What changed in this filing

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Item 1A. Risk Factors

2021-05-20 compared with 2020-11-19 · 18 added, 53 removed, 46 unchanged (61% of the section changed)

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If we are not successful in our efforts to increase sales or raise capital, we could experience a shortfall in cash over the next twelve months, and our ability to obtain additional financing on acceptable terms, if at all, may be limited.

As of September 30, 2020 and December 31, 2019, we had cash and cash equivalents and a short-term investment, collectively, of $13,047,565 and $1,625,671, respectively.

However, during the nine months ended September 30, 2020 and year ended December 31, 2019, we reported a net loss of $3,063,673 and $6,920,540 respectively, and used $4,453,862 and $2,815,621 of cash for operations, respectively.

Despite raising capital in the April 2020 Offering resulting in aggregate net proceeds of approximately $1,522,339 and May 2020 Offering resulting in the aggregate net proceeds of approximately $15,596,141, after deducting underwriting discounts and commissions and other expenses related to the offering, if we are not successful with our efforts to increase revenue, we could experience a shortfall in cash over the next twelve months.

At March 31, 2021 and December 31, 2020, we had cash and cash equivalents and a short-term investment, collectively, of $10,540,290 and $13,010,356, respectively.

However, during the three months ended March 31, 2021 and year ended December 31, 2020, we reported a net loss of $1,144,350 and $4,508,162, respectively, and used $2,183,116 and $2,887,950 of cash for operations, respectively.

If we are not successful with our efforts to increase revenue, we could experience a shortfall in cash over the next twelve months.

If there is a shortfall, we may be forced to reduce operating expenses, among other steps, all of which would have a material adverse effect on our operations going forward.

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Any of the above limitations could force us to significantly curtail or cease our operations, and you could lose all of your investment in our common stock.

These circumstances and continued cash losses may risk our status as a going concern.

These circumstances have raise substantial doubt about our ability to continue as a going concern, and continued cash losses may risk our status as a going concern.

Our consolidated financial statements do not include any adjustments that might be necessary should we be unable to continue as a going concern.

There can be no assurance that our collaboration with Transcend will be successful and generate revenue.

On March 30, 2020, we entered into a non-binding Memorandum of Understanding with Transcend to provide joint products and services.

Products that are expected to be implemented include modular primary care medical units, COVID-19 diagnostic testing units, quarantine living units, as well as drive through testing units at employer onsite clinics and community hospitals.

The Memorandum of Understanding does not specify a quantity of units to be built or provide for any guarantee of services by either party.

There can be no assurance that the collaboration will yield the anticipated benefits or generate significant revenue.

There can be no assurance that our Distributorship Agreement with Osang will generate revenue or that we will derive substantial revenue from our collaboration with Clarity Labs or our selection as a COVID-19 test provider at LAX.

On April 30, 2020, we entered into the Distributorship Agreement with Osang that provides us with the non-exclusive right to distribute Osang’s GeneFinder COVID-19 Plus RealAmp Kit in the United States for a stated term of one (1) year.

The Distribution Agreement does not guarantee us a specific quantity of kits to sell or a customer list, requires us to pay for 100% of the purchase order prior to delivery (though we do not expect to make any cash outlays for product and expect instead to require our customers to make such cash outlays) and may be terminated by either party at any time on thirty (30) days’ notice.

To date, we have never sold any medical devices or kits and there can be no guarantee that we will be able to establish a sales force, establish distribution channels or solicit customers for the kits.

There can be no assurance that the Distributorship Agreement will continue, that it will yield the anticipated benefits or generate significant revenue, if any.

On November 16, 2020, we announced that the State of Hawaii had selected Clarity Labs and Clarity Mobile Venture to provide COVID-19 testing and clinical laboratory at Los Angeles International Airport (“LAX”) for testing of passengers travelling between Los Angeles and Hawaii.

In order to provide such testing, we will be required to build certain facilities, which will require time and capital.

There can be no assurance that the collaboration with Clarity Labs or the selection as a COVID-19 test provider at LAX will provide substantial revenue.

Product liability and other claims with respect to Osang’s GeneFinder COVID-19 Plus RealAmp Kit may have material adverse effects on our business.

