EDGAR 10-K Filing

Company CIK: 1479915
Filing Year: 2021
Filename: 1479915_10-K_2021_0001493152-21-008850.json

---

ITEM 1. BUSINESS
Item 1. Business.

---

ITEM 1A. RISK FACTORS
Item 1A. Risk Factors.

---

ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 1B. UNRESOLVED STAFF COMMENTS.
Not applicable to a smaller reporting company.

---

ITEM 2. PROPERTIES
ITEM 2. DESCRIPTION OF PROPERTY.
We maintain our corporate offices at 5550 Nicollet Avenue, Minneapolis, MN 55419. We lease these premises from 5550 Nicollet LLC, an affiliate of Mr. Chong, In December 2019 we entered into a month-to-month lease for the 2020 calendar year with an annual rental of $9,300. In December 2020 a new month-to-month lease was entered into for the 2021 calendar year with an annual rental of $9,300.

---

ITEM 3. LEGAL PROCEEDINGS
ITEM 3. LEGAL PROCEEDINGS.
We are not a party to any pending or threatened litigation.

---

ITEM 4. MINE SAFETY DISCLOSURE
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable to our company.
PART II

---

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
There is no public market for our common stock. As of April 15, 2021, there were approximately 128 record owners of our common stock.
Dividend policy
We have never paid cash dividends on our common stock. Under Delaware law, we may declare and pay dividends on our capital stock either out of our surplus, as defined in the relevant Delaware statutes, or if there is no such surplus, out of our net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year. If, however, the capital of our company, computed in accordance with the relevant Delaware statutes, has been diminished by depreciation in the value of our property, or by losses, or otherwise, to an amount less than the aggregate amount of the capital represented by the issued and outstanding stock of all classes having a preference upon the distribution of assets, we are prohibited from declaring and paying out of such net profits and dividends upon any shares of our capital stock until the deficiency in the amount of capital represented by the issued and outstanding stock of all classes having a preference upon the distribution of assets shall have been repaired. Even if permitted under Delaware law, we do not have any present intention of declaring or paying dividends on our common stock in the foreseeable future.
Recent sales of unregistered securities
None, except as previously reported.
Purchases of equity securities by the issuer and affiliated purchasers
None.

---

ITEM 6. SELECTED FINANCIAL DATA
ITEM 6. SELECTED FINANCIAL DATA.
Not applicable to a smaller reporting company.

