10-Q/A

UNITED STATES

 SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

Amendment No. 1

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2020

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ___________

Commission File Number: 001-39480

APPLIED UV, INC.

(Exact name of registrant as specified in its charter)

Delaware	84-4373308
(State or other jurisdiction of incorporation)	(I.R.S. Employer Identification No.)

150 N. Macquesten Parkway

 Mount Vernon, NY 10550

 (Address of principal executive offices)

(914) 665-6100

 (Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	x
Smaller reporting company	x	Emerging Growth Company	x

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in 12b-2 of the Exchange Act):

Yes ¨ No x 

Securities registered pursuant to Section 12(b) of the Act: None.

As of September 30, 2020, we have 6,334,308 shares of common stock issued and outstanding.

EXPLANATORY NOTE

This Amendment No.1 to our Quarterly Report on Form 10-Q/A (the “10-Q/A”) amends the Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, as originally filed with the Securities and Exchange Commission on November 16, 2020 (the “Original Form 10-Q”).

The purpose of the 10-Q/A is to disclose financial information and certain cover page information of the Original Form 10-Q in XBRL format, which were not disclosed in the Original Form 10-Q. No additional changes, revisions, or updates have been made to the original Form 10-Q in this 10-Q/A. This Amendment No. 1 to the Original Form 10-Q speaks as of the original filing date of the Original Form 10-Q, does not reflect events that may have occurred subsequent to the original filing date.

ITEM 6. EXHIBITS

Index to Exhibits

31.1*	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*	Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*	Certification by the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*	Certification of the Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

 _________________ 

* Previously included in the Original Form 10-Q for the quarterly period ended September 30, 2020, filed with the Securities and Exchange Commission on November 16, 2020.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	APPLIED UV, INC.
	(Registrant)
Date: December 15, 2020	By:	/s/ Keyoumars Saeed
		Keyoumars Saeed
		Chief Executive Officer
Date: December 15, 2020	By:	/s/ Joseph Himy
		Joseph Himy
		Interim Chief Financial Officer

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Document and Entity Information	9 Months Ended
	Sep. 30, 2020 shares
Document and Entity Information [Abstract]
Document Type	10-Q/A
Document Period End Date	Sep. 30, 2020
Entity Registrant Name	Applied UV, Inc.
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	true
Entity Ex Transition Period	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding	6,334,308
Entity Central Index Key	0001811109
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q3
Amendment Flag	true
Amendment Description	Amendment No : 1

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Condensed Consolidated Balance Sheets - USD ($)	Sep. 30, 2020	Dec. 31, 2019
Current Assets
Cash	$ 5,897,441	$ 1,029,936
Vendor deposit	146,278	104,517
Accounts receivable, net of allowance for doubtful accounts	734,086	2,227,792
Inventory	189,755	99,543
Loan to shareholder	0	4,225
Prepaid expense and other current assets	44,000	30,639
Total Current Assets	7,011,560	3,496,652
Machinery and equipment, net of accumulated depreciation	120,536	34,371
Right of use asset	515,324	614,522
Other assets	114,458	623,842
Total Assets	7,761,878	4,769,387
Current Liabilities
Accounts payable and accrued expenses	513,156	1,238,822
Income tax payable	106,861	106,861
Capital lease obligations-current portion	6,380	6,380
Lease liability-current	138,173	133,097
Payroll protection plan loan	69,297
Notes payable	30,000	37,500
Deferred revenue	746,936	1,245,300
Total Current Liabilities	1,610,803	2,767,960
Long-term Liabilities
Capital lease obligations - less current portion	10,881	15,212
Note payable-less current portion	90,000	120,000
Lease liability-less current portion	377,151	481,425
Payroll protection plan loan	227,530
Total Long-Term Liabilities	705,562	616,637
Total Liabilities	2,316,365	3,384,597
Stockholders' Equity
Common stock $.0001 par value, 150,000,000 shares authorized; 6,334,308 shares issued and outstanding, respectively as of September 30, 2020 and 5,001,250 shares issued and outstanding as of December 31, 2019	633	500
Series A voting preferred stock $.0001 par value, 1,000,000 shares authorized; 2,000 shares issued and outstanding	1	1
Additional paid-in capital	5,270,288
Retained earnings	174,591	1,384,289
Total Stockholders' Equity	5,445,513	1,384,790
Total Liabilities and Stockholders' Equity	$ 7,761,878	$ 4,769,387

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Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Sep. 30, 2020	Dec. 31, 2019
Condensed Consolidated Balance Sheets
Common stock, par value	$ 0.0001	$ 0.0001
Common stock, shares authorized	150,000,000	150,000,000
Common stock, shares issued	6,334,308	5,001,250
Common stock, shares outstanding	6,334,308	5,001,250
Series A voting preferred stock, par value	$ 0.0001	$ 0.0001
Series A voting preferred stock, shares authorized	1,000,000	1,000,000
Series A voting preferred stock, shares issued	2,000	2,000
Series A voting preferred stock, shares outstanding	2,000	2,000

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Condensed Interim Consolidated Statements of Operations - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Condensed Interim Consolidated Statements of Operations
Net Sales	$ 1,560,633	$ 2,775,848	$ 4,493,061	$ 6,379,259
Cost of Goods Sold	1,482,455	1,600,287	3,825,037	4,315,095
Gross Profit	78,178	1,175,561	668,024	2,064,164
Operating Expenses
Research and development	48,037		65,037
Stock based compensation	279,707		381,314
Selling. General and Administrative Expenses	645,401	740,038	1,443,276	1,377,104
Total Operating Expenses	973,145	740,038	1,889,627	1,377,104
Operating (Loss) Income	(894,967)	435,523	(1,221,603)	687,060
Other Income
Other Income	235	850	11,905	850
Total Other Income	235	850	11,905	1,521,248
(Loss) Income Before Provision for Income Taxes	(894,732)	436,373	(1,209,698)	2,208,308
Provision for Income Taxes				63,259
Net (Loss) Income	$ (894,732)	$ 436,373	$ (1,209,698)	$ 2,145,049
Basic and Diluted (Loss) Earnings Per Common Share	$ (0.14)	$ 0.09	$ (0.19)	$ 0.43

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Condensed Consolidated Statements of Changes in Stockholders' Equity (Deficit) - USD ($)	Preferred Stock Series A Voting	Common Stock	Additional Paid-In Capital	Retained Earnings	Total
Balance at the beginning at Dec. 31, 2018	$ 1	$ 500		$ (1,417,117)	$ (1,416,616)
Balance at the beginning (in shares) at Dec. 31, 2018	2,000	5,001,250
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income loss				2,145,049	2,145,049
Balance at the end at Sep. 30, 2019	$ 1	$ 500		727,932	728,433
Balance at the end (in shares) at Sep. 30, 2019	2,000	5,001,250
Balance at the beginning at Dec. 31, 2018	$ 1	$ 500		(1,417,117)	(1,416,616)
Balance at the beginning (in shares) at Dec. 31, 2018	2,000	5,001,250
Balance at the end at Dec. 31, 2019	$ 1	$ 500		1,384,289	1,384,790
Balance at the end (in shares) at Dec. 31, 2019	2,000	5,001,250
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Common stock issued in public offering, net of costs		$ 115	$ 4,080,006		4,080,121
Common stock issued in public offering, net of costs (in shares)		1,150,000
Shares issued to Carmel, Milazzo & Feil LLP		$ 16	808,970		808,986
Shares issued to Carmel, Milazzo & Feil LLP (in shares)		161,794
Stock-based compensation		$ 2	381,312		381,314
Stock-based compensation (in shares)		21,264
Net income loss				(1,209,698)	(1,209,698)
Balance at the end at Sep. 30, 2020	$ 1	$ 633	$ 5,270,288	$ 174,591	$ 5,445,513
Balance at the end (in shares) at Sep. 30, 2020	2,000	6,334,308

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Consolidated Interim Consolidated Statements of Cash Flows - USD ($)	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Cash flows from Operating Activities
Net (Loss) Income	$ (1,209,698)	$ 2,145,049
Adjustments to Reconcile Net (Loss) Income to Net Cash (Used In) Provided by Operating Activities
Stock based compensation	381,314	85,000
Bad debt expense	50,000
Depreciation and amortization	13,528	6,519
Changes in Assets and Liabilities
Decrease (Increase) in accounts receivable	1,443,706	(660,436)
(Increase) in inventories	(90,212)	(50,189)
(Increase) in vendor deposits	(41,761)	(190,234)
(Increase) in prepaid expenses	(22,398)	(79,947)
Increase in income taxes payable		63,259
(Decrease) increase in accounts payable and accrued expenses	(152,864)	(63,670)
(Decrease) Increase in deferred revenue	(498,364)	809,556
Total Adjustments	1,082,949	(1,600,541)
Net Cash (Used in) Provided by Operating Activities	(126,749)	544,508
Cash Flows From Investing Activities
Purchase of machinery and equipment	(98,244)	(12,999)
Cash paid for patent costs	(55,814)
Net Cash Used in Investing Activities	(154,058)	(12,999)
Cash Flows From Financing Activities
Payments on capital leases	(4,331)
(Decrease) in liabilities subject to compromise		(531,511)
Loan from officer	4,225	117,987
Payments on loans payable	(37,500)	(83,000)
Proceeds for equity raise, net	4,889,091
Proceeds from payroll protection plan loan	296,827
Net Cash Provided by (Used In) Financing Activities	5,148,312	(496,524)
Net Increase in Cash and equivalents	4,867,505	34,985
Cash and equivalents at January 1,	1,029,936	793,766
Cash and equivalents at September 30,	5,897,441	828,751
Cash paid during the period for:
Interest	1,204	$ 9,146
Supplemental Non-Cash Items
Reclassification from liabilities to be settled in stock to additional paid in capital for shares granted during the period	$ 808,986

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

9 Months Ended

Sep. 30, 2020

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business

In March 2019, Applied UV, Inc. (the "Company") was formed and incorporated in the State of Delaware for the intended purpose of creating a legal holding company structure for SteriLumen, Inc. and Munn Works, LLC and any future potential mergers or acquisitions. The then-existing shareholders and members of SteriLumen, Inc. and Munn Works, LLC exchanged all of their interest for shares of Applied UV, Inc. with substantially similar economic voting interests for each shareholder immediately before and after the share exchange. As a result of the share exchange, SteriLumen, Inc. and Munn Works, LLC became wholly-owned subsidiaries of Applied UV, Inc and, collectively referred to as (the "Company"). The combination met the criteria outlined in ASC 850 to be accounted for as a transaction between entities under common control and therefore the financial statements are being presented as if the transfer happened at the beginning of the period and prior year financial information has been retrospectively adjusted to furnish comparative information.

SteriLumen, Inc. is engaged in the design, manufacture, assembly and distribution of automated disinfecting mirror systems for use in hospitals and other healthcare facilities. The Company was incorporated in the State of New York in November of 2012 and is headquartered in Mount Vernon, New York. Munn Works, LLC is engaged in the manufacture of fine mirrors specifically for the hospitality industry.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, and with the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) set forth in Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim financial statements furnished reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented. Unaudited interim results are not necessarily indicative of the results for the full fiscal year. These financial statements should be read along with the Annual Report filed of the Company for the annual period ended December 31, 2019. The consolidated balance sheet as of December 31, 2019 was derived from the audited consolidated financial statements as of and for the year then ended. The consolidated financial statements include the accounts of Applied UV, Inc., Munn Works, LLC and SteriLumen, Inc. All significant intercompany transactions and balances are eliminated in consolidation.

