 2022; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report; |
| 4. | The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d- 15(f)) for the Registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| (d) | Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and |
| 5. | The Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer’s auditors and the audit committee of the small business issuer’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer’s ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer’s internal control over financial reporting. |
Date: May 20, 2022
/s/ Jeffory A. Carlson
Jeffory A. Carlson
Principal Accounting Officer
Exhibit 32.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Douglas P. Heldoorn, do hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
| 1. | The Quarterly Report on Form 10-Q of the Company for the quarter ended March 31, 2022, as filed with the Securities and Exchange Commission (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: May 20, 2022
/s/ Douglas P. Heldoorn
Douglas P. Heldoorn
Principal Executive Officer
Exhibit 32.2
CERTIFICATION OF PRINCIPAL ACCOUNTING
PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Jeffory A. Carlson, do hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
| 1. | The Quarterly Report on Form 10-Q of the Company for the quarter ended March 31, 2022, as filed with the Securities and Exchange Commission (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Dated: May 20, 2022
/s/ Jeffory A. Carlson
Jeffory A. Carlson
Principal Accounting Officer
CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - USD ($) |
Mar. 31, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Property and equipment, net of accumulated depreciation (in Dollars) | $ 165,839 | $ 162,018 |
| Intangible assets, net of accumulated amortization (in Dollars) | $ 574,072 | $ 508,870 |
| Common stock, par value (in Dollars per share) | $ 0.00001 | $ 0.00001 |
| Common stock, shares authorized | 100,000,000 | 100,000,000 |
| Common stock, shares issued | 51,901,525 | 51,621,524 |
| Common stock, shares outstanding | 51,901,525 | 51,621,524 |
| Convertible Preferred Stock [Member] | ||
| Preferred stock, par value (in Dollars per share) | $ 0.00001 | $ 0.00001 |
| Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
| Preferred stock, shares issued | 1,000,000 | 1,000,000 |
| Preferred stock, shares outstanding | 1,000,000 | 1,000,000 |
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) |
3 Months Ended | |
|---|---|---|
Mar. 31, 2022 |
Mar. 31, 2021 |
|
| Income Statement [Abstract] | ||
| Revenues | $ 926,148 | $ 1,872,958 |
| Cost of goods sold | 607,965 | 1,550,041 |
| Gross profit | 318,183 | 322,917 |
| Operating expenses: | ||
| Advertising and marketing | 48,469 | 14,827 |
| Depreciation and amortization | 69,023 | 70,440 |
| Professional fees | 94,795 | 77,073 |
| Share-based compensation | 0 | 270,000 |
| Payroll | 183,552 | 114,818 |
| General and administrative | 90,829 | 67,728 |
| Total operating expenses | 486,668 | 614,886 |
| Operating loss | (168,485) | (291,969) |
| Non-operating income (expense) | ||
| Interest expense | (4,632) | (5,004) |
| Total non-operating income (expenses), net | (4,632) | (5,004) |
| Net loss | $ (173,117) | $ (296,973) |
| Basic loss per common share | $ (0.00) | $ (0.01) |
| Diluted loss per common share | $ (0.00) | $ (0.01) |
| Basic weighted average common shares outstanding | 51,214,545 | 51,166,487 |
| Diluted weighted average common shares outstanding | 51,214,545 | 51,166,487 |
Description of Business and Organization |
3 Months Ended |
|---|---|
Mar. 31, 2022 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| Description of Business and Organization | Note 1 – Description of Business and Organization
Advanced Container Technologies, Inc. (the “Company”) markets and sells two principal products: (i) beginning in the first quarter of 2021, GrowPods, which are specially modified insulated shipping containers manufactured by GP Solutions, Inc. (“GP”), in which plants, herbs and spices may be grown hydroponically in a controlled environment (“GrowPods”) and (ii) the Medtainer, which may be used to store pharmaceuticals, herbs, teas and other solids or liquids and can grind solids and shred herbs. The Company also markets and sells products related to GrowPods and the Medtainer. The Company also provides private labeling and branding for purchasers of Medtainers, lighters and other products.
The Company was incorporated under the laws of the state of Florida on September 5, 1997. It changed its corporate name to Acology, Inc. on January 9, 2014; to Medtainer, Inc. on August 28, 2018; and to its present name on October 3, 2020.
On October 9, 2020, the Company acquired all of the outstanding shares of Advanced Container Technologies, Inc., a California corporation (“ACT”), from its shareholders pursuant to an Exchange Agreement, dated August 14, 2020, and amended on September 9, 2020 (the “Exchange Agreement”), in exchange for 50,000,000 shares of the Company’s common stock (“Common Stock”). This exchange resulted in ACT’s becoming the wholly owned subsidiary of the Company. In connection with this exchange, the Company acquired a Distributorship Agreement, dated August 6, 2020, by and between ACT and GP (the “Distributorship Agreement”), under which ACT has the exclusive right to purchase GrowPods and related products from GP at prices to be agreed to from time to time and to sell and distribute them within the United States and its territories for an initial term that will expire on December 31, 2025. ACT may renew the Distributorship Agreement indefinitely as long as it purchases in the last calendar year of any term the lesser of (i) 100 GrowPods or (ii) GP’s total output of GrowPods.
On August 27, 2020, the Company incorporated Med X Technologies Inc. (“Med X”) in the State of California, and acquired all of its shares, such that it is the Company’s wholly owned subsidiary. The Company intends to transfer the assets used in its Medtainer and printing businesses to Med X, after which it will conduct all of its operations through Med X and ACT.
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| Summary of Significant Accounting Policies | Note 2 – Summary of Significant Accounting Policies
Accounting Principles
The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial statements and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the U.S. Securities and Exchange Commission (the “SEC”). Accordingly, they do not contain all information and footnotes required by GAAP for annual financial statements. In the opinion of the Company’s management, the accompanying unaudited consolidated financial statements contain all the adjustments necessary (consisting only of normal recurring accruals) to present the financial position of the Company as of March 31, 2022, and the results of operations and cash flows for the periods presented. The results of operations for the three months ended March 31, 2022, are not necessarily indicative of the operating results for the full fiscal year or for any future period. These unaudited consolidated financial statements should be read in conjunction with the financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed with the U.S. Securities and Exchange Commission (the “SEC”) on April 18, 2022.