---

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion of our financial condition and results of operations for 2020 and 2019 and should be read in conjunction with the financial statements and the notes to those statements that are included elsewhere in this report. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under Cautionary Statement Regarding Forward Looking Information, Item 1A. Business and Item 1A. Risk Factors in this report. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements.
Overview
Going concern
For 2020 we reported a net loss of $2,541,532 and net cash used in operations of $1,067,969. At December 31, 2020 we had cash on hand of $589,153 and an accumulated deficit of $4,843,582. The report of our independent registered public accounting firm on our consolidated financial statements for the year ended December 31, 2020 contains an explanatory paragraph regarding our ability to continue as a going concern based upon our cash balances and no source of revenues which are sufficient to cover our operating costs. These factors, among others, raise substantial doubt about our ability to continue as a going concern. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty. There are no assurances we will be successful in our efforts to raise capital, develop a source of revenues, report profitable operations or to continue as a going concern, in which event investors would lose their entire investment in our company.
Results of operations
We did not generate any revenues from our operations in the 2020 or 2019. Our total operating expenses for 2020 increased 1,985% over those for 2019. General and administrative expenses, which include amortization, compensation, rent, and website hosting expenses, increased by 3,319% in 2020 compared to 2019 due to higher levels of compensation in 2020, increased rental costs, purchase of non-capital equipment and supplies. Research and development expenses in 2020 for new prototype designs and development were $630,765 compared to none in 2019. Professional fees increased by 349% in 2020 compared to 2019, due largely to consulting services utilized in 2020 that were not present in 2019.
We expect that our operating expenses will increase as we continue to develop our business and we devote additional resources toward our new technologies and business opportunities, promoting that growth, most notably reflected in anticipated increases in general overhead, salaries for personnel and technical resources, as well as increased costs associated with our SEC reporting obligations. However, as set forth elsewhere in this report, our ability to continue to develop our business and achieve our operational goals is dependent upon our ability to raise significant additional working capital. As the availability of this capital is unknown, we are unable to quantify at this time the expected increases in operating expenses in future periods.
Liquidity and capital resources
Liquidity is the ability of a company to generate sufficient cash to satisfy its needs for cash. As of December 31, 2020, we had $589,153 in cash and cash equivalents and a working capital surplus of $312,132 compared to $1,298 in cash and cash equivalents and a working capital deficit of $856,012 at December 31, 2019. Our current liabilities decreased $522,446 from December 31, 2019, reflecting the retirement of debt and associated interest payable despite a significant increase in our accounts payable and in our accrued expenses. Our source of operating capital in 2020 came from the sale of 525,470 shares of our common stock raising $2,600,000 in capital compared to the same period in 2019 where our sole source of operating capital came from additional borrowings from a related party which loaned us an additional $76,000.
The ability of the Company to continue as a going concern is dependent upon the Company obtaining adequate capital to fund operating losses until it becomes profitable. As the company is not generating revenues, continued activities and expenditures to bring product(s) to market as soon as we are able is important. Management believes the currently available funding will be insufficient to finance the Company’s operations for a year from the date of these financial statements and to satisfy our obligations as they become due.
In 2020 we retired approximately $589,240 of debt and interest, including $450,000 owed to a related party, through repayments or conversion into equity. At December 31, 2020 the outstanding amount we owe the related party is $255,544 which is due on demand.
While we raised $2,600,000 from the sale of our securities during 2020, we still will need to raise $3,000,000 to $5,000,000 in additional capital during the next 12 months. As we only have commitments for $1,500,000 of this needed capital funding, there are no assurances we will have sufficient funds to fund our operating expenses and continued development of our products and to satisfy our obligations as they become due over the next 12 months. In that event, our ability to continue as a going concern is in jeopardy.
Summary of cash flows
December 31, 2020 December 31, 2019
Net cash (used) in operating activities $ (1,067,969 ) $ (76,179 )
Net cash (used) in investing activities $ (389,657 ) $ -
Net cash provided by financing activities $ 2,045,481 $ 76,000
Our cash used in operating activities increased 1,302% in 2020 compared to 2019. During these time periods we used the cash primarily to fund our net losses.
In 2020 our cash used in investing activities was comprised of $189,680 from capitalization of intellectual property related legal fees, $1,689 cash used for trademarks and furniture and equipment of $198,288. There was no cash used in investing activities in this same period in 2019.
Net cash provided by financing activities in 2020 consisted primarily of $2,600,000 raised from the sale of 525,470 shares of our common stock, repayment and satisfaction in full of the convertible note of $40,0000, capital contribution from fixed and non-capital asset purchase with related party of $64,519 and repayment of $450,000 with borrowing of $2,500 to and from Xten, a common control entity compared to net cash from $76,000 of additional borrowings from Xten in 2019.
Critical accounting policies
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenue and expenses during the reported periods. The more critical accounting estimates include estimates related to revenue recognition, accounts receivable allowances and impairment of long-lived assets. We also have other key accounting policies, which involve the use of estimates, judgments and assumptions that are significant to understanding our results, which are described in Note 2 to our audited consolidated financial statements for 2019 appearing later in this report.
Recent accounting pronouncements
The Company does not believe that any recently issued effective pronouncements, or pronouncements issued but not yet effective, if adopted, would have a material effect on the accompanying financial statements.
Off balance sheet arrangements
As of the date of this report, we do not have any 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 that are material to investors. The term “off-balance sheet arrangement” generally means any transaction, agreement or other contractual arrangement to which an entity unconsolidated with us is a party, under which we have any obligation arising under a guarantee contract, derivative instrument or variable interest or a retained or contingent interest in assets transferred to such entity or similar arrangement that serves as credit, liquidity or market risk support for such assets.

---

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable for a smaller reporting company.

---

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Please see our consolidated financial statements beginning on page of this annual report.

---

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.