Revenue and Cost Recognition

On January 1, 2018, the Company adopted accounting standard ASC 606, Revenue from Contracts with Customers and all the related amendments using the modified retrospective method for all customer contracts not yet completed as of the adoption date. The adoption of ASC 606 did not have a significant impact on our Consolidated Financial Statements.

The Company recognizes revenue when the performance obligations in the client contract has been achieved. A performance obligation is a contractual promise to transfer a distinct service to the customer. The transaction price of a contract is allocated to each distinct performance obligation and recognized as revenue when or as, the customer receives the benefit of the performance obligation. Under ASC 606, revenue is recognized when a customer obtains control of promised services in an amount that reflects the consideration we expect to receive in exchange for those services.

To achieve this core principal, the Company applies the following five steps:

1) Identify the contract with a customer

A contract with a customer exists when (i) the Company enters into an enforceable contract with a customer that defines each party’s rights regarding the services to be transferred and identifies the payment terms related to these services, (ii) the contract has commercial substance and, (iii) the Company determines that collection of substantially all consideration for services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration. The Company applies judgment in determining the customer’s ability and intention to pay, which is based on a variety of factors including the customer’s historical payment experience or, in the case of a new customer, published credit and financial information pertaining to the customer.

2) Identify the performance obligations in the contract

Performance obligations promised in a contract are identified based on the services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the service either on its own or together with other resources that are readily available from third parties or from the Company, and are distinct in the context of the contract, whereby the transfer of the services is separately identifiable from other promises in the contract. To the extent a contract includes multiple promised services, the Company must apply judgment to determine whether promised services are capable of being distinct in the context of the contract. If these criteria are not met the promised services are accounted for as a combined performance obligation. The Company promises to design, manufacture and sell custom mirrors through contractual arrangements. It was determined that most services within a contract are substantially the same and have the same pattern of transfer to the customer over the term of the agreement and are therefore highly interdependent upon each other. As such, the Company determined that the services within a contract are not separately identifiable in the context of the contract and should therefore be bundled into a single performance obligation.

3) Determine the transaction price

The transaction price is determined based on the consideration to which the Company will be entitled in exchange for transferring services to the customer. We evaluate whether a significant financing component exists when we recognize revenue in advance of customer payments that occur over time. We do not adjust the transaction price for the effects of financing if, at contract inception, the period between the transfer of control to a customer and final payment is expected to be one year or less. The Company establishes pricing for contracts with customers based on a fixed price for a fixed fee. Contracts do not provide for a discount or refund to customers and historically, no discounts or refunds have been given.

4) Allocate the transaction price to performance obligations in the contract

If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. However, if a series of distinct services that are substantially the same qualifies as a single performance obligation in a contract with variable consideration, the Company must determine if the variable consideration is attributable to the entire contract or to a specific part of the contract. Contracts that contain multiple performance obligations require an allocation of the transaction price based on management’s judgment. The identified promises are considered to be bundled in arriving at the overall promise within the contract. This promise therefore results in one performance obligation, to design, manufacture and sell custom mirrors to our customer, therefore, allocation of the transaction price is not necessary.

5) Recognize revenue when or as the Company satisfies a performance obligation

Revenue is comprised of projects that are completed within our own facility or from a third-party vendor (direct sales). For projects that are completed within our own facility, the Company satisfies performance obligations at over time. For projects that are completed from a third-party vendor, the performance obligation is recognized at a point in time.

As of September 30, 2020 and December 31, 2019, total deferred revenue was $746,936 and $1,245,300. As of September 30, 2020, deferred revenue was comprised of work generated from our own Mount Vernon facility of $437,552 and work performed at the third party manufacturer of $309,384. At January 1, 2020, deferred revenue was $1,245,300 which the entire amount was recognized as revenue during the nine months ended September 30, 2020. As of December 31, 2019, deferred revenue was comprised of work generated from our own Mount Vernon facility of $844,331, work performed at the third party manufacturer of $363,940 and billings made upfront of $37,029.

For projects, that are completed within our own facility, we design, manufacture and sell custom mirrors for hotels and hospitals through contractual agreements. These sales require us to deliver our products within three to six months from commencement of order acceptance. We recognize revenue over time by using the input method based on costs incurred as it depicts our progress toward satisfaction of the performance obligation. Under this method, revenue arising from fixed price contracts is recognized as work is performed based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligations. Incurred costs include all direct material and labor costs and those indirect costs related to contract performance, such as indirect labor, supplies, tools, repairs and depreciation costs. Contract material costs are included in incurred costs when the project materials have been purchased or moved to work in process as required by the project’s engineering design. Cost based input methods of revenue recognition require us to make estimates of costs to complete the projects. In making such estimates, significant judgment is required to evaluate assumptions related to the costs to complete the projects, including materials, labor and other system costs. If the estimated total costs on any contract are greater than the net contract revenues, we recognize the entire estimated loss in the period the loss becomes known and can be reasonably estimated. Deferred Revenue represents amounts billed in excess of revenues and profits recognized. Total deferred revenue from the input method of accounting was $368,007 and $844,331 as of September 30, 2020 and December 31, 2019, respectively. Revenues and profits recognized in excess of amounts billed typically does not occur as we will not perform any work in excess of the amount we bill to our customers.

Each product or service delivered to a third-party customer that is manufactured by a third-party vendor is considered to satisfy a performance obligation. Performance obligations generally occur at a point in time and are satisfied when control of the goods passes to the customer. These sales are shipped from the manufacturer to the customer without our taking physical inventory possession. We report direct sales on a gross basis, that is, the amounts billed to our customers are recorded as "Sales," and inventory purchased from manufacturers are recorded as Cost of Sales. We are the principal of direct sales because we control the inventory before it is transferred to our customers. Our control is evidenced by us being primarily responsible for fulfilling the promise to our customers, taking on inventory risk of returned product, and having discretion in establishing pricing. We typically pay our vendors a portion of the total cost up front and the remaining balance is accrued for and paid within 30 to 60 days of when the products are shipped from the third-party warehouse. Vendor payments are capitalized until completion of the project and are recorded as vendor deposits. As of September 30, 2020 and December 31, 2019, the vendor deposit balance was $146,278 and $104,517, respectively.

Losses expected to be incurred on contracts in progress are charged to operations in the period such losses are determined. Deferred revenue from these projects as of September 30, 2020 and December 31, 2019 was $378,929 and $363,942, respectively. At September 30, 2020 and December 31, 2019, there were no losses charged to expense.

There are times that we bill upfront where no work is performed until 30 to 60 days after the deposit is received from our customer. Accordingly, no revenue is recognized and the amounts are deferred. As of September 30, 2020 and December 31, 2019, deferred revenue balances related to these invoices were $- and $37,029, respectively.

For the nine months ended September 30, 2020, the Company generated revenues of $2,981,651 at a point in time and $1,511,410 over time. For the nine months ended September 30, 2019, the Company generated revenues of $4,472,038 at a point in time and $1,907,221 over time.

Stock Based Compensation

Share based compensation cost is measured at grant date, based on the estimated fair value of the award using a Black Scholes option pricing model for options with service or performance-based conditions. Stock based compensation cost is recognized as expense, over the requisite service period on a straight-line basis for service-based awards. The Black-Scholes model incorporate several variables, including expected term, expected volatility, expected dividend yield and a risk-free interest rate. We estimate the expected term of the options granted based on anticipated exercises in future periods based on historical activity. The expected stock price volatility for the Company’s stock options is calculated based on the historical volatility of the Company’s common stock. The expected dividend yield reflects our current and expected future policy for dividends on our common stock. To determine the risk-free interest rate, we utilize the U.S. Treasury yield curve in effect at the time of grant with a term consistent with the expected term of our awards. We have elected to account for forfeitures as they occur.

Recent Accounting Pronouncements

Recently Adopted

In February 2016, the Financial Accounting Standards Board, or the FASB, issued ASU No. 2016‑02, Leases (Topic 842), which requires lessees to recognize right-of-use, or ROU, assets and related lease liabilities on the balance sheet for all leases greater than one year in duration. We adopted ASC 842 on January 1, 2019 using a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach did not require any transition accounting for leases that expired before the earliest comparative period presented. The adoption of this standard resulted in the recording of ROU assets and lease liabilities for all our lease agreements with original terms of greater than one year. The adoption of ASC 842 did not have a significant impact on our statements of income or cash flows.

In August 2018, the FASB issued ASU 2018‑13, Fair Value Measurement (Topic 820): Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement, which removes, modifies and adds various disclosure requirements related to fair value disclosures. Disclosures related to transfers between fair value hierarchy levels will be removed and further detail around changes in unrealized gains and losses for the period and unobservable inputs used in determining level 3 fair value measurements will be added, among other changes. ASU 2018‑13 is effective for interim and annual reporting periods beginning after December 15, 2019, and early adoption is permitted. The adoption of this standard did not have a material impact on our financial statements.

In June 2016, the FASB issued ASU 2016‑13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which replaces the current incurred loss impairment methodology for financial assets with a methodology that reflects expected credit losses. The new credit losses model must be applied to loans, accounts receivable, and other financial assets. ASU 2016‑13 is effective for annual periods beginning after December 15, 2019, including interim periods within those annual periods. The adoption of this standard did not have a material impact on our financial statements.

We currently believe that all other issued and not yet effective accounting standards are not relevant to our financial statements.

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INVENTORY

9 Months Ended

Sep. 30, 2020

INVENTORY

INVENTORY

NOTE 2 – INVENTORY

Inventory consists of raw materials of $189,755 and $99,543 at September 30, 2020 and December 31, 2019, respectively.

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PROPERTY AND EQUIPMENT

9 Months Ended

Sep. 30, 2020

PROPERTY AND EQUIPMENT

PROPERTY AND EQUIPMENT

NOTE 3 – PROPERTY AND EQUIPMENT

Property and equipment are summarized by major classifications as follows:

	September 30,		December 31,
	2020		2019
Machinery and Equipment	$	61,083	$	39,583
Furniture and Fixtures		33,385		16,864
Leasehold improvements		60,223		—
		154,691		56,447
Less: Accumulated Depreciation		(34,155)		(22,076)
	$	120,536	$	34,371

Depreciation expense, including amortization of assets under capital leases and patent cost, for the nine months ended September 30, 2020 and 2019 was $13,528 and $6,519, respectively.

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DUE TO AND FROM SHAREHOLDER

9 Months Ended

Sep. 30, 2020

DUE TO AND FROM SHAREHOLDER

DUE TO AND FROM SHAREHOLDER

NOTE 4 – DUE TO AND FROM SHAREHOLDER

As of September 30, 2020 and December 31, 2019 the Company loaned its majority shareholder noninterest-bearing advances, which are due upon demand. As of September 30, 2020 and December 31, 2019, amounts owed from the Company’s majority shareholder was $- and $4,225, respectively. The loans were repaid during the period.

