UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For
the quarterly period ended
OR
For the transition period from ___________ to ____________
Commission
File Number:
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| (Address of principal executive offices) | (Zip Code) |
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Securities registered pursuant to Section 12(b) of the Act
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
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
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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 such shorter period that the registrant was
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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 reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large, accelerated filer | ☐ | Accelerated filer | ☐ | |
| ☒ | Smaller reporting company | |||
| Emerging growth company |
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
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Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: There were shares of common stock outstanding as of November 13, 2023.
TABLE OF CONTENTS
| i |
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS AND INFORMATION
This Quarterly Report contains forward-looking statements that involve risks and uncertainties. These forward-looking statements are not historical facts but rather are plans and predictions based on current expectations, estimates, and projections about our industry, our beliefs, and assumptions.
We use words such as “may,” “will,” “could,” “should,” “anticipate,” “expect,” “intend,” “project,” “plan,” “believe,” “seek,” “assume,” and variations of these words and similar expressions to identify forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties, and other factors, some of which are beyond our control, are difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements. You should not place undue reliance on these forward-looking statements because the matters they describe are subject to certain risks, uncertainties, and assumptions that are difficult to predict. Our forward-looking statements are based on the information currently available to us and speak only as of the date on which they were made. Over time, our actual results, performance, or achievements may differ from those expressed or implied by our forward-looking statements, and such difference might be significant and materially adverse to our security holders. Except as required by law, we undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise. Factors that could materially affect these forward-looking statements and/or predictions include, among other things: (i) the development and protection of our brands and other intellectual property, (ii) the need to raise capital to meet business requirements, (iii) significant fluctuations in marketing expenses, (iv) the ability to achieve and expand significant levels of revenues, or recognize net income, from the sale of our products, (v) management’s ability to attract and maintain qualified personnel necessary for the development and commercialization of its planned products, (vi) the impact of the COVID-19 pandemic on our business, suppliers, consumers, customers, and employees or the overall economy, and (vii) other information that may be detailed from time to time in the Company’s filings with the United States Securities and Exchange Commission (“SEC”). Please consider our forward-looking statements in light of those risks as you read this Quarterly Report.
| ii |
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
OPTI-HARVEST, INC.
CONDENSED BALANCE SHEETS
(Amounts rounded to nearest thousands, except share amounts)
September 30, 2023 | December 31, 2022 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable | ||||||||
| Prepaid expense and other current assets | ||||||||
| Total Current Assets | ||||||||
| Rental equipment, net of accumulated depreciation of $ | ||||||||
| Property and equipment, net of accumulated depreciation of $ | ||||||||
| Deferred offering costs | ||||||||
| Total Assets | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS’ DEFICIENCY | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Due to related party | ||||||||
| Deferred revenue | ||||||||
| Convertible notes payable, net of debt discount of $ | ||||||||
| Current portion of loan payable (includes a $ | ||||||||
| Total Current Liabilities | ||||||||
| Loan payable, less current portion | ||||||||
| Deferred revenue, less current portion | ||||||||
| Total Liabilities | ||||||||
| Common stock subject to redemption by Company ( shares at conversion) | ||||||||
| Commitments and Contingencies | ||||||||
| Shareholders’ Deficiency | ||||||||
| Preferred stock, $ par value, shares authorized; share of Series A issued and outstanding at September 30, 2023 and December 31, 2022, respectively | ||||||||
| Common stock, $ par value, shares authorized; and shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively | ||||||||
| Additional paid-in-capital | ||||||||
| Common stock issuable – shares | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Shareholders’ Deficiency | ( | ) | ( | ) | ||||
| Total Liabilities and Shareholders’ Deficiency | $ | $ | ||||||
The accompanying notes are an integral part of these condensed financial statements.
| F-1 |
OPTI-HARVEST, INC.
CONDENSED STATEMENTS OF OPERATIONS
For the Three and Nine Months Ended September 30, 2023 and 2022
(Amounts rounded to nearest thousands, except share and per share amounts)
(Unaudited)
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Revenues | ||||||||||||||||
| Equipment rentals | $ | $ | $ | $ | ||||||||||||
| Product sales | ||||||||||||||||
| Total revenues | ||||||||||||||||
| Cost of revenues | ||||||||||||||||
| Rental depreciation | ||||||||||||||||
| Product sales | ||||||||||||||||
| Total cost of revenues | ||||||||||||||||
| Gross profit (loss) | ( | ) | ( | ) | ||||||||||||
| Operating expenses | ||||||||||||||||
| Selling, general and administrative expenses | ||||||||||||||||
| Research and development expenses | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other expenses | ||||||||||||||||
| Financing costs | ( | ) | ( | ) | ( | ) | ||||||||||
| Loss on extinguishment of debt | ( | ) | ||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total other expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Loss per share – basic and diluted | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| Weighted average number of shares outstanding – basic and diluted | ||||||||||||||||
The accompanying notes are an integral part of these condensed financial statements.
| F-2 |
OPTI-HARVEST, INC.
CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIENCY
For the Three and Nine Months Ended September 30, 2023 and 2022
(Unaudited)
(Amount rounded to nearest thousands, except share amount)
For the Three Months Ended September 30, 2023
| Common Stock | Preferred Stock | Common Stock Issuable | Additional Paid In | Accumulated | Total Stockholders’ Equity | |||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | (Deficit) | ||||||||||||||||||||||||||||
| Balance, June 30, 2023 | $ | $ | | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||
| Fair value of vested options | ||||||||||||||||||||||||||||||||||||
| Fair value of vested restricted stock units | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Fair value of common shares issued for services | - | |||||||||||||||||||||||||||||||||||
| Common shares issued with convertible notes and promissory notes | - | |||||||||||||||||||||||||||||||||||
| Net Loss | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Balance, September 30, 2023 (Unaudited) | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
For the Nine Months Ended September 30, 2023
| Common Stock | Preferred Stock | Common Stock Issuable | Additional Paid In | Accumulated | Total Stockholders’ Equity | |||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | (Deficit) | ||||||||||||||||||||||||||||
| Balance, December 31, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
| Fair value of vested options | ||||||||||||||||||||||||||||||||||||
| Fair value of vested restricted stock units | ( | ) | ||||||||||||||||||||||||||||||||||
| Fair value of common shares issued for services | - | |||||||||||||||||||||||||||||||||||
| Fair value of warrants issued as a debt discount | - | - | ||||||||||||||||||||||||||||||||||
| Common shares issued as financing costs | ||||||||||||||||||||||||||||||||||||
| Warrant modification cost | - | |||||||||||||||||||||||||||||||||||
| Common shares issued with convertible notes and promissory notes | - | |||||||||||||||||||||||||||||||||||
| Common shares issued on the exercise of warrants | ||||||||||||||||||||||||||||||||||||
| Net Loss | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Balance, September 30, 2023 (Unaudited) | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
| F-3 |
For the Three Months Ended September 30, 2022
| Common Stock | Preferred Stock | Additional Paid In | Accumulated | Total Shareholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Deficiency | ||||||||||||||||||||||
| Balance, June 30, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Fair value of vested options and warrants issue for services | - | |||||||||||||||||||||||||||
| Fair value of vested restricted stock units | ||||||||||||||||||||||||||||
| Fair value of common shares issued for services | ||||||||||||||||||||||||||||
| Fair value of common shares issued for financing costs | ||||||||||||||||||||||||||||
| Common shares issued on the exercise of warrants | ||||||||||||||||||||||||||||
| Common shares issued in private offerings | ||||||||||||||||||||||||||||
| Net Loss | ( | ) | ( | ) | ||||||||||||||||||||||||
| Balance, September 30, 2022 (Unaudited) | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
For the Nine Months Ended September 30, 2022
| Common Stock | Preferred Stock | Additional Paid In | Accumulated | Total Shareholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Deficiency | ||||||||||||||||||||||
| Balance, December 31, 2021 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Fair value of vested options and warrants issue for services | - | |||||||||||||||||||||||||||
| Fair value of vested restricted stock units | ||||||||||||||||||||||||||||
| Fair value of common shares issued for services | ||||||||||||||||||||||||||||
| Fair value of common shares issued for financing costs | ||||||||||||||||||||||||||||
| Common shares issued on the exercise of warrants | ||||||||||||||||||||||||||||
| Common shares issued in private offerings | ||||||||||||||||||||||||||||
| Net Loss | ( | ) | ( | ) | ||||||||||||||||||||||||
| Balance, September 30, 2022 (Unaudited) | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
The accompanying notes are an integral part of these condensed financial statements.
| F-4 |
OPTI-HARVEST, INC.
CONDENSED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2023 and 2022
(Unaudited)
(Amounts rounded to nearest thousands)
| Nine Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Cash Flows from Operating Activities | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation of property and equipment | ||||||||
| Depreciation of rental equipment | ||||||||
| Amortization of debt discount | ||||||||
| Fair value of common stock issued for financing costs | ||||||||
| Loss on extinguishment of debt | ||||||||
| Fair value of common stock issued for services | ||||||||
| Fair value of vested options and warrants | ||||||||
| Fair value of vested restricted stock units | ||||||||
| Changes in operating assets and liabilities | ||||||||
| Accounts receivable | ||||||||
| Inventory | ( | ) | ||||||
| Prepaid expenses and other current assets | ||||||||
| Accounts payable and accrued expenses | ||||||||
| Deferred revenues | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash Flows from Investing Activities | ||||||||
| Purchase of property and equipment | ( | ) | ||||||
| Purchase of rental equipment | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ||||||
| Cash Flows from Financing Activities | ||||||||
| Proceeds from sales of common stock | ||||||||
| Proceeds from exercise of warrants | ||||||||
| Proceeds from notes payable – related party | ||||||||
| Repayment of notes payable – related party | ( | ) | ||||||
| Proceeds from notes payable | ||||||||
| Repayment of notes payable | ( | ) | ( | ) | ||||
| Proceeds from convertible notes payable | ||||||||
| Repayment of convertible notes payable | ( | ) | ||||||
| Advances from related party | ||||||||
| Deferred offering costs | ( | ) | ||||||
| Net cash provided by financing activities | ||||||||
| Net decrease in cash | ( | ) | ( | ) | ||||
| Cash beginning of period | ||||||||
| Cash end of period | $ | $ | ||||||
| Supplemental disclosures of cash flow information: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for income taxes | $ | $ | ||||||
| Noncash financing and investing activities: | ||||||||
| Fair value of warrants recorded as a debt discount to convertible notes payable | $ | $ | ||||||
| Common stock issued as debt discount to loans payable | $ | $ | ||||||
| Reclass of accrued interest on convertible notes payable to common shares subject to redemption by Company | $ | $ | ||||||
| Reclass of convertible notes payable to common shares subject to redemption by Company | $ | $ | ||||||
| Exchange of convertible notes payable with notes payable | $ | $ | ||||||
| Reclassification of vendor deposits to property and equipment | $ | $ | ||||||
| Reclassification of vendor deposits to inventory | $ | $ | ||||||
| Issuance of loan payable for vehicle purchase | $ | $ | ||||||
The accompanying notes are an integral part of these condensed financial statements.
| F-5 |
OPTI-HARVEST, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
For the Three and Nine Months Ended September 30, 2023 and 2022
(Amounts rounded to nearest thousands, except share and per share amounts)
Note 1 – Operations and Liquidity
Opti-Harvest, Inc. (“Opti-Harvest” or “the Company”) is an agricultural innovation company with products backed by a portfolio of patented and patent pending technologies focused on solving several critical challenges faced by agribusinesses: maximizing crop yield, accelerating crop growth, optimizing land and water resources, reducing labor costs and mitigating negative environmental impacts.
Our advanced agriculture technology (Opti-Filter™) and precision farming (Opti-View™) platforms, enable commercial growers and home gardeners to harness, optimize and better utilize sunlight, the planet’s most fundamental and renewable natural resource.
Our sustainable agricultural technology platform is powered by the sun. It maximizes a free and renewable resource with no need for additional chemicals or fertilizers.
Opti-Harvest was formed in the State of Delaware on September 20, 2016. Our principal executive offices are located at 190 N Canon Dr., Suite 304, Beverly Hills, California 90210. Our website address is www.opti-harvest.com.
Effective on February 22, 2023 and September 2, 2023, the Board of Directors and stockholders have approved resolutions authorizing a reverse stock split of the outstanding shares of the Company’s common stock on the basis of shares for every one share of common stock, and one share of common stock for every two shares or common stock, respectively. All shares and per share amounts and information presented herein have been retroactively adjusted to reflect the reverse stock split for all periods presented.
Going Concern
The
accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement
of liabilities and commitments in the normal course of business. As reflected in the accompanying financial statements, during the nine
months ended September 30, 2023, the Company recorded a net loss of $
At
September 30, 2023, the Company had cash on hand in the amount of $
| F-6 |
Note 2 – Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Those estimates and assumptions include depreciable lives of rental equipment and property and equipment, impairment testing of recorded long-term tangible assets, the valuation allowance for deferred tax assets, accruals for potential liabilities, assumptions made in valuing stock instruments issued for services, and assumptions used in the determination of the Company’s liquidity.
Inventory
Inventory is stated at the lower of cost or net realizable value, with cost determined on a first-in, first-out (“FIFO”) basis. We regularly review our inventory quantities on hand and record a provision for excess and obsolete inventory based primarily on our estimated forecast of product demand and our ability to sell the product(s) concerned. Demand for our products can fluctuate significantly. Factors that could affect demand for our products include unanticipated changes in consumer preferences, general market conditions or other factors, which may result in cancellations of advance orders or a reduction in the rate of reorders placed by customers. Additionally, our management’s estimates of future product demand may be inaccurate, which could result in an understated or overstated provision required for excess and obsolete inventory. At September 30, 2023 and December 31, 2022, the inventory is fully reserved for slow moving and potentially obsolete inventory.
Rental Equipment
The rental equipment we purchase is stated at cost and is depreciated over the estimated useful life of the equipment using the straight-line method and is included in rental depreciation within the consolidated statements of operations. Estimated useful lives vary based upon type of equipment. Generally, we depreciate our products over a estimated useful life. We periodically evaluate the appropriateness of remaining depreciable lives and any salvage value assigned to rental equipment.
Deferred Offering Costs
Deferred offering costs consist principally of legal, accounting, and underwriters’ fees incurred related to equity financing. These offering costs are deferred and then charged against the gross proceeds received once the equity financing occurs or are charged to expense if the financing does not occur.
Revenue Recognition
The Company recognizes revenue in accordance with two different Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) standards: 1) Topic 606 and 2) Topic 842.
The Company recognizes revenue in accordance with Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers (“ASC 606”). The underlying principle of ASC 606 is to recognize revenue to depict the transfer of goods or services to customers at the amount expected to be collected. ASC 606 creates a five-step model that requires entities to exercise judgment when considering the terms of contract(s), which include (1) identifying the contract or agreement with a customer, (2) identifying our performance obligations in the contract or agreement, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations, and (5) recognizing revenue as each performance obligation is satisfied.
The Company does not have any significant contracts with customers requiring performance beyond delivery, and contracts with customers contain no incentives or discounts that could cause revenue to be allocated or adjusted over time. Shipping and handling activities are performed before the customer obtains control of the goods and therefore represent a fulfillment activity rather than a promised service to the customer. Revenue and costs of sales are recognized when control of the products is transferred to our customer, which generally occurs upon shipment from our facilities. The Company’s performance obligations are satisfied at that time.
| F-7 |
All of the Company’s products are offered for sale as finished goods only, and there are no performance obligations required post-shipment for customers to derive the expected value from them.
The Company does not allow for returns, except for damaged products when the damage occurred pre-fulfillment. Damaged product returns have historically been insignificant. Because of this, the stand-alone nature of our products, and our assessment of performance obligations and transaction pricing for our sales contracts, we do not currently maintain a contract asset or liability balance for obligations. We assess our contracts and the reasonableness of our conclusions on a quarterly basis.
Under Topic 842, Leases, the Company accounts for owned equipment rental contracts as operating leases. We recognize revenue from equipment rentals in the period earned, regardless of the timing of billing to customers. A rental contract generally includes rates for monthly use, and rental revenues are earned on a daily basis as rental contracts remain outstanding. Because the rental contracts can extend across multiple reporting periods, we record unbilled rental revenues and deferred rental revenues at the end of reporting periods so rental revenues earned is appropriately stated for the periods presented. The lease terms are included in our contracts, and the determination of whether our contracts contain leases generally does not require significant assumptions or judgments. In some cases, a rental contract may contain a rental purchase option, whereby the customer has an option to purchase the rented equipment at the end of the term for a specified price. Revenues related to the rental contract will be accounted for as an operating lease as the option to purchase is not reasonably certain to be exercised. Lessees do not provide residual value guarantees on rented equipment.
The
Company recently began offering rental contracts as an option to its customers under operating leases. The material terms of
As of September 30, 2023, future operating lease income and future lease payments to be received from equipment rentals are as follows:
| Years Ending December 31, | Future Lease Income | Future Lease Payments | |||||||
| 2023 (remaining) | $ | $ | |||||||
| 2024 | |||||||||
| Total | $ | $ | |||||||
Receivables and contract assets and liabilities
The Company manages credit risk associated with its accounts receivables at the customer level. Because the same customers typically generate the revenues that are accounted for under both Topic 606 and Topic 842, the discussions below on credit risk and our allowances for doubtful accounts address our total revenues from Topic 606 and Topic 842.
The
Company does not have material contract assets, impairment losses associated therewith, or material contract liabilities associated with
contracts with customers. Our contracts with customers do not generally result in material amounts billed to customers more than recognizable
revenue. The Company recognized $
| F-8 |
Basic earnings (loss) per share is computed by dividing the net income (loss) applicable to common stockholders by the weighted average number of shares of common stock outstanding during the period. Diluted earnings (loss) per share is computed by dividing the net income applicable to common stockholders by the weighted average number of common shares outstanding plus the number of additional common shares that would have been outstanding if all dilutive potential common shares had been issued, using the treasury stock method. Potential common shares are excluded from the computation when their effect is antidilutive.
| September 30, 2023 | September 30, 2022 | |||||||
| Warrants | ||||||||
| Options | ||||||||
| Convertible notes | ||||||||
| Commons shares issuable | ||||||||
| Common stock subject to redemption by Company | ||||||||
| Restricted stock units | ||||||||
| Series A Preferred | ||||||||
| Total | ||||||||
The Company periodically issues stock options to employees and non-employees in non-capital raising transactions for services and for financing costs. The Company accounts for such grants issued and vesting based on ASC 718, Compensation-Stock Compensation whereby the value of the award is measured on the date of grant and recognized for employees as compensation expense on the straight-line basis over the vesting period. The Company recognizes the fair value of stock-based compensation within its Statements of Operations with classification depending on the nature of the services rendered.
The fair value of each option or warrant grant is estimated using the Black-Scholes option-pricing model. As the common shares of the Company were not publicly traded, the Company lacked company-specific historical and implied volatility information. Therefore, it estimated its expected stock volatility based on the historical volatility of a publicly traded set of peer companies within the agriculture technology industry with characteristics similar to the Company. The expected term of the Company’s stock options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options. The expected term of stock options granted to non-employees is equal to the contractual term of the option award. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is zero, based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future.
During the nine months ended September 30, 2023 and 2022, common shares of the Company were not publicly traded. As such, during the period, the Company estimated the fair value of common stock using an appropriate valuation methodology, in accordance with the framework of the American Institute of Certified Public Accountants’ Technical Practice Aid, Valuation of Privately-Held Company Equity Securities Issued as Compensation. Each valuation methodology includes estimates and assumptions that require the Company’s judgment. These estimates and assumptions include a number of objective and subjective factors, including external market conditions, guideline public company information, the prices at which the Company sold its common stock to third parties in arms’ length transactions, the rights and preferences of securities senior to the Company’s common stock at the time, and the likelihood of achieving a liquidity event such as an initial public offering or sale. Significant changes to the assumptions used in the valuations could result in different fair values of stock options at each valuation date, as applicable.
| F-9 |
Research and Development
Research
and development costs include advisors, consultants, legal, software licensing, product design and development, data monitoring and collection,
field trial installations, and travel related expenses. Research and development costs are expensed as incurred. During the nine months
ended September 30, 2023 and 2022, research and development costs were approximately $
Fair Value of Financial Instruments
The Company uses various inputs in determining the fair value of its financial assets and liabilities and measures these assets on a recurring basis. Financial assets recorded at fair value are categorized by the level of subjectivity associated with the inputs used to measure their fair value. ASC 820 defines the following levels of subjectivity associated with the inputs:
Level 1—Quoted prices in active markets for identical assets or liabilities.
Level 2—Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly.
Level 3—Unobservable inputs based on the Company’s assumptions.
The carrying amounts of financial assets and liabilities, such as cash, accounts receivable, accounts payable and accrued liabilities, and patent purchase obligation approximate their fair values because of the short maturity of these instruments. The carrying values of loan and convertible notes payables approximate their fair values because interest rates on these obligations are based on prevailing market interest rates.
Recent Accounting Pronouncements
In In September 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments. ASU 2016-13 requires entities to use a forward-looking approach based on current expected credit losses (“CECL”) to estimate credit losses on certain types of financial instruments, including trade receivables. This may result in the earlier recognition of allowances for losses. ASU 2016-13 is effective for the Company beginning January 1, 2023, and early adoption is permitted. The impact of the new guidance and related codification improvements did not have a material effect to the Company’s financial position, results of operations and cash flows.
In May 2021, the FASB issued ASU 2021-04 “Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation— Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815- 40) Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options” (“ASU 2021-04”). ASU 2021-04 provides guidance as to how an issuer should account for a modification of the terms or conditions or an exchange of a freestanding equity-classified written call option (i.e., a warrant) that remains equity classified after modification or exchange as an exchange of the original instrument for a new instrument. An issuer should measure the effect of a modification or exchange as the difference between the fair value of the modified or exchanged warrant and the fair value of that warrant immediately before modification or exchange and then apply a recognition model that comprises four categories of transactions and the corresponding accounting treatment for each category (equity issuance, debt origination, debt modification, and modifications unrelated to equity issuance and debt origination or modification). ASU 2021-04 is effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. An entity should apply the guidance provided in ASU 2021-04 prospectively to modifications or exchanges occurring on or after the effective date. The Company adopted ASU 2021-04 effective January 1, 2022. The adoption of ASU 2021-04 did not have any impact on the Company’s financial statement presentation or disclosures.
Other recent accounting pronouncements issued by the FASB, its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present or future financial statements.
Concentration Risks
Cash
includes cash on hand and cash in banks and are reported as “Cash” in the balance sheets. The balance of cash on hand is
not insured by the Federal Deposit Insurance Corporation. The balance of cash in banks is insured by the Federal Deposit Insurance Corporation
for up to $
| F-10 |
Net
Sales. The Company performs a regular review of customer activity and associated credit risks and does not require collateral or
other arrangements. Two customers accounted for
Accounts
payable. As of September 30, 2023, the Company’s had two vendors which comprised
Vendors. The Company’s uses two vendors to manufacture its products available for sale, inventory, and our products used in field trials for research and development purposes.
Segment Reporting
The Company operates in one segment for the manufacture and distribution of our products. In accordance with the “Segment Reporting” Topic of the ASC, the Company’s chief operating decision maker has been identified as the Chief Executive Officer and President, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company. Existing guidance, which is based on a management approach to segment reporting, establishes requirements to report selected segment information quarterly and to report annually entity-wide disclosures about products and services, major customers, and the countries in which the entity holds material assets and reports revenue. All material operating units qualify for aggregation under “Segment Reporting” due to their similar customer base and similarities in: economic characteristics; nature of products and services; and procurement, manufacturing and distribution processes. Since the Company operates in one segment, all financial information required by “Segment Reporting” can be found in the accompanying financial statements.