---

ITEM 9A. CONTROLS AND PROCEDURES
ITEM 9A. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures. We are required to maintain “disclosure controls and procedures” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”). Based on their evaluation as of the end of the period covered by this Annual Report on Form 10-K, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures were not effective to ensure that the information relating to our company, required to be disclosed in our Securities and Exchange Commission reports (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure as a result of material weaknesses in our internal control over financial reporting.
Management’s Report on Internal Control over Financial Reporting. Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that:
● pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;
● provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and
● provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
Because of the inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2020. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (2013). Management’s assessment included an evaluation of the design of our internal control over financial reporting and testing of the operational effectiveness of these controls. Based on this assessment our management has concluded that as of December 31, 2020, our internal control over financial reporting was not effective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles as a result of material weaknesses. These material weaknesses in our internal control over financial reporting result from limited segregation of duties and limited multiple levels of review in the financial close process.
The existence of the continuing material weaknesses in our internal control over financial reporting increases the risk that a future restatement of our financials is possible. In order to remediate these material weaknesses, we will need to expand our accounting resources. We will continue to monitor and evaluate the effectiveness of our disclosure controls and procedures and our internal control over financial reporting on an ongoing basis, however, we do not expect that the deficiencies in our disclosure controls will be remediated until such time as we have remediated the material weaknesses in our internal control over financial reporting. In order to do so, we will need additional capital to permit us to hire employees and put the requisite controls in place. We had expected to expand our accounting resources in 2019, which was subsequently delayed into 2020 and has now been delayed into 2021. Given the uncertainties with our ability to raise working capital as discussed earlier in this report, there are no assurances we will be able to remediate the material weaknesses in our internal control over financial reporting during 2021.
Changes in Internal Control over Financial Reporting. There have been no changes in our internal control over financial reporting during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