Principles of Consolidation
The unaudited consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly owned. All intercompany balances and transactions have been eliminated. Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make significant estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates. Certain of these estimates could be affected by external conditions, including those unique to the Company’s industries, and general economic conditions. These external conditions could have an effect on the Company’s estimates that could cause actual results to differ materially from its estimates. The Company re-evaluates all of its accounting estimates at least quarterly based on these conditions and records adjustments when necessary.
Significant estimates relied upon in preparing these consolidated financial statements include revenue recognition, accounts receivable reserves, inventory and related reserves, valuations and purchase price allocations related to business combinations, expected future cash flows used to evaluate the recoverability of long-lived assets, estimated fair values of long-lived assets used to record impairment charges related to intangible assets and goodwill, amortization periods, accrued expenses, share-based compensation, and recoverability of the Company’s net deferred tax assets and any related valuation allowance.
Cash and Cash Equivalents
The Company considers all short-term highly liquid investments with an original maturity at the date of purchase of 3 months or less to be cash equivalents. The Company had no cash equivalents at March 31, 2022, or December 31, 2021.
Accounts Receivable
Included in accounts receivable on the consolidated balance sheets are amounts primarily related to customers. The Company estimates losses on receivables based on known troubled accounts and historical experience of losses incurred. Receivables are considered impaired and written off when it is probable that all contractual payments due will not be collected in accordance with the terms of the related agreement. Based upon experience and the judgment of management, the allowance for doubtful accounts was $0 as of March 31, 2022, and December 31, 2021.
Inventories
Inventories, which consist of products held for resale, are stated at the lower of cost (determined using the first-in first-out method) and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs to complete and dispose of the product. If the Company identifies excess, obsolete or unsalable items, its inventories are written down to their realizable value in the period in which the impairment is first identified. Shipping and handling costs incurred for inventory purchases and product shipments are recorded in cost of sales in the Company’s consolidated statements of operations.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation. Depreciation is provided for on a straight-line basis over the useful lives of the assets. Furniture and fixtures are depreciated over the useful life of 7 years. Machinery, equipment, and computers are depreciated over the useful life of 3 to 7 years. Leasehold improvements are depreciated over 2 years and were fully depreciated as of March 31, 2022. Expenditures for additions and improvements are capitalized and repairs and maintenance are expensed as incurred.
Goodwill and Intangible Assets
Goodwill and intangible assets that have indefinite useful lives are not amortized but are evaluated for impairment annually or whenever events or changes in circumstances indicate that their carrying value may not be recoverable. The Company records intangible assets at fair value when they are acquired and they are tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. The impairment test consists of a comparison of the fair value of the indefinite-lived intangible asset with its carrying amount. If the carrying amount of an intangible asset exceeds its fair value, an impairment loss will be recorded in the consolidated statements of operations in an amount equal to that excess. The Company amortizes its intangible assets that have finite lives using either the straight-line method or based upon estimated future cash flows to approximate the pattern in which the economic benefit of the assets will be utilized. Amortization is recorded over estimated useful lives ranging from 5 to 20 years. The Company records intangible assets at fair value, estimated using a discounted-cash-flow approach.
The Company reviews intangible assets subject to amortization at least annually to determine whether any adverse conditions exist or a change in circumstances has occurred that would indicate impairment or a change in the remaining useful life. Conditions that would indicate impairment and trigger a more frequent than quarterly impairment assessment include, but are not limited to, a significant adverse change in legal factors or business climate that could affect the value of an asset or an adverse action or assessment by a regulator. If the carrying value of an intangible asset exceeds its undiscounted cash flows, the Company will write down the carrying value to its fair value in the period identified. The Company generally calculates fair value as the present value of estimated future cash flows to be generated by the asset using a risk-adjusted discount rate. If the estimate of an intangible asset’s remaining useful life is changed, the Company will amortize its remaining carrying value prospectively over its revised remaining useful life. The Company has conducted its annual impairment test of goodwill during the fourth quarter of each year. The estimation of fair value requires significant judgment. There was no impairment of intangible assets, long-lived assets or goodwill during the three-month periods ended March 31, 2022, or March 31, 2021.
Any loss resulting from an impairment test will be reflected in operating income in the Company’s consolidated statements of operations. The annual impairment testing process is subjective and requires judgment at many points. If these estimates or their related assumptions change in the future, the Company may be required to record impairment charges for these assets not previously recorded.
Revenue Recognition
The Company follows the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606), as amended. This standard requires a company to recognize revenues when it transfers goods or services to customers in an amount that reflects the consideration that it expects to receive for them.
Under ASC 606, Company recognizes revenue when a customer obtains control of promised goods or services or when they are shipped to a customer, in an amount that reflects the consideration that it expects to receive in exchange for them. The Company recognizes revenues following the five-step model prescribed under ASC 606: (a) it identifies a contract with a customer; (b) it identifies the performance obligations in the contract; (c) it determines the transaction price; (d) it allocates the transaction price to the performance obligations in the contract; and (e) it recognizes revenues when (or as) it satisfies its performance obligation.
Revenues from product sales are recognized when a customer obtains control of the Company’s product, which occurs at a point in time, typically upon shipment to the customer. The Company expenses incremental costs of obtaining a contract as and when incurred if the expected amortization period of the asset that it would have been recognized is 1 year or less or the amount is immaterial.
Revenue from sales of items sold by the Company for the three months ended March 31, 2022, and March 31, 2021, and the percentage of sales allocable to each item to the Company’s total revenues were as follows:
The table below presents the customer deposits payable balance and the significant activity affecting customer deposits during the quarterly period ended March 31, 2022:
ASC 718, Compensation – Stock Compensation, prescribes accounting and reporting standards for all share-based payment transactions. The Company follows FASB guidance related to equity-based payments, for both employees and non-employees, which requires that equity-based compensation be accounted for using a fair value method and recognized as expense in the accompanying consolidated statements of operations. Equity-based compensation expense is recognized as compensation expense over the applicable service or vesting period (see Note 7).
Fair Value Measurements
The Company has adopted ASC Topic 820, Fair Value Measurements, which defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value and expands disclosure of fair value measurements.