Note 3 – Rental Equipment
Rental equipment includes the Company’s Opti-Gro, Opti-Shields, and Opti-Panel product lines which are being leased to customers under operating leases. Rental equipment is comprised of the following:
September 30, 2023 | December 31, 2022 | |||||||
| Rental equipment | $ | $ | ||||||
| Accumulated depreciation | ( | ) | ( | ) | ||||
| Net book value | $ | $ | ||||||
Depreciation
expense for the nine months ended September 30, 2023 and 2022 was $
Note 4 – Property and Equipment
Property and equipment are comprised of the following:
September 30, 2023 | December 31, 2022 | |||||||
| Tools and molds | $ | $ | ||||||
| Computer equipment | ||||||||
| Vehicles | ||||||||
| Total cost | ||||||||
| Accumulated depreciation | ( | ) | ( | ) | ||||
| Net book value | $ | $ | ||||||
| F-11 |
Depreciation
expense for the nine months ended September 30, 2023 and 2022, was $
Note 5 – Convertible Notes Payable
Convertible notes payable consists of the following at September 30, 2023 and December 31, 2022:
September 30, 2023 | December 31, 2022 | |||||||
| Senior Convertible Notes and Warrants (a) | $ | $ | ||||||
| Convertible Notes and Warrants (b) | ||||||||
| Convertible Note and Restricted Shares (c) | ||||||||
| Total notes payable | ||||||||
| Less debt discount | ( | ) | ||||||
| Notes payable, net of discount | $ | $ | ||||||
| (a) |
During
the year ended December 31, 2021, the Company sold approximately $
The
holder of the Warrants shall have the right to purchase up to the number of shares that equals the quotient obtained by dividing: (i)
the Warrant Coverage Amount, by (ii) the Conversion Price. The “Warrant Coverage Amount” shall mean the amount obtained by
multiplying: (A) one hundred percent (100%); by (B) aggregate principal amount of the Holder’s Note(s). The conversion price in
effect on any Conversion Date shall be equal to
Each
Note is convertible, in the sole discretion of the holder of the Note, into shares of our common stock at a purchase price equal to
The
Notes mature
| F-12 |
Each
Note and Warrant holder has (i) the right of first refusal to purchase up to
Total
principal balance owed was $
In
September 2023, the Noteholders entered into a conversion agreement (the “Agreement”) with the Company in which the Noteholders
elected to convert $
The
Company also agreed to change the exercise price of the Warrants to
| F-13 |
| (b) |
In
January and February 2023, the Company sold $
(a)
If a Qualified Public Offering does not occur before the Initial Maturity Date, the outstanding principal balance of this Note shall
be increased by an amount equal to
(b)
If the Company exercises its Extension Option and a Qualified Public Offering does not occur before the Extended Maturity Date, the outstanding
principal balance due and payable to the Lender shall be increased by the Premium plus an additional
(c) As used herein, “Qualified Public Offering” means the issuance and sale of shares of comment stock, par value $ per share, of the Company (the “Common Stock”) to investors in an underwritten public offering or a direct listing by the Company of its Common Stock, in either case pursuant to an effective registration statement under the Securities Act of 1933, as amended.
In
the event the Company consummates a Qualified Public Offering, Lender shall have the right, but not the obligation, at any time prior
to the Maturity Date or earlier repayment of this Note, to convert all, or any portion, of the outstanding principal balance of this
Note into shares of Common Stock at a conversion price equal to
The
total of the allocated relative fair value of warrants issued of $
During
the nine months ended September 30, 2023, the Company added $
Total
principal balance owed was $
| F-14 |
| (c) |
During
the nine months ended September 30, 2023, the Company sold $ of Convertible Promissory Notes (the “Notes”). These
Notes will accrue interest at a rate of twelve percent (%) per annum, compounded annually, until maturity or conversion hereof. The
interest payable hereunder shall automatically accrue and be capitalized to the principal amount of this Note (“PIK Interest”),
and shall thereafter be deemed to be a part of the principal amount of this Note, unless such interest is paid in cash on or prior to
the maturity date of the Notes. . The Lender shall
have the right, but not the obligation, at any time to convert all, or any portion, of the outstanding principal balance of the Notes
into shares of Common Stock at a conversion price equal to either (i) $ per share, or (ii) the price at which shares of Common Stock
are first sold to the public in a Qualified Public Offering. The Company shall issue shares of common stock of the Company for
each $ invested by an Investor, provided, however, that if an Investor invests a sum of funds which does not round to $
The
Company issued shares of common stock related to the Note at the date of issuance, which the Company determined had a fair value
of $
During
the nine months ended September 30, 2023, the Company added $
Total
principal balance owed was $
Note 6 – Notes Payable
Loan payable consists of the following at September 30, 2023 and December 31, 2022:
September 30, 2023 | December 31, 2022 | |||||||
| Automobile loans (a) | $ | $ | ||||||
| Unsecured promissory note – related party (b)- past due | ||||||||
| Unsecured promissory note and restricted shares (c) (c) | ||||||||
| Total notes payable | ||||||||
| Less: debt discount | ( | ) | ||||||
| Total notes payable, less debt discount | ||||||||
| Notes payable, current portion | ( | ) | ( | ) | ||||
| Notes payable, net of current portion | $ | $ | ||||||
| (a) |
On
November 20, 2020, the Company financed the purchase of a vehicle for $
On
January 20, 2022, the Company financed the purchase of a second vehicle for $
| F-15 |
| (b) |
On
February 21, 2023, the Company sold $
The total of the original issue discount of $ was capitalized and recorded as a debt discount and are amortized over the remaining life of the Note. Amortization of debt discount was $ for the nine months ended September 30, 2023, which was recorded as a component of interest expense in the accompanying condensed statement of operations.
During
the nine months ended September 30, 2023, the Company added $
During
the nine months ended September 30, 2023, the Company paid $
| (c) |
During
the nine months ended September 30, 2023, the Company sold approximately $
The
Company issued shares of common stock related to the Note, which the Company determined had a fair value of $, were capitalized
and recorded as a debt discount, and are being amortized over the remaining life of the Note. During the nine months ended September
30, 2023, the Company amortized $
Total
principal balance owed was $
| F-16 |
Note 7 – Shareholders’ Equity
Common Shares Issued on Exercise of Warrants
During
the nine months ended September 30, 2023, the Company received proceeds of $
Common Shares Issued as an Inducement for the Conversion of Senior Convertible Notes Payable
During
the nine months ended September 30, 2023, the Company was obligated to issue the Noteholders (see Note 5) an aggregate of shares
of common stock (the “Signing Premium Shares”) with a fair value of approximately $
Common Shares Issued for Services
The Company enters into various consulting agreements with third parties (“Consultants”) pursuant to which these Consultants provided business development, sales promotion, introduction to new business opportunities, strategic analysis and sales and marketing activities. In addition, the Company issued shares to a director for board service.
During
the nine months ended September 30, 2023, the Company issued shares of common stock for services, with a fair value of approximately
$
Common Shares Issued with Notes Payable
During
the nine months ended September 30, 2023, the Company issued shares of common stock related to its notes payables, with a fair
value of approximately $
Summary of Restricted Stock Units
On May 17, 2022, the Company granted an aggregate of restricted stock units (RSU) to its employees and executives pursuant to the Company’s 2022 Stock Incentive Plan, with an aggregate fair value of $, based on the Company’s current private offering price. .
On December 8, 2022, the Company granted its Chief Executive Officer, Geoffrey Andersen, RSU, with a fair value of $, based on the Company’s current private offering price. The RSU was issued per the terms of Mr. Andersen’s employment agreement dated December 8, 2022, and per the Company’s 2022 Stock Incentive Plan. .
At December 31, 2022, of the RSUs granted, and shares of common stock were vested and issued. During the nine months ended September 30, 2023, of unvested RSUs were forfeited, RSUs were issued, of RSUs vested but remain unissued, and included in common stock issuable, leaving of unvested RSUs on September 30, 2023.
As
of December 31, 2022, the aggregate amount of unvested compensation related to RSUs was approximately $
| F-17 |
Summary of Warrants
A summary of warrants for the nine months ended September 30, 2023, is as follows:
| Weighted | ||||||||
| Average | ||||||||
| Number of | Exercise | |||||||
| Warrants | Price | |||||||
| Balance outstanding, December 31, 2022 | $ | |||||||
| Warrants granted | ||||||||
| Warrants exercised | ( | ) | ||||||
| Warrants expired or forfeited | ( | ) | ||||||
| Balance outstanding, September 30, 2023 | $ | |||||||
| Balance exercisable, September 30, 2023 | $ | |||||||
| Outstanding | Exercisable | |||||||||||||||||||||
| Exercise Price Per Share | Share | Life (Years) | Weighted Exercise | Shares | Weighted Exercise | |||||||||||||||||
| $ | $ | $ | ||||||||||||||||||||
| $ | $ | $ | ||||||||||||||||||||
| $ | $ | $ | ||||||||||||||||||||
| $ | $ | $ | ||||||||||||||||||||
| $ | $ | $ | ||||||||||||||||||||
| $ | ||||||||||||||||||||||
As of September 30, 2023, both the outstanding and exercisable warrants have an intrinsic value of $. The aggregate intrinsic value was calculated as the difference between the estimated market value of $ per share as of September 30, 2023, and the exercise price of the outstanding warrants.
During
the nine months ended September 30, 2023, the Company’s extended the expiration date from September 30, 2023 to
During the nine months ended September 30, 2023 and 2022, the Company recognized $and $ of compensation expense relating to vested warrants, respectively. As of September 30, 2023, unvested compensation related to these warrants remained.
Warrants Issued with Convertible Notes Payable
In
January and February 2023, the Company sold approximately $
| F-18 |
Summary of Options
| Weighted | ||||||||
| Average | ||||||||
| Number of | Exercise | |||||||
| Options | Price | |||||||
| Balance outstanding, December 31, 2022 | $ | |||||||
| Options granted | ||||||||
| Options exercised | ||||||||
| Options expired or forfeited | ( | ) | ||||||
| Balance outstanding, September 30, 2023 | $ | |||||||
| Balance exercisable, September 30, 2023 | $ | |||||||
| Outstanding | Exercisable | |||||||||||||||||||||
| Exercise Price Per Share | Share | Life (Years) | Weighted Average Exercise Price | Shares | Weighted Average Exercise Price | |||||||||||||||||
| $ | $ | $ | ||||||||||||||||||||
| $ | $ | $ | ||||||||||||||||||||
| $ | $ | |||||||||||||||||||||
During the nine months ended September 30, 2023 and 2022, the Company recognized $ and $ of compensation expense relating to vested stock options, respectively. As of September 30, 2023, the aggregate amount of unvested compensation related to stock options was approximately $ will be recognized as an expense as the options vest in future periods through May 2025.
As of September 30, 2023, the outstanding and exercisable options have intrinsic value. The aggregate intrinsic value was calculated as the difference between the estimated market value of $per share as of September 30, 2023, and the exercise price of the outstanding options.
Note 8 – Commitment and Contingencies
We are engaged from time to time in the defense of lawsuits arising out of the ordinary course and conduct of our business. There is no action, suit, proceeding, inquiry, or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our Company or our subsidiary, threatened against our Company, our common stock, our subsidiary or of our Company or our subsidiary’s officers or directors in their capacities as such.
Litigation against Jonathan Destler, our former Chief Executive Officer and former director, and Don Danks, a former director
On September 30, 2022, a Complaint (the “Complaint”), captioned Securities and Exchange Commission vs. David Stephens, Donald Linn Danks, Jonathan Destler and Robert Lazarus, and Daniel Solomita and 8198381 Canada, Inc., as relief defendants, Case No. ‘22CV1483AJB DEB, was filed in the United States District Court, Southern District of California. In general, the Complaint alleges that Jonathan Destler, a co-founder and our former Chairman and Chief Executive Officer, and a current employee, and Donald Danks, a co-founder, former director, and a former employee, were part of a control group that committed securities fraud in connection with the purchase and sale of securities of Loop Industries, Inc., a Nasdaq-listed company.
| F-19 |
On November 22, 2022, an Indictment (the “Indictment”), captioned United States of America v. David Stephens, Donald Danks, Jonathan Destler and Robert Lazarus, Case No. ‘22CR2701 BAS, was filed in the United States District Court, Southern District of California. In general, the Indictment alleges that Mr. Destler and Mr. Danks conspired to and committed securities fraud, based on the same allegations in the Complaint. The indictment also alleges that Donald Danks engaged in money laundering.
Furthermore, the Complaint and the Indictment allege that Mr. Destler and Mr. Danks were part of a control group consisting of four other persons (David Stephens, Jonathan Destler, Don Danks and Robert Lazarus) who used a third person to make an unregistered offering of securities. The third person is a deceased former-stockholder of Opti-Harvest, whose Opti-Harvest shares are now held by his estate.
Mr. Destler is currently our key employee with respect to our business development because of his material role marketing selling our products. Additionally, the Voting Trust Agreement with Mr. Destler terminates on the first to occur of (i) final disposition of the proceedings related to the Complaint and the Indictment, or (ii) mutual agreement of Opti-Harvest and Mr. Destler. If Mr. Destler loses his criminal litigation, it is possible that Mr. Destler could be incarcerated, in which case our marketing and sales could suffer because of his inability to communicate with potential new and existing customers. Furthermore, final disposition of the proceedings related to the Complaint and the Indictment could possibly also mean that Mr. Destler would have voting control over us while being incarcerated. In such event, Mr. Destler’s separation from daily business activities could cause him to make voting decisions without the knowledge of our daily operations that he has today.
Transfer of Voting Control of Mr. Destler’s Opti-Harvest Shares to Opti-Harvest
Although Mr. Destler (and Mr. Danks, who on January 9, 2023, resigned as an employee of Opti-Harvest) have denied to Opti-Harvest the claims made against them in the Complaint and the Indictment, Mr. Destler agreed to resign his positions as a director, Chief Executive Officer, President and Secretary with Opti-Harvest, and transfer voting control (while retaining ownership) of his shares of common stock and Series A Preferred Stock, to the board of directors of Opti-Harvest. Accordingly, Jeffrey Klausner, Opti-Harvest’s, sole director is the sole trustee of a Voting Trust Agreement, dated December 23, 2022, by and among Opti-Harvest, Inc., Mr. Destler, entities Mr. Destler controls, Mr. Destler’s spouse, and Mr. Klausner, pursuant to which Mr. Klausner, on behalf of Opti-Harvest, votes Mr. Destler’s shares of common stock and Series A Preferred Stock.
It should be noted that the term “Trust” in the title “Voting Trust Agreement” is used for naming convention only, and no trust, as an entity, has been created in connection with the Voting Trust Agreement. Accordingly, Mr. Klausner, as the trustee under the Voting Trust, does not owe any fiduciary duty to Mr. Destler, his affiliated entities, or his spouse, under the Voting Trust Agreement. Mr. Klausner’s sole duty under the Voting Trust Agreement is to vote Mr. Destler’s beneficial ownership in Opti-Harvest securities.
Under the Voting Trust Agreement, Mr. Destler had agreed and consented to the appointment of any member of our board of directors to be appointed a trustee under the Voting Trust Agreement. Therefore, future members of our board of directors may become a trustee under the Voting Trust Agreement. Whether any future member of our board of directors may become a trustee under the Voting Trust Agreement would depend on whether any such new director would want to and agree to becoming a trustee under the Voting Trust Agreement.
The Voting Trust Agreement terminates on the first to occur of (i) final disposition of the proceedings related to the Complaint and the Indictment, or (ii) mutual agreement of Opti-Harvest and Mr. Destler.
Advisory Agreements
During the years ended December 31, 2022 and 2021, the Company entered into various advisory agreements in connection with transactions in which the Company, directly or indirectly through one or more affiliates, raises debt capital or receives a loan from one or more investors identified. The advisory agreements generally expire on the date specified by either the advisory firm or the Company, and with 30 days’ notice of termination. The Company agreed to pay up to six percent (6%) of the capital raised if the funding is in the form of debt, equity, mezzanine structure or subordinated debt structure or any other type of transaction. As of September 30, 2023, no transaction has occurred related to the advisor agreements.
| F-20 |
DisperSolar LLC (Related Party)
On April 7, 2017 (as amended on December 6, 2018), the Company and DisperSolar LLC (the “Seller”), a California limited liability company, entered into a Patent Purchase Agreement (the “Agreement”) pursuant to which the Company acquired certain patents (intellectual property) of the Seller. The Seller developed the patents for harvesting, transmission, spectral modification and delivery of sunlight to shaded areas of plants. Per the Agreement, the Company was obligated to pay milestone payments, earnout payments, and royalties.
Earnout Payments
The
Company is obligated to pay total
Royalties
The Company will pay to Seller royalties as follows:
| (i) | Following
the recognition by the Company of the first $ | |
| (ii) | Once
the Company has paid to Seller an aggregate amount in royalties of $ |
As of September 30, 2023, the Company recorded no earnout or royalties payment obligations as no gross margin was realized.
Strategic Transaction
The
Company will pay to Seller
Strategic Transaction Consideration. “Strategic Transaction Consideration” means any cash consideration and the fair market value of any non-cash consideration paid to the Company by any acquirer as consideration for the Strategic Transaction, less the costs and expenses incurred by the Company for the purpose of consummating the Strategic Transaction. The Company will pay to Seller a percentage of all license consideration received by the Company as follows:
| (i) | ||
| (ii) | ||
| (iii) |
| F-21 |
Inventor Royalty (Related Party)
On July 5, 2019, the Company and Nicholas Booth (“Mr. Booth”) entered into a Royalty Agreement. Mr. Booth is a member of Dispersolar, LLC and a named inventor of the acquired patents from Dispersolar, LLC discussed above. Effective July 1, 2021, Mr. Booth was employed by the Company as its Chief Technology Officer.
The Company will pay Mr. Booth a percentage of all License Consideration received by the Company as follows:
(a)
Once the Company has paid to DisperSolar an aggregate amount in royalties of $
(b) Opti-Harvest will pay to Booth a percentage of all License Consideration received by the Company on the same terms as payable by the Company to DisperSolar under the Agreement, except that the percentages of License Consideration due to Booth shall be as follows:
| (a) | ||
| (b) | ||
| (c) | ||
| (d) |
As of September 30, 2023, no amounts were due for earnouts or royalties.
Both Yosepha Shahak Ravid and Nicholas Booth are members of the Seller, and are named inventors of the acquired patents from the Seller, discussed above. Effective July 1, 2021, Ms. Shahak Ravid, our Chief Science Officer, and Mr. Booth, our Chief Technology Officer, were employed by the Company.
Note 9 – Related Party Transactions
As
discussed in Note 8, Mr. Destler agreed to transfer voting control (while retaining ownership) of his shares of common stock and Series
A Preferred Stock, to the board of directors of Opti-Harvest. Accordingly, Jeffrey Klausner, Opti-Harvest’s, sole director is the
sole trustee of a Voting Trust Agreement, dated December 23, 2022, by and among Opti-Harvest, Inc., Mr. Destler, entities Mr. Destler
controls, Mr. Destler’s spouse, and Mr. Klausner, pursuant to which Mr. Klausner, on behalf of Opti-Harvest, votes Mr. Destler’s
shares of common stock and Series A Preferred Stock. On January 9, 2023, the Company issued Mr. Klausner shares of common stock,
with an estimated fair value of $
On
March 31, 2023, Mr. Destler paid a Company vendor $
On
April 5, 2023, Mr. Destler advanced the Company $
On
July 20, 2023, Geoff Andersen, the Company’s CEO, advanced the Company $
On
September 19, 2023, Donald Danks, a former director of the Company, advanced the Company $
Note 10 – Subsequent Events
The Company has evaluated subsequent events occurring from October 1, 2023, through the date of this filing.
Promissory Notes and Restricted Shares
Subsequent
to September 30, 2023, the Company sold approximately $
| F-22 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Management’s Discussion and Analysis of Financial Condition and Results of Operations is designed to provide a reader of the financial statements with a narrative report on our financial condition, results of operations, and liquidity. This discussion and analysis should be read in conjunction with the attached unaudited Condensed Consolidated Financial Statements and notes thereto and our Annual Report on Form 10-K for the year ended December 31, 2022, including the audited Financial Statements and notes thereto. The following discussion contains forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations, and intentions. Our actual results could differ materially from those discussed in the forward-looking statements. Please also see the cautionary language at the beginning of this Quarterly Report regarding forward-looking statements.
Recent Events
Litigation against Jonathan Destler, our former Chief Executive Officer and former director, and Don Danks, a former director
On September 30, 2022, a Complaint (the “Complaint”), captioned Securities and Exchange Commission vs. David Stephens, Donald Linn Danks, Jonathan Destler and Robert Lazarus, and Daniel Solomita and 8198381 Canada, Inc., as relief defendants, Case No. ‘22CV1483AJB DEB, was filed in the United States District Court, Southern District of California. In general, the Complaint alleges that Jonathan Destler, a co-founder and our former Chairman and Chief Executive Officer, and current employee, and Donald Danks, a co-founder, former director, and former employee, were part of a control group that committed securities fraud in connection with the purchase and sale of securities of Loop Industries, Inc., a Nasdaq-listed company.
On November 22, 2022, an Indictment (the “Indictment”), captioned United States of America v. David Stephens, Donald Danks, Jonathan Destler and Robert Lazarus, Case No. ‘22CR2701 BAS, was filed in the United States District Court, Southern District of California. In general, the Indictment alleges that Mr. Destler and Mr. Danks conspired to and committed securities fraud, based on the same allegations in the Complaint. The indictment also alleges that Donald Danks engaged in money laundering.
Furthermore, the Complaint and the Indictment allege that Mr. Destler and Mr. Danks were part of a control group consisting of four other persons (David Stephens, Jonathan Destler, Don Danks and Robert Lazarus) who used a third person to make an unregistered offering of securities. The third person is a deceased former-stockholder of Opti-Harvest, whose Opti-Harvest shares are now held by his estate.
Transfer of Voting Control of Mr. Destler’s Opti-Harvest Shares to Opti-Harvest
Although Mr. Destler (and Mr. Danks, who on January 9, 2023, resigned as an employee of Opti-Harvest) have denied to Opti-Harvest the claims made against them in the Complaint and the Indictment, Mr. Destler agreed to resign his positions as a director, Chief Executive Officer, President and Secretary with Opti-Harvest, and transfer voting control (while retaining ownership) of his shares of common stock and Series A Preferred Stock, to the board of directors of Opti-Harvest. Accordingly, Jeffrey Klausner, Opti-Harvest’s, sole director is the sole trustee of a Voting Trust Agreement, dated December 23, 2022, by and among Opti-Harvest, Inc., Mr. Destler, entities Mr. Destler controls, Mr. Destler’s spouse, and Mr. Klausner, pursuant to which Mr. Klausner, on behalf of Opti-Harvest, votes Mr. Destler’s shares of common stock and Series A Preferred Stock.
