Document and Entity Information
Document and Entity Information - USD ($) | 9 Months Ended | ||
Dec. 31, 2018 | Feb. 14, 2019 | Sep. 30, 2018 | |
Document and Entity Information: | |||
Entity Registrant Name | Advansource Biomaterials Corp | ||
Document Type | 10-Q | ||
Document Period End Date | Dec. 31, 2018 | ||
Amendment Flag | false | ||
Entity Central Index Key | 1,011,060 | ||
Current Fiscal Year End Date | --03-31 | ||
Entity Common Stock, Shares Outstanding | 21,490,621 | ||
Entity Public Float | $ 17,380,000 | ||
Entity Filer Category | Smaller Reporting Company | ||
Entity Current Reporting Status | Yes | ||
Document Fiscal Year Focus | 2,019 | ||
Document Fiscal Period Focus | Q3 | ||
Trading Symbol | asnb |
Balance Sheets
Balance Sheets - USD ($) $ in Thousands | Dec. 31, 2018 | Mar. 31, 2018 | ||
Current assets | ||||
Cash | $ 93 | $ 120 | ||
Accounts receivable-trade, net | 436 | [1] | 202 | [2] |
Accounts receivable-other | 241 | 368 | ||
Inventories, net | 242 | 297 | ||
Prepaid expenses and other current assets | 4 | 4 | ||
Total current assets | 1,016 | 991 | ||
Property, plant and equipment, net | 1,805 | 1,823 | ||
Deferred financing costs, net | 54 | 59 | ||
Other assets | 47 | 47 | ||
Total assets | 2,922 | 2,920 | ||
Current liabilities | ||||
Accounts payable | 535 | 544 | ||
Accrued expenses | 237 | 265 | ||
Customer advance | 243 | 295 | ||
Notes payable | 140 | 145 | ||
Deferred revenue | 25 | 13 | ||
Total current liabilities | 1,180 | 1,262 | ||
Long-term liabilities | ||||
Long-term financing obligation | 1,986 | 1,986 | ||
Accrued interest on financing obligation | 172 | 175 | ||
Total long-term liabilities | 2,158 | 2,161 | ||
Total liabilities | 3,338 | 3,423 | ||
Commitments and contingencies | ||||
Stockholders' equity | ||||
Preferred stock | [3] | [4] | ||
Common stock | 21 | [5] | 21 | [6] |
Additional paid-in capital | 38,423 | 38,404 | ||
Accumulated deficit | (38,830) | (38,898) | ||
Treasury stock | (30) | [7] | (30) | [8] |
Total stockholders' equity | (416) | (503) | ||
Total liabilities and stockholders' equity | $ 2,922 | $ 2,920 | ||
[1] | Net of allowance of $5 as of12/31/2018. | |||
[2] | Net of allowance of $5 as 3/31/2018. | |||
[3] | $.001 par value, 5,000,000 shares authorized; no shares issued and outstanding as of 12/31/2018. | |||
[4] | $.001 par value, 5,000,000 shares authorized; no shares issued and outstanding as of 3/31/2018. | |||
[5] | $.001 par value, 50,000,000 shares authorized; 21,567,313 shares issued and 21,490,621 shares outstanding as of 12/31/2018. | |||
[6] | $.001 par value, 50,000,000 shares authorized; 21,567,313 shares issued and 21,490,621 shares outstanding as of 3/31/2018. | |||
[7] | 76,692 shares at cost at 12/31/2018. | |||
[8] | 76,692 shares at cost at 3/31/2018. |
Statements of Operations
Statements of Operations - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | |
Revenues | ||||
Total revenues | $ 889 | $ 610 | $ 2,272 | $ 1,988 |
Cost of sales | 259 | 178 | 670 | 603 |
Gross profit | 630 | 432 | 1,602 | 1,385 |
Operating expenses | ||||
Research, development and regulatory | 77 | 87 | 253 | 284 |
Selling, general and administrative | 325 | 295 | 999 | 1,272 |
Total operating expenses | 402 | 382 | 1,252 | 1,556 |
Income (loss) from operations | 228 | 50 | 350 | (171) |
Interest expense | 94 | 94 | 282 | 289 |
Net income (loss) | $ 134 | $ (44) | $ 68 | $ (460) |
Net income (loss) per common share, basic | $ 0.01 | $ 0 | $ 0 | $ (0.02) |
Net income (loss) per common share, diluted | $ 0.01 | $ 0 | $ 0 | $ (0.02) |
Shares used in computing net income (loss) per common share, basic | 21,491 | 21,491 | 21,491 | 21,491 |
Shares used in computing net income (loss) per common share, diluted | 22,711 | 21,491 | 22,627 | 22,631 |
Statement of Cash Flows
Statement of Cash Flows - USD ($) | 9 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Cash flows from operating activities | ||
Net income (loss) | $ 68,000 | $ (460,000) |
Adjustments to reconcile net income (loss) to net cash flows used in operating activities: | ||
Depreciation | 43,000 | 38,000 |
Amoritization of deferred financing costs | 5,000 | 5,000 |
Stock-based compensation | 19,000 | 300,000 |
Changes in assets and liabilities: | ||
(Increase) decrease in accounts receivable-trade | (234,000) | (21,000) |
(Increase) decrease in accounts receivable-other | 127,000 | (90,000) |
(Increase) decrease in inventories | 55,000 | (115,000) |
(Increase) decrease in prepaid expenses and other current assets | 1,000 | |