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CAPITAL LEASE OBLIGATION

9 Months Ended

Sep. 30, 2020

CAPITAL LEASE OBLIGATION

CAPITAL LEASE OBLIGATION

NOTE 5 – CAPITAL LEASE OBLIGATION

The Company’s machinery under a capital lease, which is included in machinery and equipment is summarized as follows:

Machinery and Equipment	$	61,083
Less: Accumulated Depreciation		(25,685)
	$	35,398

Future minimum principal and interest payments under the capital lease agreements as of September 30, 2020, are as follows:

2020	$	2,949
2021		7,280
2022		7,280
2023		1,489
Less: Amount representing interest		(1,737)
Present value of future minimum lease payments		17,261
Less: current portion		(6,380)
	$	10,881

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LOANS PAYABLE

9 Months Ended

Sep. 30, 2020

LOANS PAYABLE

LOANS PAYABLE

NOTE 6 – LOANS PAYABLE

In December of 2012, the Company received $260,000 from Seagrace Partners that accrued interest at 5% annually with no maturity date and no stated terms of repayment. As of December 31, 2019 and 2018, the note had an outstanding principal balance of $0 and $131,336, respectively. Interest expense related to this note for the year ended December 31, 2019 and 2018 was $5,902 and $7,656, respectively. The outstanding principal balance of $132,390 was reclassed to liabilities subject to compromise (note payable- pre-petition). In 2019, the Company entered into a settlement agreement in relation to the Company’s Chapter 11 Bankruptcy (as further described in Note 10 of the financial statements) with the note holder where the Company would pay $80,000 over the next 90 days, in four equal installments of $20,000. The entire $80,000 was repaid prior to December 31, 2019. In addition, the Company will provide the third party lender 8,000 shares of common stock in the Company (subject to certain transfer restrictions), in an amount which will have a public trading value within 24 months of at least $85,000. If the value of the stock does not reach $85,000 at the end of 24 months, the shareholders of the Company will provide the third party lender make-up stock to reach the value of $85,000 with a maximum amount of shares to be issued of 17,000 shares. This repayment would constitute as full and final payment of any and all obligations to the lender. On the date of the settlement, the Company recorded a loss on extinguishments in the amount of $34,610.

In June of 2018 and June of 2016, the Company received advances from On Deck Capital in the amounts of $150,000 and $100,000, respectively. The June 2016 note matured in one year from the date of issuance and required 52 weekly payments of $2,346. As of December 31, 2019 and 2018, the balance of this note was $0 and interest expense of $3,981 was recorded during the year ended December 31, 2018. The June 2018 note matured in one year from the date of issuance and required 52 weekly payments of $3,605. As of December 31, 2018, the company made no repayments on this note and has an outstanding principal balance of $150,000. As part of the Chapter 11 Bankruptcy, the outstanding principal balance of $150,000 was reclassed to liabilities subject to compromise (note payable- pre-petition) as further described in Note 10 of the financial statements. Accrued interest on this note as of December 31, 2018 was $17,360 and an additional $20,140 was accrued for based on the proof of claim submitted by the note holder. These amounts were also reclassed to liabilities subject to compromise (accounts payable and accrued expenses- pre-petition) as further described in Note 10 of the financial statements. In 2019, the Company paid $18,750, which was 10% of the allowed proof of claim in the Chapter 11 Bankruptcy of $187,500. In addition, the Company was required to pay $157,500 in a five payments in the amount of $30,000 per year, with an additional $7,500 in year two. The Company recognized a gain on extinguishments of $11,250 in relation to the settlement in the year ended December 31, 2019. As of September 30, 2020 and December 31, 2019, the company had an outstanding balance of $120,000 and $157,500, respectively.

Minimum obligations under this loan agreement is as follows:

As of September 30,
2021	$	30,000
2022		30,000
2023		30,000
2024		30,000
	$	120,000

In October of 2017, June of 2017, and September of 2016, the Company received advances from LG Funding, LLC in the amounts of $150,971,  $150,990, and $125,990, respectively, in exchange for notes in the amounts of $182,679,  $187,228, and $156,228, respectively. On the initial date of the note, the Company accounted for the notes at face value less a discount for the difference between the face value and advances received. The discounts were amortized to interest expense in proportion to the repayments over the total amount loaned. For the nine months ended September 30, 2020 and 2019, the Company recorded $0 in interest expense in relation to these notes. The Company recognized a gain of $81,000 in 2019 as a result of the Chapter 11 Bankruptcy Case and all remaining outstanding balances were settled in full. There were no outstanding balances on this note as of September 30, 2020 and December 31, 2019.

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STOCKHOLDERS' EQUITY

9 Months Ended

Sep. 30, 2020

STOCKHOLDERS' EQUITY

STOCKHOLDERS' EQUITY

NOTE 7 – STOCKHOLDERS’ EQUITY

Series A Preferred Stock

Liquidation Preference

In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, holders of shares of Series A Preferred Stock shall not be entitled to any liquidation preference.

Voting

On any matters presented to the stockholders of the corporation for their action or consideration at any meeting of stockholders of the Corporation (or by written consent of stockholders in lieu of meeting), each holder of outstanding shares of Series A Preferred Stock shall be entitled to vote in an amount equal to 200 votes per share. Series A Preferred Stock shall vote as a single class and such voting rights shall be identical in all respects.

Conversion

The holders of the shares of Series A Preferred Stock shall not have any rights hereunder to convert such shares into, or exchange such shares for, shares of any other series or class of capital stock of the Corporation or of any other person.

Common stock

The holders of our common stock are entitled to the following rights:

Voting

Each share of our common stock entitles its holder to one vote per share on all matters to be voted or consented upon by the stockholders. Holders of our common stock are not entitled to cumulative voting rights with respect to the election of directors.

Dividend

Subject to limitations under Delaware law and preferences that may apply to any shares of preferred stock that we may decide to issue in the future, holders of our common stock are entitled to receive ratably such dividends or other distributions, if any, as may be declared by our Board out of funds legally available.

Liquidation

In the event of the liquidation, dissolution, or winding up of our business, the holders of our common stock are entitled to share ratably in the assets available for distribution after the payment of all of our debts and other liabilities, subject to the prior rights of the holders of our preferred stock.

Other Matters

The holders of our common stock have no subscription, redemption, or conversion privileges. Our common stock does not entitle its holders to preemptive rights. All of the outstanding shares of our common stock are fully paid and non-assessable. The rights, preferences and privileges of the holders of our common stock are subject to the rights of the holders of shares of any series of preferred stock which we may issue in the future.

Reverse Stock Split

In June of 2020, we effected a 5:1 reverse stock split (the “Reverse Stock Split”) by filing an amendment to the Company’s Amended and Restated Certificate Incorporation with the Delaware Secretary of State. The Reverse Stock Split combined every five shares of Common Stock issued and outstanding immediately prior to effecting the Reverse Stock Split into one share of Common Stock. As a result, the number of issued and outstanding shares of Common Stock was retroactively adjusted in the consolidated financial statements.

2020 Incentive Plan

On March 31, 2020, the Company adopted the Applied UV, Inc. 2020 Omnibus Incentive Plan (the “Plan”) with 600,000 shares of common stock available for issuance under the terms of the Plan. The Plan permits the granting of Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Shares, Performance Units and Other Awards. The objectives of the Plan are to optimize the profitability and growth of the Company through incentives that are consistent with the Company’s goals and that link the personal interests of Participants to those of the Company’s stockholders. The Plan is further intended to provide flexibility to the Company in its ability to motivate, attract and retain the services of Participants who make or are expected to make significant contributions to the Company’s success and to allow Participants to share in the success of the Company. From time to time, we may issue Incentive Awards pursuant to the Plan. Each of the awards will be evidenced by and issued under a written agreement.

If an incentive award granted under the Plan expires, terminates, is unexercised or is forfeited, or if any shares are surrendered to us in connection with an incentive award, the shares subject to such award and the surrendered shares will become available for future awards under the Plan. The number of shares subject to the Plan, and the number of shares and terms of any Incentive Award may be adjusted in the event of any change in our outstanding common stock by reason of any stock dividend, spin-off, stock split, reverse stock split, recapitalization, reclassification, merger, consolidation, liquidation, business combination or exchange of shares, or similar transaction.

A summary of the Company’s option activity and related information follows:

	Number of	Option Price		Weighted-Average
	Shares	Per Share		Exercise Price
Options Outstanding at January 1, 2020	—	$	—	$	—
Granted	12,500	$	5.00	$	5.00
Expired/cancelled	(750)
Options Outstanding, September 30, 2020	11,750	$	5.00	$	5.00
Options exercisable, September 30, 2020	375	$	5.00	$	5.00

Share-based compensation expense for options totaling $6,738 was recognized in our results for the nine-months ended September 30, 2020 based on awards vested.

The valuation methodology used to determine the fair value of the options issued during the year was the Black-Scholes option-pricing model. The Black-Scholes model requires the use of a number of assumptions including volatility of the stock price, the average risk-free interest rate, and the weighted average expected life of the options. The risk-free interest rate assumption is based upon observed interest rates on zero coupon U.S. Treasury bonds whose maturity period is appropriate for the term of the options. Estimated volatility is a measure of the amount by which the Company’s stock price is expected to fluctuate each year during the expected life of the award. The Company’s calculation of estimated volatility is based on historical stock prices of these peer entities over a period equal to the expected life of the awards. The Company uses the historical volatility of peer entities due to the lack of sufficient historical data of its stock price.

As of September 30, 2020, there was $17,844 of total unrecognized compensation expense related to unvested employee options granted under the Company’s share-based compensation plans that is expected to be recognized over a weighted average period of approximately 1 year.

The weighted average fair value of options granted, and the assumptions used in the Black-Scholes model during the year ended September 30, 2020 are set forth in the table below.

	2020
Weighted average fair value of options granted	$	5.00
Risk-free interest rate		0.31-0.37	%
Volatility		41.4-46.7	%
Expected life (years)		5.50
Dividend yield		—	%

Common Stock Warrants

A summary of the Company’s warrant activity and related information follows:

	Number of	Option Price		Weighted-Average
	Shares	Per Share		Exercise Price
Warrants Outstanding at January 1, 2020	—	$	—	$	—
Granted	85,000	$	5.00	$	5.00
Expired	—
Warrants Outstanding, September 30, 2020	85,000	$	5.00	$	5.00
Warrants exercisable, September 30, 2020	85,000	$	5.00	$	5.00

Share-based compensation expense for warrants totaling $100,896 was recognized in our results for the nine-months ended September 30, 2020 based on awards vested.

The valuation methodology used to determine the fair value of the warrants issued during the year was the Black-Scholes option-pricing model. The Black-Scholes model requires the use of a number of assumptions including volatility of the stock price, the average risk-free interest rate, and the weighted average expected life of the warrants.

The risk-free interest rate assumption is based upon observed interest rates on zero coupon U.S. Treasury bonds whose maturity period is appropriate for the term of the warrants.

Estimated volatility is a measure of the amount by which the Company’s stock price is expected to fluctuate each year during the expected life of the award. The Company’s calculation of estimated volatility is based on historical stock prices of these peer entities over a period equal to the expected life of the awards. The Company uses the historical volatility of peer entities due to the lack of sufficient historical data of its stock price.

As of September 30, 2020, there was no unrecognized compensation expense related to unvested warrants granted under the Company’s share-based compensation plans.

The weighted average fair value of warrants granted, and the assumptions used in the Black-Scholes model during the year ended September 30, 2020 are set forth in the table below.