It should be noted that the term “Trust” in the title “Voting Trust Agreement” is used for naming convention only, and no trust, as an entity, has been created in connection with the Voting Trust Agreement. Accordingly, Mr. Klausner, as the trustee under the Voting Trust, does not owe any fiduciary duty to Mr. Destler, his affiliated entities, or his spouse, under the Voting Trust Agreement. Mr. Klausner’s sole duty under the Voting Trust Agreement is to vote Mr. Destler’s beneficial ownership in Opti-Harvest securities.
Under the Voting Trust Agreement, Mr. Destler had agreed and consented to the appointment of any member of our board of directors to be appointed a trustee under the Voting Trust Agreement. Therefore, future members of our board of directors may become a trustee under the Voting Trust Agreement. Whether any future member of our board of directors may become a trustee under the Voting Trust Agreement would depend on whether any such new director would want to and agree to becoming a trustee under the Voting Trust Agreement.
| 1 |
The Voting Trust Agreement terminates on the first to occur of (i) final disposition of the proceedings related to the Complaint and the Indictment, or (ii) mutual agreement of Opti-Harvest and Mr. Destler.
Opti-Harvest Internal Investigation
The filing of the Complaint and the Indictment caused our board of directors to ask external legal counsel, who is also counsel to Opti-Harvest in its initial public offering, to conduct an investigation to determine whether Mr. Destler and/or Mr. Danks have any plan, agreement, arrangement or understanding to commit any act which could be construed as securities fraud in connection with Opti-Harvest and its initial public offering. Our legal counsel conducted an internal investigation into whether any officer, director or employee of Opti-Harvest has, or is aware of, any plan, agreement, arrangement or understanding to (i) manipulate the price or trading volume of common stock or other securities of Opti-Harvest, or (ii) publish or otherwise disseminate false, untrue, or misleading information, or information with material omissions of fact, about or otherwise regarding Opti-Harvest. Our legal counsel concluded, based verbal interviews with Mr. Destler, Mr. Danks, and each officer and director of Opti-Harvest, and based on written responses from each of officers, our director and our employees (including Mr. Destler and Mr. Danks), that there does not exist any plan, agreement, arrangement or understanding to (i) manipulate the price or trading volume of common stock or other securities of Opti-Harvest, or (ii) publish or otherwise disseminate false, untrue, or misleading information, or information with material omissions of fact, about or otherwise regarding Opti-Harvest.
Appointment of Geoffrey Andersen as Chief Executive Officer
In connection with the filing of the Complaint and the Indictment, and the agreement of Mr. Destler to transfer voting control of his voting securities of Opti-Harvest to Mr. Klausner under the Voting Trust Agreement, our board of directors appointed Geoffrey Andersen as our Chief Executive Officer, effective December 8, 2022. Mr. Andersen had previously, since July 14, 2021, served as a member of our Advisory Board. In his advisory capacity to us, Mr. Andersen worked closely with Opti-Harvest on all facets of growing our business and strategy, including government relations, building financial models, product development, technology development, marketing, and general business strategy, which allowed Mr. Andersen to not only garner a great deal of information about, and be part of, our business and operations, but to also be the lightning rod for our long-term business strategy. This and his 25-year career serving in multiple leadership and business development roles at agriculture-related businesses, led to the board of directors asking Mr. Andersen to serve as our Chief Executive Officer, which he has agreed to do, for a term of two years, stating that he believed in the viability of our business.
Business Overview
Opti-Harvest is an agricultural innovation company with products backed by a portfolio of patented and patent pending technologies focused on solving several critical challenges faced by agribusinesses: maximizing crop yield, accelerating crop growth, optimizing land and water resources, reducing labor costs and mitigating negative environmental impacts.
Our advanced agriculture technology (Opti-Filter™) and precision farming (Opti-View™) platforms, enable commercial growers and home gardeners to harness, optimize and better utilize sunlight, the planet’s most fundamental and renewable natural resource.
Our sustainable agricultural technology platform is powered by the sun. It maximizes a free and renewable resource with no need for additional chemicals or fertilizers.
From inception in 2016 through the present date, we have made substantial investments in building our intellectual property portfolio, developing, and optimizing our product designs, and conducting over 65 multi-year field trials to test and measure the effectiveness of our products. Based on our field trials and the positive feedback from our partners, we began commercializing our Opti-Gro and ChromaGro products in the first half of 2021, our Opti-Shield and Opti-Panel products late in the first half of 2022, and we plan to commercialize our Opti-Skylight products in the first half of 2023. Our Opti-View product is currently in our research and development phase with an anticipated commercial offering in the second half of 2023. We remain focused on developing new products and enhancing existing products.
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With the recent commercialization of several of our products, we are making significant investments in sales and marketing, tooling to manufacture our products, and infrastructure investments to meet planned customer demand. We will also incur additional expenses generally associated with being a publicly traded company, including the cost of regulatory compliance, director fees, insurances, investor relations, upgraded systems, and enhanced internal controls.
Recent Trends - Market Conditions
During the period ended September 30, 2023, the COVID-19 pandemic continued to impact our operating results and the Company anticipates a residual effect for the balance of the year. In addition, the pandemic could cause reduced demand for our products if, for example, the pandemic results in a recessionary economic environment which negatively effects the consumers who purchase our products. Based on the recent increase in demand for our products, we believe that over the long term, there will continue to be strong demand for our products.
Although the U.S. economy continued to grow during the first half of 2022, the continuing impact of the COVID-19 pandemic, higher inflation, the actions by the Federal Reserve to address inflation, and rising energy prices create uncertainty about the future economic environment which will continue to evolve and may impact our business in future periods. We have experienced supply chain challenges, including increased lead times, as well as inflation of raw materials, logistics and labor costs due to availability constraints and high demand. Although we regularly monitor companies in our supply chain, and use alternative suppliers when necessary and available, supply chain constraints could cause a disruption in our ability to obtain raw materials required to manufacture our products and adversely affect our operations. We expect the inflationary trends and supply chain pressures to continue throughout the remainder of 2023.
Through September 30, 2023, the Company experienced elevated freight costs as a result of a higher transportation market as the capacity in the freight market has not kept up with demand. The Company believes these challenges will continue throughout the year. In addition, the Company experienced increases in the pricing of its raw materials and delays in procuring raw materials. The disruption caused by labor shortages, significant raw material cost inflation, logistics issues and increased freight costs, and ongoing port congestion, resulted in suppressed margins. The Company anticipates a continued impact throughout 2023.
Our ability to operate without significant incremental negative operational impact from the COVID-19 pandemic will in part depend on our ability to protect our employees and protect our supply chain. The Company has endeavored to follow the recommended actions of government and health authorities to protect our employees. Since the inception of the COVID-19 pandemic and through September 30, 2023, we maintained the consistency of our operations during the onset of the COVID-19 pandemic. We will continue to innovate in managing our business, coordinating with our employees and suppliers to do our part in the infection prevention and remain flexible in responding to our customers and suppliers. However, the uncertainty resulting from the pandemic could result in an unforeseen disruption to our workforce and supply chain (for example an inability of a key supplier or transportation supplier to source and transport materials) that could negatively impact our operations.
We have not observed any material impairments of our assets or a significant change in the fair value of our assets due to the COVID-19 pandemic.
Results of Operations for the Three Months Ended September 30, 2023 Compared to the Three Months Ended September 30, 2022
Revenues
Our revenues were $33,000 and $10,000 for the three months ended September 30, 2023 and 2022, respectively. Beginning in second half of 2022, we began offering our customers the option to rent our products for a monthly fee per unit, generating $19,000, or 58% of our revenues during the three months ended September 30, 2023.
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Cost of Revenues
Cost of revenues represent the cost to manufacture our products sold, depreciation expense related to our rental equipment sales, and changes in our inventory reserves. Cost of revenues was $33,000 and $29,000 for the three months ended September 30, 2023 and 2022, respectively.
Operating Expenses
Operating expenses include selling, general and administrative expenses, research and development costs, and impairment of rental equipment costs.
Our selling, general and administrative expenses decreased approximately $483,000 to $1.5 million during the three months ended September 30, 2023, compared to $1.9 million for the three months ended September 30, 2022. The decrease in selling, general and administrative expenses was primarily due to decreased stock-based compensation expenses of $302,000, and a decrease of $181,000 from routine fluctuations in our operating accounts to support our operations.
Research and development costs include advisors, consultants, software licensing, product design and development, data monitoring and collection, field trial installations, and travel related expenses. Research and development expenses decreased approximately $277,000 to $214,000 during the three months ended September 30, 2023, compared to $491,000 for the three months ended September 30, 2022. The decrease in research and development costs was primarily due to decreased field trial and product development costs, as compared to the prior year period.
Financing Costs
During the three months ended September 30, 2022, financing costs of $943,000 were for shares issued as consideration for extending the maturity date of our senior convertible notes, which did not occur in the current year period.
Interest Expense
Interest expense decreased $408,000 to $458,000 during the three months ended September 30, 2023, compared to $866,000 for the three months ended September 30, 2022. The decrease in interest expense was from a $353,000 decrease in debt discount amortization compared to the prior year period, and a decrease in interest expense of $55,000 due to decreased debt balances as compared to the prior year period.
Net Loss
Net loss decreased $2.1 million to $2.1 million during the three months ended September 30, 2023, compared to $4.3 million for the three months ended September 30, 2022. The decrease in net loss was due to our increased revenue and gross profit, offset by decreased operating expenses, and decreased other expenses, as discussed above.
Results of Operations for the Nine Months Ended September 30, 2023 Compared to the Nine Months Ended September 30, 2022
Revenues
Our revenues were $80,000 and $30,000 for the nine months ended September 30, 2023 and 2022, respectively. Beginning in second half of 2022, we began offering our customers the option to rent our products for a monthly fee per unit, generating $57,000, or 71% of our revenues during the nine months ended September 30, 2023.
Cost of Revenues
Cost of revenues represent the cost to manufacture our products sold, depreciation expense related to our rental equipment sales, and changes in our inventory reserves. Cost of revenues was $78,000 and $55,000 for the nine months ended September 30, 2023 and 2022, respectively.
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Operating Expenses
Operating expenses include selling, general and administrative expenses, research and development costs, and impairment of rental equipment costs.
Our selling, general and administrative expenses decreased approximately $724,000 to $5.3 million during the nine months ended September 30, 2023, compared to $6.1 million for the nine months ended September 30, 2022. The decrease in selling, general and administrative expenses was primarily due to decreased stock-based compensation expenses of $516,000, and a decrease of $208,000 from routine fluctuations in our operating accounts to support our operations.
Research and development costs include advisors, consultants, software licensing, product design and development, data monitoring and collection, field trial installations, and travel related expenses. Research and development expenses decreased approximately $964,000 to $784,000 during the nine months ended September 30, 2023, compared to $1.8 million for the nine months ended September 30, 2022. The decrease in research and development costs was primarily due to decreased field trial and product development costs, as compared to the prior year period.
Loss from Operations
Loss from operations decreased to approximately $6.1 million for the nine months ended September 30, 2023, compared to a loss from operations of $7.8 million for the nine months ended September 30, 2022. The decrease in loss from operations was due to primarily to our increase in revenue and gross profit and decreased operating expenses as discussed above.
Financing Costs
Financing costs decreased $35,000 to $1.5 million during the nine months ended September 30, 2023, compared to $1.6 million for the nine months ended September 30, 2022. The decrease in financing cost was from $1.5 million incurred during the nine months ended September 30, 2023, on the conversion of our senior convertible notes (see Note 5 of our accompany condensed financial statements). During the nine months ended September 30, 2022, financing costs of $1.56 million were for shares issued as consideration for extending the maturity date of our senior convertible notes, which did not occur in the current year period.
Loss on Extinguishment of Debt
In September 2023, the Noteholders entered into a conversion agreement (the “Agreement”) with the Company in which the Noteholders elected to convert $3,373,000 of principal, and $685,000 of accrued interest into 2,029,306 shares of Common Stock with a fair value of $8,118,000, based upon the fair value of $4.00 per share, resulting in a loss on extinguishment of debt of $4,060,000. The Company further realized an additional $250,000 loss on extinguishment of debt related to the modification of Warrants discussed below, resulting in the recording of an aggregate $4,310,000 loss on extinguishment of debt in the accompanying condensed statement of operations (see Note 5 of the accompanying condensed financial statements).
Interest Expense
Interest expense decreased $1.6 million to $1.0 million during the nine months ended September 30, 2023, compared to $2.6 million for the nine months ended September 30, 2022. The decrease in interest expense was from a $1.6 million decrease in debt discount amortization compared to the prior year period, offset by an decrease in interest expense of $51,000 due to decreased debt balances as compared to the prior year period.
Net Loss
Net loss increased $930,000 to $12.9 million during the nine months ended September 30, 2023, compared to $12.0 million for the nine months ended September 30, 2022. The increase in net loss was due to our increased revenue and gross profit, decreased operating expenses, offset by increased other expenses, as discussed above.
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Liquidity and Capital Resources
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying financial statements, during the nine months ended September 30, 2023, the Company recorded a net loss of $12.9 million, used cash in operations of $2.3 million, and had a stockholders’ deficit of $11.0 million at September 30, 2023. These factors raise substantial doubt about our ability to continue as a going concern within one year after the date of the financial statements being issued.
The ability to continue as a going concern is dependent upon our ability to raise additional funds and implement our business plan. As a result, management has concluded that there is substantial doubt about our ability to continue as a going concern. Our independent registered public accounting firm, in its report on the Company’s consolidated financial statements for the year ended December 31, 2022, has also expressed substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.
At September 30, 2023, we had cash on hand in the amount of $3,000. Subsequent to September 30, 2023, the Company received proceeds of $350,000 on the sale of promissory notes (see Note 10 of the accompanying financial statements). The Company believes it has enough cash to sustain operations through December 31, 2023. Our continuation as a going concern is dependent upon its ability to obtain necessary debt or equity financing to continue operations until it begins generating positive cash flow. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to us. Even if we are able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing or cause substantial dilution for our stockholders, in the case or equity financing.
The following table summarizes our cash flows for the periods indicated (amounts are rounded to nearest thousands):
Nine Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Net cash provided by (used in): | ||||||||
| Operating activities | $ | (2,343,000 | ) | $ | (3,615,000 | ) | ||
| Investing activities | - | (278,000 | ) | |||||
| Financing activities | 2,174,000 | 3,018,000 | ||||||
| Net decrease in cash | $ | (169,000 | ) | $ | (875,000 | ) | ||
Net cash used in operating activities for the nine months ended September 30, 2023, totaled $2.3 million, compared to net cash used in operating activities for the nine months ended September 30, 2022 of $3.6 million. Net cash used in operations for the nine months ended September 30, 2023, was $2.3 million, and was to fund our net loss of $12.9 million, offset by $423,000 of depreciation expense, $678,000 of debt discount amortization, $1.5 million of financing costs, $4.3 million loss on extinguishment of debt, $3.1 million of stock-based compensation expense, and $572,000 of changes in our operating accounts. Net cash used in operating activities for the nine months ended September 30, 2022, was to fund our net loss of $12.0 million, offset by $382,000 of depreciation expenses, $2.3 million of debt discount amortization, $1.6 million of financing costs, $3.6 million of stock-based compensation expense, and $586,000 of changes in our operating accounts.
We had no cash flows from investing activities during the nine months ended September 30, 2023. Net cash used in investing activities was approximately $278,000 for the nine months ended September 30, 2022, and was for the purchase of property and equipment and rental equipment.
Net cash provided by financing activities for the nine months ended September 30, 2023, was approximately $2.2 million, which included proceeds of $114,000 on the exercise of warrants, proceeds of approximately $2.0 million received on the issuance of notes payable, a $75,000 related party advances, a change in deferred offering costs of $52,000, offset by the repayment of $10,000 on a related party advance and $11,000 of a loan payable. Net cash provided by financing activities for the nine months ended September 30, 2022 was approximately $3.0 million, which included proceeds of $1.6 million on the exercise of warrants, proceeds of approximately $1.6 million received in the private placement of common stock, offset by deferred offering costs of $51,000, repayment of convertible notes of $100,000, and repayments of $9,000 of a loan payable.
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Off-Balance Sheet Arrangements
At September 30, 2023 and December 31, 2022, the Company did not have any transactions, obligations or relationships that could be considered off-balance sheet arrangements.
Senior Convertible Notes and Warrants
During the year ended December 31, 2021, the Company sold approximately $3,591,000 of Senior Convertible Promissory Notes (the “Notes”) and 2,437,012 warrants (the “Warrants”). The Notes accrue interest at a rate of twelve percent (12%) per annum.
The holder of the Warrants shall have the right to purchase up to the number of shares that equals the quotient obtained by dividing: (i) the Warrant Coverage Amount, by (ii) the Conversion Price. The “Warrant Coverage Amount” shall mean the amount obtained by multiplying: (A) one hundred percent (100%); by (B) aggregate principal amount of the Holder’s Note(s). The conversion price in effect on any Conversion Date shall be equal to 80% of the offering price per share of common stock in our initial public offering.
Each Note is convertible, in the sole discretion of the holder of the Note, into shares of our common stock at a purchase price equal to 80% of the offering price of the initial public offering price currently estimated to be $4.00 per share. In the event that the initial public offering is not consummated within 12 months of the date of this Note, then the Conversion Price shall be equal to 65% of the offering price per share of common stock in the initial public offering. In the event that the initial public offering is not consummated within 24 months of the date of this Note, then the Conversion Price shall be equal to 50% of the offering price per share of common stock in the initial public offering. Each Note, issued at an original issue discount of 15%, carries interest at a rate of 12% per annum, and any interest payable under the Note shall automatically accrue and be capitalized to the principal amount of the Note, and shall thereafter be deemed to be a part of the principal amount of the Note, unless such interest is paid in cash on or prior to the maturity date of the Note.
The Notes mature 12 months from the date of the Notes, provided, however, that noteholders have the right to call the Notes prior to maturity starting from the earlier of (i) the consummation of the first underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, covering the offer and sale by the Company of not less than $10 million of its equity securities, as a result of or following which common stock shall be listed on the Nasdaq Stock Market, and (ii) December 15, 2021. Additionally, each Warrant contains a cashless exercise provision, which is effective if the shares underlying the Warrant are not covered by a registration statement 6 months from the date of issuance of the Warrant. On May 16, 2022, the Company entered into an amendment to extend the right to call provision in its senior secured convertible notes from December 15, 2021 to September 15, 2022, in exchange for issuing its senior convertible note holders an aggregate of 138,098 shares of common stock with a fair value of approximately $609,000 at the date of grant, or $4.42 per common share. On September 30, 2022, the Company entered into a second amendment to extend the right to call provision in its senior secured convertible notes from September 15, 2022 to December 31, 2022, in exchange for issuing its senior convertible note holders an aggregate of 213,473 shares of common stock with a fair value of approximately $944,000 at the date of grant, or $4.42 per common share. On December 20, 2022, the Company entered into a third amendment to extend the right to call provision and the maturity date in its senior secured convertible notes from December 31, 2022 to September 30, 2023, in exchange for issuing its senior convertible note holders an aggregate of 213,473 shares of common stock with a fair value of approximately $944,000 at the date of grant, or $4.42 per common share.
The shares of common stock underlying the Notes and the Warrants are subject to registration rights, and such shares must be registered within 90 days after the effectiveness of the Company’s initial public offering. If the Company fails to register the shares within 90 days, the Company agreed to pay a penalty of a cash payment equal to 0.02857% of the principal amount and interest due and owing under any Note held by the Holder or that number shares of common stock of the Company equal 1% of the shares of common stock underlying any Note and Warrant held by the Holder, in total amount per week paid in, whichever is greater.
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Each Note and Warrant holder has (i) the right of first refusal to purchase up to 20% of its pro rata share of new securities the that company offers, which right expires upon the consummation of an underwritten initial public offering by the Company or a change in control of the Company, and (ii) the right to be repaid any and all principal and interest due by the Company from any and all proceeds resulting from any sale of assets and any sale and issuance of debt or equity securities.
Total principal balance owed was $3,491,000 at December 31, 2022. During the nine months ended September 30, 2023, the Company converted $3,373,000 of principal and $685,000 of accrued interest into 2,029,306 shares of common stock, leaving a remaining principal balance of $118,000 at September 30, 2023. As of September 30, 2023, approximately 54,124 shares of common stock were potentially issuable under the conversion terms of the Notes.
In September 2023, the Noteholders entered into a conversion agreement (the “Agreement”) with the Company in which the Noteholders elected to convert $3,373,000 of principal, and $685,000 of accrued interest into 2,029,306 shares of Common Stock with a fair value of $8,118,000, based upon the fair value of $4.00 per share, resulting in a loss on extinguishment of debt of $4,060,000. The Company further realized an additional $250,000 loss on extinguishment of debt related to the modification of Warrants discussed below, resulting in the recording of an aggregate $4,310,000 loss on extinguishment of debt in the accompanying condensed statement of operations.
The Company also agreed to change the exercise price of the Warrants to 100% of the offering price per share of common stock in our initial public offering and extended the Warrant expiration date to September 30, 2026. The change in warrant terms changed the fair value of the Warrants by $250,000, which was recorded as a component of the loss on the extinguishment of debt in the accompanying condensed statement of operations. The Company is also obligated to issue the Noteholders an aggregate of 379,975 shares of common stock (the “Signing Premium Shares”) with a fair value of approximately $1,519,000 at date of grant as an inducement to enter into a conversion agreement with the Company. The fair value of the Premium Shares of $1,519,000 was recorded as financing costs during the nine months ended September 30, 2023. As of September 30, 2023, 192,475 shares of common stock for the Premium Shares were not issued and reflected as common stock issuable in the condensed balance sheet. Per the terms of the Agreement, in the absence of the Company’s initial public offering, the Agreement is effective until July 30, 2023, at which time it shall terminate, and the conversion be reversed. The provision herein would require a reversal of the common shares issues on the conversion which prohibits the presentation of this instrument as part of permanent equity. As such the amounts will be reflected as mezzanine financing in the accompanying condensed balance sheet. The Signing Premium Shares issued under the Agreement remain the property of the Noteholder. On August 20, 2023, the Noteholders extended the termination date of the Agreement to September 1, 2023, and on November 15, 2023, the Noteholders extended the termination date of the Agreement to December 31, 2023.
Convertible Promissory Notes and Warrants
In January and February 2023, the Company sold $250,000 of Convertible Promissory Notes (the “Notes”) and 21,206 warrants (the “Warrants”). In July 2023, a convertible note holder entered into an exchange agreement wherein a $100,000 Convertible Promissory Note was exchanged for a $100,000 note payable (see Note 6). The remaining $150,000 of Notes accrue interest at a rate of ten percent (10%) per annum. The outstanding principal amount of this Notes, together with all accrued but unpaid interest thereon, shall be due and payable on the date that is 12 months from the date of the Notes (the “Initial Maturity Date”); provided, however, that the Company may, at its option, extend such maturity date an additional six (6) months (such option, the “Extension Option” and such extended maturity date, (the “Extended Maturity Date”). The date on which this Note matures, whether the Initial Maturity Date or the Extended Maturity Date, is the “Maturity Date.” The principal amount of this Note shall be subject to increase as follows:
(a) If a Qualified Public Offering does not occur before the Initial Maturity Date, the outstanding principal balance of this Note shall be increased by an amount equal to 10% of the outstanding principal balance of this Note on the Initial Maturity Date (the “Premium”).
(b) If the Company exercises its Extension Option and a Qualified Public Offering does not occur before the Extended Maturity Date, the outstanding principal balance due and payable to the Lender shall be increased by the Premium plus an additional 2.5% of the outstanding principal balance of the Note as of the Extended Maturity Date.
