MOLEKULE GROUP, INC. The following discussion and analysis should be read in conjunction with the
historical condensed financial statements and related notes included elsewhere
in this Quarterly Report on Form 10-Q ("Quarterly Report") as well as our
audited financial statements for the fiscal year ended
Overview
We incorporate our proprietary, patented UV-C LED technology in equipment and devices to protect the occupants of interior spaces. These spaces include hospital and non-hospital healthcare facilities (such as outpatient chemotherapy and other infusion facilities and senior living centers and nursing homes), schools and universities, commercial properties and other indoor spaces.
Our products are being designed and engineered to exceed the rigorous standards
set by the
We are currently seeking FDA 510(k) clearance for the use of our products in healthcare and other markets for which product performance is required to be validated by certified independent labs. Regulatory clearances and independent certifications serve as important product imprimaturs that also influence decision-making by non-healthcare market equipment purchasers. We expect to receive FDA 510(k) clearance for P?rgo in the second half of 2022.
We initiated the full-scale launch of our first product, P?rgo, in the year
ended
P?rgo has been well-received by our customers. Our success depends to a large extent on our ability to increase sales of our P?rgo device during 2022 and beyond.
As part of our business strategy we continually evaluate a wide array of
strategic opportunities, including the acquisition, disposition or licensing of
intellectual property, mergers and acquisitions, joint ventures and other
strategic transactions. In connection with these activities we may enter into
non-binding letters of intent as we assess the commercial appeal of potential
strategic transactions. We may seek to acquire technologies, product lines and
companies that operate in businesses similar to our own or that are ancillary,
complementary or adjacent to our own or in which we do not currently operate.
Such businesses could operate in the air purification space or more generally in
the health and wellness space or in other industries. We could also seek to
merge with or into another company or sell all or substantially all of our
assets to another company. Any transactions that we enter into could be material
to our business, financial condition and operating results. Please see related
risks described under the captions "We may acquire other companies or
technologies, which could divert our management's attention, result in
additional dilution to stockholders and otherwise disrupt our operations, and
adversely affect our business, financial condition and results of operations"
and "Our executive officers, directors and principal stockholders have the
ability to control all matters submitted to stockholders for approval" in the
"Risk Factors" section of our Annual Report on Form 10-K filed with the
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COVID-19 Pandemic
We continue to monitor the COVID-19 pandemic and its variants, including the
emergence of variant strains, which continue to spread throughout the world and
have adversely impacted global commercial activity and contributed to
significant declines and volatility in financial markets. Across many
industries, including our own, COVID-19 - among other factors - has negatively
impacted personnel and operations at third-party manufacturing and component
part supplier facilities in
We continue to actively monitor the situation and may take further actions that impact operations as may be required by federal, state or local authorities or that we determine is in the best interests of our employees, customers, suppliers and stockholders. As of the date of this Quarterly Report, the pandemic presents uncertainty and risk as we cannot reasonably determine or predict the nature, duration or scope of the overall impact the COVID-19 pandemic will have on our business, results of operations, liquidity or capital resources.
Results of Operations
The following table summarizes our results of operations for the periods indicated:
Comparison of the Three Months Ended
Three Months Ended March 31,
2022 2021 Change
Product revenues $ 6,733 $ - $ 6,733
Cost of sales 3,764 - 3,764
Gross profit 2,969 - 2,969Operating expenses: Selling, general and administrative 1,471,386 380,002 1,091,384 Stock-based compensation
670,838 - 670,838
Research and development 531,483 1,589,690 (1,058,207)
Total operating expenses 2,673,707 1,969,692 704,015
Loss before income tax benefit (2,670,738) (1,969,692) (701,046)
Income tax benefit 92,774 - 92,774
Net loss $ (2,577,964) $ (1,969,692) $ (608,272)
Revenues and Cost of Sales
The Company began the production and sale of its first commercial product,
P?rgo, in
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Operating Expenses
Selling, General and Administrative Expenses
Selling, general and administrative expenses ("SG&A") consist primarily of costs related to our employees, independent contractors and consultants. Other significant general and administrative expenses include accounting and legal services and expenses associated with obtaining and maintaining patents as well as marketing and advertising services and expenses associated with establishing our brand and developing our website, marketing materials and call center.