Companies that distribute medical tests, are generally subject to risks related to product liability litigation and other claims or litigation.

Product liability risks are inherent in marketing and sale of pharmaceutical products.

Even though we are not currently subject to any product liability claims such claims could arise at a later date.

Though Osang has agreed to indemnify us for certain product liability claims, claims arising under the Distributorship Agreement must be arbitrated in Singapore and enforcement of such indemnification provisions would be time-consuming for our management and lead to significant costs and losses, which would adversely affect our business, results of operations, cash flows, financial condition, and/or prospects.

We have obtained product liability insurance and Osang has agreed to indemnify us for certain claims arising out of the manufacture of the kits, there can be no assurance that such insurance coverage will continue to be available on reasonable commercial terms or that such insurance or indemnification will prove adequate.

If sufficient insurance coverage is not obtained covering product liability, or if such future litigation or investigation exceeds our insurance coverage, we could be subject to significant liabilities, which could have material adverse effect on our business, results of operations, cash flows, financial condition, and/or prospects.

In December 2019, a novel strain of coronavirus, COVID-19, was reported to have surfaced in Wuhan, China.

Since then, the COVID-19 coronavirus has spread to multiple countries, including the United States.

The impact of the COVID-19 coronavirus outbreak, or similar global health concerns, has and could continue to negatively impact our ability to source certain products, impact product pricing, impact our customers’ ability or that of our licensee to obtain financing or have a negative impact on our business.

In March 2020, the World Health Organization declared COVID-19 a global pandemic.

As of November 12, 2020, the United States had the world’s most reported COVID-19 cases, and all 50 states and the District of Columbia have reported cases of infected individuals.

Several states and countries, including New York, where we are headquartered, have declared states of emergency.

This contagious disease outbreak, which has continued to spread, and the related adverse public health developments, have adversely affected work forces, economies and financial markets globally.

Our use of third-party suppliers for production and shipping of certain products could be negatively impacted by the regional or global outbreak of illnesses, including the COVID-19 coronavirus outbreak.

To date, we have experienced some delays in projects due to COVID-19.

Any quarantines, the timing and length of containment and eradication solutions, travel restrictions, absenteeism by infected workers, labor shortages or other disruptions to our suppliers and their contract manufacturers or our customers or our licensee, CPF, would likely adversely impact our sales and operating results and result in further project delays.

In addition, the pandemic could result in an economic downturn that could affect the ability of our customers and licensees to obtain financing and therefore impact demand for our products.

Order lead times could be extended or delayed and pricing could increase.

Some products or services may become unavailable if the regional or global spread were significant enough to prevent alternative sourcing.

Accordingly, we are considering alternative product sourcing in the event that product supply becomes problematic.

We expect this global pandemic to have an impact on our revenue and our results of operations, the size and duration of which we are currently unable to predict.

In addition, the outbreak of the COVID-19 coronavirus could disrupt our operations due to absenteeism by infected or ill members of management or other employees, or absenteeism by members of management and other employees who elect not to come to work due to the illness affecting others in our office or other workplace, or due to quarantines.

COVID-19 illness could also impact members of our Board of Directors resulting in absenteeism from meetings of the directors or committees of directors, and making it more difficult to convene the quorums of the full Board of Directors or its committees needed to conduct meetings for the management of our affairs.

The global outbreak of the COVID-19 coronavirus continues to rapidly evolve.

The extent to which the COVID-19 coronavirus may impact our business and will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the ultimate geographic spread of the disease, the duration of the outbreak, travel restrictions and social distancing in the United States and other countries, business closures or business disruptions and the effectiveness of actions taken in the United States and other countries to contain and treat the disease.

The issuance of shares of our common stock upon the exercise of outstanding options, warrants and restricted stock units may dilute the percentage ownership of the then-existing stockholders and may make it more difficult to raise additional equity capital.

As of November 14, 2020, there are outstanding options and warrants to purchase 52,337 and 353,190 shares of common stock, respectively, in addition to 512,343 vested and unvested restricted stock units .

The exercise of such options and warrants and the vesting of restricted stock units would dilute the then-existing stockholders’ percentage ownership of our stock, and any sales in the public market of common stock underlying such securities could adversely affect prevailing market prices for the common stock.