---

ITEM 9B. OTHER INFORMATION
ITEM 9B. Other Information.
None.
PART III

---

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
The following table provides information on our executive officers and directors:
Name Age Positions
Alexander Chong Chairman of the Board of Directors, Chief Executive Officer
William P. Bartkowski President, Chief Operating Officer
Daniel Markes Vice President, Chief Financial Officer, director
Roger Nielsen Vice President, Secretary, director
Alexander Chong. Mr. Chong has served as Chairman of the Board and Chief Executive Officer since July 2014. Mr. Chong is an experienced entrepreneur and businessman. Since founding the company in 1993, he has also served as the Chairman of Plexus International, a consulting and training organization with 14 international offices and its principal office located in Minneapolis, Minnesota. Mr. Chong has also served as Chief Executive Officer and a member of the board of directors of Xten, a Minnesota-based company with investment interests in technology and a variety of Asia-based opportunities since 2007. He has broad experience in international business and manufacturing quality. Mr. Chong also has experience serving on boards of directors of privately-held companies in the role of an independent director, as well as identifying key joint venture partners and negotiating and securing international distribution agreements with large multi-national companies. In connection with the developer of the original e-cigarette, Mr. Chong oversaw U.S. patent filings and developed the first disposable e-cigarette offered for distribution and sale in the U.S. Mr. Chong received a B.S. in Chemistry from Boston University. Mr. Chong’s significant professional experience in our business sector and international business and technology were factors considered by the board of directors in concluding that he should be serving as a director of our company.
William P. Bartkowski. Mr. Bartkowski has served as an executive officer of our company since July 2014. Mr. Bartkowski has had a three-decade career in banking, consulting and marketing. Since 2008 Mr. Bartkowski has been engaged as a business consultant. From 1988 to 1995 he was an executive officer of Metropolitan Financial Corp., a NYSE listed company and from 1996 to 2004 Mr. Bartkowski was a partner in Neuger, Henry, Bartkowski, a public relations firm. He has been involved with the electronic cigarette business since late 2006. In that capacity he has organized, directed and optimized marketing, consumer focus group testing, market analysis and sales testing and he has negotiated and finalized plans and agreements with major U.S. distributors and retailers with respect to electronic cigarettes. Mr. Bartkowski has also been involved extensively in U.S. and international regulatory and legal issues affecting electronic cigarettes and tobacco issues. He previously provided investor relations and capital markets advisory services, including capital formation and M&A counsel for more than a dozen public companies. From April of 2013 until November of 2015 Mr. Bartkowski served on the board of directors and was an officer of the Smoke Free Alternatives Trade Association (SFATA), a leading international advocacy group for keeping e-cigarettes innovative, accessible and unencumbered by burdensome laws and regulations. Mr. Bartkowski received a B.A. in English from the University of Mary, an M.A. in English from North Dakota State University and a PhD in Adult Education.
Daniel Markes. Mr. Markes has served as an executive officer and member of the board of directors of our company since July 2014. Mr. Markes is an experienced businessman and financial executive and his background includes having served in various capacities as controller, human resources director, business development specialist and member of the board of directors of a number of organizations throughout his professional career. Since 1997 Mr. Markes has been Director, Human Resources, Finance and Administration with Minneapolis-based Plexus Corporation founded by Mr. Chong. He also is an officer of Xten, serving as its Treasurer/Chief Financial Officer, as well as serving as an officer of 5550 Nicollet LLC, an entity affiliated with Mr. Chong. Mr. Markes received a BBA degree from Brock University. Mr. Markes’ experience as a businessman and a financial executive were factors considered by the board of directors in concluding that he should be serving as a director of our company.
Roger Nielsen. Mr. Nielsen has served as an executive officer of our company since July 2014 and a member of our board of directors since April 2015. Mr. Nielsen is an experienced businessman with broad and lengthy experience in international commerce and world-wide distribution. Mr. Nielsen is a member of the board of directors and Director, Procurement and Facilities, with Minneapolis-based Plexus Corporation founded by Mr. Chong, serving as an officer and director of that company since 1993. Mr. Nielsen and Mr. Chong have worked closely together for over 25 years in various international businesses. He has established global distribution centers throughout Asia Pacific, negotiated and closed distribution agreements with major international manufacturers for export and directed and managed international logistics for a number of global distribution networks. Mr. Nielsen studied Business Administration at Dana College. Mr. Nielsen’s experience in international commerce and world-wide distribution activities were factors considered by the board of directors in concluding that he should be serving as a director of our company.
There are no family relationships between any of the executive officers and directors.
Board of Directors
Each director is elected at our annual meeting of stockholders and holds office until the next annual meeting of stockholders, or until his successor is elected and qualified. If any director resigns, dies or is otherwise unable to serve out his or her term, or if the board of directors increases the number of directors, the board may fill any vacancy by a vote of a majority of the directors then in office, although less than a quorum exists. A director elected to fill a vacancy shall serve for the unexpired term of his or her predecessor. Vacancies occurring by reason of the removal of directors without cause may only be filled by vote of the stockholders.
Board leadership structure and board’s role in risk oversight
The board of directors is comprised of members of our management and we do not have any independent directors. Mr. Chong, our Chief Executive Officer, also serves as Chairman of the Board. Given the early stage of our company, our board believes the current leadership structure is appropriate for our company. As our company grows, we expect to expand our board of directors through the appointment of independent directors.
Risk is inherent with every business, and how well a business manages risk can ultimately determine its success. We face a number of risks, including credit risk, interest rate risk, liquidity risk, operational risk, strategic risk and reputation risk. Management is responsible for the day-to-day management of the risks we face and have responsibility for the oversight of risk management in their dual roles as directors.
Committees of the board of directors; stockholder nominations; audit committee financial expert
We have not established any committees comprised of members of our board of directors, including an Audit Committee, a Compensation Committee or a Nominating Committee, or any committee performing similar functions. The functions of those committees are being undertaken by our board of directors as a whole.
We do not have a policy regarding the consideration of any director candidates which may be recommended by our stockholders, including the minimum qualifications for director candidates, nor has our board of directors established a process for identifying and evaluating director nominees, nor do we have a policy regarding director diversity. We have not adopted a policy regarding the handling of any potential recommendation of director candidates by our stockholders, including the procedures to be followed. Our board has not considered or adopted any of these policies as we have never received a recommendation from any stockholder for any candidate to serve on our board of directors. Given the early stage of our business, we do not anticipate that any of our stockholders will make such a recommendation in the near future. While there have been no nominations of additional directors proposed, in the event such a proposal is made, all members of our board will participate in the consideration of director nominees. In considering a director nominee, it is likely that our board will consider the professional and/or educational background of any nominee with a view towards how this person might bring a different viewpoint or experience to our board.
None of our directors is an “audit committee financial expert” within the meaning of Item 401(e) of Regulation S-K. In general, an “audit committee financial expert” is an individual member of the audit committee or board of directors who:
● understands generally accepted accounting principles and financial statements;
● is able to assess the general application of such principles in connection with accounting for estimates, accruals and reserves;
● has experience preparing, auditing, analyzing or evaluating financial statements comparable to the breadth and complexity to our financial statements;
● understands internal controls over financial reporting; and
● understands audit committee functions.
Our securities are not quoted on an exchange that has requirements that a majority of our board members be independent, and we are not currently otherwise subject to any law, rule or regulation requiring that all or any portion of our board of directors include “independent” directors, nor are we required to establish or maintain an Audit Committee or other committee of our board of directors.
Code of Ethics and Conduct
We have adopted a Code of Ethics and Conduct which applies to our board of directors, our executive officers and our employees. The Code of Ethics and Conduct outlines the broad principles of ethical business conduct we adopted, covering subject areas such as:
● conflicts of interest;
● corporate opportunities;
● public disclosure reporting;
● confidentiality;
● protection of company assets;
● health and safety;
● conflicts of interest; and
● compliance with applicable laws.
A copy of our Code of Ethics and Conduct is available without charge, to any person desiring a copy, by written request to us at our principal offices at 5550 Nicollet Avenue, Minneapolis, MN 55419.
Director compensation
Our directors do not receive compensation for their services as directors.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Exchange Act, requires our executive officers and directors, and persons who beneficially own more than 10% of a registered class of our equity securities to file with the Securities and Exchange Commission initial statements of beneficial ownership, reports of changes in ownership and annual reports concerning their ownership of our common shares and other equity securities, on Forms 3, 4 and 5 respectively. Executive officers, directors and greater than 10% stockholders are required by the Securities and Exchange Commission regulations to furnish us with copies of all Section 16(a) reports they file. Based solely upon a review of Forms 3 and 4 and amendments thereto furnished to us under Rule 16a-3(d) of the Securities Exchange Act during the year ended December 31, 2020 and Forms 5 and amendments thereto furnished to us with respect to the year ended December 31, 2020, as well as any written representation from a reporting person that no Form 5 is required, we are not aware that any officer, director or 10% or greater stockholder failed to file on a timely basis, as disclosed in the aforementioned Forms, reports required by Section 16(a) of the Exchange Act of during the year ended December 31, 2020.