Increase (decrease) in accounts payable | (9,000) | 24,000 |
Increase (decrease) in accrued expenses | (32,000) | 25,000 |
Increase (decrease) in customer advance | (52,000) | 326,000 |
Increase (decrease) in deferred revenue | 12,000 | 12,000 |
Net cash flows provided by (used in) operating activities | 2,000 | 45,000 |
Cash flows from investing activities | ||
Purchase of equipment | (24,000) | (10,000) |
Net cash flows provided by (used in) investing activities | (24,000) | (10,000) |
Cash flows from financing activities | ||
Repayment of promissory note | (5,000) | (5,000) |
Net cash flows provided by (used in) financing activities | (5,000) | (5,000) |
Net change in cash | (27,000) | 30,000 |
Cash at beginning of period | 120,000 | 27,000 |
Cash at end of period | 93,000 | 57,000 |
Supplemental disclosures of cash flow information | ||
Interest paid | $ 280,000 | $ 279,000 |
Description of Business
Description of Business | 9 Months Ended |
Dec. 31, 2018 | |
Notes | |
Description of Business | 1. Description of Business AdvanSource Biomaterials Corporation develops advanced polymer materials which provide critical characteristics in the design and development of medical devices. Our biomaterials are used in devices that are designed for treating a broad range of anatomical sites and disease states. Our business model leverages our proprietary materials science technology and manufacturing expertise in order to expand product sales and royalty and license fee income. Our technology, notably products such as ChronoFlex®, HydroMed , and HydroThane , which have been developed to overcome a wide range of design and functional challenges, such as the need for dimensional stability, ease of manufacture and demanding physical properties to overcoming environmental stress cracking and providing heightened lubricity for ease of insertion. Our new product extensions customize proprietary polymers for specific customer applications in a wide range of device categories. Our corporate, development and manufacturing operations are located in our leased facility in Wilmington, Massachusetts. |
Interim Financial Statements an
Interim Financial Statements and Basis of Presentation | 9 Months Ended |
Dec. 31, 2018 | |
Notes | |
Interim Financial Statements and Basis of Presentation | 2. Interim Financial Statements and Basis of Presentation The accompanying unaudited condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP) for interim financial information with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, these unaudited condensed financial statements do not include all of the information and disclosures required by U.S. GAAP for complete financial statements. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments (consisting only of normal recurring adjustments), which we consider necessary, for a fair presentation of those financial statements. The results of operations and cash flows for the nine months ended December 31, 2018 may not necessarily be indicative of results that may be expected for any succeeding quarter or for the entire fiscal year. The information contained in this quarterly report on Form 10-Q should be read in conjunction with our audited financial statements included in our annual report on Form 10-K, as amended, as of and for the year ended March 31, 2018 as filed with the Securities and Exchange Commission (the SEC). Additionally, the accompanying unaudited financial statements have been prepared on a going concern basis which implies we will continue to meet our obligations for the next twelve months as of the date these financial statements are issued and contemplates the realization of assets and satisfaction of liabilities in the normal course of business. For the nine months ended December 31, 2018, we recognized net income of approximately $68,000, had positive net cash flows of approximately $2,000 from operating activities and had a working capital deficit of approximately $164,000. Management believes that substantial doubt of our ability to meet our obligations for the next twelve months from the date these financial statements were first made available has been alleviated due to, but not limited to, i) certain arrangements entered into during the fiscal year ended March 31, 2018 with three of our significant customers which provide inventory purchase financing and long-term commitments for continued product purchase; ii) continued growth of product sales from our current customer base and new customers; and iii) stable to increasing license fees and royalties pursuant to long-term contracts and arrangements. However, management cannot provide any assurances that we will be successful in accomplishing any of our plans. Management also cannot provide any assurance that unforeseen circumstances that could occur at any time within the next twelve months or thereafter will not increase the need for us to raise additional capital on an immediate basis. However, based upon our evaluation, management believes that we are a going concern. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and judgments, which are evaluated on an ongoing basis, and that affect the amounts reported in our unaudited condensed financial statements and accompanying notes. Management bases its estimates on historical experience and on various other assumptions that it believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the amounts of revenues and expenses that are not readily apparent from other sources. Actual results could differ from those estimates and judgments. In particular, significant estimates and judgments include those related to revenue recognition, allowance for doubtful accounts, inventory reserves, useful lives and valuation of property and equipment. Other than as stated below, our significant accounting policies are described in Note 3 to the financial statements included in Item 8 of our annual report on Form 10-K as of March 31, 2018. Revenue Recognition We adopted the Accounting Standard Codification (ASC) 606, Revenue from Contracts with Customers as of April 1, 2018, using the modified retrospective method, and concluded that, consistent with prior reporting, we have two separate revenue streams: (i) product sales, and (ii) royalty and licensing revenues. Results for reporting periods after April 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported in accordance with legacy accounting guidance under ASC 605, Revenue Recognition. The adoption of ASC 606 had no impact upon adoption, to our net income (loss) for the three and nine months ended December 31, 2018. ASC 606 defines a five-step process to recognize revenues at the time and in an amount that reflects the consideration expected to be received for the performance obligations that have been provided. ASC 606 defines contracts as written, oral and through customary business practice. Under this definition, the Company considers contracts to be created at the time that an order to purchase product is agreed upon regardless of whether or not there is a written contract or when a contract is entered into for licensing and royalties. We have two separate and distinct performance obligations offered to our customers: a product sales performance obligation and a licensing and royalty performance obligation. These performance obligations are related to separate revenue streams and at no point are they combined into a single transaction. We generate the majority of our revenue from product sales, and to a lesser extent from fees generated from licensing and royalty arrangements primarily with two customers. Our revenue related to product sales is recognized upon shipment, provided that a purchase order has been received or a contract has been executed, there are no uncertainties regarding customer acceptance, the sales price is fixed or determinable and collection is deemed reasonably assured. If uncertainties regarding customer acceptance exist, we recognize revenues when those uncertainties are resolved and title has been transferred to the customer. Amounts collected or billed prior to satisfying the above revenue recognition criteria are recorded as deferred revenue. Our revenue related to licensing and royalty arrangements is recognized in accordance with the terms of the arrangements which typically provide for quarterly payment of exclusivity fees and royalties earned on the sale of customer products on a quarterly basis. |
New Accounting Pronouncement
New Accounting Pronouncement | 9 Months Ended |
Dec. 31, 2018 | |
Notes | |
New Accounting Pronouncement | 3. Recent Accounting Pronouncements From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board or other standard setting bodies that may have an impact on our accounting and reporting. We believe that such recently issued accounting pronouncements and other authoritative guidance for which the effective date is in the future either will not have an impact on our accounting or reporting or that such impact will not be material to our financial position, results of operations and cash flows when implemented. Recent accounting pronouncements are included in Note 3 to the financial statements included in Item 8 of our annual report on Form 10-K as of March 31, 2018. |