The estimated fair value of certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses, is carried on an historical cost basis, which approximates their fair values because of the short-term nature of these instruments. The carrying amounts of the Company’s short- and long-term credit obligations approximate fair value because the effective yields on these obligations, which include contractual interest rates taken together with other features, such as concurrent issuances of warrants and/or embedded conversion options, are comparable to rates of returns for instruments of similar credit risk.
ASC Topic 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC Topic 820 also establishes a fair-value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC Topic 820 describes three levels of inputs that may be used to measure fair value:
Level 1 - Quoted prices in active markets for identical assets or liabilities.
Level 2 - Quoted prices for similar assets and liabilities in active markets or inputs that are observable.
Level 3 - Inputs that are unobservable (for example, cash flow modeling inputs based on assumptions).
Advertising
Advertising and marketing expenses are charged to operations as incurred. These expenses totaled $48,469 and $14,827 for the three months ended March 31, 2022, and March 31, 2021, respectively.
Income Taxes
The Company uses the asset and liability method of accounting for income taxes in accordance with ASC Topic 740, Income Taxes. Under this method, income tax expense is recognized for (a) taxes payable or refundable for the current year and (b) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in the consolidated statements of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if, based on the weight of the available positive and negative evidence, it is more likely than not that some portion or all the deferred tax assets will not be realized.
ASC Topic 740.10.30 clarifies accounting for uncertainty in income taxes recognized in an entity’s financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740.10.40 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Company has no material uncertain tax positions.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in financial institutions, which at times may exceed the federal deposit insurance coverage of $250,000. The Company has not experienced losses on these accounts and believes that it is not exposed to significant risks on such accounts. The Company has not experienced losses on accounts receivable and the Company believes that it is not exposed to significant risks with respect to them.
The basic loss per share is calculated by dividing the Company’s net loss attributable to common stockholders by the weighted average number of common shares outstanding during the year. The diluted loss per share is calculated by dividing the Company’s net loss attributable to common stockholders by the diluted weighted average number of shares outstanding during the year. The potentially dilutive stock options on the Company’s common stock were not considered in the computation of diluted net loss per share as they would be anti-dilutive. dilutive effective was calculated for the three months ended March 31, 2021, and March 31, 2020, as the Company reported a net loss for each period.
Recent Accounting Pronouncements
The Company follows ASU 2016-02, Leases (Topic 842), which requires recognition of lease liabilities, representing future minimum lease payments, on a discounted basis, and a corresponding right-of-use asset on a balance sheet for most leases, along with requirements for enhanced disclosures to enable the assessment of the amount, timing and uncertainty of cash flows arising from leasing arrangements. The Company and a related party entered into a building lease effective on September 1, 2018, which had a one-year term that expired on August 31, 2019, was renewed for a one-year term that expired on August 31, 2020, was renewed for a one-year term that expired on August 31, 2021, and has been renewed for a one-year term that expires August 31, 2022, at a monthly rent of $9,791. On March 23, 2021, the Company and an unrelated party entered into a lease of premises in Tulsa, Oklahoma, having a monthly rental of $5,500. The lease has a one-year term that expired on March 31, 2022, and was renewed for a one-year term at the same rent. The Company is obligated to pay all taxes, insurance, operating expenses, repairs and certain maintenance costs and utilities. Because each of these leases has a term of 12 months or less and there is no assurance the Company will remain in the building locations after the leases have expired, the Company has concluded that this ASU does not apply to these leases.
In August 2020, FASB issued ASU 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.” For convertible instruments, FASB reduced the number of accounting models for convertible debt instruments and convertible preferred stock. Limiting the accounting models results in fewer embedded conversion features being separately recognized from the host contract as compared with current GAAP. Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features that are not clearly and closely related to the host contract that meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting and (2) those issued with substantial premiums for which the premiums are recorded as paid-in capital. FASB decided to amend the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. FASB observed that the application of the derivatives scope exception guidance results in accounting for some contracts as derivatives while accounting for economically similar contracts as equity. FASB also decided to improve and amend the related earnings per share guidance. The amendments in this update are effective for public business entities that meet the definition of an SEC filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years.
In December 2019, FASB issued ASU 2019-12, Income Taxes, which simplifies the accounting for income taxes by eliminating certain exceptions to the guidance in ASC 740 related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The new guidance also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The guidance is effective for fiscal years beginning after December 31, 2021, and interim periods within that year. The adoption did not have any material impact on the Company’s consolidated financial statements.
In June 2016, FASB issued ASU 2016-13 regarding ASC Topic 326, “Measurement of Credit Losses on Financial Instruments.” This pronouncement changes the impairment model for most financial assets and will require the use of an “expected loss” model for instruments measured at amortized cost. Under this model, entities will be required to estimate the lifetime expected credit loss on such instruments and record an allowance to offset the amortized cost basis of the financial asset, resulting in a net presentation of the amount expected to be collected on the financial asset. Subsequently, FASB issued an amendment to clarify the implementation dates and items that fall within the scope of this pronouncement. This standard is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Management is currently evaluating the effect on the Company’s financial statements.
The Company does not believe there are any other recently issued, but not yet effective, accounting standards that would have a significant impact on the Company’s financial position or results of operations.
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Going Concern |
3 Months Ended |
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Mar. 31, 2022 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| Going Concern | Note 3 – Going Concern
The consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. At March 31, 2022, the Company had a working capital deficit of $967,003 and an accumulated deficit of $6,532,567. In addition, the Company has generated operating losses since its inception and has notes payable that are currently in default. These factors, among others, raise substantial doubt about the ability of the Company to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the successful execution of its operating plan, which includes increasing sales of existing products and services, introducing additional products and services, controlling operating expenses, negotiating extensions of overdue notes payable and raising either debt or equity financing. There is no assurance that the Company will be able to implement any of these measures.