---

ITEM 11. EXECUTIVE COMPENSATION
ITEM 11. EXECUTIVE COMPENSATION.
The following table summarizes all compensation recorded by us in the past two years for:
● our principal executive officer or other individual serving in a similar capacity;
● our two most highly compensated named executive officers at December 31, 2020 whose annual compensation exceeded $100,000; and
● up to two additional individuals for whom disclosure would have been required but for the fact that the individual was not serving as an executive officer at December 31, 2020.
For definitional purposes, these individuals are sometimes referred to as the “named executive officers.”
Summary Compensation Table
Name and principal
position Year Salary
($)
Bonus
($)
Stock
Awards
($)
Option
Awards
($)
No equity
incentive
plan
compensation
($)
Non-qualified
deferred
compensation
earnings
($)
All
other
compensation
($)
Total
($)
Alexander Chong, 49,200 25,000 - 874,697
- - - 948,897
Chief Executive Officer (1) - - - 11,698 - - - 11,698
(1) The amounts included in the “Option Awards” column represent the aggregate grant date fair value of stock options to purchase (i) 175,000 shares of common stock at an exercise price of $5.31 per share awarded to Mr. Chong in October 2020 as additional compensation, and (ii) 175,000 shares of common stock at an exercise price of $1.00 awarded to Mr. Chong in December 2019 as additional compensation. The assumptions made in the valuations of the option awards are included in Note 2 of the notes to our financial statements appearing later in this report.
How the executive’s compensation is determined
We are not a party to written employment agreements with any of our executive officers.
Mr. Chong, who has served as our Chief Executive Officer since July 2014, previously did not receive cash compensation for his services to us. Effective August 1, 2020, the board of directors approved an annual salary for Mr. Chong of $98,400 and in October 2020 he was awarded stock options to purchase 175,000 shares of our common stock at an exercise price of $5.31 as additional compensation. The amount of compensation we may pay to Mr. Chong from time to time is in the discretion of the board of directors of which he is one of three members.
Outstanding equity awards at fiscal year-end
The following table provides information concerning unexercised options, stock that has not vested and equity incentive plan awards for each named executive officer outstanding as of December 31, 2020:
OPTION AWARDS STOCK AWARDS
Name Number of Securities
Underlying
Unexercised
Options (#)
Exercisable Number of
Securities
Underlying
Unexercised Options (#) Unexercisable Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned Options
(#)
Option
Exercise
Price ($) Option
Expiration
Date Number
of
Shares
or Units
of Stock
That Have
Not Vested (#) Market
Value of
Shares
or Units
of Stock
That
Have Not
Vested
($) Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units or
Other
Rights
that Have
Not
Vested (#) Equity
Incentive
Plan
Awards:
Market
or Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
(#)
Alexander Chong 300,000 - - .75 12/30/21
300,000 - - 1.40 12/21/23
175,000 - - 1.00 12/31/24
175,000 - - 5.31 10/1/25