Customer Advances
Customer Advances | 9 Months Ended |
Dec. 31, 2018 | |
Notes | |
Customer Advances | 4. Customer Advances In April 2017, we received approximately $581,000 from three significant customers as advances against future product sales and inventory purchases. During the three months and nine months ended December 31, 2018, we shipped and recognized revenue on the sale of product to this customer in the approximate amount of $0 and $33,000, respectively. During the three months and nine months ended December 31, 2017, we shipped and recognized revenue on the sale of product to this customer in the approximate amount of $97,000 and $248,000, respectively During the nine months ended December 31, 2017, we received approximately $$660,000 and $145,000 from two customers which cash was retained by us in order to purchase certain raw material inventory on their behalf. We purchased raw materials on behalf of these two customers resulting in an available balance of approximately $243,000 as of December 31, 2018 and March 31, 2018, which is included in Customer Advances in our balance sheet. |
Related Party Transactions
Related Party Transactions | 9 Months Ended |
Dec. 31, 2018 | |
Notes | |
Related Party Transactions | 5. Related Party Transactions On April 26, 2016, we entered into Promissory Notes in the aggregate principal amount of $50,000 (the Notes) with Khristine Carroll, our Executive VP of Commercial Operations and an affiliate of Michael Adams, our Chief Executive Officer (the Affiliate) (collectively, the Investors). The Notes were initially due on May 25, 2016 and are currently being extended for consecutive monthly periods as mutually agreed upon by the parties and provided for by the terms of the Notes. The Notes bear interest at the rate of 10% per annum and all principal and accrued interest, if any, is due on demand. During the three months ended December 31, 2018 and the fiscal year ended March 31, 2018, we repaid $5,000 and $5,000, respectively, of principal to Ms. Carroll. As of December 31, 2018 and March 31, 2018, the aggregate principal balance outstanding was $40,000 and $45,000, respectively. During the three months ended December 31, 2018 and 2017, we recorded interest expense of approximately $1,000 and $1,000, respectively, on the Notes. During the nine months ended December 31, 2018 and 2017, we recorded interest expense of approximately $3,000 and $3,000, respectively, on the Notes. As of December 31, 2018 and March 31, 2018, we recorded interest payable of $0 and $0, respectively. On December 5, 2016, we entered into an additional Promissory Note in the principal amount of $100,000 (the Second Note) with the Affiliate. The Second Note bears interest at the rate of 12% per annum, provides for a $3,000 commitment fee, which fee was paid in February 2017. Additionally, all principal and accrued interest, if any, which is due on demand, has been extended for consecutive month-to-month periods as mutually agreed to by the parties. As of December 31, 2018 and March 31, 2018, the principal balance outstanding was $100,000 and $100,000, respectively. During the three months ended December 31, 2018 and 2017 we recorded interest expense of $3,000 and $3,000, respectively, on the Second Note. During the nine months ended December 31, 2018 and 2017 we recorded interest expense of $9,000 and $9,000, respectively, on the Second Note. As of December 31, 2018 and March 31, 2018, we recorded interest payable of $0 and $0, respectively. On April 3, 2017, Michael Adams, our CEO and President, advanced and committed to us $20,000 pursuant to a promissory note, as amended (the Advance Note). The Advance Note provided the availability of up to $20,000 at the sole discretion of Mr. Adams through April 2, 2018, bears interest at the rate of 10% per annum, and provides for a $2,000 commitment fee and guaranteed interest of $2,000 payable upon execution of the Advance Note. On April 19, 2017 we paid the commitment fee and guaranteed interest of $2,000 and $2,000, respectively. Additionally, on April 19, 2017 we paid down the $20,000 advance. As of December 31, 2018 and March 31, 2018, the principal balance outstanding on the Advance Note was $0. |
Equity-Based Compensation