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| Goodwill and Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Intangible Assets and Goodwill | Note 4 – Intangible Assets and Goodwill
Intangible assets, including patents and patent applications, a trademark and an internet domain related to Medtainer and distribution rights under a Distributorship Agreement dated August 6, 2020, are recorded at cost or estimated fair value at the date of acquisition. Goodwill relates to an Asset Purchase Agreement, amended as of June 8, 2018. The Company tested intellectual property and goodwill for impairment in preparing its financial statements for the year ended December 31, 2021, and determined that no adjustment was required. As of March 31, 2022, and December 31, 2021, there was no impairment of these assets, which are included in the tables below:
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Convertible Notes Payable and Promissory Notes Payable |
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| Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Convertible Notes Payable and Promissory Notes Payable | Note 5 – Convertible Notes Payable and Promissory Notes Payable
As of March 31, 2022, and December 31, 2021, the Company had outstanding the following convertible notes payable and notes payable:
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Stockholders’ Equity |
3 Months Ended |
|---|---|
Mar. 31, 2022 | |
| Equity [Abstract] | |
| Stockholders’ Equity | Note 6 – Stockholders’ Equity
On October 8, 2020, the Company combined the outstanding shares of its common stock on the basis of 1 share of common stock for each 59 shares of common stock. The effects of this combination have been retroactively applied to all periods presented in the unaudited consolidated financial statements.
On July 30, 2020, the Company filed articles of amendment with the Secretary of State of the State of Florida, pursuant to which, a series of 1,000,000 of its 10,000,000 authorized shares of preferred stock was created, which series is named Series A Convertible Preferred Stock (“Series A Preferred”). Each share of Series A Preferred is convertible into 0.3051 shares of Common Stock, has the dividend and distribution rights and redemption rights of the shares of Common Stock into which it is convertible, is not redeemable and has voting power equal to the combined voting power of all other of classes and series of the Company’s capital stock. On June 24, 2020, the Company issued all of the shares of this series to a related party in exchange for 305,085 shares of Common Stock.
On October 9, 2020, the Company issued 50,000,000 shares of Common Stock to the shareholders of ACT in exchange for their shares in ACT pursuant to the Exchange Agreement. See Note 1. As a result, ACT became the wholly owned subsidiary of the Company and the Company acquired the Distributorship Agreement, which has been valued as an intangible asset at $900,000 (see Note 4) and $86,293 in cash. Under the Distributorship Agreement, ACT has the exclusive right to purchase GrowPods and related products at prices to be agreed to from time to time and to sell and distribute them within the United States and its territories for an initial term that will expire on December 31, 2025. ACT may renew the Distributorship Agreement indefinitely as long as it purchases the lesser of (i) 100 GrowPods or (ii) GP’s total output of GrowPods in the last calendar year of any term.
On January 1, 2021, the Company issued shares of Common Stock to one of the Company’s directors, as compensation pursuant to a Director Agreement between the Company and him, dated as of that date.
During the three months ended March 31, 2022, the Company issued shares of Common Stock to four individuals. The aggregate purchase price of these shares was $. During the year ended December 31, 2021, the Company issued shares of Common Stock to eight individuals. The aggregate purchase price of these shares was $.
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Share-Based Compensation |
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| Compensation Related Costs [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-Based Compensation | Note 7 – Share-Based Compensation
The Company’s 2018 Incentive Award Plan (the “2018 Plan”) became effective on December 1, 2018, under which the Company may issue up to shares of common stock as incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, and other forms of compensation to employees, directors and consultants. In addition, the 2018 Plan provides for the grant of performance cash awards to employees, directors and consultants.
On December 1, 2018, 22,882 shares of common stock were awarded to employees in the form of restricted shares and 5,678 shares of common stock were awarded to consultants as compensation. The fair value of these shares on the grant date was $0.59 per share. As of December 31, 2020, all of these shares had vested. The following table shows vesting for financial reporting purposes under GAAP of the shares issued under the 2018 Plan:
The Company made no awards in any other form during the three months ended March 31, 2022, and March 31, 2021.
The Company expensed $ for share-based compensation under the 2018 Plan in the three months ended March 31, 2022, and March 31, 2021, respectively, for its employees and consultants in the accompanying consolidated statements of operations.
On January 1, 2021, the Company issued shares of Common Stock to one of its directors, as compensation pursuant to a Director Agreement, dated as of that date and, in the three months ended March 31, 2021, the Company expensed $270,000 for share-based compensation in respect of these shares (see Note 6), based on their fair market value of $2.25 per share on their date of issuance.
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Income Taxes |
3 Months Ended |
|---|---|
Mar. 31, 2022 | |
| Income Tax Disclosure [Abstract] | |
| Income Taxes | Note 8 – Income Taxes
As of December 31, 2021, the Company had approximately $2,351,000 and $1,649,000 of net operating loss carryforwards (“NOLs”) available to reduce future Federal and California, respectively, taxable income, which will begin to expire in 2031. In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based on the assessment, management has established a full valuation allowance against all the deferred tax assets for every period because it is more likely than not that the deferred tax assets will not be realized.
On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the “2017 Tax Act”) was enacted, making significant changes to the Internal Revenue Code. Changes include a federal corporate tax rate decrease from 35% to 21% for tax years beginning after December 31, 2017, the transition of U.S. international taxation from a worldwide tax system to a territorial system and a one-time transition tax on the mandatory deemed repatriation of foreign earnings. The Company has estimated its provision for income taxes in accordance with the 2017 Tax Act and the guidance available and, based thereon, has determined that the 2017 Tax Act does not change the determination that it is more likely than not that the deferred tax assets will not be realized. Accordingly, the Company has kept the full valuation allowance. As a result, the Company recorded no income tax expense during the three months ended March 31, 2022, and March 31, 2021.
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Related-Party Transactions |
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| Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Related-Party Transactions | Note 9 – Related-Party Transactions
Loans
The Company has received loans from its officers and directors from time to time since its inception. During the three months ended March 31, 2022, the Company received $64,839 in loans from one of its officers and directors and repaid $65,000 of these loans. During the three months ended March 31, 2021, the Company received no such loans and repaid $60,793 of these loans. The balance of these loans at March 31, 2022, and December 31, 2021, was $320,250 and $320,411, respectively. All of these loans are non-interest-bearing and have no set maturity date. The Company expects to repay these loans when cash flows become available.
Contracts
The Company makes building lease payments and purchases products for resale from entities owned by a related party, who is also one of its executive officers.
Payments made to related parties for the three months ended March 31, 2022, and March 31, 2021, were as follows:
Director Compensation
On January 1, 2021, the Company issued 120,000 shares of Common Stock to one of its directors, as compensation pursuant to a Director Agreement, dated as of that date. (See Note 7.)