	2020
Weighted average fair value of options granted	$	5.00
Risk-free interest rate		0.37-0.89	%
Volatility		36.5-41.4	%
Expected life (years)		2.50
Dividend yield		—	%

On August 31, 2020, the Company closed its offering (the “August Offering”) in which it sold 1,000,000 common shares at a public offering price of $5.00 per share. In connection with the Offering, the Company (i) received $5,750,000, less underwriting fees of $517,000 and write-off of capitalized IPO Costs in the amount of $343,000, resulting in net proceeds of $4,889,000. Addionally, the Company issued 167,794 shares to Ross Carmel of Carmel, Milazzo & Feil LLP for the Offering. In addition, the underwriters were granted a 45‑day option to purchase up to an additional 150,000 shares of Common Stock or any combination thereof, to cover over-allotments, if any (the “Over-Allotment Option”). The shares were offered and sold to the public pursuant to the Company’s registration statement on Form S‑1, filed by the Company with the Securities and Exchange Commission on August 26, 2020, as amended, which became effective on August 28, 2020.

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RELATED PARTY

9 Months Ended

Sep. 30, 2020

RELATED PARTY

RELATED PARTY

NOTE 8 – RELATED PARTY

In February of 2019, the Company engaged Carmel, Milazzo & Feil LLP (the "Firm") to represent and assist the company with all general corporate legal matters including the preparation and filing with the Securities and Exchange Commission of a registration statement on Form S‑1 through the Company’s intended initial public offering. Ross Carmel, a board member of Applied UV, is a partner at the firm. The firm will perform services in exchange for three percent of the outstanding shares of the Company’s common stock, issued as follows: 1.) One percent due upon execution of the agreement 2.) One percent due up the filing of the Form S‑1; and 3.) One percent due upon the SEC declaring the Form S‑1 effective. As of September 30, 2020 and December 31, 2019, the company was liable to issue 102,066 shares of common stock to the firm. These shares have previously not been issued and have been recorded as a liability to be settled in stock for an amount of $507,805 as of December 31, 2019, however, the shares were subsequently issued in June of 2020, and the liability has been reclassed to additional paid in capital. Pursuant to the offering in August of 2020, the company issued an additional 59,728 common shares to the firm. The amount of $298,640 was recorded to additional paid in capital with a net effect of nill as the shares were issued in connection with the offering.

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LEASING ARRANGEMENTS

9 Months Ended

Sep. 30, 2020

LEASING ARRANGEMENTS

LEASING ARRANGEMENTS

NOTE 9 – LEASING ARRANGEMENTS

The Company adopted ASU 2016‑02 prospectively as of January 1, 2019, the date of initial application, and therefore prior comparative periods were not adjusted. As part of the adoption, the Company elected the “package of expedients”, which permits the Company not to reassess under the new standard the Company’s prior conclusions about lease identification and initial direct costs. The Company did not elect the use-of hindsight or the practical expedient pertaining to land easements, the latter not being applicable to the Company. The Company has lease arrangements which are classified as short-term in nature. The Company has elected the short-term lease recognition exemption for all leases that qualify. This means, for those leases that qualify, the Company will not recognize Right of Use ("ROU") assets or lease liabilities.

The Company determines whether an arrangement is a lease at inception. The Company has operating leases for office space and office equipment. The Company’s leases have remaining lease terms of one year to seven years, some of which include options to extend the lease term for up to five years. The Company considered these options to extend in determining the lease term used to establish the Company’s right-of use assets and lease liabilities once reasonably certain of exercise. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and operating lease liabilities are recognized at the lease commencement date based on the present value of the future lease payments over the lease term. The operating lease ROU asset also includes any lease payments made in advance of lease commencement and excludes lease incentives. The lease terms used in the calculations of the operating ROU assets and operating lease liabilities include options to extend or terminate the lease when the Company is reasonably certain that it will exercise those options. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

As the Company’s leases do not provide an implicit rate, the Company uses an incremental borrowing rate of 5% based on the information available at commencement date in determining the present value of lease payments.

Consistent with ASC 842‑20‑50‑4, the Company calculated its total lease cost based solely on its monthly rent obligation. The Company had no cash flows arising from its lease, no finance lease cost, short term lease cost, or variable lease costs. Our lease does not produce any sublease income, or any net gain or loss recognized from sale and leaseback transactions. As a result, the Company did not need to segregate amounts between finance and operating leases for cash paid for amounts included in the measurement of lease liabilities, segregated between operating and financing cash flows; supplemental non-cash information on lease liabilities arising from obtaining right-of-use assets; weighted-average calculations for the remaining lease term; or the weighted-average discount rate.

On February 7, 2014, the Company entered into a lease agreement in Mount Vernon, New York on a month to month basis. The monthly rent under this arrangement from January 1, 2018 through November 30, 2018 was $10,000 per month, from December 2018 through February 2019 was $11,150 per month. The company did not record an ROU asset or corresponding liability as the lease arrangement was month to month. The Company then amended the lease for a term that commenced on April 1, 2019 and expire on the 31st day of March 2024 at a monthly rate of $13,400. On April 1, 2019 the company recorded an ROU asset and a corresponding lease liability in the amount of $710,075. Rent expense for the nine months ended September 30, 2020 and 2019 was $127,800 and $116,350, respectively. As of September 30, 2020 and December 31, 2019, the balance of the ROU asset was $515,324 and $614,522, respectively. The lease can be cancelled by either party with 150 days of written notice.

Schedule maturities of operating lease liabilities outstanding as of September 30, 2020 are as follows:

2021	$	160,800
2022		160,800
2023		160,800
2024		93,800
Total lease payments		576,200
Less: Imputed Interest		(60,876)
Present value of future minimum lease payments	$	515,324

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COSTS AND ESTIMATED EARNINGS ON CONTRACTS IN PROGRESS

9 Months Ended

Sep. 30, 2020

COSTS AND ESTIMATED EARNINGS ON CONTRACTS IN PROGRESS

COSTS AND ESTIMATED EARNINGS ON CONTRACTS IN PROGRESS

NOTE 10 - COSTS AND ESTIMATED EARNINGS ON CONTRACTS IN PROGRESS

Costs and estimated earnings on contracts in progress, net of progress billings, are as follows as of September 30, 2020 and December 31, 2019:

Costs incurred on contracts in progress	$	498,190	$	240,732
Estimated net earnings thereon		541,728		42,403
Total costs and estimated earnings		1,039,918		283,135
Billings to date		(1,407,925)		(1,127,466)
Net overbilled	$	(368,007)	$	(844,331)
Contract Assets	$	—	$	—
Contract Liabilities (Deferred Revenue)		(368,007)		(844,331)
	$	(368,007)	$	(844,331)

Contract assets represent amounts earned under contracts in progress but not yet billed under the terms of those contracts. These amounts become billable according to the contract terms, which usually consider passage of time, achievement of certain milestones or completion of the project. Substantially all costs and estimated earnings in excess of billings on contracts in progress are expected to be billed and collected in the following year.

Contract liabilities represent billings to customers in excess of costs and earnings on contracts in progress. Substantially all such amounts are expected to be earned in the following year.

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SHARE EXCHANGE

9 Months Ended

Sep. 30, 2020

SHARE EXCHANGE

SHARE EXCHANGE

NOTE 11 – SHARE EXCHANGE

On July 31, 2019, March 27, 2019 and March 26, 2019, we and the shareholder of SteriLumen, Inc. and the sole member of Munn Works, LLC, completed the transactions contemplated by three Share Exchange Agreements. Pursuant to the applicable Share Exchange Agreements, SteriLumen, Inc. and Munn Works, LLC transferred to us all assets and liabilities. The shareholders of SteriLumen, Inc. exchanged all of their shares in SteriLumen for 2,000 preferred and 2,001,250 common shares of Applied UV, Inc. The sole member of Munn Works, LLC exchanged all of its membership interest in Munn Works, LLC for 3,000,000 common shares of Applied UV, Inc. As the Share Exchanges were transactions between entities that are under common control, accounting rules require that our Consolidated Financial Statements include the results of the Transferred Businesses for all periods presented, including periods prior to the completion of the Share Exchanges.

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LEGAL

9 Months Ended

Sep. 30, 2020

LEGAL

LEGAL

NOTE 12 - LEGAL

APF Management filed and served a complaint in 2013 New York state court against Munn Works, LLC, Max Munn and various other parties seeking recovery of damages and was awarded various damages on behalf of APF.

On June 25, 2018, Munn Works, LLC. entered Chapter 11 bankruptcy in order to facilitate an appeal and a resolution to this matter. As part of the Chapter 11 bankruptcy, APF management filed a claim in the amount of $1,474,505. All of the parties agreed to resolve the disputes whereby, APF would receive $400,000 payable by the Company. The amount was settled and paid in full in 2019.

Administration of Chapter 11 Case

In June of 2018, Munn Works, LLC received Bankruptcy court approval of certain "first-day" motions, which preserved the Company’s ability to continue operations without interruption in Chapter 11. As part of the "first-day" motions, the Company received approval to pay or otherwise honor certain pre-petition obligations generally designed to support the Company’s operations. Additionally, the Bankruptcy Court confirmed the Company’s authority to pay for goods and services received post-petition in the ordinary course of business.

As part of the chapter 11 case, the Company has retained, pursuant to Bankruptcy Court authorization, legal and other professionals to advise the Company in connection with the administration of its chapter 11 case and its litigation with APF management, and certain other professionals to provide services and advice in the ordinary course business. As a result of the chapter 11 filing, the payment of pre-petition liabilities is generally subject to compromise pursuant to a plan of reorganization. Generally, under the Bankruptcy Code, actions to enforce or otherwise effect payment of pre-bankruptcy filing liabilities are stayed. Although payment of pre-petition claims generally is not permitted, the Bankruptcy Court granted the Company authority to pay certain pre-petition claims in designated categories and subject to certain terms and conditions. Among other things, the Bankruptcy Court has authorized the Company to pay certain pre-petition claims relating to employees and critical vendors.

On June 25, 2018. the Company filed schedules of assets and liabilities and statement of financial affairs (the "Schedules") with the Bankruptcy Court. The Bankruptcy Court has entered an order setting October 26, 2018 as the deadline for filing proofs of claim (the "Bar Date"). The Bar Date is the date by which claims against the Company relating to the period prior to the commencement of the Company’s chapter 11 case must be filed if such claims are not listed in liquidated, non-contingent and undisputed amounts in the Schedules, or if the claimant disagrees with the amount, characterization or classification of its claim as reflected in the Schedules. Claims that are subject to the Bar Date and which are not filed on or prior to the Bar Date, may be barred from participating in any distribution that may be made under a plan of reorganization in the Company’s chapter 11 case.

The Company applied Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 852, Reorganizations, which is applicable to companies under bankruptcy protection, and requires amendments to the presentation of key financial statement line items. It requires that the financial statements for periods subsequent to the chapter 11 filing distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business. Revenues, expenses, realized gains and losses, and provisions for losses that can be directly associated with the reorganization and restructuring of the business must be reported separately as reorganization items in the consolidated statements of operations. The balance sheet must distinguish pre-petition liabilities subject to compromise from both those pre-petition liabilities that are not subject to compromise and from post-petition liabilities. Liabilities that may be subject to a plan of reorganization must be reported at the amounts expected to be allowed in the Company’s chapter 11 case, even if they may be settled for lesser amounts as a result of the plan of reorganization or negotiations with creditors. In addition, cash used by reorganization items are disclosed separately in the consolidated statements of cash flow.