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(c) As used herein, “Qualified Public Offering” means the issuance and sale of shares of comment stock, par value $0.0001 per share, of the Company (the “Common Stock”) to investors in an underwritten public offering or a direct listing by the Company of its Common Stock, in either case pursuant to an effective registration statement under the Securities Act of 1933, as amended.
In the event the Company consummates a Qualified Public Offering, Lender shall have the right, but not the obligation, at any time prior to the Maturity Date or earlier repayment of this Note, to convert all, or any portion, of the outstanding principal balance of this Note into shares of Common Stock at a conversion price equal to 80% of the price at which shares of Common Stock are first sold to the public in a Qualified Public Offering. Upon conversion, the Company will pay all accrued but unpaid interest on this Note in cash. An election to convert the Note shall be made in writing and delivered to the Company no later than five (5) days before the Maturity Date; provided, however, that if the Qualified Public Offering is consummated within five (5) days before the Maturity Date, the notice of election will be delivered no later than five (5) days after the date on which such Qualified Public Offering is consummated.
The Holder shall have the right to purchase up to the number of Shares that equals the amount obtained by dividing: (A) eighty percent (80%) of the aggregate principal amount of the Holder’s Note(s) delivered pursuant to the Note and Warrant Purchase Agreement; by (B) 80% of $4.00, the current midpoint price of the Company’s prospective IPO. For example, $100,000 aggregate principal amount of Note x 80% = $80,000) / ($4.00 current midpoint price of prospective IPO x 80% = $3.20) = 25,000 warrants. The exercise price per share shall be equal to 80% of the offering price per share of common stock of the Company in its first underwritten public offering (the “IPO”) pursuant to an effective registration statement under the Securities Act of 1933, as amended, covering the offer and sale by the Company of not less than $10,000,000 of its equity securities, as a result of or following which the Company shall be a reporting issuer under the Securities and Exchange Act of 1934, as amended, and its common stock shall be listed on the Nasdaq Stock Market. This Warrant shall be exercisable, in whole or in part: (i) after the earlier to occur of: (A) the consummation of the IPO; or (B) six months after the date of this Warrant; and (ii) prior to the Warrant expiration date which is twelve months after the date of this Warrant.
The total of the allocated relative fair value of warrants issued of $76,000 were capitalized and recorded as a debt discount and are amortized over the remaining life of the Notes. Amortization of debt discount was approximately $56,000 for the nine months September 30, 2023, which was recorded as a component of interest expense in the accompanying statement of operations, leaving a $20,000 unamortized debt discount balance at September 30, 2023.
During the nine months ended September 30, 2023, the Company added $11,000 of accrued interest, leaving an accrued interest balance of $11,000 at September 30, 2023. Accrued interest in included in accounts payable and accrued expenses in the accompanying balance sheets.
Total principal balance owed was $150,000 at September 30, 2023. As of September 30, 2023, approximately 48,482 shares of common stock were potentially issuable under the conversion terms of the Notes.
Convertible Promissory Notes and Restricted Shares
During the nine months ended September 30, 2023, the Company sold $462,000 of Convertible Promissory Notes (the “Notes”). These Notes will accrue interest at a rate of twelve percent (12%) per annum, compounded annually, until maturity or conversion hereof. The interest payable hereunder shall automatically accrue and be capitalized to the principal amount of this Note (“PIK Interest”), and shall thereafter be deemed to be a part of the principal amount of this Note, unless such interest is paid in cash on or prior to the maturity date of the Notes. The Notes shall be due and payable on the date that is six (6) months from the date of the Notes (the “Initial Maturity Date”); provided, however, that the Company and Lender may, upon mutual written agreement, extend such maturity date an additional six (6) months (such extended maturity date, (the “Extended Maturity Date”). The Lender shall have the right, but not the obligation, at any time to convert all, or any portion, of the outstanding principal balance of the Notes into shares of Common Stock at a conversion price equal to either (i) $3.00 per share, or (ii) the price at which shares of Common Stock are first sold to the public in a Qualified Public Offering. The Company shall issue 10,000 shares of common stock of the Company for each $100,000 invested by an Investor, provided, however, that if an Investor invests a sum of funds which does not round to $100,000, the Company shall issue to such Investor Shares on a pro rata basis, based on an issuance of 20,000 Shares for each $100,000 invested. If the company enters into a subsequent financing with another individual or entity (a “Third Party”) on terms that are more favorable to the Third Party, the agreements between the company and the Investors shall be amended to include such better terms so long as the Notes are outstanding.
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The Company issued 46,000 shares of common stock related to the Note at the date of issuance, which the Company determined had a fair value of $370,000, were capitalized and recorded as a debt discount and are being amortized over the remaining life of the Note. During the nine months ended September 30, 2023, the company recorded $329,000 of amortization expense to interest expense, leaving a unamortized debt discount balance was $41,000 at September 30, 2023.
During the nine months ended September 30, 2023, the Company added $25,000 of accrued interest, leaving an accrued interest balance of $25,000 at September 30, 2023. Accrued interest in included in accounts payable and accrued expenses in the accompanying balance sheets.
Total principal balance owed was $462,000 at September 30, 2023. As of September 30, 2023, approximately 162,401 shares of common stock were potentially issuable under the conversion terms of the Notes.
Promissory Notes and Restricted Shares
During the nine months ended September 30, 2023, the Company sold approximately $1,062,000 of Promissory Notes (the “Note”), and issued a $100,000 Note in exchange of a convertible note (see Note 5) and issued 174,300 shares of restricted common stock. The outstanding principal amount shall bear interest from the date of the Note at a rate of twelve percent (12%) per annum (the “Interest Rate”). Interest shall automatically accrue and be capitalized to the principal amount of this Note (“PIK Interest”) and shall thereafter be deemed to be a part of the principal amount of this Note, unless such interest is paid in cash on or prior to the maturity date of this Note. This Note shall become due and payable on the earlier of (i) the consummation of the first underwritten public offering (the “IPO”) of Obligor pursuant to an effective registration statement under the Securities Act of 1933, as amended, covering the offer and sale by Obligor of not less than $8,000,000 of its equity securities, as a result of or following which Obligor shall be a reporting issuer under the Securities and Exchange Act of 1934, as amended, and its common stock (the “Common Stock”) shall be listed on the Nasdaq Stock Market, and (ii) twelve months from the funding of the Principal to Obligor.
The Company issued 174,300 shares of common stock related to the Note, which the Company determined had a fair value of $943,0000, were capitalized and recorded as a debt discount, and are being amortized over the remaining life of the Note. During the nine months ended September 30, 2023, the Company amortized $248,000, which was recorded as a component of interest expense in the accompanying condensed statement of operations, leaving a remaining unamortized debt discount balance of $695,000 at September 30, 2023.
Total principal balance owed was $1,162,000 at September 30, 2023.
Automobile Loans
On November 20, 2020, the Company financed the purchase of a vehicle for $40,000. The loan term is for 59 months, annual interest rate of 4.49%, with monthly principal and interest payments of $745, and secured by the purchased vehicle. The loan balance was $24,000 at December 31, 2022. During the nine months ended September 30, 2023, the Company made principal payments of $6,000, leaving a loan balance of $18,000 at September 30, 2023, of which $8,000 was recorded as the current portion of loan payable on the accompanying balance sheet.
On January 20, 2022, the Company financed the purchase of a second vehicle for $49,000. The loan term is for 71 months, annual interest rate of 15.54%, with monthly principal and interest payments of $1,066, and secured by the purchased vehicle. The loan balance was $45,000 at December 31, 2022. During the nine months ended September 30, 2023, the Company made principal payments of $5,000, leaving a loan balance of $40,000 at September 30, 2023, of which $5,000 was recorded as the current portion of loan payable on the accompanying balance sheet.
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Unsecured Promissory Note – Related Party
On February 21, 2023, the Company sold $225,000 of Unsecured Promissory Note (the “Note”) to Donald Danks, a former member of the Company’s Board of Directors. The Company received net proceeds of $180,000 after deducting an original issue discount of 20%, or $45,000, which was recorded as a debt discount. The note bears no interest and matures of March 21, 2023 (“Initial Maturity Date”). If a Qualified Public Offering does not occur before the Initial Maturity Date, the outstanding principal amount of this Note, together with all accrued but unpaid interest thereon, shall be paid from funds from any offer and sale of Lender of equity or debt securities whereby Lender obtains gross cash proceeds in an amount not less than Five Hundred Thousand Dollars ($500,000). If a Qualified Public Offering does not occur before the Initial Maturity Date, this Note will accrue interest at a rate of twelve percent (12%) per annum. The Company may prepay the Note, or any portion outstanding, at any time and from time to time prior to Maturity Date without notice and without the payment of any premium, fee, or penalty.
The total of the original issue discount of $45,000 was capitalized and recorded as a debt discount and are amortized over the remaining life of the Note. Amortization of debt discount was $45,000 for the nine months ended September 30, 2023, which was recorded as a component of interest expense in the accompanying condensed statement of operations.
During the nine months ended September 30, 2023, the Company added $16,000 of accrued interest, leaving an accrued interest balance of $16,000 at September 30, 2023. Accrued interest in included in accounts payable and accrued expenses in the accompanying balance sheets.
During the nine months ended September 30, 2023, the Company paid $10,000 towards the principal balance leaving a principal balance of $215,000 at September 30, 2023, which is past due.
Lease Obligations
Our principal executive offices are located at 190 N. Canon Dr., Beverly Hills, California 90210. We sublease this location on a month-to-month agreement and our rent expense is $2,500 per month.
Earnout and Royalty Obligations
On April 7, 2017, we and DisperSolar LLC (the “Seller”), a California limited liability company, entered into a Patent Purchase Agreement (the “Agreement”) pursuant to which we acquired certain patents (intellectual property) of the Seller (see Note 7 of the accompanying financial statements). The Seller developed the patents for harvesting, transmission, spectral modification and delivery of sunlight to shaded areas of plants.
Under the Agreement, the Company agreed to pay the following for the acquisition of Seller’s intellectual property:
| (i) | Initial Payment: $150,000 deposited into the Seller Account within 10 days of the Effective Date (the “Initial Payment”). | |
| (ii) | Initial Milestone Payments: Additional payments in the aggregate combined amount up to $350,000 upon reaching defined milestones (the “Milestone Payments”), of which $50,000 was paid in 2017, $200,000 in 2018, and $100,000 in 2021. | |
| (iii) | Earnout Payments: $800,000 paid on the on-going basis at a rate of 50% of gross margin and/or License Revenue from the date of the first commercial sale of a Covered Product or the first receipt by Purchaser of License Revenue, until the aggregate combined Gross Margin and License Revenue reach $1,600,000. |
On December 6, 2018, we and Seller amended the Agreement by increasing the Milestone Payments from $350,000 to $450,000. The $100,000 increase in Milestone Payments was paid in 2019.
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As of September 30, 2023, we had an $800,000 earnout obligation payable on the on-going basis at a rate of 50% of gross margin and/or license revenue from the date of the first commercial sale of a covered product or the first receipt by purchaser of license revenue, until the aggregate combined gross margin and license revenue reach $1.6 million.
We will pay to Seller royalties as follows:
| (i) | Following the recognition by us of the first $1.6 million in aggregate combined gross margin and license revenue, and until we pay to Seller an aggregate amount in royalties of $30 million, we shall pay to Seller royalties on sales of covered products at a rate of 8% of gross margin. | |
| (ii) | Once we paid to Seller an aggregate amount in royalties of $30 million, we shall pay to Seller royalties on sales of covered products at a rate of 4.75% of gross margin until the earlier of (x) such time as covered products are not covered by any claims of any assigned patent, and (y) the date of the consummation of a strategic transaction. |
As of September 30, 2023, the Company recorded no earnout or royalty payment obligations as no gross margin was realized.
We will pay to Seller 7.6% of all License Consideration received by us until the date of the consummation of a Strategic Transaction. “Strategic Transaction” means a transaction or a series of related transactions that results in an acquisition of the Company by a third party, including by way of merger, purchase of capital stock or purchase of assets or change of control or otherwise.
Strategic Transaction Consideration. “Strategic Transaction Consideration” means any cash consideration and the fair market value of any non-cash consideration paid to we by any acquirer as consideration for the Strategic Transaction, less the costs and expenses incurred by Purchaser for the purpose of consummating the Strategic Transaction. The Company will pay to Seller a percentage of all License Consideration received by Purchaser as follows:
| (i) | 3.8% of the first $50 million of the Strategic Transaction Consideration; | |
| (ii) | 5.7% of the next $100 million of the Strategic Transaction Consideration (i.e. over $50 million and up to $150 million); | |
| (iii) | 7.6% of Strategic Transaction Consideration over $150 million. |
Both our Chief Science Officer, Yosepha Shahak Ravid, and our Chief Technology Officer, Nicholas Booth, we employed by us on July 1, 2021, and are control persons of DisperSolar and named inventors of the acquired patents we acquired from DisperSolar under our Patent Purchase Agreement with DisperSolar.
On July 5, 2019, we and Nicholas Booth (“Mr. Booth”) entered into a royalty agreement.
The Company will pay Mr. Booth a percentage of all license consideration received by us as follows:
(0) Once we paid to DisperSolar an aggregate amount in royalties of $30 million under the Agreement, we will pay to Mr. Booth a percentage of all royalties on sales of covered products at a rate of 0.25% of gross margin until the earlier of (x) such time as covered products are not covered by any claims of any assigned patent, and (y) the date of the consummation of a strategic transaction.
(b) Opti-Harvest will pay to Mr. Booth a percentage of all license consideration received by purchaser on the same terms as payable by us to DisperSolar under the Agreement, except that the percentages of license consideration due to Mr. Booth shall be as follows:
| (a) | 0.4% of all license consideration received by us until the date of consummation of a strategic transaction; | |
| (b) | 0.2% of the first $50 million of the strategic transaction consideration; |
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| (c) | 0.3% of the next $100 million of the strategic transaction consideration (i.e. over $50 million and up to $150 million); and | |
| (d) | 0.4% of strategic transaction consideration over $150 million. |
As of September 30, 2023, the Company recorded no earnout or royalty payment obligations as no gross margin was realized.
Off-Balance Sheet Arrangements
None.
Critical Accounting Policies and Estimates
The preparation of the Company’s financial statements in conformity with generally accepted accounting principles in the United States (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Some of those judgments can be subjective and complex, and therefore, actual results could differ materially from those estimates under different assumptions or conditions. Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken as a whole under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Management regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly. Actual results could differ from those estimates. Significant estimates include those related to assumptions used in estimates for reserves of uncollectible accounts, , depreciable lives of property and equipment, analysis of impairments of recorded long-term tangible and intangible assets, realization of deferred tax assets, accruals for potential liabilities and assumptions made in valuing stock instruments issued for services. There were no changes to our critical accounting policies described in the consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, that impacted our condensed financial statements and related notes included herein.
Recently Issued Accounting Pronouncements
See Note 2 of the Notes to Condensed Financial Statements for a discussion of recent accounting pronouncements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
As a smaller reporting company (as defined in Rule 12b-2 of the Exchange Act), we are not required to provide the information called for by this Item 3.
Item 4. Controls and Procedures.
Evaluation of Disclosure control and Procedures
We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of September 30, 2023, the period covered in this Report, our disclosure controls and procedures were not effective to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the required time periods and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
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Changes in Internal Control Over Financial Reporting
There were no changes in the Company’s internal control over financial reporting during the quarter ended September 30, 2023, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Inherent Limitations on the Effectiveness of Controls
Management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control systems are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in a cost-effective control system, no evaluation of internal control over financial reporting can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been or will be detected.
These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of a simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.
PART II – OTHER INFORMATION
Item 1. Legal Proceedings
We are engaged from time to time in the defense of lawsuits arising out of the ordinary course and conduct of our business. There is no action, suit, proceeding, inquiry, or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our Company or our subsidiary, threatened against our Company, our common stock, our subsidiary or of our Company or our subsidiary’s officers or directors in their capacities as such.
Litigation against Jonathan Destler, our former Chief Executive Officer and former director, and Don Danks, a former director
On September 30, 2022, a Complaint (the “Complaint”), captioned Securities and Exchange Commission vs. David Stephens, Donald Linn Danks, Jonathan Destler and Robert Lazarus, and Daniel Solomita and 8198381 Canada, Inc., as relief defendants, Case No. ‘22CV1483AJB DEB, was filed in the United States District Court, Southern District of California. In general, the Complaint alleges that Jonathan Destler, a co-founder and our former Chairman and Chief Executive Officer, and a current employee, and Donald Danks, a co-founder, former director, and a former employee, were part of a control group that committed securities fraud in connection with the purchase and sale of securities of Loop Industries, Inc., a Nasdaq-listed company.
On November 22, 2022, an Indictment (the “Indictment”), captioned United States of America v. David Stephens, Donald Danks, Jonathan Destler and Robert Lazarus, Case No. ‘22CR2701 BAS, was filed in the United States District Court, Southern District of California. In general, the Indictment alleges that Mr. Destler and Mr. Danks conspired to and committed securities fraud, based on the same allegations in the Complaint. The indictment also alleges that Donald Danks engaged in money laundering.
Furthermore, the Complaint and the Indictment allege that Mr. Destler and Mr. Danks were part of a control group consisting of four other persons (David Stephens, Jonathan Destler, Don Danks and Robert Lazarus) who used a third person to make an unregistered offering of securities. The third person is a deceased former-stockholder of Opti-Harvest, whose Opti-Harvest shares are now held by his estate.
Mr. Destler is currently our key employee with respect to our business development because of his material role marketing selling our products. Additionally, the Voting Trust Agreement with Mr. Destler terminates on the first to occur of (i) final disposition of the proceedings related to the Complaint and the Indictment, or (ii) mutual agreement of Opti-Harvest and Mr. Destler. If Mr. Destler loses his criminal litigation, it is possible that Mr. Destler could be incarcerated, in which case our marketing and sales could suffer because of his inability to communicate with potential new and existing customers. Furthermore, final disposition of the proceedings related to the Complaint and the Indictment could possibly also mean that Mr. Destler would have voting control over us while being incarcerated. In such event, Mr. Destler’s separation from daily business activities could cause him to make voting decisions without the knowledge of our daily operations that he has today.
Item 1A. Risk Factors
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this Item 1A.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
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Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
Item 6. Exhibits
The following exhibits are filed herewith as a part of this report.
| Number | Description | |
| 3.1.1 | Certificate of Incorporation | |
| 3.1.2 | Certificate of Amendment | |
| 3.1.3 | Certificate of Designation | |
| 3.1.4 | Certificate of Amendment | |
| 3.1.5 | First Amendment to Certificate of Designation | |
| 3.1.6 | Certificate of Amendment | |
| 3.2 | Bylaws | |
| 31.1 | Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
| 31.2 | Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
| 32.1* | Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
| 101.INS | Inline XBRL Instance Document | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). |
*This certification is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (Exchange Act), or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act.
| 15 |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
| OPTI-HARVEST, INC. | ||
| Dated: November 20, 2023 | By: | /s/ Geoffrey Andersen |
| Name: | Geoffrey Andersen | |
| Title: | Chief Executive Officer (principal executive officer, principal financial officer and principal accounting officer) | |
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Exhibit 31.1
Certification of Principal Executive Officer
Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934
I, Geoffrey Andersen, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of Opti-Harvest, Inc. |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report. |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Dated: November 20, 2023 | By: | /s/ Geoffrey Andersen |
| Name: | Geoffrey Andersen | |
| Title: | Chief Executive Officer (principal executive officer, principal financial officer and principal accounting officer) |
Exhibit 31.2
Certification of Principal Financial Officer
Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934
I, Geoffrey Andersen, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of Opti-Harvest, Inc. |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Dated: November 20, 2023 | By: | /s/ Geoffrey Andersen |
| Name: | Geoffrey Andersen | |
| Title: | Chief Executive Officer (principal executive officer, principal financial officer and principal accounting officer) |
Exhibit 32.1
Certification of Principal Executive Officer and Principal Financial Officer
Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code
Pursuant to U.S.C. Section 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned Chief Executive Officer of Opti-Harvest, Inc. (the “Company”) does hereby certify, to the best of such officer’s knowledge, that:
| 1. | The Quarterly Report on Form 10-Q of the Company for the quarterly period ended September 30, 2023 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and | |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Dated: November 20, 2023 | By: | /s/ Geoffrey Andersen |
| Name: | Geoffrey Andersen | |
| Title: | Chief Executive Officer (principal executive officer, principal financial officer and principal accounting officer) |
Condensed Balance Sheets (Parenthetical) - USD ($) |
9 Months Ended | |
|---|---|---|
Sep. 30, 2023 |
Dec. 31, 2022 |
|
| Accumulated depreciation | $ 1,444,000 | $ 1,078,000 |
| Debt instrument, unamortized discount, current | 61,000 | 0 |
| Notes payable current | 730,000 | 3,491,000 |
| Loan payable debt discount, current | $ 695,000 | $ 0 |
| Shares at coversion | 2,029,306 | |
| Preferred stock, par value | $ 0.0001 | $ 0.0001 |
| Preferred stock, shares authorized | 1,000,000 | 1,000,000 |
| Common stock, par value | $ 0.0001 | $ 0.0001 |
| Common stock, shares authorized | 100,000,000 | 100,000,000 |
| Common stock, shares issued | 12,419,155 | 11,900,099 |
| Common stock, shares outstanding | 12,419,155 | 11,900,099 |
| Common stock shares issuable | 235,606 | 235,606 |
| Series A Preferred Stock [Member] | ||
| Preferred stock, shares issued | 1 | 1 |
| Preferred stock, shares outstanding | 1 | 1 |
| Related Party [Member] | ||
| Notes payable current | $ 215,000 | $ 215,000 |
| Rental Equipment [Member] | ||
| Accumulated depreciation | $ 83,000 | $ 26,000 |
Condensed Statements of Operations (Unaudited) - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Revenues | ||||
| Total revenues | $ 33,000 | $ 10,000 | $ 80,000 | $ 30,000 |
| Cost of revenues | ||||
| Total cost of revenues | 33,000 | 29,000 | 78,000 | 55,000 |
| Gross profit (loss) | (19,000) | 2,000 | (25,000) | |
| Operating expenses | ||||
| Selling, general and administrative expenses | 1,459,000 | 1,942,000 | 5,338,000 | 6,062,000 |
| Research and development expenses | 214,000 | 491,000 | 784,000 | 1,748,000 |
| Total operating expenses | 1,673,000 | 2,433,000 | 6,122,000 | 7,810,000 |
| Loss from operations | (1,673,000) | (2,452,000) | (6,120,000) | (7,835,000) |
| Other expenses | ||||
| Financing costs | (943,000) | (1,519,000) | (1,554,000) | |
| Loss on extinguishment of debt | (4,310,000) | |||
| Interest expense | (458,000) | (866,000) | (959,000) | (2,589,000) |
| Total other expenses | (458,000) | (1,809,000) | (6,788,000) | (4,143,000) |
| Net loss | $ (2,131,000) | $ (4,261,000) | $ (12,908,000) | $ (11,978,000) |
| Loss per share - basic | $ (0.17) | $ (0.38) | $ (1.07) | $ (1.06) |
| Loss per share - diluted | $ (0.17) | $ (0.38) | $ (1.07) | $ (1.06) |
| Weighted average number of shares outstanding - basic | 12,361,637 | 11,277,434 | 12,112,810 | 11,277,434 |
| Weighted average number of shares outstanding - diluted | 12,361,637 | 11,277,434 | 12,112,810 | 11,277,434 |
| Equipment Rental Revenue [Member] | ||||
| Revenues | ||||
| Total revenues | $ 19,000 | $ 7,000 | $ 57,000 | $ 7,000 |
| Product Sales [Member] | ||||
| Revenues | ||||
| Total revenues | 14,000 | 3,000 | 23,000 | 23,000 |
| Cost of revenues | ||||
| Total cost of revenues | 14,000 | 24,000 | 21,000 | 50,000 |
| Rental Depreciation Cost of Revenues [Member] | ||||
| Cost of revenues | ||||
| Total cost of revenues | $ 19,000 | $ 5,000 | $ 57,000 | $ 5,000 |
Operations and Liquidity |
9 Months Ended |
|---|---|
Sep. 30, 2023 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| Operations and Liquidity | Note 1 – Operations and Liquidity
Opti-Harvest, Inc. (“Opti-Harvest” or “the Company”) is an agricultural innovation company with products backed by a portfolio of patented and patent pending technologies focused on solving several critical challenges faced by agribusinesses: maximizing crop yield, accelerating crop growth, optimizing land and water resources, reducing labor costs and mitigating negative environmental impacts.