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Concentrations |
3 Months Ended |
|---|---|
Mar. 31, 2022 | |
| Risks and Uncertainties [Abstract] | |
| Concentrations | Note 10 – Concentrations
For the three months ended March 31, 2022, two of the Company's customers accounted for approximately 15% and 14%, respectively, of total revenues. For the three months ended March 31, 2021, two of the Company's customers accounted for 46% and 25%, respectively, of total revenues.
For the three months ended March 31, 2022, and March 31, 2021, the Company purchased approximately 42% and 82%, respectively, of its products for cost of goods sold from one distributor.
As of March 31, 2022, two of the Company's customers accounted for 37% and 34%, respectively, of its accounts receivables. As of December 31, 2021, two of the Company’s customers accounted for 43% and 34%, respectively, of its accounts receivable.
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Commitments |
3 Months Ended |
|---|---|
Mar. 31, 2022 | |
| Commitments and Contingencies Disclosure [Abstract] | |
| Commitments | Note 11 – Commitments
On September 1, 2018, the Company entered into an operating lease with an entity owned by a related party calling for monthly payments of $8,641, plus 100% of operating expenses, for a term expiring on August 31, 2019. On September 1, 2019, this lease was amended such that it expired on August 31, 2020, and the rent thereunder was increased to $8,967 per month. On September 1, 2020, this lease was amended such that its term will expire on August 31, 2021, and the rent thereunder was increased to $9,007 per month. On September 1, 2021, the lease was amended such that its term will expire on August 31, 2022, and the rent thereunder was increased to $9,791 per month.
The Company leases premises of 6,000 square feet, which it uses as a showroom, in Tulsa, Oklahoma, at a monthly rental of $5,500 for a term that will expire on March 31, 2023.
Under an agreement with the supplier of Medtainers entered into in 2018, the Company agreed to purchase a minimum of 30,000 units of product per month. Under the terms of this agreement, the minimum purchase quantity increases by 1% on every anniversary of its effective date and is now 30,909 units per month. The purchase price for units is subject to periodic adjustment for changes in the consumer price index. This agreement will expire on April 30, 2031; however, it can be terminated upon payment of $400,000.
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Subsequent Events |
3 Months Ended |
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Mar. 31, 2022 | |
| Subsequent Events [Abstract] | |
| Subsequent Events | Note 12 – Subsequent Events
Management has evaluated all other subsequent events when the consolidated financial statements were issued and determined that none of them requires this disclosure herein.
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Summary of Significant Accounting Policies (Policies) |
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| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounting Principles | Accounting Principles
The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial statements and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the U.S. Securities and Exchange Commission (the “SEC”). Accordingly, they do not contain all information and footnotes required by GAAP for annual financial statements. In the opinion of the Company’s management, the accompanying unaudited consolidated financial statements contain all the adjustments necessary (consisting only of normal recurring accruals) to present the financial position of the Company as of March 31, 2022, and the results of operations and cash flows for the periods presented. The results of operations for the three months ended March 31, 2022, are not necessarily indicative of the operating results for the full fiscal year or for any future period. These unaudited consolidated financial statements should be read in conjunction with the financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed with the U.S. Securities and Exchange Commission (the “SEC”) on April 18, 2022.
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| Principles of Consolidation | Principles of Consolidation
The unaudited consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly owned. All intercompany balances and transactions have been eliminated. |
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| Use of Estimates | Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make significant estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates. Certain of these estimates could be affected by external conditions, including those unique to the Company’s industries, and general economic conditions. These external conditions could have an effect on the Company’s estimates that could cause actual results to differ materially from its estimates. The Company re-evaluates all of its accounting estimates at least quarterly based on these conditions and records adjustments when necessary.
Significant estimates relied upon in preparing these consolidated financial statements include revenue recognition, accounts receivable reserves, inventory and related reserves, valuations and purchase price allocations related to business combinations, expected future cash flows used to evaluate the recoverability of long-lived assets, estimated fair values of long-lived assets used to record impairment charges related to intangible assets and goodwill, amortization periods, accrued expenses, share-based compensation, and recoverability of the Company’s net deferred tax assets and any related valuation allowance.
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| Cash and Cash Equivalents | Cash and Cash Equivalents
The Company considers all short-term highly liquid investments with an original maturity at the date of purchase of 3 months or less to be cash equivalents. The Company had no cash equivalents at March 31, 2022, or December 31, 2021.
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| Accounts Receivable | Accounts Receivable
Included in accounts receivable on the consolidated balance sheets are amounts primarily related to customers. The Company estimates losses on receivables based on known troubled accounts and historical experience of losses incurred. Receivables are considered impaired and written off when it is probable that all contractual payments due will not be collected in accordance with the terms of the related agreement. Based upon experience and the judgment of management, the allowance for doubtful accounts was $0 as of March 31, 2022, and December 31, 2021.
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| Inventories | Inventories
Inventories, which consist of products held for resale, are stated at the lower of cost (determined using the first-in first-out method) and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs to complete and dispose of the product. If the Company identifies excess, obsolete or unsalable items, its inventories are written down to their realizable value in the period in which the impairment is first identified. Shipping and handling costs incurred for inventory purchases and product shipments are recorded in cost of sales in the Company’s consolidated statements of operations.
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| Property and Equipment | Property and Equipment
Property and equipment are stated at cost less accumulated depreciation. Depreciation is provided for on a straight-line basis over the useful lives of the assets. Furniture and fixtures are depreciated over the useful life of 7 years. Machinery, equipment, and computers are depreciated over the useful life of 3 to 7 years. Leasehold improvements are depreciated over 2 years and were fully depreciated as of March 31, 2022. Expenditures for additions and improvements are capitalized and repairs and maintenance are expensed as incurred.
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| Goodwill and Intangible Assets | Goodwill and Intangible Assets
Goodwill and intangible assets that have indefinite useful lives are not amortized but are evaluated for impairment annually or whenever events or changes in circumstances indicate that their carrying value may not be recoverable. The Company records intangible assets at fair value when they are acquired and they are tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. The impairment test consists of a comparison of the fair value of the indefinite-lived intangible asset with its carrying amount. If the carrying amount of an intangible asset exceeds its fair value, an impairment loss will be recorded in the consolidated statements of operations in an amount equal to that excess. The Company amortizes its intangible assets that have finite lives using either the straight-line method or based upon estimated future cash flows to approximate the pattern in which the economic benefit of the assets will be utilized. Amortization is recorded over estimated useful lives ranging from 5 to 20 years. The Company records intangible assets at fair value, estimated using a discounted-cash-flow approach.
