| Summary of Significant Accounting Policies | Note 2 - Summary of Significant Accounting Policies There have been no material changes to the significant
accounting policies included in the consolidated financial statements as of December 31, 2020 and for the year then ended, which were
previously filed, except as disclosed in this note. Basis of Presentation The accompanying unaudited condensed consolidated
financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.
GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S.
GAAP for complete financial statements. In the opinion of management, such statements include all adjustments (consisting only of normal
recurring items) which are considered necessary for a fair presentation of the unaudited condensed consolidated financial statements of
the Company as of March 31, 2021 and for the three months ended March 31, 2021 and 2020. The results of operations for the three months
ended March 31, 2021 are not necessarily indicative of the operating results for the full year ending December 31, 2021 or any other period.
These unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and related
disclosures as of December 31, 2020 and for the year then ended which have been previously filed. Use of Estimates Preparation of financial statements in conformity
with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the amounts reported in the financial statements
and the amounts disclosed in the related notes to the financial statements. The Company’s significant estimates used in these financial
statements include, but are not limited to, fair value calculations for equity securities, stock-based compensation, the collectability
of receivables, the recoverability and useful lives of long-lived assets, and the valuation allowance related to the Company’s deferred
tax assets. Certain of the Company’s estimates could be affected by external conditions, including those unique to the Company and
general economic conditions. It is reasonably possible that these external factors could have an effect on the Company’s estimates
and could cause actual results to differ from those estimates. Cash and Cash Equivalents The Company considers all highly liquid investments
purchased with an original maturity of three months or less to be cash equivalents in the financial statements. As of March 31, 2021 and
December 31, 2020, the Company had no cash equivalents. The Company has cash on deposits in several financial institutions which, at times,
may be in excess of Federal Deposit Insurance Corporation (“FDIC”) insurance limits. The Company has not experienced losses
in such accounts and periodically evaluates the creditworthiness of its financial institutions. The Company reduces its credit risk by
placing its cash and cash equivalents with major financial institutions. From time to time, the Company has deposits in excess of FDIC
insurance limits. Restricted Cash Restricted cash was comprised of cash held as a security
deposit in connection with the Company’s operating lease. See Note 8 – Commitments and Contingencies - Operating Lease for
additional details. Property and Equipment Property and equipment are stated at cost, net of
accumulated depreciation using the straight-line method over their estimated useful lives, once the asset is placed in service. Expenditures
for maintenance and repairs, which do not extend the economic useful life of the related assets, are charged to operations as incurred,
and expenditures which extend the economic life are capitalized. Leasehold improvements are depreciated over the lesser of their estimated
useful lives or the remaining term of their respective lease. When assets are retired or otherwise disposed of, the costs and related
accumulated depreciation or amortization are removed from the accounts and any gain or loss on disposal is recognized in the statement
of operations for the respective period. The Company’s long-lived assets are reviewed
for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. An impairment
loss would be recognized when estimated future cash flows expected to result from the use of the asset and its eventual disposition are
less than its carrying amount. The estimated useful lives of property and equipment
are as follows:
Asset Useful lives (years)
Computer and office equipment 5
Lab equipment 5
Leasehold improvements shorter of useful life or lease term
Machinery 7-15
Furniture 7 Fair Value of Stock Options and Warrants The risk-free interest rate was determined from the
implied yields from U.S. Treasury zero-coupon bonds with a remaining term consistent with the expected term of the instrument being valued.