Our advanced agriculture technology (Opti-Filter™) and precision farming (Opti-View™) platforms, enable commercial growers and home gardeners to harness, optimize and better utilize sunlight, the planet’s most fundamental and renewable natural resource.
Our sustainable agricultural technology platform is powered by the sun. It maximizes a free and renewable resource with no need for additional chemicals or fertilizers.
Opti-Harvest was formed in the State of Delaware on September 20, 2016. Our principal executive offices are located at 190 N Canon Dr., Suite 304, Beverly Hills, California 90210. Our website address is www.opti-harvest.com.
Effective on February 22, 2023 and September 2, 2023, the Board of Directors and stockholders have approved resolutions authorizing a reverse stock split of the outstanding shares of the Company’s common stock on the basis of shares for every one share of common stock, and one share of common stock for every two shares or common stock, respectively. All shares and per share amounts and information presented herein have been retroactively adjusted to reflect the reverse stock split for all periods presented.
Going Concern
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying financial statements, during the nine months ended September 30, 2023, the Company recorded a net loss of $12,908,000, used cash in operations of $2,343,000, and had a stockholders’ deficit balance of $11,037,000 at September 30, 2023. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date of the financial statements being issued. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to raise additional funds and implement its business plan. As a result, management has concluded that there is substantial doubt about the Company’s ability to continue as a going concern. The Company’s independent registered public accounting firm, in its report on the Company’s consolidated financial statements for the year ended December 31, 2022, has also expressed substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
At September 30, 2023, the Company had cash on hand in the amount of $3,000. Subsequent to September 30, 2023, the Company received proceeds of $350,000 on the sale of promissory notes (see Note 10). The Company believes it has enough cash to sustain operations through December 31, 2023. The continuation of the Company as a going concern is dependent upon its ability to obtain necessary debt or equity financing to continue operations until it begins generating positive cash flow. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing or cause substantial dilution for our stockholders, in case or equity financing.
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Significant Accounting Policies |
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| Significant Accounting Policies | Note 2 – Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Those estimates and assumptions include depreciable lives of rental equipment and property and equipment, impairment testing of recorded long-term tangible assets, the valuation allowance for deferred tax assets, accruals for potential liabilities, assumptions made in valuing stock instruments issued for services, and assumptions used in the determination of the Company’s liquidity.
Inventory
Inventory is stated at the lower of cost or net realizable value, with cost determined on a first-in, first-out (“FIFO”) basis. We regularly review our inventory quantities on hand and record a provision for excess and obsolete inventory based primarily on our estimated forecast of product demand and our ability to sell the product(s) concerned. Demand for our products can fluctuate significantly. Factors that could affect demand for our products include unanticipated changes in consumer preferences, general market conditions or other factors, which may result in cancellations of advance orders or a reduction in the rate of reorders placed by customers. Additionally, our management’s estimates of future product demand may be inaccurate, which could result in an understated or overstated provision required for excess and obsolete inventory. At September 30, 2023 and December 31, 2022, the inventory is fully reserved for slow moving and potentially obsolete inventory.
Rental Equipment
The rental equipment we purchase is stated at cost and is depreciated over the estimated useful life of the equipment using the straight-line method and is included in rental depreciation within the consolidated statements of operations. Estimated useful lives vary based upon type of equipment. Generally, we depreciate our products over a estimated useful life. We periodically evaluate the appropriateness of remaining depreciable lives and any salvage value assigned to rental equipment.
Deferred Offering Costs
Deferred offering costs consist principally of legal, accounting, and underwriters’ fees incurred related to equity financing. These offering costs are deferred and then charged against the gross proceeds received once the equity financing occurs or are charged to expense if the financing does not occur.
Revenue Recognition
The Company recognizes revenue in accordance with two different Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) standards: 1) Topic 606 and 2) Topic 842.
The Company recognizes revenue in accordance with Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers (“ASC 606”). The underlying principle of ASC 606 is to recognize revenue to depict the transfer of goods or services to customers at the amount expected to be collected. ASC 606 creates a five-step model that requires entities to exercise judgment when considering the terms of contract(s), which include (1) identifying the contract or agreement with a customer, (2) identifying our performance obligations in the contract or agreement, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations, and (5) recognizing revenue as each performance obligation is satisfied.
The Company does not have any significant contracts with customers requiring performance beyond delivery, and contracts with customers contain no incentives or discounts that could cause revenue to be allocated or adjusted over time. Shipping and handling activities are performed before the customer obtains control of the goods and therefore represent a fulfillment activity rather than a promised service to the customer. Revenue and costs of sales are recognized when control of the products is transferred to our customer, which generally occurs upon shipment from our facilities. The Company’s performance obligations are satisfied at that time.
All of the Company’s products are offered for sale as finished goods only, and there are no performance obligations required post-shipment for customers to derive the expected value from them.
The Company does not allow for returns, except for damaged products when the damage occurred pre-fulfillment. Damaged product returns have historically been insignificant. Because of this, the stand-alone nature of our products, and our assessment of performance obligations and transaction pricing for our sales contracts, we do not currently maintain a contract asset or liability balance for obligations. We assess our contracts and the reasonableness of our conclusions on a quarterly basis.
Under Topic 842, Leases, the Company accounts for owned equipment rental contracts as operating leases. We recognize revenue from equipment rentals in the period earned, regardless of the timing of billing to customers. A rental contract generally includes rates for monthly use, and rental revenues are earned on a daily basis as rental contracts remain outstanding. Because the rental contracts can extend across multiple reporting periods, we record unbilled rental revenues and deferred rental revenues at the end of reporting periods so rental revenues earned is appropriately stated for the periods presented. The lease terms are included in our contracts, and the determination of whether our contracts contain leases generally does not require significant assumptions or judgments. In some cases, a rental contract may contain a rental purchase option, whereby the customer has an option to purchase the rented equipment at the end of the term for a specified price. Revenues related to the rental contract will be accounted for as an operating lease as the option to purchase is not reasonably certain to be exercised. Lessees do not provide residual value guarantees on rented equipment.
The Company recently began offering rental contracts as an option to its customers under operating leases. The material terms of the Company’s current rental agreements include a rental period duration between twelve to twenty-four (24) months, with an option to extend for an additional twelve to twenty-four (24) months. There are no minimum purchase commitments, and some rental contracts contain an option to purchase the rented equipment at the end of the term for a specified price. The Company currently requires its customers to pay in advance for the full rental period within the first ninety days of the rental contract period.
As of September 30, 2023, future operating lease income and future lease payments to be received from equipment rentals are as follows:
Receivables and contract assets and liabilities
The Company manages credit risk associated with its accounts receivables at the customer level. Because the same customers typically generate the revenues that are accounted for under both Topic 606 and Topic 842, the discussions below on credit risk and our allowances for doubtful accounts address our total revenues from Topic 606 and Topic 842.
The Company does not have material contract assets, impairment losses associated therewith, or material contract liabilities associated with contracts with customers. Our contracts with customers do not generally result in material amounts billed to customers more than recognizable revenue. The Company recognized $57,000 of revenues during the nine months ended September 30, 2023, that was included in the Company’s deferred revenue balance at December 31, 2022.
Basic earnings (loss) per share is computed by dividing the net income (loss) applicable to common stockholders by the weighted average number of shares of common stock outstanding during the period. Diluted earnings (loss) per share is computed by dividing the net income applicable to common stockholders by the weighted average number of common shares outstanding plus the number of additional common shares that would have been outstanding if all dilutive potential common shares had been issued, using the treasury stock method. Potential common shares are excluded from the computation when their effect is antidilutive.
The Company periodically issues stock options to employees and non-employees in non-capital raising transactions for services and for financing costs. The Company accounts for such grants issued and vesting based on ASC 718, Compensation-Stock Compensation whereby the value of the award is measured on the date of grant and recognized for employees as compensation expense on the straight-line basis over the vesting period. The Company recognizes the fair value of stock-based compensation within its Statements of Operations with classification depending on the nature of the services rendered.
The fair value of each option or warrant grant is estimated using the Black-Scholes option-pricing model. As the common shares of the Company were not publicly traded, the Company lacked company-specific historical and implied volatility information. Therefore, it estimated its expected stock volatility based on the historical volatility of a publicly traded set of peer companies within the agriculture technology industry with characteristics similar to the Company. The expected term of the Company’s stock options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options. The expected term of stock options granted to non-employees is equal to the contractual term of the option award. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is zero, based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future.
During the nine months ended September 30, 2023 and 2022, common shares of the Company were not publicly traded. As such, during the period, the Company estimated the fair value of common stock using an appropriate valuation methodology, in accordance with the framework of the American Institute of Certified Public Accountants’ Technical Practice Aid, Valuation of Privately-Held Company Equity Securities Issued as Compensation. Each valuation methodology includes estimates and assumptions that require the Company’s judgment. These estimates and assumptions include a number of objective and subjective factors, including external market conditions, guideline public company information, the prices at which the Company sold its common stock to third parties in arms’ length transactions, the rights and preferences of securities senior to the Company’s common stock at the time, and the likelihood of achieving a liquidity event such as an initial public offering or sale. Significant changes to the assumptions used in the valuations could result in different fair values of stock options at each valuation date, as applicable.
Research and Development
Research and development costs include advisors, consultants, legal, software licensing, product design and development, data monitoring and collection, field trial installations, and travel related expenses. Research and development costs are expensed as incurred. During the nine months ended September 30, 2023 and 2022, research and development costs were approximately $784,000 and $1,748,000, respectively.
Fair Value of Financial Instruments
The Company uses various inputs in determining the fair value of its financial assets and liabilities and measures these assets on a recurring basis. Financial assets recorded at fair value are categorized by the level of subjectivity associated with the inputs used to measure their fair value. ASC 820 defines the following levels of subjectivity associated with the inputs:
Level 1—Quoted prices in active markets for identical assets or liabilities. Level 2—Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly. Level 3—Unobservable inputs based on the Company’s assumptions.
The carrying amounts of financial assets and liabilities, such as cash, accounts receivable, accounts payable and accrued liabilities, and patent purchase obligation approximate their fair values because of the short maturity of these instruments. The carrying values of loan and convertible notes payables approximate their fair values because interest rates on these obligations are based on prevailing market interest rates.
Recent Accounting Pronouncements
In In September 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments. ASU 2016-13 requires entities to use a forward-looking approach based on current expected credit losses (“CECL”) to estimate credit losses on certain types of financial instruments, including trade receivables. This may result in the earlier recognition of allowances for losses. ASU 2016-13 is effective for the Company beginning January 1, 2023, and early adoption is permitted. The impact of the new guidance and related codification improvements did not have a material effect to the Company’s financial position, results of operations and cash flows.
In May 2021, the FASB issued ASU 2021-04 “Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation— Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815- 40) Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options” (“ASU 2021-04”). ASU 2021-04 provides guidance as to how an issuer should account for a modification of the terms or conditions or an exchange of a freestanding equity-classified written call option (i.e., a warrant) that remains equity classified after modification or exchange as an exchange of the original instrument for a new instrument. An issuer should measure the effect of a modification or exchange as the difference between the fair value of the modified or exchanged warrant and the fair value of that warrant immediately before modification or exchange and then apply a recognition model that comprises four categories of transactions and the corresponding accounting treatment for each category (equity issuance, debt origination, debt modification, and modifications unrelated to equity issuance and debt origination or modification). ASU 2021-04 is effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. An entity should apply the guidance provided in ASU 2021-04 prospectively to modifications or exchanges occurring on or after the effective date. The Company adopted ASU 2021-04 effective January 1, 2022. The adoption of ASU 2021-04 did not have any impact on the Company’s financial statement presentation or disclosures.
Other recent accounting pronouncements issued by the FASB, its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present or future financial statements.
Concentration Risks
Cash includes cash on hand and cash in banks and are reported as “Cash” in the balance sheets. The balance of cash on hand is not insured by the Federal Deposit Insurance Corporation. The balance of cash in banks is insured by the Federal Deposit Insurance Corporation for up to $250,000.
Net Sales. The Company performs a regular review of customer activity and associated credit risks and does not require collateral or other arrangements. Two customers accounted for 56%, and 15% of the Company’s sales during the nine months ended September 30, 2023. Three customers accounted for 31%, 14%, and 10% of the Company’s sales during the nine months ended September 30, 2022. No other customers accounted for sales in excess of 10% for the nine months ended September 30, 2023 and 2022.
Accounts payable. As of September 30, 2023, the Company’s had two vendors which comprised 43% and 16% of total accounts payable, respectively. As of December 31, 2022, the Company’s had two vendors which comprised 53% and 13% of total accounts payable, respectively. No other vendors exceeded 10% of gross accounts payable in either period.
Vendors. The Company’s uses two vendors to manufacture its products available for sale, inventory, and our products used in field trials for research and development purposes.
Segment Reporting
The Company operates in one segment for the manufacture and distribution of our products. In accordance with the “Segment Reporting” Topic of the ASC, the Company’s chief operating decision maker has been identified as the Chief Executive Officer and President, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company. Existing guidance, which is based on a management approach to segment reporting, establishes requirements to report selected segment information quarterly and to report annually entity-wide disclosures about products and services, major customers, and the countries in which the entity holds material assets and reports revenue. All material operating units qualify for aggregation under “Segment Reporting” due to their similar customer base and similarities in: economic characteristics; nature of products and services; and procurement, manufacturing and distribution processes. Since the Company operates in one segment, all financial information required by “Segment Reporting” can be found in the accompanying financial statements.
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Rental Equipment |
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| Rental Equipment | Note 3 – Rental Equipment
Rental equipment includes the Company’s Opti-Gro, Opti-Shields, and Opti-Panel product lines which are being leased to customers under operating leases. Rental equipment is comprised of the following:
Depreciation expense for the nine months ended September 30, 2023 and 2022 was $57,000 and $5,000, respectively.
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Property and Equipment |
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| Property and Equipment | Note 4 – Property and Equipment
Property and equipment are comprised of the following:
Depreciation expense for the nine months ended September 30, 2023 and 2022, was $366,000 and $377,000, respectively.
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Convertible Notes Payable |
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| Convertible Notes Payable | Note 5 – Convertible Notes Payable
Convertible notes payable consists of the following at September 30, 2023 and December 31, 2022:
During the year ended December 31, 2021, the Company sold approximately $3,591,000 of Senior Convertible Promissory Notes (the “Notes”) and 2,437,012 warrants (the “Warrants”). The Notes accrue interest at a rate of twelve percent (12%) per annum.
The holder of the Warrants shall have the right to purchase up to the number of shares that equals the quotient obtained by dividing: (i) the Warrant Coverage Amount, by (ii) the Conversion Price. The “Warrant Coverage Amount” shall mean the amount obtained by multiplying: (A) one hundred percent (100%); by (B) aggregate principal amount of the Holder’s Note(s). The conversion price in effect on any Conversion Date shall be equal to 80% of the offering price per share of common stock in our initial public offering.
Each Note is convertible, in the sole discretion of the holder of the Note, into shares of our common stock at a purchase price equal to 80% of the offering price of the initial public offering price currently estimated to be $ per share. In the event that the initial public offering is not consummated within 12 months of the date of this Note, then the Conversion Price shall be equal to 65% of the offering price per share of common stock in the initial public offering. In the event that the initial public offering is not consummated within 24 months of the date of this Note, then the Conversion Price shall be equal to 50% of the offering price per share of common stock in the initial public offering. Each Note, issued at an original issue discount of 15%, carries interest at a rate of 12% per annum, and any interest payable under the Note shall automatically accrue and be capitalized to the principal amount of the Note, and shall thereafter be deemed to be a part of the principal amount of the Note, unless such interest is paid in cash on or prior to the maturity date of the Note.
The Notes mature 12 months from the date of the Notes, provided, however, that noteholders have the right to call the Notes prior to maturity starting from the earlier of (i) the consummation of the first underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, covering the offer and sale by the Company of not less than $10 million of its equity securities, as a result of or following which common stock shall be listed on the Nasdaq Stock Market, and (ii) December 15, 2021. Additionally, each Warrant contains a cashless exercise provision, which is effective if the shares underlying the Warrant are not covered by a registration statement 6 months from the date of issuance of the Warrant. On May 16, 2022, the Company entered into an amendment to extend the right to call provision in its senior secured convertible notes from December 15, 2021 to September 15, 2022, in exchange for issuing its senior convertible note holders an aggregate of shares of common stock with a fair value of approximately $609,000 at the date of grant, or $ per common share. On September 30, 2022, the Company entered into a second amendment to extend the right to call provision in its senior secured convertible notes from September 15, 2022 to December 31, 2022, in exchange for issuing its senior convertible note holders an aggregate of shares of common stock with a fair value of approximately $944,000 at the date of grant, or $ per common share. On December 20, 2022, the Company entered into a third amendment to extend the right to call provision and the maturity date in its senior secured convertible notes from December 31, 2022 to September 30, 2023, in exchange for issuing its senior convertible note holders an aggregate of shares of common stock with a fair value of approximately $944,000 at the date of grant, or $per common share.
The shares of common stock underlying the Notes and the Warrants are subject to registration rights, and such shares must be registered within 90 days after the effectiveness of the Company’s initial public offering. If the Company fails to register the shares within 90 days, the Company agreed to pay a penalty of a cash payment equal to 0.02857% of the principal amount and interest due and owing under any Note held by the Holder or that number shares of common stock of the Company equal 1% of the shares of common stock underlying any Note and Warrant held by the Holder, in total amount per week paid in, whichever is greater.
Each Note and Warrant holder has (i) the right of first refusal to purchase up to 20% of its pro rata share of new securities the that company offers, which right expires upon the consummation of an underwritten initial public offering by the Company or a change in control of the Company, and (ii) the right to be repaid any and all principal and interest due by the Company from any and all proceeds resulting from any sale of assets and any sale and issuance of debt or equity securities.
Total principal balance owed was $3,491,000 at December 31, 2022. During the nine months ended September 30, 2023, the Company converted $3,373,000 of principal and $685,000 of accrued interest into shares of common stock, leaving a remaining principal balance of $118,000 at September 30, 2023. As of September 30, 2023, approximately shares of common stock were potentially issuable under the conversion terms of the Notes.
In September 2023, the Noteholders entered into a conversion agreement (the “Agreement”) with the Company in which the Noteholders elected to convert $3,373,000 of principal, and $685,000 of accrued interest into shares of Common Stock with a fair value of $8,118,000, based upon the fair value of $4.00 per share, resulting in a loss on extinguishment of debt of $4,060,000. The Company further realized an additional $250,000 loss on extinguishment of debt related to the modification of Warrants discussed below, resulting in the recording of an aggregate $4,310,000 loss on extinguishment of debt in the accompanying condensed statement of operations.
The Company also agreed to change the exercise price of the Warrants to 100% of the offering price per share of common stock in our initial public offering and extended the Warrant expiration date to September 30, 2026. The change in warrant terms changed the fair value of the Warrants by $250,000, which was recorded as a component of the loss on the extinguishment of debt in the accompanying condensed statement of operations. The Company is also obligated to issue the Noteholders an aggregate of shares of common stock (the “Signing Premium Shares”) with a fair value of approximately $1,519,000 at date of grant as an inducement to enter into a conversion agreement with the Company. The fair value of the Premium Shares of $1,519,000 was recorded as financing costs during the nine months ended September 30, 2023. As of September 30, 2023, shares of common stock for the Premium Shares were not issued and reflected as common stock issuable in the condensed balance sheet. Per the terms of the Agreement, in the absence of the Company’s initial public offering, the Agreement is effective until July 30, 2023, at which time it shall terminate, and the conversion be reversed. The provision herein would require a reversal of the common shares issues on the conversion which prohibits the presentation of this instrument as part of permanent equity. As such the amounts will be reflected as mezzanine financing in the accompanying condensed balance sheet. The Signing Premium Shares issued under the Agreement remain the property of the Noteholder. On August 20, 2023, the Noteholders extended the termination date of the Agreement to September 1, 2023, and on November 15, 2023, the Noteholders extended the termination date of the Agreement to December 31, 2023.
In January and February 2023, the Company sold $250,000 of Convertible Promissory Notes (the “Notes”) and 21,206 warrants (the “Warrants”). In July 2023, a convertible note holder entered into an exchange agreement wherein a $100,000 Convertible Promissory Note was exchanged for a $100,000 note payable (see Note 6). The remaining $150,000 of Notes accrue interest at a rate of ten percent (10%) per annum. The outstanding principal amount of this Notes, together with all accrued but unpaid interest thereon, shall be due and payable on the date that is 12 months from the date of the Notes (the “Initial Maturity Date”); provided, however, that the Company may, at its option, extend such maturity date an additional six (6) months (such option, the “Extension Option” and such extended maturity date, (the “Extended Maturity Date”). The date on which this Note matures, whether the Initial Maturity Date or the Extended Maturity Date, is the “Maturity Date.” The principal amount of this Note shall be subject to increase as follows:
(a) If a Qualified Public Offering does not occur before the Initial Maturity Date, the outstanding principal balance of this Note shall be increased by an amount equal to 10% of the outstanding principal balance of this Note on the Initial Maturity Date (the “Premium”).
(b) If the Company exercises its Extension Option and a Qualified Public Offering does not occur before the Extended Maturity Date, the outstanding principal balance due and payable to the Lender shall be increased by the Premium plus an additional 2.5% of the outstanding principal balance of the Note as of the Extended Maturity Date.
(c) As used herein, “Qualified Public Offering” means the issuance and sale of shares of comment stock, par value $ per share, of the Company (the “Common Stock”) to investors in an underwritten public offering or a direct listing by the Company of its Common Stock, in either case pursuant to an effective registration statement under the Securities Act of 1933, as amended.
In the event the Company consummates a Qualified Public Offering, Lender shall have the right, but not the obligation, at any time prior to the Maturity Date or earlier repayment of this Note, to convert all, or any portion, of the outstanding principal balance of this Note into shares of Common Stock at a conversion price equal to 80% of the price at which shares of Common Stock are first sold to the public in a Qualified Public Offering. Upon conversion, the Company will pay all accrued but unpaid interest on this Note in cash. An election to convert the Note shall be made in writing and delivered to the Company no later than five (5) days before the Maturity Date; provided, however, that if the Qualified Public Offering is consummated within five (5) days before the Maturity Date, the notice of election will be delivered no later than five (5) days after the date on which such Qualified Public Offering is consummated.