Equity-Based Compensation | 9 Months Ended |
Dec. 31, 2018 | |
Notes | |
Equity-Based Compensation | 6. Equity-Based Compensation In October 2003, our shareholders approved the AdvanSource 2003 Stock Option Plan (the 2003 Plan), which authorizes the issuance of 3,000,000 shares of common stock. Under the terms of the Plan, the exercise price of Incentive Stock Options issued under the Plan must be equal to the fair market value of the common stock at the date of grant. In the event that Non-Qualified Options are granted under the Plan, the exercise price may be less than the fair market value of the common stock at the time of the grant (but not less than par value). Total shares of common stock registered under the 2003 Plan are 7,000,000 shares. Normally, options granted expire ten years from the grant date. Activity under the 2003 Plan for the nine months ended December 31, 2018 is as follows: Options Outstanding Weighted-Average Exercise Price per Share Weighted-Average Remaining Contractual Term in Years Aggregate Intrinsic Value (in thousands) Options outstanding as of April 1, 2018 1,813,750 $ 0.21 3.00 $ - Granted - Exercised Cancelled or forfeited (25,000) $ 0.42 - $ - Options outstanding as of December 31, 2018 (unaudited) 1,788,750 $ 0.20 2.28 $ - Options exercisable as of December 31, 2018 (unaudited) 1,788,750 $ 0.20 2.28 $ - Options vested or expected to vest as of December 31, 2018 (unaudited) 1,788,750 $ 0.20 2.28 $ - Our unaudited condensed statements of operations include no equity-based compensation expense related to our 2003 Plan for employee and non-employee director awards for the three and nine months ended December 31, 2018 and 2017, respectively, as all of the stock options pursuant to the 2003 Plan are fully vested and there remains no further unrecognized equity-based compensation costs. On August 14, 2017, our board of directors approved and adopted the 2017 Non-Qualified Equity Incentive Plan (the 2017 Plan), which authorized the grant of non-qualified stock options exercisable into a maximum of 7,000,000 shares of our common stock. Under the terms of the 2017 Plan, the exercise price of stock options issued under the 2017 Plan must be equal to the fair market value of the common stock at the date of grant. Options granted expire ten years from the grant date. On August 17, 2017, the board of directors approved the grant of stock options to certain directors, employees and a consultant exercisable into 5,600,000 shares of our common stock (the 2017 Plan Options). The 2017 Plan Options were immediately vested on the date of grant and exercisable at $0.06 per share, the fair market value on the date of grant. In determining the fair value of the 2017 Stock Options, we utilized the Black-Scholes pricing model utilizing the following assumptions: i) stock option exercise price of $0.06; ii) grant date price of our common stock of $0.06; iii) expected term of option of 10 years; iv) expected volatility of our common stock of 100%; v) expected dividend rate of 0.0%; and vi) risk-free interest rate of 0.0%. We recorded stock-based compensation of approximately $300,000 on August 17, 2017, the date of grant. On August 16, 2018, the board of directors approved the grant of an additional stock option pursuant to the 2017 Plan to our executive vice president exercisable into 750,000 shares of our common stock which was immediately vested on the date of grant and exercisable at $0.04 per share, the fair market value on the date of grant. In determining the fair value of the subject stock option, we utilized the Black-Scholes pricing model utilizing the following assumptions: i) stock option exercise price of $0.04; ii) grant date price of our common stock of $0.04; iii) expected term of option of 10 years; iv) expected volatility of our common stock of 100%; v) expected dividend rate of 0.0%; and vi) risk-free interest rate of 0.0%. We recorded stock-based compensation of $0 and approximately $19,000 during the three and nine months ended December 31, 2018, respectively. We recorded stock-based compensation of $0 and approximately $300,000 during the three and nine months ended December 31, 2017, respectively. |
Inventories
Inventories | 9 Months Ended |
Dec. 31, 2018 | |
Notes | |
Inventories | 7. Inventories Inventories, net, are stated at the lower of cost (first in, first out) or market and consist of the following: (in thousands) December 31, 2018 (unaudited) March 31, 2018 Raw materials $ 182 $ 215 Work in progress 43 64 Finished goods 129 130 354 409 Less: allowance for obsolete and excess inventory (112) (112) Total inventories, net $ 242 $ 297 |