Option forfeitures are accounted for at the time of occurrence. The expected term used is the estimated period of time that warrants or
options are expected to be outstanding. The Company utilizes the “simplified” method to develop an estimate of the expected
term of “plain vanilla” employee options. For investor warrants and non-employee options, the expected term used is the contractual
life of the instrument being valued. Historically the Company has used an expected volatility figure based on a review of the historical
volatility of comparable entities over a period of time equivalent to the expected life of the instrument being valued. Revenue Recognition The Company recognizes revenue
under ASC Topic 606, “Revenue from Contracts with Customers” (“ASC 606”). The Company determines revenue recognition
through the following steps:
● Step 1:
● Step 2:
● Step 3:
● Step 4:
● Step 5: A majority of the Company’s
revenues are generated from contracts with customers that require it to design, develop, manufacture, test and integrate complex equipment
and to provide engineering and technical services according to customer specifications. These contracts are often priced on a time and
material type basis. Revenues on time and material type contracts are generally recognized in each period based on the amount billable
to the customer which is based on direct labor hours expended multiplied by the contractual fixed rate per hour, plus the actual costs
of materials and other direct non-labor costs. The timing of the Company’s revenue recognition
may differ from the timing of payment by its customers. A receivable is recorded when revenue is recognized prior to payment and the Company
has an unconditional right to payment. Alternatively, when payment precedes the provision of the related services, the Company records
deferred revenue until the performance obligations are satisfied. Contract assets are comprised of unbilled contract receivables related
to revenues earned but not yet invoiced to customers. During the three months ended March 31, 2021 and 2020,
there was no revenue recognized from performance obligations satisfied (or partially satisfied) in previous periods. The Company generates revenue
from government contracts that reimburse the Company for certain allowable costs for funded projects. For contracts with government agencies,
when the Company has concluded that it is the principal in conducting the research and development expenses and where the funding arrangement
is considered central to the Company’s ongoing operations, the Company classifies the recognized funding received as revenue. The
Company has determined that revenue generated from government grants is outside the scope of ASC 606 and, as a result, the Company recognizes
revenue upon incurring qualifying, reimbursable expenses. During the three months ended March 31, 2021 and 2020, the Company recognized
approximately $193,000 and $201,000, respectively, of grant revenue. Deferred Expenses Deferred expenses consist of labor, materials and
other costs that are attributable to customer contracts that the Company has not completed its performance obligation under the contract
and, as a result, has not recognized revenue. As of March 31, 2021 and December 31, 2020, deferred expenses were $260,000 and $185,000,
respectively. Stock-Based Compensation The Company measures the cost of services received
in exchange for an award of equity instruments based on the fair value of the award. The fair value of the award is measured on the grant
date. The fair value amount is then recognized over the period during which services are required to be provided in exchange for the award,
usually the vesting period. Upon the exercise of an award, the Company issues new shares of common stock out of its authorized shares. Net (Loss) Income per share of Common Stock Basic net (loss) income per share of common stock
is computed by dividing net (loss) income by the weighted average number of vested shares of common stock outstanding during the period. Diluted
net income per share of common stock is computed by dividing net income by the weighted average number of common and dilutive common-equivalent
shares outstanding during each period. The following shares were excluded from the calculation
of weighted average dilutive shares of common stock because their inclusion would have been anti-dilutive:
As of March 31,
2021 2020
Warrants 245,696 155,966
Options 3,211,785 965,000
Total 3,457,481 1,120,966 Income Taxes The Company recognizes deferred tax assets and liabilities
for the expected future tax consequences of items that have been included or excluded in the financial statements or tax returns. Deferred
tax assets and liabilities are determined on the basis of the difference between the tax basis of assets and liabilities and their respective
financial reporting amounts (“temporary differences”) at enacted tax rates in effect for the years in which the temporary
differences are expected to reverse. The Company has recorded a full valuation allowance against its deferred tax assets for all periods,
due to the uncertainty of future utilization. The Company utilizes a recognition threshold and measurement
process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Management
has evaluated and concluded that there were no material uncertain tax positions requiring recognition in the Company’s financial
statements as of March 31, 2021 and December 31, 2020. The Company does not expect any significant changes in its unrecognized tax benefits
within twelve months of the reporting date. The Company’s policy is to classify assessments, if any, for tax related interest as
interest expense and penalties as selling, general and administrative expenses in the consolidated statements of operations. Recently Issued Accounting Standards In February 2016, the FASB issued ASU No. 2016-02,
“Leases (Topic 842),” (“ASU 2016-02”). ASU 2016-02 requires an entity to recognize assets and liabilities arising
from a lease for both financing and operating leases. ASU 2016-02 will also require new qualitative and quantitative disclosures to help
investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases.
The FASB issued ASU No. 2018-10 “Codification Improvements to Topic 842, Leases” (“ASU 2018-10”), ASU No. 2018-11
“Leases (Topic 842) Targeted Improvements” (“ASU 2018-11”) in July 2018, and ASU No. 2018-20 “Leases (Topic
842) - Narrow Scope Improvements for Lessors” (“ASU 2018-20”) in December 2018. ASU 2018-10 and ASU 2018-20 provide
certain amendments that affect narrow aspects of the guidance issued in ASU 2016-02. ASU 2018-11 allows all entities adopting ASU 2016-02
to choose an additional (and optional) transition method of adoption, under which an entity initially applies the new leases standard
at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption.
See ASU 2019-10 below, which defers the effective date for ASC 842. The Company expects to recognize operating lease right-of-use assets
and lease liabilities on the balance sheet upon adoption of this ASU. The Company is currently evaluating these ASUs and their impact
on its consolidated financial statements. |