The Holder shall have the right to purchase up to the number of Shares that equals the amount obtained by dividing: (A) eighty percent (80%) of the aggregate principal amount of the Holder’s Note(s) delivered pursuant to the Note and Warrant Purchase Agreement; by (B) 80% of $4.00, the current midpoint price of the Company’s prospective IPO. For example, $100,000 aggregate principal amount of Note x 80% = $80,000) / ($4.00 current midpoint price of prospective IPO x 80% = $3.20) = 25,000 warrants. The exercise price per share shall be equal to 80% of the offering price per share of common stock of the Company in its first underwritten public offering (the “IPO”) pursuant to an effective registration statement under the Securities Act of 1933, as amended, covering the offer and sale by the Company of not less than $10,000,000 of its equity securities, as a result of or following which the Company shall be a reporting issuer under the Securities and Exchange Act of 1934, as amended, and its common stock shall be listed on the Nasdaq Stock Market. This Warrant shall be exercisable, in whole or in part: (i) after the earlier to occur of: (A) the consummation of the IPO; or (B) six months after the date of this Warrant; and (ii) prior to the Warrant expiration date which is twelve months after the date of this Warrant.
The total of the allocated relative fair value of warrants issued of $76,000 were capitalized and recorded as a debt discount and are amortized over the remaining life of the Notes. Amortization of debt discount was approximately $56,000 for the nine months September 30, 2023, which was recorded as a component of interest expense in the accompanying statement of operations, leaving a $20,000 unamortized debt discount balance at September 30, 2023.
During the nine months ended September 30, 2023, the Company added $11,000 of accrued interest, leaving an accrued interest balance of $11,000 at September 30, 2023. Accrued interest in included in accounts payable and accrued expenses in the accompanying balance sheets.
Total principal balance owed was $150,000 at September 30, 2023. As of September 30, 2023, approximately shares of common stock were potentially issuable under the conversion terms of the Notes.
During the nine months ended September 30, 2023, the Company sold $ of Convertible Promissory Notes (the “Notes”). These Notes will accrue interest at a rate of twelve percent (%) per annum, compounded annually, until maturity or conversion hereof. The interest payable hereunder shall automatically accrue and be capitalized to the principal amount of this Note (“PIK Interest”), and shall thereafter be deemed to be a part of the principal amount of this Note, unless such interest is paid in cash on or prior to the maturity date of the Notes. . The Lender shall have the right, but not the obligation, at any time to convert all, or any portion, of the outstanding principal balance of the Notes into shares of Common Stock at a conversion price equal to either (i) $ per share, or (ii) the price at which shares of Common Stock are first sold to the public in a Qualified Public Offering. The Company shall issue shares of common stock of the Company for each $ invested by an Investor, provided, however, that if an Investor invests a sum of funds which does not round to $100,000, the Company shall issue to such Investor Shares on a pro rata basis, based on an issuance of Shares for each $100,000 invested. If the company enters into a subsequent financing with another individual or entity (a “Third Party”) on terms that are more favorable to the Third Party, the agreements between the company and the Investors shall be amended to include such better terms so long as the Notes are outstanding.
The Company issued shares of common stock related to the Note at the date of issuance, which the Company determined had a fair value of $370,000, were capitalized and recorded as a debt discount and are being amortized over the remaining life of the Note. During the nine months ended September 30, 2023, the company recorded $329,000 of amortization expense to interest expense, leaving a unamortized debt discount balance was $41,000 at September 30, 2023.
During the nine months ended September 30, 2023, the Company added $25,000 of accrued interest, leaving an accrued interest balance of $25,000 at September 30, 2023. Accrued interest in included in accounts payable and accrued expenses in the accompanying balance sheets.
Total principal balance owed was $462,000 at September 30, 2023. As of September 30, 2023, approximately shares of common stock were potentially issuable under the conversion terms of the Notes.
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Notes Payable |
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| Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes Payable | Note 6 – Notes Payable
Loan payable consists of the following at September 30, 2023 and December 31, 2022:
On November 20, 2020, the Company financed the purchase of a vehicle for $40,000. The loan term is for 59 months, annual interest rate of 4.49%, with monthly principal and interest payments of $745, and secured by the purchased vehicle. The loan balance was $24,000 at December 31, 2022. During the nine months ended September 30, 2023, the Company made principal payments of $6,000, leaving a loan balance of $18,000 at September 30, 2023, of which $8,000 was recorded as the current portion of loan payable on the accompanying balance sheet.
On January 20, 2022, the Company financed the purchase of a second vehicle for $49,000. The loan term is for 71 months, annual interest rate of 15.54%, with monthly principal and interest payments of $1,066, and secured by the purchased vehicle. The loan balance was $45,000 at December 31, 2022. During the nine months ended September 30, 2023, the Company made principal payments of $5,000, leaving a loan balance of $40,000 at September 30, 2023, of which $5,000 was recorded as the current portion of loan payable on the accompanying balance sheet.
On February 21, 2023, the Company sold $225,000 of Unsecured Promissory Note (the “Note”) to Donald Danks, a former member of the Company’s Board of Directors. The Company received net proceeds of $180,000 after deducting an original issue discount of 20%, or $45,000, which was recorded as a debt discount. The note bears no interest and matures of March 21, 2023 (“Initial Maturity Date”). If a Qualified Public Offering does not occur before the Initial Maturity Date, the outstanding principal amount of this Note, together with all accrued but unpaid interest thereon, shall be paid from funds from any offer and sale of Lender of equity or debt securities whereby Lender obtains gross cash proceeds in an amount not less than Five Hundred Thousand Dollars ($500,000). If a Qualified Public Offering does not occur before the Initial Maturity Date, this Note will accrue interest at a rate of twelve percent (12%) per annum. The Company may prepay the Note, or any portion outstanding, at any time and from time to time prior to Maturity Date without notice and without the payment of any premium, fee, or penalty.
The total of the original issue discount of $ was capitalized and recorded as a debt discount and are amortized over the remaining life of the Note. Amortization of debt discount was $ for the nine months ended September 30, 2023, which was recorded as a component of interest expense in the accompanying condensed statement of operations.
During the nine months ended September 30, 2023, the Company added $16,000 of accrued interest, leaving an accrued interest balance of $16,000 at September 30, 2023. Accrued interest in included in accounts payable and accrued expenses in the accompanying balance sheets.
During the nine months ended September 30, 2023, the Company paid $10,000 towards the principal balance leaving a principal balance of $215,000 at September 30, 2023, which is past due.
During the nine months ended September 30, 2023, the Company sold approximately $1,062,000 of Promissory Notes (the “Note”), and issued a $ Note in exchange of a convertible note (see Note 5), and issued shares of restricted common stock. The outstanding principal amount shall bear interest from the date of the Note at a rate of twelve percent (12%) per annum (the “Interest Rate”). Interest shall automatically accrue and be capitalized to the principal amount of this Note (“PIK Interest”) and shall thereafter be deemed to be a part of the principal amount of this Note, unless such interest is paid in cash on or prior to the maturity date of this Note. This Note shall become due and payable on the earlier of (i) the consummation of the first underwritten public offering (the “IPO”) of Obligor pursuant to an effective registration statement under the Securities Act of 1933, as amended, covering the offer and sale by Obligor of not less than $8,000,000 of its equity securities, as a result of or following which Obligor shall be a reporting issuer under the Securities and Exchange Act of 1934, as amended, and its common stock (the “Common Stock”) shall be listed on the Nasdaq Stock Market, and (ii) twelve months from the funding of the Principal to Obligor.
The Company issued shares of common stock related to the Note, which the Company determined had a fair value of $, were capitalized and recorded as a debt discount, and are being amortized over the remaining life of the Note. During the nine months ended September 30, 2023, the Company amortized $248,000, which was recorded as a component of interest expense in the accompanying condensed statement of operations, leaving a remaining unamortized debt discount balance of $695,000 at September 30, 2023.
Total principal balance owed was $1,162,000 at September 30, 2023.
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Shareholders’ Equity |
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| Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shareholders’ Equity | Note 7 – Shareholders’ Equity
Common Shares Issued on Exercise of Warrants
During the nine months ended September 30, 2023, the Company received proceeds of $114,000 on the exercise of warrants for the purchase of 19,255 shares of common stock, at exercise price of $5.90 per share.
Common Shares Issued as an Inducement for the Conversion of Senior Convertible Notes Payable
During the nine months ended September 30, 2023, the Company was obligated to issue the Noteholders (see Note 5) an aggregate of shares of common stock (the “Signing Premium Shares”) with a fair value of approximately $1,519,000 at date of grant as an inducement to enter into a conversion agreement with the Company. The fair value of the Signing Premium Shares of $1,519,000 was recorded as financing costs during the nine months ended September 30, 2023. As of September 30, 2023, shares of common stock for the Premium Shares were not issued and reflected as common stock issuable in the condensed balance sheet.
Common Shares Issued for Services
The Company enters into various consulting agreements with third parties (“Consultants”) pursuant to which these Consultants provided business development, sales promotion, introduction to new business opportunities, strategic analysis and sales and marketing activities. In addition, the Company issued shares to a director for board service.
During the nine months ended September 30, 2023, the Company issued shares of common stock for services, with a fair value of approximately $706,000 at date of grant.
Common Shares Issued with Notes Payable
During the nine months ended September 30, 2023, the Company issued shares of common stock related to its notes payables, with a fair value of approximately $1,313,000 at date of grant (see Notes 5 and 6).
Summary of Restricted Stock Units
On May 17, 2022, the Company granted an aggregate of restricted stock units (RSU) to its employees and executives pursuant to the Company’s 2022 Stock Incentive Plan, with an aggregate fair value of $, based on the Company’s current private offering price. .
On December 8, 2022, the Company granted its Chief Executive Officer, Geoffrey Andersen, RSU, with a fair value of $, based on the Company’s current private offering price. The RSU was issued per the terms of Mr. Andersen’s employment agreement dated December 8, 2022, and per the Company’s 2022 Stock Incentive Plan. .
At December 31, 2022, of the RSUs granted, and shares of common stock were vested and issued. During the nine months ended September 30, 2023, of unvested RSUs were forfeited, RSUs were issued, of RSUs vested but remain unissued, and included in common stock issuable, leaving of unvested RSUs on September 30, 2023.
As of December 31, 2022, the aggregate amount of unvested compensation related to RSUs was approximately $362,000. During the nine months ended September 30, 2023, the Company recognized $224,000 of compensation expense relating to vested RSUs, net of forfeitures. As of September 30, 2023, the aggregate amount of unvested compensation related to RSUs was approximately $ which will be recognized as an expense as the options vest in future periods through December 2023.
Summary of Warrants
A summary of warrants for the nine months ended September 30, 2023, is as follows:
As of September 30, 2023, both the outstanding and exercisable warrants have an intrinsic value of $. The aggregate intrinsic value was calculated as the difference between the estimated market value of $ per share as of September 30, 2023, and the exercise price of the outstanding warrants.
During the nine months ended September 30, 2023, the Company’s extended the expiration date from September 30, 2023 to December 31, 2023 for 594,242 warrants with an exercise price of $8.84 per share, which were issued with the private sale of its common stock in 2019 to 2021.
During the nine months ended September 30, 2023 and 2022, the Company recognized $and $ of compensation expense relating to vested warrants, respectively. As of September 30, 2023, unvested compensation related to these warrants remained.
Warrants Issued with Convertible Notes Payable
In January and February 2023, the Company sold approximately $250,000 of Convertible Promissory Notes and 21,206 warrants (see Note 5). Each Warrant is exercisable at a price equal to 80%, or $3.20, of our initial public offering price, currently anticipated to be $ per share. The aggregate fair value of the warrants was determined to be $76,000, which was determined using a Black-Scholes-Merton option pricing model with the following average assumption: fair value of our stock price of $ per share based on recent prospectus, expected term of one year, volatility of%, dividend rate of%, and weighted average risk-free interest rate of%.
Summary of Options
During the nine months ended September 30, 2023 and 2022, the Company recognized $ and $ of compensation expense relating to vested stock options, respectively. As of September 30, 2023, the aggregate amount of unvested compensation related to stock options was approximately $ will be recognized as an expense as the options vest in future periods through May 2025.
As of September 30, 2023, the outstanding and exercisable options have intrinsic value. The aggregate intrinsic value was calculated as the difference between the estimated market value of $per share as of September 30, 2023, and the exercise price of the outstanding options.
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Commitment and Contingencies |
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| Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||
| Commitment and Contingencies | Note 8 – Commitment and Contingencies
We are engaged from time to time in the defense of lawsuits arising out of the ordinary course and conduct of our business. There is no action, suit, proceeding, inquiry, or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our Company or our subsidiary, threatened against our Company, our common stock, our subsidiary or of our Company or our subsidiary’s officers or directors in their capacities as such.
Litigation against Jonathan Destler, our former Chief Executive Officer and former director, and Don Danks, a former director
On September 30, 2022, a Complaint (the “Complaint”), captioned Securities and Exchange Commission vs. David Stephens, Donald Linn Danks, Jonathan Destler and Robert Lazarus, and Daniel Solomita and 8198381 Canada, Inc., as relief defendants, Case No. ‘22CV1483AJB DEB, was filed in the United States District Court, Southern District of California. In general, the Complaint alleges that Jonathan Destler, a co-founder and our former Chairman and Chief Executive Officer, and a current employee, and Donald Danks, a co-founder, former director, and a former employee, were part of a control group that committed securities fraud in connection with the purchase and sale of securities of Loop Industries, Inc., a Nasdaq-listed company.
On November 22, 2022, an Indictment (the “Indictment”), captioned United States of America v. David Stephens, Donald Danks, Jonathan Destler and Robert Lazarus, Case No. ‘22CR2701 BAS, was filed in the United States District Court, Southern District of California. In general, the Indictment alleges that Mr. Destler and Mr. Danks conspired to and committed securities fraud, based on the same allegations in the Complaint. The indictment also alleges that Donald Danks engaged in money laundering.
Furthermore, the Complaint and the Indictment allege that Mr. Destler and Mr. Danks were part of a control group consisting of four other persons (David Stephens, Jonathan Destler, Don Danks and Robert Lazarus) who used a third person to make an unregistered offering of securities. The third person is a deceased former-stockholder of Opti-Harvest, whose Opti-Harvest shares are now held by his estate.
Mr. Destler is currently our key employee with respect to our business development because of his material role marketing selling our products. Additionally, the Voting Trust Agreement with Mr. Destler terminates on the first to occur of (i) final disposition of the proceedings related to the Complaint and the Indictment, or (ii) mutual agreement of Opti-Harvest and Mr. Destler. If Mr. Destler loses his criminal litigation, it is possible that Mr. Destler could be incarcerated, in which case our marketing and sales could suffer because of his inability to communicate with potential new and existing customers. Furthermore, final disposition of the proceedings related to the Complaint and the Indictment could possibly also mean that Mr. Destler would have voting control over us while being incarcerated. In such event, Mr. Destler’s separation from daily business activities could cause him to make voting decisions without the knowledge of our daily operations that he has today.
Transfer of Voting Control of Mr. Destler’s Opti-Harvest Shares to Opti-Harvest
Although Mr. Destler (and Mr. Danks, who on January 9, 2023, resigned as an employee of Opti-Harvest) have denied to Opti-Harvest the claims made against them in the Complaint and the Indictment, Mr. Destler agreed to resign his positions as a director, Chief Executive Officer, President and Secretary with Opti-Harvest, and transfer voting control (while retaining ownership) of his shares of common stock and Series A Preferred Stock, to the board of directors of Opti-Harvest. Accordingly, Jeffrey Klausner, Opti-Harvest’s, sole director is the sole trustee of a Voting Trust Agreement, dated December 23, 2022, by and among Opti-Harvest, Inc., Mr. Destler, entities Mr. Destler controls, Mr. Destler’s spouse, and Mr. Klausner, pursuant to which Mr. Klausner, on behalf of Opti-Harvest, votes Mr. Destler’s shares of common stock and Series A Preferred Stock.
It should be noted that the term “Trust” in the title “Voting Trust Agreement” is used for naming convention only, and no trust, as an entity, has been created in connection with the Voting Trust Agreement. Accordingly, Mr. Klausner, as the trustee under the Voting Trust, does not owe any fiduciary duty to Mr. Destler, his affiliated entities, or his spouse, under the Voting Trust Agreement. Mr. Klausner’s sole duty under the Voting Trust Agreement is to vote Mr. Destler’s beneficial ownership in Opti-Harvest securities.
Under the Voting Trust Agreement, Mr. Destler had agreed and consented to the appointment of any member of our board of directors to be appointed a trustee under the Voting Trust Agreement. Therefore, future members of our board of directors may become a trustee under the Voting Trust Agreement. Whether any future member of our board of directors may become a trustee under the Voting Trust Agreement would depend on whether any such new director would want to and agree to becoming a trustee under the Voting Trust Agreement.
The Voting Trust Agreement terminates on the first to occur of (i) final disposition of the proceedings related to the Complaint and the Indictment, or (ii) mutual agreement of Opti-Harvest and Mr. Destler.
Advisory Agreements
During the years ended December 31, 2022 and 2021, the Company entered into various advisory agreements in connection with transactions in which the Company, directly or indirectly through one or more affiliates, raises debt capital or receives a loan from one or more investors identified. The advisory agreements generally expire on the date specified by either the advisory firm or the Company, and with 30 days’ notice of termination. The Company agreed to pay up to six percent (6%) of the capital raised if the funding is in the form of debt, equity, mezzanine structure or subordinated debt structure or any other type of transaction. As of September 30, 2023, no transaction has occurred related to the advisor agreements.
DisperSolar LLC (Related Party)
On April 7, 2017 (as amended on December 6, 2018), the Company and DisperSolar LLC (the “Seller”), a California limited liability company, entered into a Patent Purchase Agreement (the “Agreement”) pursuant to which the Company acquired certain patents (intellectual property) of the Seller. The Seller developed the patents for harvesting, transmission, spectral modification and delivery of sunlight to shaded areas of plants. Per the Agreement, the Company was obligated to pay milestone payments, earnout payments, and royalties.
Earnout Payments
The Company is obligated to pay total earnout payments of $800,000 payable on the on-going basis at a rate of 50% of gross margin and/or license revenue from the date of the first commercial sale of a covered product or the first receipt by the Company of license revenue, until the aggregate combined gross margin and license revenue reach $1.6 million.
Royalties
The Company will pay to Seller royalties as follows:
As of September 30, 2023, the Company recorded no earnout or royalties payment obligations as no gross margin was realized.
Strategic Transaction
The Company will pay to Seller 7.6% of all license consideration received by the Company until the date of the consummation of a Strategic Transaction. “Strategic Transaction” means a transaction or a series of related transactions that results in an acquisition of the Company by a third party, including by way of merger, purchase of capital stock or purchase of assets or change of control or otherwise.
Strategic Transaction Consideration. “Strategic Transaction Consideration” means any cash consideration and the fair market value of any non-cash consideration paid to the Company by any acquirer as consideration for the Strategic Transaction, less the costs and expenses incurred by the Company for the purpose of consummating the Strategic Transaction. The Company will pay to Seller a percentage of all license consideration received by the Company as follows:
Inventor Royalty (Related Party)
On July 5, 2019, the Company and Nicholas Booth (“Mr. Booth”) entered into a Royalty Agreement. Mr. Booth is a member of Dispersolar, LLC and a named inventor of the acquired patents from Dispersolar, LLC discussed above. Effective July 1, 2021, Mr. Booth was employed by the Company as its Chief Technology Officer.
The Company will pay Mr. Booth a percentage of all License Consideration received by the Company as follows:
(a) Once the Company has paid to DisperSolar an aggregate amount in royalties of $30 million under the Agreement, the Company will pay to Booth a percentage of all royalties on sales of Covered Products at a rate of 0.25% of Gross Margin until the earlier of (x) such time as Covered Products are not covered by any claims of any Assigned Patent, and (y) the date of the consummation of a Strategic Transaction.
(b) Opti-Harvest will pay to Booth a percentage of all License Consideration received by the Company on the same terms as payable by the Company to DisperSolar under the Agreement, except that the percentages of License Consideration due to Booth shall be as follows:
As of September 30, 2023, no amounts were due for earnouts or royalties.
Both Yosepha Shahak Ravid and Nicholas Booth are members of the Seller, and are named inventors of the acquired patents from the Seller, discussed above. Effective July 1, 2021, Ms. Shahak Ravid, our Chief Science Officer, and Mr. Booth, our Chief Technology Officer, were employed by the Company.
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Related Party Transactions |
9 Months Ended |
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Sep. 30, 2023 | |
| Related Party Transactions [Abstract] | |
| Related Party Transactions | Note 9 – Related Party Transactions
As discussed in Note 8, Mr. Destler agreed to transfer voting control (while retaining ownership) of his shares of common stock and Series A Preferred Stock, to the board of directors of Opti-Harvest. Accordingly, Jeffrey Klausner, Opti-Harvest’s, sole director is the sole trustee of a Voting Trust Agreement, dated December 23, 2022, by and among Opti-Harvest, Inc., Mr. Destler, entities Mr. Destler controls, Mr. Destler’s spouse, and Mr. Klausner, pursuant to which Mr. Klausner, on behalf of Opti-Harvest, votes Mr. Destler’s shares of common stock and Series A Preferred Stock. On January 9, 2023, the Company issued Mr. Klausner shares of common stock, with an estimated fair value of $200,000, as consideration for agreeing to act as the trustee for a term of one year under the Voting Trust Agreement.
On March 31, 2023, Mr. Destler paid a Company vendor $5,000. The $5,000 advance is non-interest bearing and due on demand, and remains outstanding at September 30, 2023.
On April 5, 2023, Mr. Destler advanced the Company $20,000. The $20,000 advance is non-interest bearing and due on demand, and remains outstanding at September 30, 2023.
On July 20, 2023, Geoff Andersen, the Company’s CEO, advanced the Company $10,000. The $10,000 advance is non-interest bearing and due on demand, and remains outstanding at September 30, 2023.
On September 19, 2023, Donald Danks, a former director of the Company, advanced the Company $40,000. The $40,000 advance is non-interest bearing and due on demand, and remains outstanding at September 30, 2023.
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Subsequent Events |
9 Months Ended |
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Sep. 30, 2023 | |
| Subsequent Events [Abstract] | |
| Subsequent Events | Note 10 – Subsequent Events
The Company has evaluated subsequent events occurring from October 1, 2023, through the date of this filing.
Promissory Notes and Restricted Shares
Subsequent to September 30, 2023, the Company sold approximately $350,000 of Promissory Notes and issued shares of restricted common stock. The Promissory Notes and Restricted Shares were issued on the same terms and conditions as described in Note 6.
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Significant Accounting Policies (Policies) |
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| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Use of Estimates | Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Those estimates and assumptions include depreciable lives of rental equipment and property and equipment, impairment testing of recorded long-term tangible assets, the valuation allowance for deferred tax assets, accruals for potential liabilities, assumptions made in valuing stock instruments issued for services, and assumptions used in the determination of the Company’s liquidity.
