Certain statements made in this prospectus are "forward-looking statements" regarding the plans and objectives of management for future operations. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of the "Company" to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. The Company's plans and objectives are based, in part, on assumptions involving the continued expansion of business. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the Company. Although the Company believes its assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and therefore, there can be no assurance the forward-looking statements included in this prospectus will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company or any other person that the objectives and plans of the Company will be achieved. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under "Risk Factors" and in other parts of this prospectus. Our fiscal year ends on
December 31. Overview
Applied UV is focused on the development and acquisition of technology that
addresses infection control in the healthcare, hospitality, commercial and
municipal markets. The Company has two wholly owned subsidiaries –
SteriLumen's connected platform for Data Driven Disinfection™ applies the power of ultraviolet light (UVC) to destroy pathogens safely, thoroughly, and automatically, addressing the challenge of healthcare-acquired infections ("HAIs"). Targeted for use in facilities that have high customer turnover such as hospitals, hotels, commercial facilities, and other public spaces, the Company's Lumicide™ platform uses UVC LEDs in several patented designs for infection control in and around high-traffic areas, including sinks and restrooms, killing bacteria, viruses, and other pathogens residing on hard surfaces within the devices' proximity. The Company's patented in-drain disinfection device, Lumicide Drain, is the only product on the market that addresses this critical pathogen-intensive location. SteriLumen's Airocide® air purification devices are research backed, clinically proven and developed for NASA with assistance from the
University of Wisconsin. Airocide® is listed as an FDA Class II Medical device, utilizes a proprietary photocatalytic (PCO) bioconversion technology that draws air into a reaction chamber that converts damaging molds, microorganisms, dangerous airborne pathogens, destructive VOCs, allergens, odors and biological gasses into harmless water vapor and green carbon dioxide without producing ozone or other harmful byproducts. Airocide® applications include healthcare, hospitality, grocery chains, wine making facilities, commercial real estate, schools, dental offices, post-harvest, grocery, food processing, storage and transportation, cannabis facilities, and homes. SteriLumen's Scientific Airproduct was developed initially for healthcare facilities and is helping hospitals across the country address the growing need for effective and safe airborne infection prevention. Utilizing Scientific Air systems, hospitals report significant reductions in viable airborne pathogens as well as significant declines in non-viable particulates including elimination of odor and VOC's. Scientific Airproducts produce no harmful by-products, provide rapid, portable, whole-room disinfection via a patented 3-phase design, are safe and fast-acting in occupied spaces, and have been proven and tested in facilities with EPAand FDA guidance compliance. According to Resource and Markets, the UV Disinfection market is expected to reach $9 billionby 2026 as technology continues to improve and the focus on stopping the spread of contagious diseases increases. The Center for Disease Controlstates that 1 in 25 patients have at least one Hospital Associated Infection (HAI) annually and that 3 million serious infections occur every year in long-term care facilities. Scientists globally have been advocating improving air quality post pandemic, significantly boosting global adoption to control airborne pathogen transmission. Governments globally mandating health agencies to address air quality via grants and mechanisms to ease visitation and protect facilities against future pathogens ( Centers for Medicare and Medicaid Services- CMS) February 2022Long-term Care Initiative. 28 Indoor air quality has become an even more important issue as world economies start the recovery process. In 2021, 39 scientists reiterated the need for a "paradigm shift" and called for improvements in, "how we view and address the transmission of respiratory infections to protect against unnecessary suffering and economic losses." In addition to this, the global air purifier market size is set to grow exponentially. It was valued at $9.24 billionin 2021 and is predicted to grow to approximately $22.84 billionby 2030. According to Precedence Research, the immense demand for air purification and sterilization in the US will be driven by the commercial sector. SteriLumen's product portfolio is one of the only research-backed, clinically proven pure-play air and surface disinfection technology companies with international distribution and globally recognized end users, with product developed for NASA. In addition to the numerous recognized research institutions and globally recognized names who published the reports that were completed by the acquired companies, Airocide was independently proven to kill SARS, MRSA and Anthrax, in addition to removing damaging molds, microorganisms, destructive VOC's, allergens, odors, and biological gases. Also, SteriLumen's air purification (Airocide) and surface disinfection (Lumicide) were independently tested and proven to kill both Candida Auris( Resinnova Laboratories) and SARS CoV-2 (COVID-19) ( MRIGlobal). SteriLumen's product portfolio is used by globally recognized names including: Walmart, Whole Foods, SuperValue, Delmonte, Esmeralda, Joel Gott Wines, Opus One, Athena Healthcare, NYC Healthand Hospitals, Kaiser Permanente, Advent Health, University Rochester Medical Centerand Baptist Health South Florida. This past year, the SteriLumen product portfolio expanded its reach and deployed its air purification products into Boston Red Sox Fenway Parkand Jet Blue Park, The Palace Versaille , Uruguayan School Systems, Tennessee Department of Corrections, Armed Forces Research Institute of Medical Sciences(AFRIMS), US Army Aberdeen Proving Grounds and Schools throughout South Korea. The Company works with a global base of distributors to sell both SteriLumen air purification and disinfection products and the MunnWorks product lines. The past year, the Company has signed distribution agreements covering Africa(360BioPharma), US Healthcare(Axis), Lootah Batta Water and Environment Sign Exclusive Distribution Agreement for Airocide(R) Air Purification Systems for the United Arab Emirates, and Plandent a wholly owned subsidiary of Planmeca Oy(Scandinavia). SteriLumen plans to continue to expand its global distribution base of significant breadth and scale to introduce the entire SteriLumen's air purification product lines to new markets, including building management, commercial real estate, retail, healthcare, cannabis and environmental health and safety, leveraging the networks of the recent acquisitions described above. MunnWorks is a manufacturer of custom designed fine mirrors and furniture specifically for the hospitality industry with one manufacturing facility in Mount Vernon, New Yorkand, with the acquisition of the assets of VisionMark, another manufacturing facility in Brooklyn, New York. Our goal is to contribute to the creation of what our design industry clients seek: manufacturing better framed mirrors and furniture on budget and on time. As part of our long-term strategy, the Company has instituted multi-site production for high-value items, complicated designs and finishes. Our headquarters in Mount Vernon, NYserves as the center for multi-country manufacturing. The Company works with a satellite network of artisans and craftsmen, including gilders, carvers, and old-world finishers. Acquisitions In February of 2021, the Company acquired all the assets and assumed certain liabilities of Akida Holdings, LLC("Akida"). At the time of the acquisition, Akida owned the Airocide™ system of air purification technologies, originally developed for NASA with assistance from the University of Wisconsinat Madison, that uses a combination of UVC and a proprietary, titanium dioxide based photocatalyst that may help to accelerate the reopening of the global economy with applications in the hospitality, hotel, healthcare, nursing homes, grocer, wine, commercial buildings and retail sectors. The Airocide™ system has been used by brands such as NASA, Whole Foods, Dole, Chiquita, Opus One, Sub-ZeroRefrigerators and Robert Mondavi Wines. Akida had contracted KES Science & Technology, Inc.("KES") to manufacture, warehouse and distribute the Airocide™ system and Akida's contractual relationship with KES was assigned to and assumed by the Company as part of the acquisition. On September 28, 2021, the Company acquired all the assets and assumed certain liabilities of KES. At the time of the acquisition, KES was principally engaged in the manufacturing and distribution of the Airocide™ system of air purification technologies and misting systems. KES also had the exclusive right to the sale and distribution of the Airocide™ system in certain markets. This acquisition consolidates all of manufacturing, sale and distribution of the Airocide™ system under the SteriLumen brand and expands the Company's market presence in food distribution, post-harvest produce, wineries, and retail sectors. The Company sells its products throughout the United States, Canada, and Europe. On October 13, 2021, we acquired substantially all of the assets of Old SAM Partners, LLC F/K/A Scientific Air Management, LLC, which owned a line of air purification technologies (" Scientific Air') for a purchase price of $9.5 millionin cash and 200,000 fully vested shares of our Common Stock (the "Vested Shares") and 200,000 shares of our Common Stock that are subject to vesting (the "Earnout Shares") (the "Scientific Air Acquisition"). The number of shares of Common Stock included in the purchase price was based on a per share value of $10.00. Scientific Airis a provider of whole-room, aerosol chamber and laboratory certified air disinfection machines that use a combination of UVC and a proprietary, patented system to eliminate airborne bacteria, mold, fungi, viruses, volatile organic compounds, and many odors without producing any harmful by-products. The units are well suited for larger spaces within a facility and are mobile with industrial grade casters allowing for movement throughout a facility to address increased bio burdern from larger meetings
or increased human traffic. 29
business of manufacturing furniture using wood and metal components for the
hospitality and retail industries.
Principal Factors Affecting Our Financial Performance
Our operating results are primarily affected by the following factors:
• our ability to acquire new customers or retain existing customers.
• our ability to offer competitive product pricing.
• our ability to broaden product offerings.
• industry demand and competition; and
• market conditions and our market positions
Results of Operations
Three Months Ended
March 31, 2022Compared to the Three Months Ended March 31, 2021Three Months Ended Three Months Ended March 31, 2022 March 31, 2021 Hospitality Disinfection Corporate Total Hospitality Disinfection Corporate Total Net Sales $ 1,409,250 $ 1,946,840$ - $ 3,356,090 $ 1,567,851 $ 744,764$ - $ 2,312,615Cost of Goods Sold 1,158,644 1,048,347 - 2,206,991 1,071,324 317,025 - 1,388,349 Gross Profit 250,606 898,493 - 1,149,099 496,527 427,739 - 924,266 Research and development - 59,314 - 59,314 - 43,645 - 43,645 Stock based compensation 86,011 22,286 179,702 287,999 20,516 190,225 - 210,741
Loss on impairment of goodwill - 1,138,203
- 1,138,203 - Selling, General and Administrative 659,087 1,785,210 368,930 2,813,227 635,485 755,291 - 1,390,776 Total Operating expenses 745,098 3,005,013 548,632 4,298,743 656,001 989,161 - 1,645,162 Operating Loss (494,492 ) (2,106,520 ) (548,632 ) (3,149,644 ) (159,474 ) (561,422 ) - (720,896 ) Other Income Change in Fair Market Value of Warrant Liability - - 43,828 43,828 - - (311,400 ) (311,400 ) Loss on change in contingent consideration - (240,000 ) - (240,000 ) - - - - Gain on settlement of Contingent Consideration - 1,700,000 - 1,700,000 - - - - Other income (Expense) (4,102 ) - 46 (4,066 ) - (655 ) - (655 ) Total Other (Expense) Income (4,102 ) 1,460,000 43,874 1,499,762 - (655 ) (311,400 ) (312,055 ) Loss Before Provision for Income Taxes (498,594 ) (646,520 )
(504,758 ) (1,649,882 ) (159,474 ) (562,077 ) (311,400 ) (1,032,951 )
Provision from Income Taxes
- - - - - - - - Net Loss
$ (498,594 ) $ (646,520 ) $ (504,758 ) $ (1,649,882 ) $ (159,474 ) $ (562,077 ) $ (311,400 ) $ (1,032,951 )30 Non-GAAP Financial Measures Adjusted EBITDA Operating $ (494,492 )(2,106,520 ) (548,632) (3,149,644 ) (159,474 ) (561,422 ) - (720,896 ) Loss Depreciation and 7,975 459,771 - 467,746 7,745 92,364 - 100,109 Amortization Loss on impairment - 1,138,203 - 1,138,203 - - - - of goodwill Stock based 86,011 22,286 179,702 287,999 20,516 190,225 - 210,741 compensation Adjusted (400,506) (486,260) (368,930) (1,255,696) (131,213) (278,833) - (410,046) EBITDA The Company utilizes Adjusted EBITDA, a non-GAAP financial measure, to assist in analyzing our segment operating performance by removing the impact of certain key items that management believes do not directly reflect our underlying operations. In addition, we consider certain non-GAAP (or "adjusted") measures to be useful to management and investors evaluating our operating performance for the periods presented, and provide a tool for evaluating our ongoing operations, liquidity, and management of assets. This information can assist investors in assessing our financial performance and measures our ability to generate capital. These adjusted metrics are consistent with how management views our business and are used to make financial, operating and planning decisions. These metrics, however, are not measures of financial performance under GAAP and should not be considered a substitute for revenues, operating income, net income (loss), earnings (loss) per share (basic and diluted) or net cash from operating activities as determined in accordance with GAAP. Adjusted EBITDA is defined as Operating Profit (Loss), excluding Depreciation and Amortization, and excluding Stock Based Compensation and Loss on Impairment of Goodwill. Adjusted EBITDA was a loss of ( $1,255,695) for the three months ended March 31, 2022, which was an increase of ( $845,649) as compared to the three ended March 31, 2021. By segment, Hospitality decreased ( $269,293), Disinfection decreased ( $207,427) and Corporate decreased ( $368,929).
The Company has three reportable segments: the design, manufacture, assembly and distribution of disinfecting systems for use in healthcare, hospitality, and commercial municipal and residential markets (Disinfection segment); the manufacture of fine mirrors and furniture specifically for the Hospitality industry (hospitality segment); and the Corporate Segment, which includes expenses primarily related to corporate governance, such as board fees, legal expenses, audit fees, executive management, and listing costs. See NOTE 11
- Segment Reporting.
Net sales of
$3,356,090represented an increase of $1,043,475, or 45.1% for the three months ended March 31, 2022as compared to net sales of $2,312,615for the three months ended March 31, 2021. This increase was primarily attributable to the Disinfection segment, which increased $1,202,076, largely as a result of the strategic acquisitions of KES and Scientific Airin Q3 and Q4 of 2021, respectively. The Hospitality segment decreased ( $158,601) primarily due to supply chain disruptions, with multiple order fulfilments delayed into Q2 of 2022. Gross Profit
Gross profit increased
$224,833, or 24.3%, for the three months ended March 31, 2022as compared to the three months ended March 31, 2021, driven primarily by volume growth from the Disinfection segment. However, gross profit as a percentage of sales decreased (5.7%) from 39.9% in Q1 of 2021 to 34.2% in Q1 of 2022, driven primarily by customer mix in the Disinfection segment and by lower sales, an increase in factory overhead absorption, and higher logistical costs in the Hospitality segment. As the Company continues to integrate their strategic acquisitions, the focus will be on realizing cost synergies from the consolidation and streamlining of the manufacturing and distribution operations.
Selling, General, and Administrative - S,G&A costs for the three months ended
March 31, 2022, increased to $2,813,226as compared to $1,390,776for the three months ended March 31, 2021. This increase of $1.4 millionwas driven primarily by the expansion of the Disinfection segment with the additional acquisitions of KES and SciAir. Payroll costs increased $0.3 millionyear over year as headcount increased from 31 at March 31, 2021to 89 at March 31, 2022. Consulting, accounting, and legal costs increased $0.3 million, and amortization expense, mostly related to the intangible assets associated with the acquisitions, increased $0.3 million. Additional increases were due to advertising and marketing $0.2 million, and bad debt expense of $0.1 million. We anticipate efficiency gains in the coming year as we fully integrate our acquisitions and leverage synergies where practical. 31 Loss on Impairment of Goodwill- The Company determined that a triggering event had occurred as a result of a settlement agreement with Scientific Air(" Old SAM Partners") - see explanation of Other Income/Expense below. A quantitative impairment test on the goodwill determined that the fair value was below the carrying value and as a result the Company recorded a full goodwill impairment charge of $1,138,203on the Condensed Consolidated Statements of Operations during the three months ended March 31, 2022.
The Company recorded income on the change in fair value of warrant liability in the amount of
$43,828for the three months ended March 31, 2022, as compared to a loss of ( $311,400) on the change in fair value for the three months ended March 31, 2021. On March 31, 2022, there was a dispute between the Company and Scientific Air(" Old SAM Partners") regarding certain representations and warranties in the purchase agreement which resulted in a settlement and mutual release agreement where Old Sam Partnersagreed to relinquish such Partner's right, title, and interest in the previously issued 400,000 shares that were part of the original asset acquisition transaction. As a result of the settlement, the company recorded a gain on settlement of $1,700,000during the three months ended March 31, 2022. Net Loss The Company recorded a net loss of $1,649,872for the three months ended March 31, 2022, compared to a net loss of $1,032,951for the three months ended March 31, 2021. The increase of $616,920in the net loss was mainly due to the increase is S,G&A costs incurred in support of the expansion of the Disinfection segment.
Liquidity and Capital Resources
Three Months Ended
Net Cash Used in Operating Activities
$ (1,858,794 ) $ (1,573,173 )Net Cash Used in Investing Activities (16,793 ) (1,274,728 ) Net Cash Provided by (Used In) Financing Activities 728,012 (437 ) Net in cash and cash equivalents (1,147,575 ) (2,848,338 ) Cash and equivalents at beginning of year 8,768,156
Cash and equivalents at end of year 7,620,581
In the three months ended
March 31, 2022, net cash used in operating activities was ( $1,858,794), as compared to ( $1,573,173) in the three months ended March 31, 2021. This increase in net cash used was due mainly to the increase in net loss to ( $1,649,872) for the three months ended March 31, 2022, as compared to a net loss of ( $1,032,951) for the three months ended March 31, 2021. In the three months ended March 3131, 2022, net cash used in investing activities decreased to ( $16,793) as compared to ( $1,274,728) in the three months ended March 31, 2021, primarily due to net cash paid for the acquisition of Akida on February 8, 2021( $760,293), and a loan made to a related party on February 17, 2021( $500,000) (see Note 10). In the three months ended March 31, 2022, cash provided by financing activities was $728,012, as compared to cash used in financing activities of ( $437) in the three months ended March 31, 2021, primarily due to the full exercise of the common stock offering over-allotment, which was $1.092,000net, offset by dividends to preferred shareholders of ( $362,250).
The Company believes our sources of liquidity and capital will be sufficient to
finance our continued operations and growth strategy.
Contractual Obligations and Other Commitments
Payment due by
Total 2022 2023-2025 2026-2027 Thereafter Financing lease obligations
$ 5,9335,933 - - - Operating lease obligations (1) 1,890,029 381,384 1,333,745 174,900 - Notes payable (2) 157,500 97,500 60,000 - - Assumed lease liability (3) 1,118,064 279,522 838,542 Total 3,171,526 764,339 2,232,287 174,900 -
(1) The Company entered into a lease agreement in
term that commenced on
2024 at a monthly rate of
additional lease space and rent expense was increased to
$15,171from months 13-24, and $15,626from months 25-36.
a promissory note for the principal amount of
years. The Company is required to pay
(3) In connection with the
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
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