The Company reviews intangible assets subject to amortization at least annually to determine whether any adverse conditions exist or a change in circumstances has occurred that would indicate impairment or a change in the remaining useful life. Conditions that would indicate impairment and trigger a more frequent than quarterly impairment assessment include, but are not limited to, a significant adverse change in legal factors or business climate that could affect the value of an asset or an adverse action or assessment by a regulator. If the carrying value of an intangible asset exceeds its undiscounted cash flows, the Company will write down the carrying value to its fair value in the period identified. The Company generally calculates fair value as the present value of estimated future cash flows to be generated by the asset using a risk-adjusted discount rate. If the estimate of an intangible asset’s remaining useful life is changed, the Company will amortize its remaining carrying value prospectively over its revised remaining useful life. The Company has conducted its annual impairment test of goodwill during the fourth quarter of each year. The estimation of fair value requires significant judgment. There was no impairment of intangible assets, long-lived assets or goodwill during the three-month periods ended March 31, 2022, or March 31, 2021.
Any loss resulting from an impairment test will be reflected in operating income in the Company’s consolidated statements of operations. The annual impairment testing process is subjective and requires judgment at many points. If these estimates or their related assumptions change in the future, the Company may be required to record impairment charges for these assets not previously recorded.
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| Revenue Recognition | Revenue Recognition
The Company follows the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606), as amended. This standard requires a company to recognize revenues when it transfers goods or services to customers in an amount that reflects the consideration that it expects to receive for them.
Under ASC 606, Company recognizes revenue when a customer obtains control of promised goods or services or when they are shipped to a customer, in an amount that reflects the consideration that it expects to receive in exchange for them. The Company recognizes revenues following the five-step model prescribed under ASC 606: (a) it identifies a contract with a customer; (b) it identifies the performance obligations in the contract; (c) it determines the transaction price; (d) it allocates the transaction price to the performance obligations in the contract; and (e) it recognizes revenues when (or as) it satisfies its performance obligation.
Revenues from product sales are recognized when a customer obtains control of the Company’s product, which occurs at a point in time, typically upon shipment to the customer. The Company expenses incremental costs of obtaining a contract as and when incurred if the expected amortization period of the asset that it would have been recognized is 1 year or less or the amount is immaterial.
Revenue from sales of items sold by the Company for the three months ended March 31, 2022, and March 31, 2021, and the percentage of sales allocable to each item to the Company’s total revenues were as follows:
The table below presents the customer deposits payable balance and the significant activity affecting customer deposits during the quarterly period ended March 31, 2022:
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| Share-Based Payments |
ASC 718, Compensation – Stock Compensation, prescribes accounting and reporting standards for all share-based payment transactions. The Company follows FASB guidance related to equity-based payments, for both employees and non-employees, which requires that equity-based compensation be accounted for using a fair value method and recognized as expense in the accompanying consolidated statements of operations. Equity-based compensation expense is recognized as compensation expense over the applicable service or vesting period (see Note 7).
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| Fair Value Measurements | Fair Value Measurements
The Company has adopted ASC Topic 820, Fair Value Measurements, which defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value and expands disclosure of fair value measurements.
The estimated fair value of certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses, is carried on an historical cost basis, which approximates their fair values because of the short-term nature of these instruments. The carrying amounts of the Company’s short- and long-term credit obligations approximate fair value because the effective yields on these obligations, which include contractual interest rates taken together with other features, such as concurrent issuances of warrants and/or embedded conversion options, are comparable to rates of returns for instruments of similar credit risk.
ASC Topic 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC Topic 820 also establishes a fair-value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC Topic 820 describes three levels of inputs that may be used to measure fair value:
Level 1 - Quoted prices in active markets for identical assets or liabilities.
Level 2 - Quoted prices for similar assets and liabilities in active markets or inputs that are observable.
Level 3 - Inputs that are unobservable (for example, cash flow modeling inputs based on assumptions).
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| Advertising | Advertising
Advertising and marketing expenses are charged to operations as incurred. These expenses totaled $48,469 and $14,827 for the three months ended March 31, 2022, and March 31, 2021, respectively.
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| Income Taxes | Income Taxes
The Company uses the asset and liability method of accounting for income taxes in accordance with ASC Topic 740, Income Taxes. Under this method, income tax expense is recognized for (a) taxes payable or refundable for the current year and (b) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in the consolidated statements of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if, based on the weight of the available positive and negative evidence, it is more likely than not that some portion or all the deferred tax assets will not be realized.
ASC Topic 740.10.30 clarifies accounting for uncertainty in income taxes recognized in an entity’s financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740.10.40 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Company has no material uncertain tax positions.
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| Concentration of Credit Risk | Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in financial institutions, which at times may exceed the federal deposit insurance coverage of $250,000. The Company has not experienced losses on these accounts and believes that it is not exposed to significant risks on such accounts. The Company has not experienced losses on accounts receivable and the Company believes that it is not exposed to significant risks with respect to them.
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| Loss per Share |
The basic loss per share is calculated by dividing the Company’s net loss attributable to common stockholders by the weighted average number of common shares outstanding during the year. The diluted loss per share is calculated by dividing the Company’s net loss attributable to common stockholders by the diluted weighted average number of shares outstanding during the year. The potentially dilutive stock options on the Company’s common stock were not considered in the computation of diluted net loss per share as they would be anti-dilutive. dilutive effective was calculated for the three months ended March 31, 2021, and March 31, 2020, as the Company reported a net loss for each period.