---

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
At April 15, 2021, we had 25,469,114 shares of our common stock issued and outstanding which is our only class of voting securities. The following table sets forth information regarding the beneficial ownership of our common stock as of April 15, 2021 by:
● each person known by us to be the beneficial owner of more than 5% of our common stock;
● each of our directors;
● each of our named executive officers; and
● our named executive officers, directors and director nominees as a group.
Unless otherwise indicated, the business address of each person listed is in care of 5550 Nicollet Avenue, Minneapolis, MN 55419. The percentages in the table have been calculated on the basis of treating as outstanding for a particular person, all shares of our common stock outstanding on that date and all shares of our common stock issuable to that holder in the event of exercise of outstanding options, warrants, rights or conversion privileges owned by that person at that date which are exercisable within 60 days of that date. Except as otherwise indicated, the persons listed below have sole voting and investment power with respect to all shares of our common stock owned by them, except to the extent that power may be shared with a spouse.
Common Stock
Name and Address of Beneficial Owner Shares %
Alexander Chong (1) 20,195,716 76.4 %
William P. Bartkowski (2) 135,716 ≤1 %
Daniel Markes (3) 447,146 1.7 %
Roger Nielsen (4) 421,431 1.6 %
All officers and directors as a group (four persons) (1)(2)(3)(4) 21,200,009 79.0 %
(1) Includes: (i) 1,805,715 shares of our common stock held of record by Chinhak LLC; (ii) 17,440,001 shares of our common stock held of record by Xten; (iii) 300,000 shares of common stock underlying options held with an exercise price of $1.75 per share and (iv) 300,000 shares of common stock underlying options held with an exercise price of $1.40, and (v) 175,000 shares of common stock underlying options with an exercise price of $1.00 per share (vi) 175,000 shares of common stock underlying options held at an exercise price of $5.31 per share. Mr. Chong has voting and dispositive control over the shares held of record by both of these entities.
(2) Includes (i); 42,858 shares of our common stock of common stock underlying options with an exercise price of $1.75 per share; (ii) 42,858 shares of common stock underlying options with an exercise price of $1.40 per share; and (iii) 25,000 shares of common stock underlying options with an exercise price of $1.00 per share (iv) an additional 25,000 shares of common stock underlying options with an exercise price of $5.31.
(3) Includes (i) 168,572 shares of our common stock; (ii)42,858 shares of common stock underlying options with an exercise price of $1.75 per share; (ii) 42,858 shares of common stock underlying options with an exercise price of $1.40 per share; and (iii) an additional 25,000 shares of common stock underlying options with an exercise price of $1.00 per share; (iv) 25,000 shares of common stock underlying options with an exercise price of $5.31, and (v) 142,858 shares of our common stock owned by Paula Markes, his spouse.
(4) Includes (i) 285,715 share of our common stock; (ii) 42,858 shares of our common stock underlying options with an exercise price of $1.75 per share; (iii) 42,858 shares of common stock underlying options with an exercise price of $1.40 per share; and (iv) 25,000 shares of common stock underlying options with an exercise price of $1.00 per share; (v) an additional 25,000 share of common stock underlying options with an exercise price of $5.31.
Securities authorized for issuance under equity compensation plans
The following table sets forth securities authorized for issuance under any equity compensation plans approved by our stockholders as well as any equity compensation plans not approved by our stockholders as of December 31, 2020.
Plan category Number of
securities to be
issued upon
exercise of
outstanding
options,
warrants and
rights (a)
Weighted
average exercise
price of
outstanding
options,
warrants and
rights Number of
securities
remaining
available for
future issuance
under equity
compensation
plans (excluding
securities
reflected in
column (a))
Plans not approved by our stockholders: - -
Plans approved by stockholders:
Equity Compensation Plan 857,148
$ 1.58
657,146
Equity Compensation Plan 500,000
$ 3.16
1,650,000
Equity Compensation Plan
We currently have two equity compensation plans, our 2014 Equity Compensation Plan (the “2014 Plan”) and our 2019 Equity Compensation Plan (the “2019 Plan”). While the number of shares of our common stock underlying outstanding grants under these plans were proportionally reduced and the exercise price was proportionally increased following the December 26, 2019 effective date of our 1:7 reverse stock split of our common stock, the total number of shares reserved for grants under the plans and the evergreen formulas were not impacted by the reverse split.
On August 19, 2014, our board of directors adopted our 2014 initially covering 10,000,000 shares of common stock. The 2014 Plan was ratified by our shareholders on August 19, 2019. The 2014 Plan also contains an “evergreen formula” pursuant to which the number of shares of common stock available for issuance under the 2014 Plan will automatically increase on the first trading day of January each calendar year during the term of the 2014 Plan, beginning with calendar year 2015, by an amount equal to 1% of the total number of shares of common stock outstanding on the last trading day in December of the immediately preceding calendar year, up to a maximum annual increase of 100,000 shares of common stock.
On November 19, 2019, our board of directors authorized our 2019 Plan and the 2019 Plan was ratified by our stockholders on December 26, 2019. The 2019 Plan covers 2,000,000 shares of common stock. The 2019 Plan also contains an “evergreen formula” pursuant to which the number of shares of common stock available for issuance under the 2019 Plan will automatically increase on January 1 of each calendar year during the term of the 2019 Plan, beginning with calendar year 2020, by an amount equal to 15% of the total number of shares of common stock outstanding on December 31 of the immediately preceding calendar year, up to a maximum annual increase of 150,000 shares of common stock.
The other terms of the 2014 Plan and the 2019 Plan are identical. The purpose of each of the plans is to enable us to offer to our employees, officers, directors and consultants, whose past, present and/or potential contributions to our company have been, are or will be important to our success, an opportunity to acquire a proprietary interest in our company. The plans are administered by our board of directors. Plan options may either be:
● incentive stock options (ISOs),
● non-qualified options (NSOs),
● awards of our common stock, or
● rights to make direct purchases of our common stock which may be subject to certain restrictions.
Any option granted under a plan must provide for an exercise price of not less than 100% of the fair market value of the underlying shares on the date of grant, but the exercise price of any ISO granted to an eligible employee owning more than 10% of our outstanding common stock must not be less than 110% of fair market value on the date of the grant. The plan further provides that with respect to ISOs the aggregate fair market value of the common stock underlying the options which are exercisable by any option holder during any calendar year cannot exceed $100,000. The term of each plan option and the manner in which it may be exercised is determined by the board of directors or the compensation committee, provided that no option may be exercisable more than 10 years after the date of its grant and, in the case of an incentive option granted to an eligible employee owning more than 10% of the common stock, no more than five years after the date of the grant. In the event of any stock split of our outstanding common stock, the board of directors in its discretion may elect to maintain the stated amount of shares reserved under the plan without giving effect to such stock split. Subject to the limitation on the aggregate number of shares issuable under the plan, there is no maximum or minimum number of shares as to which a stock grant or plan option may be granted to any person.