Moreover, the terms upon which we would be able to obtain additional equity capital could be adversely affected because the holders of our options and warrants can be expected to exercise them at a time when we would, in all likelihood, be able to obtain any needed capital on terms more favorable to us than those provided by such securities.

The loss of one or a few customers could have a material adverse effect on us.

A few customers have in the past, and may in the future, account for a significant portion of our revenues in any one year or over a period of several consecutive years.

For example, for the nine months ended September 30, 2020, approximately 53 % of our revenue was generated from three customers and for the year ended December 31, 2019, approximately 78% of our revenue was generated from two customers.

Although we have contractual relationships w ith many of our significant customers, our customers may unilaterally reduce or discontinue their contracts with us at any time.

For example, for the three months ended March 31, 2021 approximately 80% of our revenue was generated from two customers and for the year ended December 31, 2020, approximately 61% of our revenue was generated from three customers.

Although we have contractual relationships with many of our significant customers, our customers may unilaterally reduce or discontinue their contracts with us at any time.

The loss of business from a significant customer could have a material adverse effect on our business, financial condition, results of operations and cash flows.

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Any negative impacts to our business or liquidity could adversely impact our ability to establish or maintain these relationships.

For the nine months ended September 30, 2020 and year ended December 31, 201 9, 67 % and 74 %, respectively of our cost of revenue related to four and three vendors.

For the three months ended March 31, 2021 28 % of our costs of revenue related to two vendors.

For the year ended December 31, 2020, there were no vendors which represented 10% or more of our cost of revenue.

Our clients may adjust, cancel or suspend the contracts in our backlog;

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Backlog represents the total dollar amount of revenues we expect to record in the future as a result of performing work under contracts we have been awarded.

Backlog may fluctuate significantly due to the timing of orders or awards for large projects and is not necessarily indicative of future backlog levels or the rate at which backlog will be recognized as revenue.

We include in backlog only those contracts for which we have reasonable assurance that the customer can obtain the permits for construction and can fund the construction.

As of September 30, 202 0, our backlog totaled approximately $24.86 million and as of December 31, 2019, our backlog totaled approximately $ 17.6 million.

The increase in backlog at September 30, 2020 from December 31, 2019 is primarily attributable to two new contracts executed during the third quarter of 2020 for approximately $4.0 million and $2.95 million offset by work in progress or completed contracts during the first nine months of 2020 for approximately $1.4 million.

W e cannot provide assurance that our backlog will be realized as revenues in the amounts reported or, if realized, will result in profits.

As of December 31, 2020, our backlog totaled approximately $25.1 million and as of March 31, 2021, our backlog totaled approximately $22.9 million.

The decrease in backlog at March 31, 2021 from December 31, 2020 is primarily attributable to work in progress or completed contracts during the first three months of 2021 for approximately $3.3 million and executing one contract during the first quarter of 2021 in the amount of approximately $1.3 million.

Our backlog is described more in detail in “Note 12—Construction Backlog” of the notes to our consolidated financial statements included elsewhere in this Quarterly Report.

We cannot provide assurance that our backlog will be realized as revenues in the amounts reported or, if realized, will result in profits.

In accordance with industry practice, substantially all of our contracts are subject to cancellation, termination or suspension at our customer’s discretion.

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We can provide no assurance that the contracts in backlog, assuming they produce revenues in the amounts currently estimated, will generate gross margins at the rates we have realized in the past.

At March 31, 2021, there were options, including options granted to non-employees and non-directors, restricted stock units and warrants to purchase 36,436 , 884,343 and 128,090 shares of common stock, respectively, outstanding that could potentially dilute future net income per share.

Because we had a net loss as of March 31, 2021, it is prohibited from including potential common shares in the computation of diluted per share amounts.

Accordingly, we used the same number of shares outstanding to calculate both the basic and diluted loss per share.

At March 31, 2020 , there were options , including options to non-employees and non-directors, restricted stock units and warrants to purchase 52,337 , 9,187 and 53,190 shares of common stock, respectively, outstanding that could potentially dilute future net income per share.

Unregistered Sales of Equity Securities and Use of Proceeds

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1A. Risk Factors