For the three months ended
Research and Development Expenses
Since our inception, we have focused our resources on our research and
development activities. We expense research and development costs as they are
incurred. Our research and development expenses primarily consist of outsourced
engineering, product development and manufacturing design costs. For the three
months ended
Net Losses
Our net losses were
Liquidity and Capital Resources
Sources of Liquidity
As of
Prior to our IPO,
We have incurred operating losses since our inception. While the Company began
producing and selling its P?rgo device in
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Future Funding Requirements and Outlook
We have incurred operating losses each year since our inception. These losses are expected to continue through at least the end of 2022 because we plan to continue to make investments to develop and market our products and to establish our consumables and service business. We also expect to continue to incur increased costs to comply with corporate governance, internal controls and similar requirements applicable to public companies.
On
Based on our current financial resources, our expected revenues and our expected level of operating expenditures, we believe that we will be able to fund our projected operating requirements for at least the next 12 months from the date of issuance of this Quarterly Report.
Over the long-term, the Company will continue to have capital requirements, and expects to devote resources to grow its operations. Moreover, if the Company pursues an acquisition strategy, it may need to raise incremental capital in order to finance the purchase price to be paid to target stockholders. As a result of these funding requirements, we will likely need to obtain additional financing by engaging in debt and/or equity offerings or seeking additional borrowings. To the extent that we raise additional capital through the sale of convertible debt or equity securities, the ownership interests of our common stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. The availability of debt financing or equity capital will depend upon the Company's financial condition and results of operations as well as prevailing market conditions.
Inflation
Inflation has adversely affected our business and we expect this to continue through the end of 2022. We have been and expect to continue to be negatively impacted by increased component and logistics costs. In addition, our cost of labor and materials may increase, which would negatively impact our business and financial results. Alternatively, deflation may cause a deterioration of global and regional economic conditions, which could impact unemployment rates and consumer discretionary spending. These, and other factors that may increase the risk of significant deflation, could negatively impact our business and results of operations.
Critical Accounting Policies and Estimates
Our management's discussion and analysis of our financial condition and results
of operations is based on our condensed financial statements, which we have
prepared in accordance with accounting principles generally accepted in
Our significant accounting policies are more fully described in Note 2, Summary
of Significant Accounting Policies to our audited financial statements included
in our Annual Report on Form 10-K filed with the
JOBS Act
On
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We are in the process of evaluating the benefits of relying on other exemptions
and reduced reporting requirements provided by the JOBS Act. Subject to certain
conditions set forth in the JOBS Act, as an "emerging growth company," we intend
to rely on certain of these exemptions, including without limitation, (i)
providing an auditor's attestation report on our system of internal controls
over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act
and (ii) complying with any requirement that may be adopted by the Public
Company Oversight Board ("PCAOB") regarding mandatory audit firm rotation or a
supplement to the auditor's report providing additional information about the
audit and the financial statements, known as the auditor discussion and
analysis. We will remain an "emerging growth company" until the earliest of: (i)
the last day of the fiscal year in which we have total annual gross revenues of
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements to encourage companies to provide prospective information to investors. This Quarterly Report includes forward-looking statements that reflect our current expectations and projections about our future results, performance and prospects. Forward-looking statements include all statements that are not historical in nature or are not current facts. When used in this Quarterly Report, the words "believe," "expect," "plan," "project," "intend," "anticipate," "estimate," "predict," "potential," "continue," "may," "might," "likely," "should," "could," "will," "target" or the negative of these terms or similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. These forward-looking statements are based on our current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events.
These forward-looking statements are subject to a number of risks,
uncertainties, assumptions and other factors that could cause our actual
results, performance and prospects to differ materially from those expressed in,
or implied by, these forward-looking statements. Factors that might cause such a
difference include, but are not limited to, those discussed in our filings with
the
?general economic conditions in the markets where we operate;
?the impact of the COVID-19 pandemic and related prophylactic measures;
?expected timing of regulatory approvals and product launches;
?non-performance of third-party vendors and contractors;
?risks related to our ability to successfully sell our products and the market reception to and performance of our products;
?compliance with, and changes to, applicable laws and regulations;
?our limited operating history;
?ability to manage growth;
?ability to obtain additional financing when and if needed;
?ability to expand product offerings;
?ability to compete with others in our industry;
?ability to protect our intellectual property;
?the ability of certain existing stockholders to determine the outcome of matters which require stockholder approval;
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?ability to defend against legal proceedings; and
?success in retaining or recruiting, or changes required in, our officers, key employees or directors.
In light of these risks, uncertainties and assumptions, you are cautioned not to
put undue reliance on any forward-looking statements in this Quarterly Report.
These statements should be considered only after carefully reading this entire
Quarterly Report. Except as required under the federal securities laws and rules
and regulations of the
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