Liabilities Subject to Compromise

Pre-petition liabilities that are subject to compromise are required to be reported at the amounts expected to be allowed in the Company’s chapter 11 case, even if they may be settled for lesser amounts. The amounts classified as Liabilities Subject to Compromise as of December 31, 2018 may be subject to future adjustments depending on Bankruptcy Court actions, further developments with respect to disputed claims, determinations of the secured status of certain claims, if any, the value of any collateral securing such claims, or other events. The Company cannot reasonably estimate the value of the claims that will ultimately be allowed in its chapter 11 case until its evaluation, investigation and reconciliation of all filed claims has been completed. The amount of liabilities subject to compromise represents the Company’s estimate, where an estimate is determinable, of known or potential pre-petition claims to be addressed in connection with its chapter 11 case. Such liabilities are reported at the Company’s current estimate, where an estimate is determinable, of the allowed claim amount, even though they may be settled for lesser amounts. These claims remain subject to future adjustments depending on Bankruptcy Court actions, further developments with respect to disputed claims, determinations of the secured status of certain claims, if any, the value of any collateral securing such claims, or other events.

As of December 31, 2018, Liabilities subject to Compromise consist of the following (note: all liabilities were settled in 2019, therefore no balances remain as of December 31, 2019):

	2018
Accounts payable and accrued expenses- pre-petition	$	492,014
Notes payable- pre-petition		370,390
Expectation damages accrual- APF Management		1,474,505
Total	$	2,336,909

Pursuant to Bankruptcy Court Order dated May 31, 2019, the Debtor’s Second Amended Chapter 11 Plan dated April 29, 2019 (the “Plan”) was approved and confirmed. The Plan provided treatment for five (5) classes of claims, with the general unsecured claims composing Class 4 Claimants. Under the Plan, Class 4 Claimants, would receive 10% of their Allowed Claim on the Effective Date. As a result of the bankruptcy claim, APF received and settled for $400,000 where a gain on settlement of $1,074,505 was recorded. As described in Note 6 of the financial statements, the Company recorded a total net gain from settlement of debt in the amount of $57,640. Other various pre-petition creditors received and settled for a total of $103,761, resulting in a gain on settlement in the amount of $388,253. The entire amount was escrowed on or before May 23, 2019 and paid within 15 days of the effective date of the stipulation. As a result of the transaction, the Company recorded a total gain on settlement of $1,520,398.

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MOUNT SINAI AGREEMENT

9 Months Ended

Sep. 30, 2020

MOUNT SINAI AGREEMENT

MOUNT SINAI AGREEMENT

NOTE 13 - MOUNT SINAI AGREEMENT

On April 20, 2020 SteriLumen entered into the Mount Sinai Agreement pursuant to which Mount Sinai has agreed to conduct a study of the effectiveness of the SteriLumen Disinfecting System in 17 patient bathrooms at Mount Sinai St. Luke’s Hospital in New York, NY. SteriLumen will be responsible for funding the direct and indirect costs of Mount Sinai’s research in the amount of $160,000 plus all of the cost of microbiological testing. To the extent any intellectual property resulting from the research is conceived by Mount Sinai it will be the intellectual property of Mount Sinai and to the extent it is conceived by SteriLumen it will be the intellectual property of SteriLumen. As of the date of the financial statements are available to be issued, the company has not incurred any costs in relation to this agreement. The company paid $40,000 of prepayments and the amount has been recorded as prepayments and other current assets. SteriLumen has a 60-day exclusive option to negotiate a license for Mount Sinai’s resulting patent rights if such patent was obtained at SteriLumen’s request and SteriLumen has paid for all the costs in obtaining the patent. If the results of the study contained in Mount Sinai’s final report are used by SteriLumen in a successful regulatory filing or a successful fundraising effort, the Sponsor will be obligated to pay Mount Sinai a fee of $30,000.

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SEGMENT REPORTING

9 Months Ended

Sep. 30, 2020

SEGMENT REPORTING

SEGMENT REPORTING

NOTE 14 - SEGMENT REPORTING

FASB Codification Topic 280, Segment Reporting, establishes standards for reporting financial and descriptive information about an enterprise’s reportable segments. The Company has two reportable segments: the design, manufacture, assembly and distribution of automated disinfecting mirror systems for use in hospitals and other healthcare facilities (disinfectant mirror segment) and the manufacture of fine mirrors specifically for the hospitality industry (hospitality segment). The segments are determined based on several factors, including the nature of products and services, the nature of production processes, customer base, delivery channels and similar economic characteristics.

An operating segment’s performance is evaluated based on its pre-tax operating contribution, or segment income. Segment income is defined as net sales less cost of sales, and segment selling, general and administrative expenses, and does not include amortization of intangibles, stock-based compensation, other charges (income), net and interest and other, net.

All net sales, cost of goods sold, and other income (expense) was generated or incurred from the hospitality segment of our business. For the nine months ended September 30, 2020 and 2019, the hospitality segment of our business incurred $1,371,531 and $1,335,583, respectively, of selling, general and administrative expenses. For the nine months ended September 30, 2020 and 2019, the disinfectant mirror segment of our business incurred $110,483 and $41,521, respectively, of selling, general and administrative expenses. For the nine months ended September 30, 2020 and 2019, the disinfectant mirror segment of our business incurred $65,037 and $0, respectively, of research and development expenses

As of September 30, 2020 and December 31, 2019 assets from the hospitality segment of our business amounted to $7,495,572 and $4,706,535, respectively. As of September 30, 2020 and December 31, 2019, total assets from the disinfectant mirror segment of our business amounted to $266,306 and $62,852, respectively.

As of September 30, 2020 and December 31, 2019, total liabilities from the hospitality segment of our business amounted to $2,178,425 and $3,347,120, respectively. As of September 30, 2020 and December 31, 2019, total liabilities from the disinfectant mirror segment of our business amounted to $137,941 and $37,477, respectively.

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PAYROLL PROTECTION PLAN LOAN

9 Months Ended

Sep. 30, 2020

PAYROLL PROTECTION PLAN LOAN

PAYROLL PROTECTION PLAN LOAN

NOTE 15 - PAYROLL PROTECTION PLAN LOAN

In April of 2020, the Company submitted a Paycheck Protection Program application to Chase Bank for a loan amount equal to $296,827. The amount was approved and the Company has received the funds. The Lender will have 90 days to review borrower’s forgiveness application and the SBA will have an additional 60 days to review the Lender’s decision as to whether the borrower’s loan may be forgiven. Under the CARES Act, loan forgiveness is available for the sum of documented payroll costs, covered rent payments, covered utilities, and certain covered mortgage interest payments during the twenty four-week period beginning on the date of first disbursement of the PPP Loan. For purposes of the CARES Act, payroll costs exclude compensation of an individual employee earning more than $100,000, prorated annually. Not more than 40% of the forgiven amount may be for non-payroll costs. Forgiveness is reduced if full-time headcount declines, or if salaries and wages for employees with salaries of $100,000 or less annually are reduced by more than 25%. Although the Company currently believes that its use of the PPP Loan will meet the conditions for forgiveness of the PPP Loan, the Company cannot assure that the PPP Loan will be forgiven, in whole or in part.

Future maturities of the loan payable, if not forgiven, are as follows:

Twelve months ending September 30,
2021	$	69,927
2022		69,927
2023		69,927
2024		69,927
2025		17,119
	$	296,827

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SUBSEQUENT EVENT

9 Months Ended

Sep. 30, 2020

SUBSEQUENT EVENT

SUBSEQUENT EVENT

NOTE 16 - SUBSEQUENT EVENT

Management has evaluated subsequent events through November 15, 2020, the date the financial statements were available to be issued. As a result of the spread of the COVID‑19 Coronavirus and the resulting stay-at-home orders issued by the state and local municipalities in which the Company operates, the Company is experiencing reduced sales. The duration of the reduction in sales may be only temporary. However, the related financial impact and duration cannot be reasonably estimated at this time.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

9 Months Ended

Sep. 30, 2020

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business

Nature of Business

In March 2019, Applied UV, Inc. (the "Company") was formed and incorporated in the State of Delaware for the intended purpose of creating a legal holding company structure for SteriLumen, Inc. and Munn Works, LLC and any future potential mergers or acquisitions. The then-existing shareholders and members of SteriLumen, Inc. and Munn Works, LLC exchanged all of their interest for shares of Applied UV, Inc. with substantially similar economic voting interests for each shareholder immediately before and after the share exchange. As a result of the share exchange, SteriLumen, Inc. and Munn Works, LLC became wholly-owned subsidiaries of Applied UV, Inc and, collectively referred to as (the "Company"). The combination met the criteria outlined in ASC 850 to be accounted for as a transaction between entities under common control and therefore the financial statements are being presented as if the transfer happened at the beginning of the period and prior year financial information has been retrospectively adjusted to furnish comparative information.

SteriLumen, Inc. is engaged in the design, manufacture, assembly and distribution of automated disinfecting mirror systems for use in hospitals and other healthcare facilities. The Company was incorporated in the State of New York in November of 2012 and is headquartered in Mount Vernon, New York. Munn Works, LLC is engaged in the manufacture of fine mirrors specifically for the hospitality industry.

Basis of Presentation

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, and with the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) set forth in Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim financial statements furnished reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented. Unaudited interim results are not necessarily indicative of the results for the full fiscal year. These financial statements should be read along with the Annual Report filed of the Company for the annual period ended December 31, 2019. The consolidated balance sheet as of December 31, 2019 was derived from the audited consolidated financial statements as of and for the year then ended. The consolidated financial statements include the accounts of Applied UV, Inc., Munn Works, LLC and SteriLumen, Inc. All significant intercompany transactions and balances are eliminated in consolidation.

Revenue and Cost Recognition

Revenue and Cost Recognition

On January 1, 2018, the Company adopted accounting standard ASC 606, Revenue from Contracts with Customers and all the related amendments using the modified retrospective method for all customer contracts not yet completed as of the adoption date. The adoption of ASC 606 did not have a significant impact on our Consolidated Financial Statements.

The Company recognizes revenue when the performance obligations in the client contract has been achieved. A performance obligation is a contractual promise to transfer a distinct service to the customer. The transaction price of a contract is allocated to each distinct performance obligation and recognized as revenue when or as, the customer receives the benefit of the performance obligation. Under ASC 606, revenue is recognized when a customer obtains control of promised services in an amount that reflects the consideration we expect to receive in exchange for those services.

To achieve this core principal, the Company applies the following five steps:

1) Identify the contract with a customer

A contract with a customer exists when (i) the Company enters into an enforceable contract with a customer that defines each party’s rights regarding the services to be transferred and identifies the payment terms related to these services, (ii) the contract has commercial substance and, (iii) the Company determines that collection of substantially all consideration for services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration. The Company applies judgment in determining the customer’s ability and intention to pay, which is based on a variety of factors including the customer’s historical payment experience or, in the case of a new customer, published credit and financial information pertaining to the customer.