---

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
Director independence
None of our directors is considered “independent” within the meaning of meaning of Rule 5605 of the NASDAQ Marketplace Rules.

---

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
The following table shows the fees that were billed for the audit and other services provided by MaloneBailey LLP for 2020 and 2019.
Audit Fees $ 27,500
$ 18,500
Audit-Related Fees - -
Tax Fees - -
All Other Fees - -
Total $ 27,500
$ 18,500
Audit Fees - This category includes the audit of our annual financial statements, review of financial statements included in our Quarterly Reports on Form 10-Q and services that are normally provided by the independent registered public accounting firm in connection with engagements for those fiscal years. This category also includes advice on audit and accounting matters that arose during, or as a result of, the audit or the review of interim financial statements.
Audit-Related Fees - This category consists of assurance and related services by the independent registered public accounting firm that are reasonably related to the performance of the audit or review of our financial statements and are not reported above under “Audit Fees.” The services for the fees disclosed under this category include consultation regarding our correspondence with the Securities and Exchange Commission and other accounting consulting.
Tax Fees - This category consists of professional services rendered by our independent registered public accounting firm for tax compliance and tax advice. The services for the fees disclosed under this category include tax return preparation and technical tax advice.
All Other Fees - This category consists of fees for other miscellaneous items.
Our board of directors has adopted a procedure for pre-approval of all fees charged by our independent registered public accounting firm. Under the procedure, the Board approves the engagement letter with respect to audit, tax and review services. Other fees are subject to pre-approval by the board, or, in the period between meetings, by a designated member of the board. Any such approval by the designated member is disclosed to the entire board at the next meeting. The audit and tax fees paid to the auditors with respect to 2020 were pre-approved by the entire board of directors.