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| Inventory | Inventory
Inventory is stated at the lower of cost or net realizable value, with cost determined on a first-in, first-out (“FIFO”) basis. We regularly review our inventory quantities on hand and record a provision for excess and obsolete inventory based primarily on our estimated forecast of product demand and our ability to sell the product(s) concerned. Demand for our products can fluctuate significantly. Factors that could affect demand for our products include unanticipated changes in consumer preferences, general market conditions or other factors, which may result in cancellations of advance orders or a reduction in the rate of reorders placed by customers. Additionally, our management’s estimates of future product demand may be inaccurate, which could result in an understated or overstated provision required for excess and obsolete inventory. At September 30, 2023 and December 31, 2022, the inventory is fully reserved for slow moving and potentially obsolete inventory.
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| Rental Equipment | Rental Equipment
The rental equipment we purchase is stated at cost and is depreciated over the estimated useful life of the equipment using the straight-line method and is included in rental depreciation within the consolidated statements of operations. Estimated useful lives vary based upon type of equipment. Generally, we depreciate our products over a estimated useful life. We periodically evaluate the appropriateness of remaining depreciable lives and any salvage value assigned to rental equipment.
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| Deferred Offering Costs | Deferred Offering Costs
Deferred offering costs consist principally of legal, accounting, and underwriters’ fees incurred related to equity financing. These offering costs are deferred and then charged against the gross proceeds received once the equity financing occurs or are charged to expense if the financing does not occur.
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| Revenue Recognition | Revenue Recognition
The Company recognizes revenue in accordance with two different Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) standards: 1) Topic 606 and 2) Topic 842.
The Company recognizes revenue in accordance with Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers (“ASC 606”). The underlying principle of ASC 606 is to recognize revenue to depict the transfer of goods or services to customers at the amount expected to be collected. ASC 606 creates a five-step model that requires entities to exercise judgment when considering the terms of contract(s), which include (1) identifying the contract or agreement with a customer, (2) identifying our performance obligations in the contract or agreement, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations, and (5) recognizing revenue as each performance obligation is satisfied.
The Company does not have any significant contracts with customers requiring performance beyond delivery, and contracts with customers contain no incentives or discounts that could cause revenue to be allocated or adjusted over time. Shipping and handling activities are performed before the customer obtains control of the goods and therefore represent a fulfillment activity rather than a promised service to the customer. Revenue and costs of sales are recognized when control of the products is transferred to our customer, which generally occurs upon shipment from our facilities. The Company’s performance obligations are satisfied at that time.
All of the Company’s products are offered for sale as finished goods only, and there are no performance obligations required post-shipment for customers to derive the expected value from them.
The Company does not allow for returns, except for damaged products when the damage occurred pre-fulfillment. Damaged product returns have historically been insignificant. Because of this, the stand-alone nature of our products, and our assessment of performance obligations and transaction pricing for our sales contracts, we do not currently maintain a contract asset or liability balance for obligations. We assess our contracts and the reasonableness of our conclusions on a quarterly basis.
Under Topic 842, Leases, the Company accounts for owned equipment rental contracts as operating leases. We recognize revenue from equipment rentals in the period earned, regardless of the timing of billing to customers. A rental contract generally includes rates for monthly use, and rental revenues are earned on a daily basis as rental contracts remain outstanding. Because the rental contracts can extend across multiple reporting periods, we record unbilled rental revenues and deferred rental revenues at the end of reporting periods so rental revenues earned is appropriately stated for the periods presented. The lease terms are included in our contracts, and the determination of whether our contracts contain leases generally does not require significant assumptions or judgments. In some cases, a rental contract may contain a rental purchase option, whereby the customer has an option to purchase the rented equipment at the end of the term for a specified price. Revenues related to the rental contract will be accounted for as an operating lease as the option to purchase is not reasonably certain to be exercised. Lessees do not provide residual value guarantees on rented equipment.
The Company recently began offering rental contracts as an option to its customers under operating leases. The material terms of the Company’s current rental agreements include a rental period duration between twelve to twenty-four (24) months, with an option to extend for an additional twelve to twenty-four (24) months. There are no minimum purchase commitments, and some rental contracts contain an option to purchase the rented equipment at the end of the term for a specified price. The Company currently requires its customers to pay in advance for the full rental period within the first ninety days of the rental contract period.
As of September 30, 2023, future operating lease income and future lease payments to be received from equipment rentals are as follows:
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| Receivables and contract assets and liabilities | Receivables and contract assets and liabilities
The Company manages credit risk associated with its accounts receivables at the customer level. Because the same customers typically generate the revenues that are accounted for under both Topic 606 and Topic 842, the discussions below on credit risk and our allowances for doubtful accounts address our total revenues from Topic 606 and Topic 842.
The Company does not have material contract assets, impairment losses associated therewith, or material contract liabilities associated with contracts with customers. Our contracts with customers do not generally result in material amounts billed to customers more than recognizable revenue. The Company recognized $57,000 of revenues during the nine months ended September 30, 2023, that was included in the Company’s deferred revenue balance at December 31, 2022.
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| Loss per Common Share |
Basic earnings (loss) per share is computed by dividing the net income (loss) applicable to common stockholders by the weighted average number of shares of common stock outstanding during the period. Diluted earnings (loss) per share is computed by dividing the net income applicable to common stockholders by the weighted average number of common shares outstanding plus the number of additional common shares that would have been outstanding if all dilutive potential common shares had been issued, using the treasury stock method. Potential common shares are excluded from the computation when their effect is antidilutive.
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| Stock Compensation Expense |
The Company periodically issues stock options to employees and non-employees in non-capital raising transactions for services and for financing costs. The Company accounts for such grants issued and vesting based on ASC 718, Compensation-Stock Compensation whereby the value of the award is measured on the date of grant and recognized for employees as compensation expense on the straight-line basis over the vesting period. The Company recognizes the fair value of stock-based compensation within its Statements of Operations with classification depending on the nature of the services rendered.
The fair value of each option or warrant grant is estimated using the Black-Scholes option-pricing model. As the common shares of the Company were not publicly traded, the Company lacked company-specific historical and implied volatility information. Therefore, it estimated its expected stock volatility based on the historical volatility of a publicly traded set of peer companies within the agriculture technology industry with characteristics similar to the Company. The expected term of the Company’s stock options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options. The expected term of stock options granted to non-employees is equal to the contractual term of the option award. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is zero, based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future.
During the nine months ended September 30, 2023 and 2022, common shares of the Company were not publicly traded. As such, during the period, the Company estimated the fair value of common stock using an appropriate valuation methodology, in accordance with the framework of the American Institute of Certified Public Accountants’ Technical Practice Aid, Valuation of Privately-Held Company Equity Securities Issued as Compensation. Each valuation methodology includes estimates and assumptions that require the Company’s judgment. These estimates and assumptions include a number of objective and subjective factors, including external market conditions, guideline public company information, the prices at which the Company sold its common stock to third parties in arms’ length transactions, the rights and preferences of securities senior to the Company’s common stock at the time, and the likelihood of achieving a liquidity event such as an initial public offering or sale. Significant changes to the assumptions used in the valuations could result in different fair values of stock options at each valuation date, as applicable.
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| Research and Development | Research and Development
Research and development costs include advisors, consultants, legal, software licensing, product design and development, data monitoring and collection, field trial installations, and travel related expenses. Research and development costs are expensed as incurred. During the nine months ended September 30, 2023 and 2022, research and development costs were approximately $784,000 and $1,748,000, respectively.
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| Fair Value of Financial Instruments | Fair Value of Financial Instruments
The Company uses various inputs in determining the fair value of its financial assets and liabilities and measures these assets on a recurring basis. Financial assets recorded at fair value are categorized by the level of subjectivity associated with the inputs used to measure their fair value. ASC 820 defines the following levels of subjectivity associated with the inputs:
Level 1—Quoted prices in active markets for identical assets or liabilities. Level 2—Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly. Level 3—Unobservable inputs based on the Company’s assumptions.
The carrying amounts of financial assets and liabilities, such as cash, accounts receivable, accounts payable and accrued liabilities, and patent purchase obligation approximate their fair values because of the short maturity of these instruments. The carrying values of loan and convertible notes payables approximate their fair values because interest rates on these obligations are based on prevailing market interest rates.
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| Recent Accounting Pronouncements | Recent Accounting Pronouncements
In In September 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments. ASU 2016-13 requires entities to use a forward-looking approach based on current expected credit losses (“CECL”) to estimate credit losses on certain types of financial instruments, including trade receivables. This may result in the earlier recognition of allowances for losses. ASU 2016-13 is effective for the Company beginning January 1, 2023, and early adoption is permitted. The impact of the new guidance and related codification improvements did not have a material effect to the Company’s financial position, results of operations and cash flows.
In May 2021, the FASB issued ASU 2021-04 “Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation— Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815- 40) Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options” (“ASU 2021-04”). ASU 2021-04 provides guidance as to how an issuer should account for a modification of the terms or conditions or an exchange of a freestanding equity-classified written call option (i.e., a warrant) that remains equity classified after modification or exchange as an exchange of the original instrument for a new instrument. An issuer should measure the effect of a modification or exchange as the difference between the fair value of the modified or exchanged warrant and the fair value of that warrant immediately before modification or exchange and then apply a recognition model that comprises four categories of transactions and the corresponding accounting treatment for each category (equity issuance, debt origination, debt modification, and modifications unrelated to equity issuance and debt origination or modification). ASU 2021-04 is effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. An entity should apply the guidance provided in ASU 2021-04 prospectively to modifications or exchanges occurring on or after the effective date. The Company adopted ASU 2021-04 effective January 1, 2022. The adoption of ASU 2021-04 did not have any impact on the Company’s financial statement presentation or disclosures.
Other recent accounting pronouncements issued by the FASB, its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present or future financial statements.
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| Concentration Risks | Concentration Risks
Cash includes cash on hand and cash in banks and are reported as “Cash” in the balance sheets. The balance of cash on hand is not insured by the Federal Deposit Insurance Corporation. The balance of cash in banks is insured by the Federal Deposit Insurance Corporation for up to $250,000.
Net Sales. The Company performs a regular review of customer activity and associated credit risks and does not require collateral or other arrangements. Two customers accounted for 56%, and 15% of the Company’s sales during the nine months ended September 30, 2023. Three customers accounted for 31%, 14%, and 10% of the Company’s sales during the nine months ended September 30, 2022. No other customers accounted for sales in excess of 10% for the nine months ended September 30, 2023 and 2022.
Accounts payable. As of September 30, 2023, the Company’s had two vendors which comprised 43% and 16% of total accounts payable, respectively. As of December 31, 2022, the Company’s had two vendors which comprised 53% and 13% of total accounts payable, respectively. No other vendors exceeded 10% of gross accounts payable in either period.
Vendors. The Company’s uses two vendors to manufacture its products available for sale, inventory, and our products used in field trials for research and development purposes.
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| Segment Reporting | Segment Reporting
The Company operates in one segment for the manufacture and distribution of our products. In accordance with the “Segment Reporting” Topic of the ASC, the Company’s chief operating decision maker has been identified as the Chief Executive Officer and President, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company. Existing guidance, which is based on a management approach to segment reporting, establishes requirements to report selected segment information quarterly and to report annually entity-wide disclosures about products and services, major customers, and the countries in which the entity holds material assets and reports revenue. All material operating units qualify for aggregation under “Segment Reporting” due to their similar customer base and similarities in: economic characteristics; nature of products and services; and procurement, manufacturing and distribution processes. Since the Company operates in one segment, all financial information required by “Segment Reporting” can be found in the accompanying financial statements.
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Significant Accounting Policies (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Future Operating Lease Income and Future Lease Payments | As of September 30, 2023, future operating lease income and future lease payments to be received from equipment rentals are as follows:
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| Schedule of Anti-Dilutive Securities of Earning Per Share |
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Rental Equipment (Tables) |
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Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||
| Rental Equipment | |||||||||||||||||||||||||||||||||||||
| Schedule of Rental Equipment | Rental equipment includes the Company’s Opti-Gro, Opti-Shields, and Opti-Panel product lines which are being leased to customers under operating leases. Rental equipment is comprised of the following:
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Property and Equipment (Tables) |
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Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Property, Plant and Equipment [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Property and Equipment | Property and equipment are comprised of the following:
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Convertible Notes Payable (Tables) |
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Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Convertible Notes Payable | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Convertible Notes Payable | Convertible notes payable consists of the following at September 30, 2023 and December 31, 2022:
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Notes Payable (Tables) |
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| Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Loans Payable | Loan payable consists of the following at September 30, 2023 and December 31, 2022:
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Shareholders’ Equity (Tables) |
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Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of Warrants | A summary of warrants for the nine months ended September 30, 2023, is as follows:
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| Summary of Outstanding Warrants Exercise Price |
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| Summary of Options |
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| Summary of Outstanding Options Exercise Price |
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Operations and Liquidity (Details Narrative) - USD ($) |
3 Months Ended | 9 Months Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 02, 2023 |
Feb. 22, 2023 |
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
Nov. 20, 2023 |
Jun. 30, 2023 |
Dec. 31, 2022 |
Jun. 30, 2022 |
Dec. 31, 2021 |
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| Subsequent Event [Line Items] | |||||||||||
| Stock issued during period, shares, reverse stock splits | 0.6786 | 0.6786 | |||||||||
| Net loss | $ 2,131,000 | $ 4,261,000 | $ 12,908,000 | $ 11,978,000 | |||||||
| Net cash provided by operating activities | 2,343,000 | 3,615,000 | |||||||||
| Stockholders' equity | 11,037,000 | $ 2,510,000 | 11,037,000 | $ 2,510,000 | $ 10,070,000 | $ 4,464,000 | $ 1,828,000 | $ (1,157,000) | |||
| Cash | 3,000 | 3,000 | 172,000 | ||||||||
| Notes payable | $ 740,000 | $ 740,000 | $ 69,000 | ||||||||
| Subsequent Event [Member] | |||||||||||
| Subsequent Event [Line Items] | |||||||||||
| Notes payable | $ 350,000 | ||||||||||
Schedule of Future Operating Lease Income and Future Lease Payments (Details) |
Sep. 30, 2023
USD ($)
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|---|---|
| Lessor, Operating Lease, Payment to be Received, Fiscal Year Maturity [Abstract] | |
| Future Operating Lease Income, 2023 | $ 14,000 |
| Future Operating Lease Income, 2024 | 33,000 |
| Total Future Operating Lease Income | 47,000 |
| Lessee, Operating Lease, Liability, to be Paid, Fiscal Year Maturity [Abstract] | |
| Future Lease Payments, 2023 | |
| Future Lease Payments, 2024 | |
| Total Future Lease Payments |
Schedule of Rental Equipment (Details) - USD ($) |
Sep. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Rental Equipment | ||
| Rental equipment | $ 130,000 | $ 130,000 |
| Accumulated depreciation | (83,000) | (26,000) |
| Net book value | $ 47,000 | $ 104,000 |
Rental Equipment (Details Narrative) - USD ($) |
9 Months Ended | |
|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
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| Rental Equipment | ||
| Depreciation of rental equipment | $ 57,000 | $ 5,000 |
Schedule of Property and Equipment (Details) - USD ($) |
Sep. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Property, Plant and Equipment [Line Items] | ||
| Total cost | $ 2,111,000 | $ 2,111,000 |
| Accumulated depreciation | (1,444,000) | (1,078,000) |
| Net book value | 667,000 | 1,033,000 |
| Tools, Dies and Molds [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Total cost | 1,990,000 | 1,990,000 |
| Computer Equipment [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Total cost | 8,000 | 8,000 |
| Vehicles [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Total cost | $ 113,000 | $ 113,000 |
Property and Equipment (Details Narrative) - USD ($) |
9 Months Ended | |
|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
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| Property, Plant and Equipment [Abstract] | ||
| Depreciation | $ 366,000 | $ 377,000 |
Schedule of Convertible Notes Payable (Details) - USD ($) |
Sep. 30, 2023 |
Jul. 31, 2023 |
Jan. 31, 2023 |
Dec. 31, 2022 |
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| Convertible Notes Payable | ||||||||||
| Senior Convertible Notes and Warrants | [1] | $ 118,000 | $ 3,491,000 | |||||||
| Convertible Notes and Warrants | [2] | 150,000 | ||||||||
| Convertible Note and Restricted Shares | [3] | 462,000 | ||||||||
| Total notes payable | 730,000 | $ 100,000 | 3,491,000 | |||||||
| Less debt discount | (61,000) | 0 | ||||||||
| Notes payable, net of discount | $ 669,000 | $ 100,000 | $ 100,000 | $ 3,491,000 | ||||||
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Schedule of Convertible Notes Payable (Details) (Parenthetical) |
1 Months Ended | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
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Dec. 20, 2022
USD ($)
$ / shares
shares
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Sep. 30, 2022
USD ($)
$ / shares
shares
|
May 16, 2022
USD ($)
$ / shares
shares
|
Sep. 30, 2023
USD ($)
$ / shares
shares
|
Jul. 31, 2023
USD ($)
|
Feb. 28, 2023
USD ($)
$ / shares
shares
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Jan. 31, 2023
USD ($)
$ / shares
shares
|
Sep. 30, 2023
USD ($)
$ / shares
shares
|
Sep. 30, 2022
USD ($)
$ / shares
shares
|
Sep. 30, 2023
USD ($)
$ / shares
shares
|
Sep. 30, 2022
USD ($)
$ / shares
shares
|
Dec. 31, 2022
USD ($)
$ / shares
|
Dec. 31, 2021
USD ($)
$ / shares
shares
|
|
| Number of warrant issued | shares | 21,206 | 21,206 | |||||||||||
| Percentage of common stock purchase price | 80.00% | ||||||||||||
| Share price | $ / shares | $ 4.00 | $ 4.00 | $ 4.00 | ||||||||||
| Debt instrument redemption price percentage | 15.00% | ||||||||||||
| Debt, weighted average interest rate | 12.00% | ||||||||||||
| Long-term debt, term | 12 months | ||||||||||||
| Gain loss on equity securities | $ 8,000,000 | $ 10,000,000 | |||||||||||
| Shares of investors | $ 1,425,000 | $ 1,620,000 | |||||||||||
| Warrants description | The shares of common stock underlying the Notes and the Warrants are subject to registration rights, and such shares must be registered within 90 days after the effectiveness of the Company’s initial public offering. If the Company fails to register the shares within 90 days, the Company agreed to pay a penalty of a cash payment equal to 0.02857% of the principal amount and interest due and owing under any Note held by the Holder or that number shares of common stock of the Company equal 1% of the shares of common stock underlying any Note and Warrant held by the Holder, in total amount per week paid in, whichever is greater | ||||||||||||
| Percentage of prorata securities | 20.00% | ||||||||||||
| Loss on extinguishment of debt | $ 4,310,000 | ||||||||||||
| Sale of convertible promissory notes | $ 250,000 | $ 250,000 | |||||||||||
| Convertible promissory note | $ 669,000 | $ 100,000 | $ 100,000 | 669,000 | 669,000 | $ 3,491,000 | |||||||