2) Identify the performance obligations in the contract

Performance obligations promised in a contract are identified based on the services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the service either on its own or together with other resources that are readily available from third parties or from the Company, and are distinct in the context of the contract, whereby the transfer of the services is separately identifiable from other promises in the contract. To the extent a contract includes multiple promised services, the Company must apply judgment to determine whether promised services are capable of being distinct in the context of the contract. If these criteria are not met the promised services are accounted for as a combined performance obligation. The Company promises to design, manufacture and sell custom mirrors through contractual arrangements. It was determined that most services within a contract are substantially the same and have the same pattern of transfer to the customer over the term of the agreement and are therefore highly interdependent upon each other. As such, the Company determined that the services within a contract are not separately identifiable in the context of the contract and should therefore be bundled into a single performance obligation.

3) Determine the transaction price

The transaction price is determined based on the consideration to which the Company will be entitled in exchange for transferring services to the customer. We evaluate whether a significant financing component exists when we recognize revenue in advance of customer payments that occur over time. We do not adjust the transaction price for the effects of financing if, at contract inception, the period between the transfer of control to a customer and final payment is expected to be one year or less. The Company establishes pricing for contracts with customers based on a fixed price for a fixed fee. Contracts do not provide for a discount or refund to customers and historically, no discounts or refunds have been given.

4) Allocate the transaction price to performance obligations in the contract

If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. However, if a series of distinct services that are substantially the same qualifies as a single performance obligation in a contract with variable consideration, the Company must determine if the variable consideration is attributable to the entire contract or to a specific part of the contract. Contracts that contain multiple performance obligations require an allocation of the transaction price based on management’s judgment. The identified promises are considered to be bundled in arriving at the overall promise within the contract. This promise therefore results in one performance obligation, to design, manufacture and sell custom mirrors to our customer, therefore, allocation of the transaction price is not necessary.

5) Recognize revenue when or as the Company satisfies a performance obligation

Revenue is comprised of projects that are completed within our own facility or from a third-party vendor (direct sales). For projects that are completed within our own facility, the Company satisfies performance obligations at over time. For projects that are completed from a third-party vendor, the performance obligation is recognized at a point in time.

As of September 30, 2020 and December 31, 2019, total deferred revenue was $746,936 and $1,245,300. As of September 30, 2020, deferred revenue was comprised of work generated from our own Mount Vernon facility of $437,552 and work performed at the third party manufacturer of $309,384. At January 1, 2020, deferred revenue was $1,245,300 which the entire amount was recognized as revenue during the nine months ended September 30, 2020. As of December 31, 2019, deferred revenue was comprised of work generated from our own Mount Vernon facility of $844,331, work performed at the third party manufacturer of $363,940 and billings made upfront of $37,029.

For projects, that are completed within our own facility, we design, manufacture and sell custom mirrors for hotels and hospitals through contractual agreements. These sales require us to deliver our products within three to six months from commencement of order acceptance. We recognize revenue over time by using the input method based on costs incurred as it depicts our progress toward satisfaction of the performance obligation. Under this method, revenue arising from fixed price contracts is recognized as work is performed based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligations. Incurred costs include all direct material and labor costs and those indirect costs related to contract performance, such as indirect labor, supplies, tools, repairs and depreciation costs. Contract material costs are included in incurred costs when the project materials have been purchased or moved to work in process as required by the project’s engineering design. Cost based input methods of revenue recognition require us to make estimates of costs to complete the projects. In making such estimates, significant judgment is required to evaluate assumptions related to the costs to complete the projects, including materials, labor and other system costs. If the estimated total costs on any contract are greater than the net contract revenues, we recognize the entire estimated loss in the period the loss becomes known and can be reasonably estimated. Deferred Revenue represents amounts billed in excess of revenues and profits recognized. Total deferred revenue from the input method of accounting was $368,007 and $844,331 as of September 30, 2020 and December 31, 2019, respectively. Revenues and profits recognized in excess of amounts billed typically does not occur as we will not perform any work in excess of the amount we bill to our customers.

Each product or service delivered to a third-party customer that is manufactured by a third-party vendor is considered to satisfy a performance obligation. Performance obligations generally occur at a point in time and are satisfied when control of the goods passes to the customer. These sales are shipped from the manufacturer to the customer without our taking physical inventory possession. We report direct sales on a gross basis, that is, the amounts billed to our customers are recorded as "Sales," and inventory purchased from manufacturers are recorded as Cost of Sales. We are the principal of direct sales because we control the inventory before it is transferred to our customers. Our control is evidenced by us being primarily responsible for fulfilling the promise to our customers, taking on inventory risk of returned product, and having discretion in establishing pricing. We typically pay our vendors a portion of the total cost up front and the remaining balance is accrued for and paid within 30 to 60 days of when the products are shipped from the third-party warehouse. Vendor payments are capitalized until completion of the project and are recorded as vendor deposits. As of September 30, 2020 and December 31, 2019, the vendor deposit balance was $146,278 and $104,517, respectively.

Losses expected to be incurred on contracts in progress are charged to operations in the period such losses are determined. Deferred revenue from these projects as of September 30, 2020 and December 31, 2019 was $378,929 and $363,942, respectively. At September 30, 2020 and December 31, 2019, there were no losses charged to expense.

There are times that we bill upfront where no work is performed until 30 to 60 days after the deposit is received from our customer. Accordingly, no revenue is recognized and the amounts are deferred. As of September 30, 2020 and December 31, 2019, deferred revenue balances related to these invoices were $- and $37,029, respectively.

For the nine months ended September 30, 2020, the Company generated revenues of $2,981,651 at a point in time and $1,511,410 over time. For the nine months ended September 30, 2019, the Company generated revenues of $4,472,038 at a point in time and $1,907,221 over time.

Stock Based Compensation

Stock Based Compensation

Share based compensation cost is measured at grant date, based on the estimated fair value of the award using a Black Scholes option pricing model for options with service or performance-based conditions. Stock based compensation cost is recognized as expense, over the requisite service period on a straight-line basis for service-based awards. The Black-Scholes model incorporate several variables, including expected term, expected volatility, expected dividend yield and a risk-free interest rate. We estimate the expected term of the options granted based on anticipated exercises in future periods based on historical activity. The expected stock price volatility for the Company’s stock options is calculated based on the historical volatility of the Company’s common stock. The expected dividend yield reflects our current and expected future policy for dividends on our common stock. To determine the risk-free interest rate, we utilize the U.S. Treasury yield curve in effect at the time of grant with a term consistent with the expected term of our awards. We have elected to account for forfeitures as they occur.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

Recently Adopted

In February 2016, the Financial Accounting Standards Board, or the FASB, issued ASU No. 2016‑02, Leases (Topic 842), which requires lessees to recognize right-of-use, or ROU, assets and related lease liabilities on the balance sheet for all leases greater than one year in duration. We adopted ASC 842 on January 1, 2019 using a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach did not require any transition accounting for leases that expired before the earliest comparative period presented. The adoption of this standard resulted in the recording of ROU assets and lease liabilities for all our lease agreements with original terms of greater than one year. The adoption of ASC 842 did not have a significant impact on our statements of income or cash flows.

In August 2018, the FASB issued ASU 2018‑13, Fair Value Measurement (Topic 820): Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement, which removes, modifies and adds various disclosure requirements related to fair value disclosures. Disclosures related to transfers between fair value hierarchy levels will be removed and further detail around changes in unrealized gains and losses for the period and unobservable inputs used in determining level 3 fair value measurements will be added, among other changes. ASU 2018‑13 is effective for interim and annual reporting periods beginning after December 15, 2019, and early adoption is permitted. The adoption of this standard did not have a material impact on our financial statements.

In June 2016, the FASB issued ASU 2016‑13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which replaces the current incurred loss impairment methodology for financial assets with a methodology that reflects expected credit losses. The new credit losses model must be applied to loans, accounts receivable, and other financial assets. ASU 2016‑13 is effective for annual periods beginning after December 15, 2019, including interim periods within those annual periods. The adoption of this standard did not have a material impact on our financial statements.

We currently believe that all other issued and not yet effective accounting standards are not relevant to our financial statements.

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PROPERTY AND EQUIPMENT (Tables)

9 Months Ended

Sep. 30, 2020

PROPERTY AND EQUIPMENT

Summary of property and equipment

Property and equipment are summarized by major classifications as follows:

	September 30,		December 31,
	2020		2019
Machinery and Equipment	$	61,083	$	39,583
Furniture and Fixtures		33,385		16,864
Leasehold improvements		60,223		—
		154,691		56,447
Less: Accumulated Depreciation		(34,155)		(22,076)
	$	120,536	$	34,371

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CAPITAL LEASE OBLIGATION (Tables)

9 Months Ended

Sep. 30, 2020

CAPITAL LEASE OBLIGATION

Schedule of machinery under capital lease

Machinery and Equipment	$	61,083
Less: Accumulated Depreciation		(25,685)
	$	35,398

Schedule of future minimum principal and interest payments under capital lease arrangements

2020	$	2,949
2021		7,280
2022		7,280
2023		1,489
Less: Amount representing interest		(1,737)
Present value of future minimum lease payments		17,261
Less: current portion		(6,380)
	$	10,881

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LOANS PAYABLE (Tables)

9 Months Ended

Sep. 30, 2020

Notes payable

Debt Instrument [Line Items]

Summary of minimum obligations under loan agreement

Minimum obligations under this loan agreement is as follows:

As of September 30,
2021	$	30,000
2022		30,000
2023		30,000
2024		30,000
	$	120,000

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STOCKHOLDERS' EQUITY (Tables)

9 Months Ended

Sep. 30, 2020

STOCKHOLDERS' EQUITY

Summary of the Company's option activity

A summary of the Company’s option activity and related information follows:

	Number of	Option Price		Weighted-Average
	Shares	Per Share		Exercise Price
Options Outstanding at January 1, 2020	—	$	—	$	—
Granted	12,500	$	5.00	$	5.00
Expired/cancelled	(750)
Options Outstanding, September 30, 2020	11,750	$	5.00	$	5.00
Options exercisable, September 30, 2020	375	$	5.00	$	5.00

Summary of weighted average fair value of options granted, and the assumptions used in the Black-Scholes model

The weighted average fair value of options granted, and the assumptions used in the Black-Scholes model during the year ended September 30, 2020 are set forth in the table below.

	2020
Weighted average fair value of options granted	$	5.00
Risk-free interest rate		0.31-0.37	%
Volatility		41.4-46.7	%
Expected life (years)		5.50
Dividend yield		—	%

Summary of the Company's warrant activity

A summary of the Company’s warrant activity and related information follows:

	Number of	Option Price		Weighted-Average
	Shares	Per Share		Exercise Price
Warrants Outstanding at January 1, 2020	—	$	—	$	—
Granted	85,000	$	5.00	$	5.00
Expired	—
Warrants Outstanding, September 30, 2020	85,000	$	5.00	$	5.00
Warrants exercisable, September 30, 2020	85,000	$	5.00	$	5.00

Summary of weighted average fair value of warrants granted, and the assumptions used in the Black-Scholes model

The weighted average fair value of warrants granted, and the assumptions used in the Black-Scholes model during the year ended September 30, 2020 are set forth in the table below.