---

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
(a)(1) Financial statements.
● Report of Independent Registered Public Accounting Firm;
● Consolidated balance sheets at December 31, 2020 and 2019;
● Consolidated statements of operations for the years ended December 31, 2020 and 2019;
● Consolidated statements of changes in stockholders’ equity (deficit) for the years ended December 31, 2020 and 2019;
● Consolidated statements cash flows for the years ended December 31, 2020 and 2019; and
● Notes to consolidated financial statements.
(b) Exhibits.
Incorporated by Reference
Filed or
Furnished
Herewith
No .
Exhibit Description
Form
Date
Filed
Number
2.1
Share Exchange Agreement and Plan of Reorganization dated April 11, 2014 by and between OICco Acquisition IV, Inc., VapAria Corporation and the listed shareholders
8-K
4/11/14
2a
3.1
Amended and Restated Certificate of Incorporation
S-1
6/30/10
3(c)
3.2
Certificate of Amendment to the Amended and Restated Certificate of Incorporation
8-K
8/21/14
3.4
3.3
Certificate of Amendment to the Amended and Restated Certificate of Incorporation
10-Q
11/19/16
3.5
3.4
Bylaws
S-1
3/29/10
3(b)
3.5
Certificate of Amendment to the Amended and Restated Certificate of Incorporation
8-K
12/18/29
3.5
4.1
Form of Series A Common Stock Purchase Warrant
8-K
10/2/20
4.1
4.2
Form of Series B Common Stock Purchase Warrant
8-K
10/2/20
4.2
4.3
Form of Series C Common Stock Purchase Warrant
8-K
10/2/20
4.3
10.1
Exclusive License and Option to License Agreement dated December 31, 2013 by and between Chong Corporation and VapAria Corporation
S-1
5/1/14
10-b
10.2
Intellectual Property Assignment Agreement dated August 1, 2010 between Alexander C. Chong, William P. Bartkowski and Chong Corporation
S-1
6/9/14
10(d)
10.3
2014 Equity Compensation Plan
8-K
8/21/14
10.7
10.4
License Agreement dated January 28, 2016 by and between VapAria Corporation and Chong Corporation for the 228 patent
8-K
1/29/16
10.9
10.5
License Agreement dated January 28, 2016 by and between VapAria Corporation and Chong Corporation for the 040 patent
8-K
1/29/16
10.10
10.6
License Agreement dated January 28, 2016 by and between VapAria Corporation and Chong Corporation for the 617 patent application
8-K
1/29/16
10.11
10.7
License Agreement dated January 28, 2016 by and between VapAria Corporation and Chong Corporation for the 939 patent application
8-K
1/29/16
10.12
10.8
License Agreement dated January 28, 2016 by and between VapAria Corporation and Chong Corporation for the 279 patent application
8-K
1/29/16
10.13
10.9
Lease extension dated December 31, 2017 with Chong Corporation
10-K
3/29/18
10.21
10.10
Asset Purchase Agreement dated December 31, 2019 by and between CQENS Technologies Inc. and Chong Corporation
8-K
1/2/20
10.1
10.11
Form of Stock Purchase Agreement
8-K
10/31/19
10.1
10.12
Commercial Month to Month Lease
10-K
4/10/20
10.29
10.13
Form of Stock Purchase Agreement
8-K
6/5/20
10.1
10.14
Form of Amended and Restated Operating Agreement dated July 24, 2020 of Leap Technology LLC by and between CQENS Technologies, Inc., Zong Group Holdings LLC and Leap Management LLP
8-K
7/29/20
10.1
10.15
Form of Contribution Agreement Via Exclusive Licensing Agreement dated July 24, 2020 by and between CQENS Technologies Inc. and Leap Technology LLC
8-K
7/29/20
10.2
10.16
Form of Intellectual Property License Agreement dated July 24, 2020 by and between CQENS Technologies Inc. and Leap Technology LLP
8-K
7/29/20
10.3
10.17
Asset Purchase Agreement dated September 30, 2020 by and between CQENS Technologies Inc. and Xten Capital Group, Inc. (IP)
8-K
10/2/20
10.1
10.18
Asset Purchase Agreement dated September 30, 2020 by and between CQENS Technologies Inc. and Xten Capital Group, Inc. (other assets)
8-K
10/2/20
10.2
14.1
Code Conduct and Ethics
10-K
4/14/15
14.1
31.1
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
Filed
31.2
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
Filed
32.1
Section 1350 Certification of Chief Executive Officer and Chief Financial Officer
Filed
101.INS
XBRL Instance Document
Filed
101.SCH
XBRL Taxonomy Extension Schema Document
Filed
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document
Filed
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document
Filed
101.LAB
XBRL Taxonomy Extension Label Linkbase Document
Filed
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document
Filed