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| Recent Accounting Pronouncements | Recent Accounting Pronouncements
The Company follows ASU 2016-02, Leases (Topic 842), which requires recognition of lease liabilities, representing future minimum lease payments, on a discounted basis, and a corresponding right-of-use asset on a balance sheet for most leases, along with requirements for enhanced disclosures to enable the assessment of the amount, timing and uncertainty of cash flows arising from leasing arrangements. The Company and a related party entered into a building lease effective on September 1, 2018, which had a one-year term that expired on August 31, 2019, was renewed for a one-year term that expired on August 31, 2020, was renewed for a one-year term that expired on August 31, 2021, and has been renewed for a one-year term that expires August 31, 2022, at a monthly rent of $9,791. On March 23, 2021, the Company and an unrelated party entered into a lease of premises in Tulsa, Oklahoma, having a monthly rental of $5,500. The lease has a one-year term that expired on March 31, 2022, and was renewed for a one-year term at the same rent. The Company is obligated to pay all taxes, insurance, operating expenses, repairs and certain maintenance costs and utilities. Because each of these leases has a term of 12 months or less and there is no assurance the Company will remain in the building locations after the leases have expired, the Company has concluded that this ASU does not apply to these leases.
In August 2020, FASB issued ASU 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.” For convertible instruments, FASB reduced the number of accounting models for convertible debt instruments and convertible preferred stock. Limiting the accounting models results in fewer embedded conversion features being separately recognized from the host contract as compared with current GAAP. Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features that are not clearly and closely related to the host contract that meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting and (2) those issued with substantial premiums for which the premiums are recorded as paid-in capital. FASB decided to amend the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. FASB observed that the application of the derivatives scope exception guidance results in accounting for some contracts as derivatives while accounting for economically similar contracts as equity. FASB also decided to improve and amend the related earnings per share guidance. The amendments in this update are effective for public business entities that meet the definition of an SEC filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years.
In December 2019, FASB issued ASU 2019-12, Income Taxes, which simplifies the accounting for income taxes by eliminating certain exceptions to the guidance in ASC 740 related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The new guidance also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The guidance is effective for fiscal years beginning after December 31, 2021, and interim periods within that year. The adoption did not have any material impact on the Company’s consolidated financial statements.
In June 2016, FASB issued ASU 2016-13 regarding ASC Topic 326, “Measurement of Credit Losses on Financial Instruments.” This pronouncement changes the impairment model for most financial assets and will require the use of an “expected loss” model for instruments measured at amortized cost. Under this model, entities will be required to estimate the lifetime expected credit loss on such instruments and record an allowance to offset the amortized cost basis of the financial asset, resulting in a net presentation of the amount expected to be collected on the financial asset. Subsequently, FASB issued an amendment to clarify the implementation dates and items that fall within the scope of this pronouncement. This standard is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Management is currently evaluating the effect on the Company’s financial statements.
The Company does not believe there are any other recently issued, but not yet effective, accounting standards that would have a significant impact on the Company’s financial position or results of operations.
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Summary of Significant Accounting Policies (Tables) |
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| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of revenue from sales of items sold |
|
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| Schedule of customer deposits |
|
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Intangible Assets and Goodwill (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Goodwill and Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of intangible assets and goodwill |
|
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Convertible Notes Payable and Promissory Notes Payable (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of convertible notes payable and notes payable outstanding |
|
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Share-Based Compensation (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Compensation Related Costs [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of share based compensation |
|
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Related-Party Transactions (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of related party transactions |
|
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Summary of Significant Accounting Policies (Details) - Schedule of customer deposits payable balance and the significant activity affecting customer deposits |
Mar. 31, 2022
USD ($)
|
|---|---|
| Accounting Policies [Abstract] | |
| Balance at December 31, 2021 | $ 361,230 |
| Balance at March 31, 2022 | $ 258,670 |
Going Concern (Details Narrative) - USD ($) |
Mar. 31, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
| Working capital deficit | $ 967,003 | |
| Accumulated deficit | $ 6,532,567 | $ 6,359,450 |
Convertible Notes Payable and Promissory Notes Payable (Details) - USD ($) |
Mar. 31, 2022 |
Dec. 31, 2021 |
||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Short-Term Debt [Line Items] | ||||||||||
| Interest Payable | $ 87,440 | |||||||||
| Long-Term Debt | $ 331,077 | 368,659 | ||||||||
| Convertible Notes Payable 1 [Member] | ||||||||||
| Short-Term Debt [Line Items] | ||||||||||
| Convertible Notes Payable | [1] | 66,172 | 66,172 | |||||||
| Interest Payable | [1] | 38,600 | 36,496 | |||||||
| Convertible Notes Payable 2 [Member] | ||||||||||
| Short-Term Debt [Line Items] | ||||||||||
| Convertible Notes Payable | [1] | 15,000 | 15,000 | |||||||
| Interest Payable | [1] | 13,000 | 12,625 | |||||||