	2020
Weighted average fair value of options granted	$	5.00
Risk-free interest rate		0.37-0.89	%
Volatility		36.5-41.4	%
Expected life (years)		2.50
Dividend yield		—	%

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LEASING ARRANGEMENTS (Tables)

9 Months Ended

Sep. 30, 2020

LEASING ARRANGEMENTS

Schedule of maturities of operating lease liabilties

Schedule maturities of operating lease liabilities outstanding as of September 30, 2020 are as follows:

2021	$	160,800
2022		160,800
2023		160,800
2024		93,800
Total lease payments		576,200
Less: Imputed Interest		(60,876)
Present value of future minimum lease payments	$	515,324

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COSTS AND ESTIMATED EARNINGS ON CONTRACTS IN PROGRESS (Tables)

9 Months Ended

Sep. 30, 2020

COSTS AND ESTIMATED EARNINGS ON CONTRACTS IN PROGRESS

Schedule of estimated earnings on contracts in progress

Costs and estimated earnings on contracts in progress, net of progress billings, are as follows as of September 30, 2020 and December 31, 2019:

Costs incurred on contracts in progress	$	498,190	$	240,732
Estimated net earnings thereon		541,728		42,403
Total costs and estimated earnings		1,039,918		283,135
Billings to date		(1,407,925)		(1,127,466)
Net overbilled	$	(368,007)	$	(844,331)
Contract Assets	$	—	$	—
Contract Liabilities (Deferred Revenue)		(368,007)		(844,331)
	$	(368,007)	$	(844,331)

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LEGAL (Tables)

9 Months Ended

Sep. 30, 2020

LEGAL

Schedule of liabilities subject to compromise.

As of December 31, 2018, Liabilities subject to Compromise consist of the following (note: all liabilities were settled in 2019, therefore no balances remain as of December 31, 2019):

	2018
Accounts payable and accrued expenses- pre-petition	$	492,014
Notes payable- pre-petition		370,390
Expectation damages accrual- APF Management		1,474,505
Total	$	2,336,909

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PAYROLL PROTECTION PLAN LOAN (Tables)

9 Months Ended

Sep. 30, 2020

PPP Loan, CARES ACT

Debt Instrument [Line Items]

Schedule of future maturities of loan payable

Future maturities of the loan payable, if not forgiven, are as follows:

Twelve months ending September 30,
2021	$	69,927
2022		69,927
2023		69,927
2024		69,927
2025		17,119
	$	296,827

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Revenue and cost recognition (Details) - USD ($)	9 Months Ended	12 Months Ended
	Sep. 30, 2020	Dec. 31, 2019	Sep. 30, 2019
Disaggregation of Revenue [Line Items]
Contract Liabilities (Deferred Revenue)	$ 746,936	$ 1,245,300
Deferred revenue	1,245,300
Vendor deposit balance	146,278	104,517
Losses charged to expense	$ 0	0
Invoices
Disaggregation of Revenue [Line Items]
Contract Liabilities (Deferred Revenue)		37,029	$ 0
Minimum
Disaggregation of Revenue [Line Items]
Period of delivery of products from commencement of order acceptance	3 months
Period for remaining balance accrued for and paid when the products are shipped from the third-party warehouse	30 days
Maximum
Disaggregation of Revenue [Line Items]
Period of delivery of products from commencement of order acceptance	6 months
Period for remaining balance accrued for and paid when the products are shipped from the third-party warehouse	60 days
Work generated from our own Mount Vernon facility
Disaggregation of Revenue [Line Items]
Contract Liabilities (Deferred Revenue)	$ 437,552	844,331
Work performed at the third party manufacturer
Disaggregation of Revenue [Line Items]
Contract Liabilities (Deferred Revenue)	309,384	363,940
Billings made upfront
Disaggregation of Revenue [Line Items]
Contract Liabilities (Deferred Revenue)		37,029
Input method of accounting
Disaggregation of Revenue [Line Items]
Contract Liabilities (Deferred Revenue)	368,007	844,331
Contracts in progress
Disaggregation of Revenue [Line Items]
Contract Liabilities (Deferred Revenue)	$ 378,929	$ 363,942

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Disaggregation of Revenue [Line Items]
Revenue	$ 1,560,633	$ 2,775,848	$ 4,493,061	$ 6,379,259
At a point in time
Disaggregation of Revenue [Line Items]
Revenue			2,981,651	4,472,038
Over time
Disaggregation of Revenue [Line Items]
Revenue			$ 1,511,410	$ 1,907,221

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INVENTORY (Details) - USD ($)	Sep. 30, 2020	Dec. 31, 2019
INVENTORY
Inventory, raw materials	$ 189,755	$ 99,543

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PROPERTY AND EQUIPMENT (Details) - USD ($)	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Dec. 31, 2019
Property, Plant and Equipment, Net, by Type [Abstract]
Property and equipment, gross	$ 154,691		$ 56,447
Less: Accumulated Depreciation	(34,155)		(22,076)
Property and equipment, net	120,536		34,371
Depreciation expense, including amortization of assets under capital leases and patent cost	13,528	$ 6,519
Machinery and Equipment
Property, Plant and Equipment, Net, by Type [Abstract]
Property and equipment, gross	61,083		39,583
Furniture and Fixtures
Property, Plant and Equipment, Net, by Type [Abstract]
Property and equipment, gross	33,385		$ 16,864
Leasehold improvements
Property, Plant and Equipment, Net, by Type [Abstract]
Property and equipment, gross	$ 60,223

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DUE TO AND FROM SHAREHOLDER (Details) - USD ($)	Sep. 30, 2020	Dec. 31, 2019
DUE TO AND FROM SHAREHOLDER
Amount owed from the Company's majority shareholder	$ 0	$ 4,225

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CAPITAL LEASE OBLIGATION - Machinery under capital lease (Details)	Sep. 30, 2020 USD ($)
CAPITAL LEASE OBLIGATION
Machinery and Equipment	$ 61,083
Less: Accumulated Depreciation	(25,685)
Machinery And Equipment under capital lease	$ 35,398

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CAPITAL LEASE OBLIGATION - Future minimum principal and interest payments under capital lease arrangements (Details) - USD ($)	Sep. 30, 2020	Dec. 31, 2019
Finance Lease, Liability, Payment, Due, Rolling Maturity [Abstract]
2020	$ 2,949
2021	7,280
2022	7,280
2023	1,489
Less: Amount representing interest	(1,737)
Present value of future minimum lease payments	17,261
Less: current portion	(6,380)	$ (6,380)
Capital lease obligations	$ 10,881	$ 15,212

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LOANS PAYABLE - Minimum obligations under this loan agreement (Details) - USD ($)	Sep. 30, 2020	Dec. 31, 2019
Minimum obligations
Total	$ 120,000	$ 157,500
Notes payable
Minimum obligations
2021	30,000
2022	30,000
2023	30,000
2024	30,000
Total	$ 120,000

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LOANS PAYABLE (Details)	1 Months Ended			9 Months Ended		12 Months Ended
	Dec. 31, 2019 USD ($)	Dec. 31, 2018 USD ($)	Dec. 31, 2012 USD ($)	Sep. 30, 2020 USD ($)	Sep. 30, 2019 USD ($)	Dec. 31, 2019 USD ($) installment shares
Debt Instrument [Line Items]
Outstanding principal balance	$ 157,500			$ 120,000		$ 157,500
Interest expense				0	$ 0
Repayments of debt						$ 157,500
Number of equal installments | installment						5
Amount paid in installment						$ 30,000
Minimum amount of shares				$ 4,080,121
Loss on extinguishments						11,250
Loans payable
Debt Instrument [Line Items]
Proceeds from notes payable			$ 260,000
Interest rate			5.00%
Outstanding principal balance	0	$ 131,336				0
Interest expense	5,902	$ 7,656
Outstanding principal balance reclassified to liabilities subject to compromise	$ 132,390					132,390
Repayments of debt						$ 80,000
Period for repayments of debt						90 days
Number of equal installments | installment						4
Amount paid in installment						$ 20,000
Third party lender
Debt Instrument [Line Items]
Number of common stock issued during the period | shares						8,000
Period for shares to reach its minimum limit						24 months
Minimum amount of shares						$ 85,000
Maximum shares to be issued to bring value to its minimum limit | shares						17,000
Loss on extinguishments						$ (34,610)

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LOANS PAYABLE - Advances from on deck capital (Details)	1 Months Ended		9 Months Ended		12 Months Ended
	Jun. 30, 2018 USD ($)	Jun. 30, 2016 USD ($)	Sep. 30, 2020 USD ($)	Sep. 30, 2019 USD ($)	Dec. 31, 2019 USD ($) installment	Dec. 31, 2018 USD ($)
Debt Instrument [Line Items]
Number of equal installments | installment					5
Amount paid in installment					$ 30,000
Outstanding principal balance			$ 120,000		157,500
Interest expense			$ 0	$ 0
Repayments of debt					157,500
Additional accrued based on the proof of claim submitted						$ 20,140
Amount of allowed proof of claim paid					$ 18,750
Percentage of allowed proof of claim paid (as a percent)					10.00%
Amount of proof of claim filed					$ 187,500
Additional amount payable in year two					7,500
Gain on extinguishments					11,250
June 2016 note
Debt Instrument [Line Items]
Maturity term		1 year
Number of equal installments		52
Amount paid in installment		$ 2,346
Outstanding principal balance					$ 0
Interest expense						3,981
June 2018 note
Debt Instrument [Line Items]
Maturity term	1 year
Number of equal installments	52
Amount paid in installment	$ 3,605
Outstanding principal balance						150,000
Repayments of debt						0
Outstanding principal balance reclassified to liabilities subject to compromise						150,000
Accrued interest						$ 17,360
On Deck Capital | June 2016 note
Debt Instrument [Line Items]
Proceeds from notes payable		$ 100,000
On Deck Capital | June 2018 note
Debt Instrument [Line Items]
Proceeds from notes payable	$ 150,000

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LOANS PAYABLE - Additional information (Details) - USD ($)	1 Months Ended			9 Months Ended		12 Months Ended
	Oct. 31, 2017	Jun. 30, 2017	Sep. 30, 2016	Sep. 30, 2020	Sep. 30, 2019	Dec. 31, 2019
Debt Instrument [Line Items]
Interest expense				$ 0	$ 0
Gain as a result of the Chapter 11 Bankruptcy Case						$ 81,000
Outstanding principal balance				120,000		157,500
LG Funding, LLC
Debt Instrument [Line Items]
Proceeds from notes payable	$ 150,971	$ 150,990	$ 125,990
Notes exchanged	$ 182,679	$ 187,228	$ 156,228
Outstanding principal balance				$ 0		$ 0

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STOCKHOLDERS' EQUITY - Voting (Details)	9 Months Ended
	Sep. 30, 2020 Vote
Series A Preferred Stock
Class of Stock [Line Items]
Number of votes per share	200
Common Stock
Class of Stock [Line Items]
Number of votes per share	1

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STOCKHOLDERS' EQUITY - Reverse Stock Split (Details)	1 Months Ended
	Jun. 30, 2020
STOCKHOLDERS' EQUITY
Reverse stock split	0.2