| Note payable | $ 730,000 | 100,000 | $ 730,000 | $ 730,000 | $ 3,491,000 | ||||||||
| Notes accrued interest | $ 150,000 | ||||||||||||
| Common stock, par value | $ / shares | $ 0.0001 | $ 0.0001 | $ 0.0001 | $ 0.0001 | |||||||||
| Debt conversion price | 80.00% | 80.00% | |||||||||||
| Holders rights description | The Holder shall have the right to purchase up to the number of Shares that equals the amount obtained by dividing: (A) eighty percent (80%) of the aggregate principal amount of the Holder’s Note(s) delivered pursuant to the Note and Warrant Purchase Agreement; by (B) 80% of $4.00, the current midpoint price of the Company’s prospective IPO. For example, $100,000 aggregate principal amount of Note x 80% = $80,000) / ($4.00 current midpoint price of prospective IPO x 80% = $3.20) = 25,000 warrants. The exercise price per share shall be equal to 80% of the offering price per share of common stock of the Company in its first underwritten public offering (the “IPO”) pursuant to an effective registration statement under the Securities Act of 1933, as amended, covering the offer and sale by the Company of not less than $10,000,000 of its equity securities, as a result of or following which the Company shall be a reporting issuer under the Securities and Exchange Act of 1934, as amended, and its common stock shall be listed on the Nasdaq Stock Market. This Warrant shall be exercisable, in whole or in part: (i) after the earlier to occur of: (A) the consummation of the IPO; or (B) six months after the date of this Warrant; and (ii) prior to the Warrant expiration date which is twelve months after the date of this Warrant. | The Holder shall have the right to purchase up to the number of Shares that equals the amount obtained by dividing: (A) eighty percent (80%) of the aggregate principal amount of the Holder’s Note(s) delivered pursuant to the Note and Warrant Purchase Agreement; by (B) 80% of $4.00, the current midpoint price of the Company’s prospective IPO. For example, $100,000 aggregate principal amount of Note x 80% = $80,000) / ($4.00 current midpoint price of prospective IPO x 80% = $3.20) = 25,000 warrants. The exercise price per share shall be equal to 80% of the offering price per share of common stock of the Company in its first underwritten public offering (the “IPO”) pursuant to an effective registration statement under the Securities Act of 1933, as amended, covering the offer and sale by the Company of not less than $10,000,000 of its equity securities, as a result of or following which the Company shall be a reporting issuer under the Securities and Exchange Act of 1934, as amended, and its common stock shall be listed on the Nasdaq Stock Market. This Warrant shall be exercisable, in whole or in part: (i) after the earlier to occur of: (A) the consummation of the IPO; or (B) six months after the date of this Warrant; and (ii) prior to the Warrant expiration date which is twelve months after the date of this Warrant. | |||||||||||
| Unamortized debt discount | $ 695,000 | $ 695,000 | $ 695,000 | ||||||||||
| Convertible Promissory Note and Warrant [Member] | |||||||||||||
| Common stock share | shares | 48,482 | ||||||||||||
| Opti Harvest [Member] | |||||||||||||
| Ownership percent | 100.00% | 100.00% | 100.00% | ||||||||||
| Conversion Agreement [Member] | |||||||||||||
| Common stock share | shares | 379,975 | ||||||||||||
| Shares of investors | $ 1,519,000 | $ 1,519,000 | |||||||||||
| Debt conversion amount | 3,373,000 | ||||||||||||
| Accrued interest converted | $ 685,000 | $ 685,000 | $ 685,000 | ||||||||||
| Covertible debt, shares issued | shares | 2,029,306 | ||||||||||||
| Common stock converted amount | $ 8,118,000 | ||||||||||||
| Common stock converted amount | $ / shares | $ 4.00 | $ 4.00 | $ 4.00 | ||||||||||
| Loss on extinguishment of debt | $ 4,060,000 | ||||||||||||
| Additional loss on extinguishment of debt | 250,000 | ||||||||||||
| Loss on extinguishment of debt | 4,310,000 | ||||||||||||
| Fair value warrant | 250,000 | ||||||||||||
| Convertible Common Stock [Member] | |||||||||||||
| Common stock intial public offering rate | 65.00% | ||||||||||||
| IPO [Member] | |||||||||||||
| Share price | $ / shares | $ 4.00 | ||||||||||||
| Conversion price percentage | 50.00% | ||||||||||||
| Qualified Public Offering [Member] | |||||||||||||
| Increase in outstanding balance, percentage | 10.00% | 10.00% | |||||||||||
| Increase in outstanding balance additional, percentage | 2.50% | 2.50% | |||||||||||
| Convertible Promissory Note [Member] | |||||||||||||
| Accrue interest | 12.00% | ||||||||||||
| Common stock share | shares | 20,000 | ||||||||||||
| Sale of convertible promissory notes | 1,062,000 | $ 1,062,000 | $ 1,062,000 | ||||||||||
| Unamortized debt discount | 41,000 | 41,000 | 41,000 | ||||||||||
| Accrued interest | 25,000 | 25,000 | 25,000 | ||||||||||
| Principal amount | 462,000 | 462,000 | $ 462,000 | ||||||||||
| Common stock, shares related to note | shares | 46,000 | ||||||||||||
| Common stock issued as debt discount | $ 370,000 | ||||||||||||
| Amortization on interest expense | $ 329,000 | ||||||||||||
| Conversion of units | shares | 162,401 | ||||||||||||
| Convertible Promissory Note [Member] | Investor [Member] | |||||||||||||
| Shares of investors | $ 100,000 | ||||||||||||
| Convertible Promissory Notes [Member] | |||||||||||||
| Sale of convertible promissory notes | $ 250,000 | $ 250,000 | |||||||||||
| Convertible Promissory Note and Warrant [Member] | |||||||||||||
| Fair value warrant | 76,000 | ||||||||||||
| Amortization of debt discount | 56,000 | ||||||||||||
| Unamortized debt discount | 20,000 | 20,000 | 20,000 | ||||||||||
| Accrued interest | $ 11,000 | $ 11,000 | $ 11,000 | ||||||||||
| Convertible Promissory Note and Restricted Shares [Member] | |||||||||||||
| Accrue interest | 12.00% | 12.00% | 12.00% | ||||||||||
| Share price | $ / shares | $ 3.00 | $ 3.00 | $ 3.00 | ||||||||||
| Common stock share | shares | 174,300 | ||||||||||||
| Sale of convertible promissory notes | $ 462,000 | $ 462,000 | $ 462,000 | ||||||||||
| Maturity date description | The Notes shall be due and payable on the date that is six (6) months from the date of the Notes (the “Initial Maturity Date”); provided, however, that the Company and Lender may, upon mutual written agreement, extend such maturity date an additional six (6) months (such extended maturity date, (the “Extended Maturity Date”) | ||||||||||||
| Convertible Promissory Note and Restricted Shares [Member] | Investor [Member] | |||||||||||||
| Common stock share | shares | 10,000 | ||||||||||||
| Shares of investors | $ 100,000 | ||||||||||||
| Warrant [Member] | |||||||||||||
| Number of warrant issued | shares | 21,206 | 21,206 | 2,437,012 | ||||||||||
| Share price | $ / shares | $ 4.00 | $ 4.00 | |||||||||||
| Debt instrument, description | December 15, 2021 | ||||||||||||
| Common Stock [Member] | |||||||||||||
| Number of warrant issued | shares | 19,255 | 19,255 | 19,255 | ||||||||||
| Common stock share | shares | 161,168 | 183,223 | |||||||||||
| Shares of investors | |||||||||||||
| Conversion price percentage | 10 | ||||||||||||
| Common stock, shares related to note | shares | 82,500 | 220,550 | |||||||||||
| Common Stock [Member] | Senior Convertible Note Holders [Member] | |||||||||||||
| Share price | $ / shares | $ 4.42 | $ 4.42 | $ 4.42 | $ 4.42 | $ 4.42 | ||||||||
| Common stock share | shares | 213,473 | 213,473 | 138,098 | ||||||||||
| Shares of investors | $ 944,000 | $ 944,000 | $ 609,000 | $ 1,519,000 | |||||||||
| Common stock, shares related to note | shares | 379,975 | ||||||||||||
| Common Stock [Member] | Qualified Public Offering [Member] | |||||||||||||
| Common stock, par value | $ / shares | $ 0.0001 | $ 0.0001 | |||||||||||
| Common Stock Issuable [Member] | |||||||||||||
| Common shares issued as financing costs | shares | 192,475 | ||||||||||||
| Senior Convertible Promissory Notes [Member] | |||||||||||||
| Notes Issued | $ 3,591,000 | ||||||||||||
| Principal amount owed | $ 3,491,000 | ||||||||||||
| Debt conversion amount | $ 3,373,000 | ||||||||||||
| Accrued interest converted | $ 685,000 | $ 685,000 | $ 685,000 | ||||||||||
| Covertible debt, shares issued | shares | 2,029,306 | ||||||||||||
| Remaining principal amount | $ 118,000 | ||||||||||||
| Covertible debt, shares issuable | shares | 54,124 | 54,124 | 54,124 | ||||||||||
| Convertible Promissory Note and Warrant [Member] | |||||||||||||
| Principal amount | $ 150,000 | $ 150,000 | $ 150,000 | ||||||||||
Schedule of Loans Payable (Details) - USD ($) |
Sep. 30, 2023 |
Dec. 31, 2022 |
||||||
|---|---|---|---|---|---|---|---|---|
| Debt Disclosure [Abstract] | ||||||||
| Loans Payable | [1] | $ 58,000 | $ 69,000 | |||||
| Unsecured promissory note – related party - past due | [2] | 215,000 | ||||||
| Unsecured promissory note and restricted shares (c) | [3] | 1,162,000 | ||||||
| Total notes payable | 1,435,000 | 69,000 | ||||||
| Less: debt discount | (695,000) | 0 | ||||||
| Total notes payable, less debt discount | 740,000 | 69,000 | ||||||
| Notes payable, current portion | (695,000) | (13,000) | ||||||
| Notes payable, net of current portion | $ 45,000 | $ 56,000 | ||||||
| ||||||||
Summary of Warrants (Details) - Warrant [Member] |
9 Months Ended |
|---|---|
|
Sep. 30, 2023
$ / shares
shares
| |
| Accumulated Other Comprehensive Income (Loss) [Line Items] | |
| Warrants, Balance outstanding | shares | 2,059,334 |
| Weighted Average Exercise Price, Balance outstanding | $ / shares | $ 4.85 |
| Warrants granted | shares | 21,206 |
| Weighted Average Exercise Price, granted | $ / shares | $ 3.20 |
| Warrants exercised | shares | (19,255) |
| Weighted Average Exercise Price, exercised | $ / shares | $ 5.90 |
| Warrants expired or forfeited | shares | (8,483) |
| Weighted Average Exercise Price, expired or forfeited | $ / shares | $ 3.20 |
| Warrants, Balance outstanding | shares | 2,052,802 |
| Weighted Average Exercise Price, Balance outstanding | $ / shares | $ 6.06 |
| Warrants, Balance exercisable | shares | 2,052,802 |
| Weighted Average Exercise Price, Balance exercisable | $ / shares | $ 6.06 |
Summary of Outstanding Warrants Exercise Price (Details) |
Sep. 30, 2023
$ / shares
shares
|
|---|---|
| Class of Warrant or Right [Line Items] | |
| Outstanding share | shares | 2,052,802 |
| Life (Years) | 1 year 9 months 7 days |
| Weighted Average Exercise Price | $ 6.06 |
| Exercisable share | shares | 2,052,802 |
| Exercisable Weighted Average Exercise Price | $ 6.06 |
| Warrant Exercise Price One [Member] | |
| Class of Warrant or Right [Line Items] | |
| Exercise Price Per Share | $ 3.20 |
| Outstanding share | shares | 12,724 |
| Life (Years) | 3 months 10 days |
| Weighted Average Exercise Price | $ 3.20 |
| Exercisable share | shares | 12,724 |
| Exercisable Weighted Average Exercise Price | $ 3.20 |
| Warrant Exercise Price Two [Member] | |
| Class of Warrant or Right [Line Items] | |
| Exercise Price Per Share | $ 4.00 |
| Outstanding share | shares | 1,218,505 |
| Life (Years) | 2 years 9 months |
| Weighted Average Exercise Price | $ 4.00 |
| Exercisable share | shares | 1,218,505 |
| Exercisable Weighted Average Exercise Price | $ 4.00 |
| Warrant Exercise Price Three [Member] | |
| Class of Warrant or Right [Line Items] | |
| Exercise Price Per Share | $ 5.90 |
| Outstanding share | shares | 67,860 |
| Life (Years) | 9 months |
| Weighted Average Exercise Price | $ 5.90 |
| Exercisable share | shares | 67,860 |
| Exercisable Weighted Average Exercise Price | $ 5.90 |
| Warrant Exercise Price Four [Member] | |
| Class of Warrant or Right [Line Items] | |
| Exercise Price Per Share | $ 8.84 |
| Outstanding share | shares | 594,242 |
| Life (Years) | 3 months |
| Weighted Average Exercise Price | $ 8.84 |
| Exercisable share | shares | 594,242 |
| Exercisable Weighted Average Exercise Price | $ 8.84 |
| Warrant Exercise Price Five [Member] | |
| Class of Warrant or Right [Line Items] | |
| Exercise Price Per Share | $ 11.78 |
| Outstanding share | shares | 159,471 |
| Life (Years) | 9 months |
| Weighted Average Exercise Price | $ 11.78 |
| Exercisable share | shares | 159,471 |
| Exercisable Weighted Average Exercise Price | $ 11.78 |
Summary of Options (Details) |
9 Months Ended |
|---|---|
|
Sep. 30, 2023
$ / shares
shares
| |
| Equity [Abstract] | |
| Options, Balance outstanding | shares | 1,733,823 |
| Weighted Average Exercise Price, Balance outstanding | $ / shares | $ 5.04 |
| Options granted | shares | |
| Weighted Average Exercise Price, granted | $ / shares | |
| Options exercised | shares | |
| Weighted Average Exercise Price, exercised | $ / shares | |
| Options expired or forfeited | shares | (136,992) |
| Weighted Average Exercise Price, expired or forfeited | $ / shares | $ 5.93 |
| Options, Balance outstanding | shares | 1,596,831 |
| Weighted Average Exercise Price, Balance outstanding | $ / shares | $ 6.24 |
| Options, Balance exercisable | shares | 1,028,503 |
| Weighted Average Exercise Price, Balance exercisable | $ / shares | $ 6.34 |
Summary of Outstanding Options Exercise Price (Details) - $ / shares |
9 Months Ended | |
|---|---|---|
Sep. 30, 2023 |
Dec. 31, 2022 |
|
| Share-Based Payment Arrangement, Option, Exercise Price Range [Line Items] | ||
| Outstanding, Share | 1,596,831 | 1,733,823 |
| Outstanding, Life (Years) | 6 years 11 months 12 days | |
| Outstanding, Weighted Average Exercise Price | $ 6.24 | $ 5.04 |
| Exercisable Shares | 1,028,503 | |
| Exercisable Weighted Average Exercise Price | $ 6.34 | |
| Exercise Price Range One [Member] | ||
| Share-Based Payment Arrangement, Option, Exercise Price Range [Line Items] | ||
| Exercise Price Per Share | $ 5.90 | |
| Outstanding, Share | 1,413,185 | |
| Outstanding, Life (Years) | 7 years 3 months 29 days | |
| Outstanding, Weighted Average Exercise Price | $ 5.90 | |
| Exercisable Shares | 875,960 | |
| Exercisable Weighted Average Exercise Price | $ 5.90 | |
| Exercise Price Range Two [Member] | ||
| Share-Based Payment Arrangement, Option, Exercise Price Range [Line Items] | ||
| Exercise Price Per Share | $ 8.84 | |
| Outstanding, Share | 183,646 | |
| Outstanding, Life (Years) | 4 years 1 month 28 days | |
| Outstanding, Weighted Average Exercise Price | $ 8.84 | |
| Exercisable Shares | 152,543 | |
| Exercisable Weighted Average Exercise Price | $ 8.84 |
Shareholders’ Equity (Details Narrative) - USD ($) |
1 Months Ended | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 20, 2022 |
Dec. 08, 2022 |
Sep. 30, 2022 |
May 16, 2022 |
Mar. 17, 2022 |
Feb. 28, 2023 |
Jan. 31, 2023 |
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
Dec. 31, 2023 |
Dec. 31, 2022 |
Dec. 31, 2021 |
|
| Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||||||||||||
| Proceeds from exercise of warrants | $ 114,000 | $ 1,558,000 | ||||||||||||
| Number of warrant issued | 21,206 | 21,206 | ||||||||||||
| Aggregate value of common stock | $ 1,425,000 | 1,620,000 | ||||||||||||
| Financing Costs | 943,000 | $ 1,519,000 | 1,554,000 | |||||||||||
| Common stock issuable shares | 235,606 | 235,606 | 235,606 | |||||||||||
| Outstanding options, intrinsic value | $ 0 | $ 0 | ||||||||||||
| Common shares issued in the exercise of warrants, shares | 2,052,802 | 2,052,802 | ||||||||||||
| Common shares issued in the exercise of warrants, shares | $ 6.06 | $ 6.06 | ||||||||||||
| Compensation expense | $ 2,133,000 | 1,965,000 | ||||||||||||
| Unvested compensation related to stock options | $ 0 | $ 0 | ||||||||||||
| Sale of convertible promissory notes | $ 250,000 | $ 250,000 | ||||||||||||
| Stock price | $ 4.00 | $ 4.00 | ||||||||||||
| Fair value warrants | $ 76,000 | $ 76,000 | $ 76,000 | |||||||||||
| Volatility | 91.00% | |||||||||||||
| Dividend rate | 0.00% | |||||||||||||
| Weighted average risk-free interest rate | 4.72% | |||||||||||||
| Unvested compensation expense | $ 2,855,000 | $ 2,855,000 | ||||||||||||
| Estimated market value | $ 6.24 | $ 6.24 | $ 5.04 | |||||||||||
| Restricted Stock Units (RSUs) [Member] | 2022 Stock Incentive Plan [Member] | ||||||||||||||
| Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||||||||||||
| Number of share granted | 67,860 | |||||||||||||
| Fair value of shares granted in private offering | $ 600,000 | |||||||||||||
| Vesting conditions | The RSUs vest on the earliest of twelve months from the date of grant, or a strategic transaction including the Company being acquired, an initial public offering, or a liquidity event more than $10 million | |||||||||||||
| Share-Based Compensation Arrangement by Share-Based Payment Award, Equity Instruments Other than Options, Nonvested, Number | 16,965 | 16,965 | ||||||||||||
| Number of shares issued | 7,764 | |||||||||||||
| Number of share vested | 43,131 | |||||||||||||
| Recognized compensation expense | $ 224,000 | $ 362,000 | ||||||||||||
| Share based payment options non vested | $ 25,000 | $ 25,000 | ||||||||||||
| Restricted Stock Units (RSUs) [Member] | 2022 Stock Incentive Plan [Member] | Forecast [Member] | ||||||||||||||
| Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||||||||||||
| Common shares issued in private offerings, shares | 0 | |||||||||||||
| Number of share granted | 84,825 | |||||||||||||
| Restricted Stock Units (RSUs) [Member] | 2022 Stock Incentive Plan [Member] | Geoffrey Andersen [Member] | ||||||||||||||
| Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||||||||||||
| Number of share granted | 16,965 | |||||||||||||
| Fair value of shares granted in private offering | $ 150,000 | |||||||||||||
| Vesting conditions | The RSUs vest on the earlier of twelve months from the date of grant, or a strategic transaction including the Company being acquired, an initial public offering, or a liquidity event more than $5 million | |||||||||||||
| Share-Based Payment Arrangement, Option [Member] | ||||||||||||||
| Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||||||||||||
| Estimated market value | $ 4.00 | $ 4.00 | ||||||||||||
| Notes Payable [Member] | ||||||||||||||
| Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||||||||||||
| Aggregate value of common stock | $ 1,313,000 | |||||||||||||
| Common shares issued in private offerings, shares | 220,550 | |||||||||||||
| Consultants [Member] | ||||||||||||||
| Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||||||||||||
| Aggregate value of common stock | $ 706,000 | |||||||||||||
| Fair value of common shares issued for services, shares | 83,987 | |||||||||||||
| Senior Convertible Note Holders [Member] | ||||||||||||||
| Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||||||||||||
| Financing Costs | $ 1,519,000 | |||||||||||||
| Common stock issuable shares | 192,475 | 192,475 | ||||||||||||
| Warrant [Member] | ||||||||||||||
| Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||||||||||||
| Proceeds from exercise of warrants | $ 114,000 | |||||||||||||
| Common shares issued in the exercise of warrants, shares | 19,255 | 19,255 | ||||||||||||
| Number of warrant issued | 21,206 | 21,206 | 2,437,012 | |||||||||||
| Warrant exercise price | $ 3.20 | $ 3.20 | $ 5.90 | $ 5.90 | ||||||||||
| Outstanding options, intrinsic value | $ 10,000 | $ 10,000 | ||||||||||||
| Estimated market value | $ 4.00 | $ 4.00 | ||||||||||||
| Warrants maturity date | Dec. 31, 2023 | Dec. 31, 2023 | ||||||||||||
| Common shares issued in the exercise of warrants, shares | 594,242 | 594,242 | ||||||||||||
| Common shares issued in the exercise of warrants, shares | $ 8.84 | $ 8.84 | ||||||||||||
| Compensation expense | $ 0 | 80,000 | ||||||||||||
| Common stock percentage amount | 80.00% | 80.00% | ||||||||||||
| Stock price | $ 4.00 | $ 4.00 | ||||||||||||
| Common Stock [Member] | ||||||||||||||
| Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||||||||||||
| Number of warrant issued | 19,255 | 19,255 | ||||||||||||
| Common shares issued with convertible notes, shares | 82,500 | 220,550 | ||||||||||||
| Aggregate value of common stock | ||||||||||||||
| Fair value of common shares issued for services, shares | 16,826 | 38,597 | 83,987 | 148,020 | ||||||||||
| Common shares issued in private offerings, shares | 161,168 | 183,223 | ||||||||||||
| Fair value warrants | ||||||||||||||
| Common Stock [Member] | Senior Convertible Note Holders [Member] | ||||||||||||||
| Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||||||||||||
| Common shares issued with convertible notes, shares | 379,975 | |||||||||||||
| Aggregate value of common stock | $ 944,000 | $ 944,000 | $ 609,000 | $ 1,519,000 | ||||||||||
| Common shares issued in private offerings, shares | 213,473 | 213,473 | 138,098 | |||||||||||
| Stock price | $ 4.42 | $ 4.42 | $ 4.42 | $ 4.42 | $ 4.42 | |||||||||
Commitment and Contingencies (Details Narrative) - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Product Liability Contingency [Line Items] | ||||
| Revenues | $ 33,000 | $ 10,000 | $ 80,000 | $ 30,000 |
| Advance royalties | $ 1,600,000 | 1,600,000 | ||
| Royalty expense | 30,000,000 | |||
| Mr. Booth [Member] | ||||
| Product Liability Contingency [Line Items] | ||||
| Royalty expense | $ 30,000,000 | |||
| Percentage of consideration received | 0.30% | 0.30% | ||
| Strategic transaction consideration | $ 100,000,000 | $ 100,000,000 | ||
| Royalty percentage | 0.25% | |||
| Minimum [Member] | Mr. Booth [Member] | ||||
| Product Liability Contingency [Line Items] | ||||
| Percentage of consideration received | 0.20% | 0.20% | ||
| Strategic transaction consideration | $ 50,000,000 | $ 50,000,000 | ||
| Maximum [Member] | Mr. Booth [Member] | ||||
| Product Liability Contingency [Line Items] | ||||
| Percentage of consideration received | 0.40% | 0.40% | ||
| Strategic transaction consideration | $ 150,000,000 | $ 150,000,000 | ||
| Seller [Member] | Revenue from Contract with Customer Benchmark [Member] | Customer Concentration Risk [Member] | ||||
| Product Liability Contingency [Line Items] | ||||
| Concentration risk, percentage | 8.00% | |||
| License [Member] | ||||
| Product Liability Contingency [Line Items] | ||||
| Revenues | $ 1,600,000 | |||
| Percentage of consideration received | 7.60% | 7.60% | ||
| License [Member] | Mr. Booth [Member] | ||||
| Product Liability Contingency [Line Items] | ||||
| Percentage of consideration received | 0.40% | 0.40% | ||
| Product [Member] | Revenue from Contract with Customer Benchmark [Member] | Customer Concentration Risk [Member] | ||||
| Product Liability Contingency [Line Items] | ||||
| Concentration risk, percentage | 4.75% | |||
| DisperSolar LLC [Member] | Earnout Payments [Member] | ||||
| Product Liability Contingency [Line Items] | ||||
| Earnout payments, description | earnout payments of $800,000 payable on the on-going basis at a rate of 50% of gross margin and/or license revenue from the date of the first commercial sale of a covered product or the first receipt by the Company of license revenue | |||
| Payments to acquire intangible assets | $ 800,000 | |||
| Strategic Transaction Consideration [Member] | ||||
| Product Liability Contingency [Line Items] | ||||
| Percentage of consideration received | 5.70% | 5.70% | ||
| Strategic transaction consideration | $ 100,000,000 | $ 100,000,000 | ||
| Strategic Transaction Consideration [Member] | Minimum [Member] | ||||
| Product Liability Contingency [Line Items] | ||||
| Percentage of consideration received | 3.80% | 3.80% | ||
| Strategic transaction consideration | $ 50,000,000 | $ 50,000,000 | ||
| Strategic Transaction Consideration [Member] | Maximum [Member] | ||||
| Product Liability Contingency [Line Items] | ||||
| Percentage of consideration received | 7.60% | 7.60% | ||
| Strategic transaction consideration | $ 150,000,000 | $ 150,000,000 | ||
Related Party Transactions (Details Narrative) - USD ($) |
3 Months Ended | 9 Months Ended | |||||||
|---|---|---|---|---|---|---|---|---|---|
Sep. 19, 2023 |
Jul. 20, 2023 |
Apr. 05, 2023 |
Mar. 31, 2023 |
Jan. 09, 2023 |
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Related Party Transaction [Line Items] | |||||||||
| Stock issued for service, values | $ 70,000 | $ 341,000 | $ 706,000 | $ 1,309,000 | |||||
| Proceeds from related party debt | 180,000 | ||||||||
| Vendor [Member] | |||||||||
| Related Party Transaction [Line Items] | |||||||||
| Proceeds from related party debt | $ 5,000 | ||||||||
| Changes in interest payable | 5,000 | ||||||||
| Vendor One [Member] | |||||||||
| Related Party Transaction [Line Items] | |||||||||
| Proceeds from related party debt | $ 20,000 | ||||||||
| Changes in interest payable | 20,000 | ||||||||
| Chief Executive Officer [Member] | |||||||||
| Related Party Transaction [Line Items] | |||||||||
| Proceeds from related party debt | $ 10,000 | ||||||||
| Changes in interest payable | 10,000 | ||||||||
| Director [Member] | |||||||||
| Related Party Transaction [Line Items] | |||||||||
| Proceeds from related party debt | $ 40,000 | ||||||||
| Changes in interest payable | 40,000 | ||||||||
| Mr Klausner [Member] | |||||||||
| Related Party Transaction [Line Items] | |||||||||
| Stock issued for service, shares | 16,965 | ||||||||
| Stock issued for service, values | $ 200,000 | ||||||||
Subsequent Events (Details Narrative) - USD ($) |
2 Months Ended | |||
|---|---|---|---|---|
Nov. 20, 2023 |
Oct. 01, 2023 |
Feb. 28, 2023 |
Jan. 31, 2023 |
|
| Subsequent Event [Line Items] | ||||
| Convertible notes | $ 250,000 | $ 250,000 | ||
| Subsequent Event [Member] | ||||
| Subsequent Event [Line Items] | ||||
| Number of common stock shares of restricted common stock | 52,500 | |||
| Subsequent Event [Member] | Promissory Notes [Member] | ||||
| Subsequent Event [Line Items] | ||||
| Convertible notes | $ 350,000 |