| Convertible Notes Payable [Member] | ||||||||||
| Short-Term Debt [Line Items] | ||||||||||
| Convertible Notes Payable | 81,172 | 81,172 | ||||||||
| Interest Payable | 51,600 | 49,571 | ||||||||
| Notes Payable 1 [Member] | ||||||||||
| Short-Term Debt [Line Items] | ||||||||||
| Interest Payable | [2] | 738 | 889 | |||||||
| Notes Payable | [2] | 134,692 | 162,274 | |||||||
| Notes Payable 2 [Member] | ||||||||||
| Short-Term Debt [Line Items] | ||||||||||
| Interest Payable | [3] | 36,980 | 36,980 | |||||||
| Notes Payable | [3] | 53,020 | 53,020 | |||||||
| Notes Payable 3 [Member] | ||||||||||
| Short-Term Debt [Line Items] | ||||||||||
| Interest Payable | [4] | 0 | 0 | |||||||
| Notes Payable | [4] | 62,193 | 72,193 | |||||||
| Total Notes Payable [Member] | ||||||||||
| Short-Term Debt [Line Items] | ||||||||||
| Interest Payable | 37,718 | 37,869 | ||||||||
| Notes Payable | $ 249,905 | $ 287,487 | ||||||||
| ||||||||||
Convertible Notes Payable and Promissory Notes Payable (Details Narrative) - USD ($) |
3 Months Ended | 12 Months Ended | ||||
|---|---|---|---|---|---|---|
Mar. 31, 2022 |
Mar. 31, 2021 |
Dec. 31, 2021 |
Feb. 22, 2018 |
Aug. 15, 2015 |
Jul. 31, 2014 |
|
| Convertible Notes Payable 1 [Member] | ||||||
| Short-Term Debt [Line Items] | ||||||
| Debt Instrument, Face Amount | $ 90,000 | |||||
| Repayments of Convertible Debt | $ 8,828 | |||||
| Convertible Notes Payable 2 [Member] | ||||||
| Short-Term Debt [Line Items] | ||||||
| Debt Instrument, Face Amount | $ 298,959 | |||||
| Notes Payable 2 [Member] | ||||||
| Short-Term Debt [Line Items] | ||||||
| Debt Instrument, Face Amount | $ 150,000 | |||||
| Repayments of Notes Payable | $ 0 | $ 11,227 | ||||
| Interest Paid, Including Capitalized Interest, Operating and Investing Activities | 0 | 33,775 | ||||
| Notes Payable 3 [Member] | ||||||
| Short-Term Debt [Line Items] | ||||||
| Repayments of Notes Payable | $ 10,000 | $ 90,000 | ||||
Stockholders’ Equity (Details Narrative) - USD ($) |
3 Months Ended | 12 Months Ended | ||
|---|---|---|---|---|
Jan. 02, 2021 |
Mar. 31, 2022 |
Mar. 31, 2021 |
Dec. 31, 2021 |
|
| Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||||
| Proceeds from Issuance of Common Stock | $ 210,000 | $ 615,000 | ||
| Director [Member] | ||||
| Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||||
| Stock Issued During Period, Shares, Issued for Services | 120,000 | |||
| Four Unrelated Persons [Member] | ||||
| Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||||
| Stock Issued During Period, Shares, New Issues | 280,001 | |||
| Proceeds from Issuance of Common Stock | $ 210,000 | |||
| Eight Unrelated Persons [Member] | ||||
| Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||||
| Stock Issued During Period, Shares, New Issues | 485,000 | |||
| Proceeds from Issuance of Common Stock | $ 615,000 | |||
Share-Based Compensation (Details) - Schedule of share based compensation - shares |
1 Months Ended | 4 Months Ended | 7 Months Ended | 19 Months Ended | 28 Months Ended | |
|---|---|---|---|---|---|---|
Jan. 02, 2019 |
Dec. 31, 2018 |
Mar. 31, 2019 |
Jun. 30, 2019 |
Jun. 30, 2020 |
Mar. 31, 2021 |
|
| Employees [Member] | ||||||
| Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||||||
| Share-Based Compensation Arrangement by Share-Based Payment Award, Equity Instruments Other than Options, Vested in Period | 12,712 | 0 | 0 | 5,085 | 5,085 | 22,882 |
| Consultants [Member] | ||||||
| Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||||||
| Share-Based Compensation Arrangement by Share-Based Payment Award, Equity Instruments Other than Options, Vested in Period | 0 | 3,136 | 2,542 | 0 | 0 | 5,678 |
Share-Based Compensation (Details Narrative) - USD ($) |
3 Months Ended | |||
|---|---|---|---|---|
Jan. 02, 2021 |
Mar. 31, 2022 |
Mar. 31, 2021 |
Dec. 31, 2018 |
|
| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||||
| Share-based Payment Arrangement, Noncash Expense | $ 0 | $ 270,000 | ||
| Stock Issued During Period, Value, Issued for Services | 270,000 | |||
| Director [Member] | ||||
| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||||
| Stock Issued During Period, Shares, Issued for Services | 120,000 | |||
| Stock Issued During Period, Value, Issued for Services | $ 270,000 | |||
| 2018 Plan [Member] | ||||
| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||||
| Share-based Payment Arrangement, Noncash Expense | $ 0 | $ 0 | ||
| 2018 Plan [Member] | ||||
| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||||
| Share-Based Compensation Arrangement by Share-Based Payment Award, Number of Shares Authorized | 33,898 | |||
Income Taxes (Details Narrative) |
Dec. 31, 2021
USD ($)
|
|---|---|
| Federal [Member] | |
| Operating Loss Carryforwards [Line Items] | |
| Operating Loss Carryforwards | $ 2,351,000 |
| State [Member] | |
| Operating Loss Carryforwards [Line Items] | |
| Operating Loss Carryforwards | $ 1,649,000 |
Related-Party Transactions (Details) - Schedule of related party transactions - USD ($) |
3 Months Ended | |
|---|---|---|
Mar. 31, 2022 |
Mar. 31, 2021 |
|
| Related Party Transaction [Line Items] | ||
| Total | $ 181,120 | $ 101,327 |
| Building Lease Payments [Member] | ||
| Related Party Transaction [Line Items] | ||
| Total | 28,197 | 27,201 |
| Purchase Of Products For Resale [Member] | ||
| Related Party Transaction [Line Items] | ||
| Total | $ 152,923 | $ 74,126 |
Related-Party Transactions (Details Narrative) - USD ($) |
3 Months Ended | |
|---|---|---|
Mar. 31, 2022 |
Mar. 31, 2021 |
|
| Assets Sold under Agreements to Repurchase [Line Items] | ||
| Proceeds from Related Party Debt | $ 64,839 | $ 0 |
| Repayments of Related Party Debt | $ 65,000 | $ 60,793 |
Concentrations (Details Narrative) |
3 Months Ended | 12 Months Ended | |
|---|---|---|---|
Mar. 31, 2022 |
Mar. 31, 2021 |
Dec. 31, 2021 |
|
| Revenue Benchmark [Member] | Customer Concentration Risk [Member] | One Customer [Member] | |||
| Concentration Risk [Line Items] | |||
| Concentration Risk, Percentage | 15.00% | 46.00% | |
| Revenue Benchmark [Member] | Customer Concentration Risk [Member] | Another Customer [Member] | |||
| Concentration Risk [Line Items] | |||
| Concentration Risk, Percentage | 14.00% | 25.00% | |
| Cost Of Goods [Member] | Product Concentration Risk [Member] | One Distributor [Member] | |||
| Concentration Risk [Line Items] | |||
| Concentration Risk, Percentage | 42.00% | 82.00% | |
| Accounts Receivable [Member] | Customer Concentration Risk [Member] | One Customer [Member] | |||
| Concentration Risk [Line Items] | |||
| Concentration Risk, Percentage | 37.00% | 43.00% | |
| Accounts Receivable [Member] | Customer Concentration Risk [Member] | Another Customer [Member] | |||
| Concentration Risk [Line Items] | |||
| Concentration Risk, Percentage | 34.00% | 34.00% | |
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