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STOCKHOLDERS' EQUITY - Company's Option Activity (Details) - USD ($)	3 Months Ended	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2020	Mar. 31, 2020
Weighted-Average Exercise Price
Stock based compensation	$ 279,707	$ 381,314
Employee stock option
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares of common stock available for issuance			600,000
Number of Shares
Granted		12,500
Expired/cancelled		(750)
Options Outstanding at the end	11,750	11,750
Options exercisable at the end	375	375
Option Price Per Share
Granted (in dollars per share)		$ 5.00
Options Outstanding at the end (in dollars per share)	$ 5.00	5.00
Options exercisable at the end (in dollars per share)		5.00
Weighted-Average Exercise Price
Granted (in dollars per share)		5.00
Options Outstanding at the end (in dollars per share)	5.00	5.00
Options exercisable at the end (in dollars per share)	$ 5.00	$ 5.00
Stock based compensation		$ 6,738
Total unrecognized compensation expense	$ 17,844	$ 17,844
Total unrecognized compensation expense expected to be recognized over weighted average period		1 year

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STOCKHOLDERS' EQUITY - Weighted average fair value of options granted, and the assumptions used in the Black-Scholes model (Details) - Employee stock option	9 Months Ended
	Sep. 30, 2020 $ / shares
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions and Methodology [Abstract]
Weighted average fair value of options granted	$ 5.00
Risk-free interest rate, minimum	0.31%
Risk-free interest rate, maximum	0.37%
Volatility, minimum	41.40%
Volatility, maximum	46.70%
Expected life (years)	5 years 6 months

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STOCKHOLDERS' EQUITY - Summary of Warrant activity (Details)	3 Months Ended	9 Months Ended
	Sep. 30, 2020 USD ($) $ / shares shares	Sep. 30, 2020 USD ($) $ / shares shares
Weighted-Average Exercise Price
Share-based compensation expense | $	$ 279,707	$ 381,314
Warrants
Number of Shares
Granted | shares		85,000
Options Outstanding at the end | shares	85,000	85,000
Options exercisable at the end | shares	85,000	85,000
Option Price Per Share
Granted (in dollars per share)		$ 5.00
Options Outstanding at the end (in dollars per share)	$ 5.00	5.00
Options exercisable at the end (in dollars per share)		5.00
Weighted-Average Exercise Price
Granted (in dollars per share)		5.00
Options Outstanding at the end (in dollars per share)	5.00	5.00
Options exercisable at the end (in dollars per share)	$ 5.00	$ 5.00
Share-based compensation expense | $		$ 100,896
Total unrecognized compensation expense | $	$ 0	$ 0

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STOCKHOLDERS' EQUITY - Weighted average fair value of warrants granted, and the assumptions used in the Black-Scholes model (Details)	Sep. 30, 2020 Y $ / shares
Weighted average fair value of options granted
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Warrants measurement input | $ / shares	5.00
Risk-free interest rate | Minimum
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Warrants measurement input	0.37
Risk-free interest rate | Maximum
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Warrants measurement input	0.89
Volatility | Minimum
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Warrants measurement input	36.5
Volatility | Maximum
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Warrants measurement input	41.4
Expected life (years)
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Warrants measurement input | Y	2.50

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STOCKHOLDERS' EQUITY - Additional information (Details)	1 Months Ended
	Aug. 31, 2020 USD ($) $ / shares shares
August Offering
Subsidiary, Sale of Stock [Line Items]
Number of common stock issued during the period | shares	1,000,000
Public offering price | $ / shares	$ 5.00
Gross proceeds from issuance	$ 5,750,000
Underwriting fees	517,000
Write-off of capitalized IPO Costs	343,000
Net proceeds from issuance	$ 4,889,000
Shares issued to Carmel, Milazzo & Feil LLP (in shares) | shares	167,794
Over-Allotment Option
Subsidiary, Sale of Stock [Line Items]
Number of common stock issued during the period | shares	150,000
Period for option to purchase additional shares of common stock	45 days

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RELATED PARTY (Details) - USD ($)	1 Months Ended		9 Months Ended	12 Months Ended
	Aug. 31, 2020	Feb. 28, 2019	Sep. 30, 2020	Dec. 31, 2019
RELATED PARTY
Shares issued to Carmel, Milazzo & Feil LLP			$ 808,986
Common Stock
RELATED PARTY
Percentage of Shares issued in exchange of services		3.00%
Percentage of shares issues in exchange of services upon execution of agreement		1.00%
Percentage of shares issues in exchange of services upon filing of Form S-1		1.00%
Percentage of shares issues in exchange of services upon SEC's declaration of Form S-1		1.00%
Shares issued to Carmel, Milazzo & Feil LLP (in shares)	59,728		102,066	102,066
Shares issued to Carmel, Milazzo & Feil LLP				$ 507,805
Additional Paid-In Capital
RELATED PARTY
Shares issued to Carmel, Milazzo & Feil LLP	$ 298,640		$ 808,970

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LEASING ARRANGEMENTS - Maturities of Operating lease laibilities (Details) - USD ($)	Sep. 30, 2020	Apr. 01, 2019
Lessee, Operating Lease, Liability, Payment, Due, Rolling Maturity [Abstract]
2021	$ 160,800
2022	160,800
2023	160,800
2024	93,800
Total lease payments	576,200
Less: Imputed Interest	(60,876)
Present value of future minimum lease payments	$ 515,324	$ 710,075

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LEASING ARRANGEMENTS - Additional information (Details) - USD ($)		3 Months Ended	9 Months Ended		11 Months Ended	60 Months Ended
	Jan. 01, 2019	Feb. 28, 2019	Sep. 30, 2020	Sep. 30, 2019	Nov. 30, 2018	Mar. 31, 2024	Dec. 31, 2019	Apr. 01, 2019
Lessee, Lease, Description [Line Items]
Practical expedients, package of expedients	true
Practical expedient, use-of hindsight	false
Practical expedient, land easements	false
Lease existence of option to extend	true
Renewal term			5 years
Incremental borrowing rate			5.00%
Monthly Rent		$ 11,150			$ 10,000
Right of use asset			$ 515,324				$ 614,522	$ 710,075
Operating lease liability			515,324					$ 710,075
Rent expense			$ 127,800	$ 116,350
Notice period to terminate lease			150 days
Forecast
Lessee, Lease, Description [Line Items]
Monthly Rent						$ 13,400
Minimum
Lessee, Lease, Description [Line Items]
Remaining lease term			1 year
Maximum
Lessee, Lease, Description [Line Items]
Remaining lease term			7 years

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COSTS AND ESTIMATED EARNINGS ON CONTRACTS IN PROGRESS (Details) - USD ($)	Sep. 30, 2020	Dec. 31, 2019
COSTS AND ESTIMATED EARNINGS ON CONTRACTS IN PROGRESS
Costs incurred on contracts in progress	$ 498,190	$ 240,732
Estimated net earnings thereon	541,728	42,403
Total costs and estimated earnings	1,039,918	283,135
Billings to date	(1,407,925)	(1,127,466)
Net overbilled	(368,007)	(844,331)
Contract Liabilities (Deferred Revenue)	(368,007)	(844,331)
Total	$ (368,007)	$ (844,331)

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SHARE EXCHANGE (Details)	Jul. 31, 2019 item shares	Mar. 27, 2019 item shares	Mar. 26, 2019 item shares
Share Exchange Agreement Line Items
Number of share exchange agreements | item	3	3	3
SteriLumen | Preferred Stock Series A Voting
Share Exchange Agreement Line Items
Number of common stock issued during the period	2,000	2,000	2,000
SteriLumen | Common Stock
Share Exchange Agreement Line Items
Number of common stock issued during the period	2,001,250	2,001,250	2,001,250
Munn Works, LLC | Common Stock
Share Exchange Agreement Line Items
Number of common stock issued during the period	3,000,000	3,000,000	3,000,000

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LEGAL - Liabilities Subject to Compromise (Details) - Chapter 11 Bankrupcy - USD ($)	Dec. 31, 2019	Dec. 31, 2018
Loss Contingencies [Line Items]
Accounts payable and accrued expenses- pre-petition		$ 492,014
Notes payable- pre-petition		370,390
Expectation damages accrual- APF Management		1,474,505
Total liabilities subject to compromise	$ 0	$ 2,336,909

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LEGAL - Additional information (Details)	Apr. 29, 2019 USD ($) claim	Jun. 25, 2018 USD ($)	Dec. 31, 2019 USD ($)	Dec. 31, 2018 USD ($)
Loss Contingencies [Line Items]
Gain on settlement	$ 1,520,398
Total net gain from settlement of debt	$ 57,640
Settlement period (in days)	15 days
Chapter 11 Bankrupcy
Loss Contingencies [Line Items]
Liabilities subject to compromise			$ 0	$ 2,336,909
Classes of claims | claim	5
Percentage of allowed claim	10.00%
Chapter 11 Bankrupcy | APF Management
Loss Contingencies [Line Items]
Damages sought		$ 1,474,505
Settlement Amount			$ 400,000
Gain on settlement	$ 1,074,505
Chapter 11 Bankrupcy | Pre-Petition Creditors
Loss Contingencies [Line Items]
Settlement Amount	103,761
Gain on settlement	$ 388,253

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MOUNT SINAI AGREEMENT (Details)		3 Months Ended	9 Months Ended
	Apr. 20, 2020 USD ($)	Sep. 30, 2020 USD ($)	Sep. 30, 2020 USD ($)	Sep. 30, 2019 USD ($)
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Research expenses		$ 48,037	$ 65,037
Prepayments			$ 22,398	$ 79,947
Mount Sinai Agreement
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Prepayments	$ 40,000
SteriLumen | Mount Sinai Agreement
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Number of patient bathrooms	17
Research expenses	$ 160,000
Option to negotiate (in days)	60 days
Fees for usage of study report	$ 30,000

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SEGMENT REPORTING (Details)	3 Months Ended		9 Months Ended
	Sep. 30, 2020 USD ($)	Sep. 30, 2019 USD ($)	Sep. 30, 2020 USD ($) segment	Sep. 30, 2019 USD ($)	Dec. 31, 2019 USD ($)
Segment Reporting Information [Line Items]
Number of reporting segments | segment			2
Selling. general and administrative expenses	$ 645,401	$ 740,038	$ 1,443,276	$ 1,377,104
Research and development	48,037		65,037
Total assets	7,761,878		7,761,878		$ 4,769,387
Total liabilities	2,316,365		2,316,365		3,384,597
Hospitality segment
Segment Reporting Information [Line Items]
Selling. general and administrative expenses			1,371,531	1,335,583
Total assets	7,495,572		7,495,572		4,706,535
Total liabilities	2,178,425		2,178,425		3,347,120
Disinfectant mirror segment
Segment Reporting Information [Line Items]
Selling. general and administrative expenses			110,483	41,521
Research and development			65,037	$ 0
Total assets	266,306		266,306		62,852
Total liabilities	$ 137,941		$ 137,941		$ 37,477

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PAYROLL PROTECTION PLAN LOAN - Future maturities of loan payable (Details) - USD ($)	Sep. 30, 2020	Dec. 31, 2019
Debt Instrument [Line Items]
Total	$ 120,000	$ 157,500
PPP Loan, CARES ACT
Debt Instrument [Line Items]
2021	69,927
2022	69,927
2023	69,927
2024	69,927
2025	17,119
Total	$ 296,827

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PAYROLL PROTECTION PLAN LOAN - Additional information (Details)	Apr. 30, 2020 USD ($)
PPP Loan, CARES ACT
Debt Instrument [Line Items]
Loan borrowed under CARES Act	$ 296,827