XML 29 R17.htm IDEA: XBRL DOCUMENT
v3.23.4

COMMITMENTS AND CONTINGENCIES | 9 Months Ended | 12 Months Ended
--- | --- | ---
Sep. 30, 2023 | Dec. 31, 2022
Commitments and Contingencies Disclosure [Abstract] |  |
COMMITMENTS AND CONTINGENCIES | NOTE 4 – COMMITMENTS AND CONTINGENCIES Operating Lease Obligations On July 26, 2021, the Company entered into a new operating lease agreement for office and warehouse combination space of 40,000 square feet, with the lease commencing on November 1, 2021 and ending April 30, 2032. This new space combines the Company’s two separate work locations into one facility, which allows for greater collaboration and also accommodates a larger anticipated workforce and manufacturing facility. On November 24, 2021, the lease was amended to commence on December 1, 2021 and end on May 31, 2032. The Company recognized a ROU asset and operating lease liability in the amount of $4,980,104 at lease commencement. Rent for the first eleven months of the term was calculated based on 30,000 rentable square feet. The rent is subject to an annual escalation of 2.5%, beginning November 1, 2023. The Company made a security deposit payment in the amount of $600,000 on July 26, 2021. Per the contract, on the 18th month, the security deposit was reduced by $50,000. The right of use asset balance at September 30, 2023, net of accumulated amortization, was $4,454,714. As of September 30, 2023, the office and warehouse lease is the Company’s only lease with a term greater than twelve months. The office and warehouse lease has a remaining term of approximately 8.8 years and includes an option to extend for two renewal terms of five years each. The renewal options are not reasonably certain to be exercised, and therefore, they are not included when determining the lease term used to establish the right of use asset and lease liability. The Company also has several short-term leases, primarily related to equipment. The Company made an accounting policy election to not recognize short-term leases with terms of twelve months or less on the consolidated balance sheet and instead recognize the lease payments in expense as incurred. The Company has also elected to account for real estate leases that contain both lease and non-lease components (such as common area maintenance) as a single lease component. The following table shows supplemental information related to leases:
Schedule of supplemental information related to leases |  |  |  |  |  |
|  | Nine Months Ended September 30, |
|  | 2023 |  |  | 2022 |
Lease cost: |  |  |  |  |  |  |  |
Operating lease cost |  | $ | 586,228 |  |  | $ | 582,989 |
Short-term lease cost |  | $ | 56,052 |  |  | $ | 26,127 |
Other information: |  |  |  |  |  |  |  |
Operating cash outflow used for operating leases |  | $ | 505,664 |  |  | $ | 323,750 |
Weighted average discount rate |  |  | 9.0 | % |  |  | 9.0 | %
Weighted average remaining lease term |  |  | 8.6 years |  |  |  | 9.6 years |
As of September 30, 2023, future minimum lease payments due under our operating leases are as follows:
Schedule of future minimum lease payments |  |  |
|  | Amount |
Calendar year: |  |  |  |
2023 |  | $ | 191,205 |
2024 |  |  | 779,087 |
2025 |  |  | 798,556 |
2026 |  |  | 818,518 |
2027 |  |  | 838,984 |
Thereafter |  |  | 4,043,427 |
Total undiscounted future minimum lease payments |  |  | 7,469,777 |
Less: Impact of discounting |  |  | (2,384,618 | )
Total present value of operating lease obligations |  |  | 5,085,159 |
Current portion |  |  | (774,306) |
Operating lease obligations, less current portion |  | $ | 4,310,853 |
Executive Severance Agreement Pursuant to a separation agreement with Gianni Arcaini, our former Chief Executive Officer and Chairman of the Board (the “Separation Agreement”), Mr. Arcaini’s employment with the Company ended on September 1, 2020 (“Separation Date”). The Separation Agreement provided that he would receive separation payments over a 36-month period equal to his base salary plus $75,000 as well as certain limited health and life insurance benefits. The Separation Agreement also contained confidentiality, non-disparagement and non-solicitation covenants and a release of claims by Mr. Arcaini. In accordance with the Separation Agreement, the Company paid to Mr. Arcaini the total sum of $747,788. On March 1, 2021, the Company paid to Mr. Arcaini a lump-sum amount equal to the first six months of payments, or $124,631, owed to Mr. Arcaini and the Company continued to pay him in semi-monthly installments for 30 months thereafter, as contemplated in Mr. Arcaini’s Separation Agreement. The remaining balance included in accrued expenses in the accompanying unaudited consolidated balance sheet is zero as of September 30, 2023. | NOTE 10 – COMMITMENTS AND CONTINGENCIES Operating Lease Obligations On July 26, 2021, the Company entered a new operating lease agreement for office and warehouse combination space of 40,000 square feet, with the lease commencing on November 1, 2021, and ending April 30, 2032. This new space combines the Company’s two separate work locations into one facility, which allows for greater collaboration and also accommodates a larger anticipated workforce and manufacturing facility. On November 24, 2021, the lease was amended to commence on December 1, 2021, and end on May 31, 2032. The Company recognized a ROU asset and operating lease liability in the amount of $4,980,104 at lease commencement. Rent for the first eleven months of the term was calculated based on 30,000 rentable square feet. The rent is subject to an annual escalation of 2.5%, beginning November 1, 2023. The Company made a security deposit payment in the amount of $600,000 on July 26, 2021. The right of use asset balance at December 31, 2022, net of amortization, was $4,689,931. As of December 31, 2022, the office and warehouse lease is the Company’s only lease with a term greater than twelve months. The office and warehouse lease has a remaining term of approximately 9.5 years and includes an option to extend for two renewal terms of five years each. The renewal options are not reasonably certain to be exercised, and therefore, they are not included when determining the lease term used to establish the right-of use asset and lease liability. The Company also has several short-term leases, primarily related to equipment. The Company made an accounting policy election to not recognize short-term leases with terms of twelve months or less on the consolidated balance sheet and instead recognize the lease payments in expense as incurred. The Company has also elected to account for real estate leases that contain both lease and non-lease components (such as common area maintenance) as a single lease component. The following table shows supplemental information related to leases:
Schedule of supplemental information related to leases |  |  |  |  |  |
|  | Year Ended December 31, |
|  | 2022 |  |  | 2021 |
Lease cost: |  |  |  |  |  |  |  |
Operating lease cost |  | $ | 782,591 |  |  | $ | 414,085 |
Short-term lease cost |  |  | 33,751 |  |  |  | 21,628 |
Other information: |  |  |  |  |  |  |  |
Operating cash outflow used for operating leases |  |  | 416,250 |  |  |  | 285,959 |
Weighted average discount rate |  |  | 9.0 | % |  |  | 9.0 | %
Weighted average remaining lease term |  |  | 9.5 years |  |  |  | 10.4 years |
At December 31, 2022, future minimum lease payments due under the operating lease are as follows:
Schedule of future minimum lease payments for non-cancellable operating leases |  |  |  |
| As of December 31, 2022 |
Fiscal year: |  |  |  |
2023 |  | $ | 696,869 |
2024 |  |  | 779,087 |
2025 |  |  | 798,556 |
2026 |  |  | 818,518 |
2027 |  |  | 838,984 |
Thereafter |  |  | 4,043,427 |
Total undiscounted future minimum lease payments |  |  | 7,975,441 |
Less: Impact of discounting |  |  | (2,735,629 | )
Total present value of operating lease liability |  |  | 5,239,812 |
Current portion |  |  | (696,869 | )
Operating lease liability, less current portion |  | $ | 4,542,943 |
Executive Severance Agreement On April 1, 2018, the Company entered into an employment agreement (the “Arcaini Employment Agreement”) with Gianni B. Arcaini, pursuant to which Mr. Arcaini served as Chief Executive Officer and Chairman of the Board of Directors of the Company. Under the Arcaini Employment Agreement, Mr. Arcaini was paid an annual salary of $249,260 and an annual car allowance of $18,000. In addition, as incentive-based compensation, Mr. Arcaini was entitled to 1% of annual gross revenues of the Company and its subsidiaries. The Arcaini Employment Agreement had an initial term through March 31, 2020, subject to renewal for successive one-year terms unless either party gave notice of that party’s election to not renew to the other at least 60 days prior to the expiration of the then-current term. The Arcaini Employment Agreement was approved by the Compensation Committee. As previously disclosed, on July 10, 2020, the Company announced that Mr. Arcaini would retire from these positions, effective as of September 1, 2020 (the “CEO Transition”). In order to facilitate a transition of his duties, the Company and Mr. Arcaini entered into a separation agreement which became effective as of July 10, 2020 (the “Separation Agreement”). Pursuant to the Separation Agreement, Mr. Arcaini’s employment with the Company ended on September 1, 2020 and he will receive separation payments over a 36-month period equal to his base salary plus $75,000 as well as certain limited health and life insurance benefits. The Separation Agreement also contains confidentiality, non-disparagement and non-solicitation covenants and a release of claims by Mr. Arcaini who continued to serve as Chairman of the Board of Directors of the Company. The Corporate Governance and Nominating Committee did not submit Mr. Arcaini for re-election as a director and on November 19, 2020 at the Annual Shareholders meeting a new non-Executive Chairman was appointed. In accordance with the Separation Agreement, the Company will pay to Mr. Arcaini the total sum of $747,788. Notwithstanding the foregoing, the status of Mr. Arcaini as a “Specified Employee” as defined in Internal Revenue Code Section 409A has the effect of delaying any payments to Mr. Arcaini under the Separation Agreement for six months after the Separation Date. On March 1, 2021, the Company paid to Mr. Arcaini a lump-sum amount equal to the first six months of payments, or $124,631, owed to Mr. Arcaini and the Company will continue to pay him in semi-monthly installments for 30 months thereafter, as contemplated in Mr. Arcaini’s Separation Agreement. The remaining balance of approximately $228,673 as of December 31, 2022 is included in accrued expenses in the accompanying consolidated balance sheet. In addition, the Company will pay one-half of Mr. Arcaini’s current life insurance premiums for 36 months of approximately $1,200 per month and provide and pay for his health insurance for 36 months following the Separation Date of approximately $450 per month. Unvested options in the amount of 50,358 became exercisable and vested in their entirety on the Separation Date valued at $95,127. The Company made payment of his attorneys’ fees for legal work associated with the negotiation and drafting of the Separation Agreement of approximately $17,000.

X
- References No definition available. + Details
Name: | us-gaap_CommitmentsAndContingenciesDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for commitments and contingencies. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 440 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 4 -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org//1943274/2147482648/440-10-50-4 Reference 2: http://www.xbrl.org/2009/role/commonPracticeRef -Topic 450 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//450/tableOfContent Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Topic 954 -SubTopic 440 -Name Accounting Standards Codification -Section 50 -Paragraph 1 -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480327/954-440-50-1 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Topic 440 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 4 -Subparagraph (c) -Publisher FASB -URI https://asc.fasb.org//1943274/2147482648/440-10-50-4 Reference 5: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 440 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//440/tableOfContent + Details
Name: | us-gaap_CommitmentsAndContingenciesDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration