Quarterly report pursuant to Section 13 or 15(d)

Other Assets

Other Assets
6 Months Ended
Jun. 30, 2022
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]  
Other Assets

Note 5. Other Assets


Other assets as of June 30, 2022 and December 31, 2021 are summarized as follows:


    2022     2021  
Acquisition (see below)   $ 2,873,494     $ 472,701  
Other     370       57,162  
Other assets   $ 2,873,864     $ 529,863  


Acquisition Agreement


In June 2020, the Company entered into a Share Purchase Agreement (“Agreement”) and amendments to the Agreement through June 30, 2022, collectively, the Agreements, to purchase either the stock or certain assets of a manufacturing facility for $2.5M in cash, plus additional consideration of 28,571 shares of common stock with an estimated fair market value of $7.00 and 35,714 stock options with an exercise price of $7.00. At March 31, 2022, the fair market value of the common stock of $200,000 and the vested options of $163,602 is included in Other Assets, The Agreements provided the Company various periods for due diligence and post due diligence, requirements for escrow payments of $150,000 and a closing date was expected by June 30, 2022 (“Closing Date”). Due to delayed approvals and registrations by the Hungarian government, the Company agreed to increase the escrow balance an additional $2,350,000.


As of June 30, 2022, the Company has paid $2,500,000 in escrow payments, which is recorded in Other Assets. The escrow payments may be forfeited upon: the occurrence of any damage to the assets caused by the actions of the Company; the occurrence of any debt on the books of the seller as a result of an expense initiated by the Company; any failure by the Company to fund the Operating Costs; and any material breach by the Company of its obligations under this Agreement that causes any financial damage to either the seller or the assets. On the Closing Date, the Escrow balances will be applied to the final payment due the Sellers. (See Note 15)


Through the Closing Date, the Agreements provide the Company with the exclusive use of the facility in exchange for payment of the facility’s operating costs. The monthly fee (“Operating Costs”), which primarily covers the facility’s operating costs, is mainly comprised of the seller’s workforce costs, materials and other recurring monthly operating cost.


The payment of the Operating Costs does not provide the Company with rights associated with a rent agreement. As a result, the payment of operating costs was concluded not to be in substance a lease agreement, and therefore no right-of-use asset or lease liability were recognized. During the three and six months ended June 30, 2022, the Company had remitted $337,000 (2021 - $226,000) and $771,000 (2021 - $691,000), respectively for the aforementioned Operating Costs. These costs were included in research and development expense in the statement of operations and comprehensive loss as the activities at the facility in 2022 and 2021 were related to design and testing of the Company’s products.