Property, Plant and Equipment
Property, Plant and Equipment | 9 Months Ended |
Dec. 31, 2018 | |
Notes | |
Property, Plant and Equipment | 8. Property, Plant and Equipment Property, plant and equipment consists of the following: (in thousands) December 31, 2018 (unaudited) March 31, 2018 Land $ 500 $ 500 Building 2,705 2,705 Machinery, equipment and tooling 1,248 1,224 Furniture, fixtures and office equipment 285 285 Office equipment under capital lease 13 13 4,751 4,727 Less: accumulated depreciation 2,946 2,904 $ 1,805 $ 1,823 For the three months ended December 31, 2018 and 2017, depreciation expense was approximately $14,000 and $13,000, respectively. For the nine months ended December 31, 2018 and 2017, depreciation expense was approximately $43,000 and $38,000, respectively. |
Loss Per Share
Loss Per Share | 9 Months Ended |
Dec. 31, 2018 | |
Notes | |
Loss Per Share | 9. Income Per Share Basic income per common share is computed by dividing net income by the weighted-average number of common shares outstanding during the period. Diluted income per common share are based upon the weighted-average common shares outstanding during the period plus additional weighted-average common equivalent shares outstanding during the period. Common equivalent shares result from the assumed exercise of outstanding stock options and warrants, the proceeds of which are then assumed to have been used to repurchase outstanding common stock using the treasury stock method. In addition, the numerator is adjusted for any changes in income that would result from the assumed conversion of potential shares. Potentially dilutive shares, which were included in the diluted income per share calculations for the three and nine months ended December 31, 2018 were 1,220,008 shares and 1,137,025 shares, respectively. Potentially dilutive shares, which were excluded from the diluted income per share calculations because the effect would be antidilutive or the options exercise prices were greater than the average market price of the common shares, were 8,250,250 shares for the each of the three and nine months ended December 31, 2017. |
Stockholders' Equity
Stockholders' Equity | 9 Months Ended |
Dec. 31, 2018 | |
Notes | |
Stockholders' Equity | 10. Stockholders Deficit Common Stock Options and Warrants On July 22, 2015, we engaged the services of a financial and strategic advisor whose services include, but are not limited to, financial advice, strategic advice and investment banking services. In connection with this engagement, we agreed to compensate the investment bankers approximately $4,000 per quarter for a one year period and we issued them a warrant to purchase 830,500 shares of our common stock at an exercise price of $0.0301 per share, the approximate fair value of our common stock on the date of the engagement. The warrant is exercisable at any time until July 21, 2025. The warrant was valued at approximately $28,000 using the Black-Scholes model. There were no exercises of options or warrants by employees or consultants during the nine months ended December 31, 2018 and 2017, respectively. |
Income Taxes
Income Taxes | 9 Months Ended |
Dec. 31, 2018 | |
Notes | |
Income Taxes | 11. Income Taxes The provision for income taxes includes federal, state, local and foreign taxes. Income taxes are accounted for under the liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences of temporary differences between the financial statement carrying amounts and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the year in which the temporary differences are expected to be recovered or settled. We evaluate the realizability of our deferred tax assets and establishes a valuation allowance when it is more likely than not that all or a portion of deferred tax assets will not be realized. A valuation allowance has been recorded to offset all deferred tax assets due to uncertainty of realizing the tax benefits of the underlying operating loss and tax credit carry forwards over their carry forward periods. We have no significant deferred tax liabilities as of December 31, 2018 and March 31, 2018. We account for uncertain tax positions using a more-likely-than-not threshold for recognizing and resolving uncertain tax positions. The evaluation of uncertain tax positions is based on factors including, but not limited to, changes in tax law, the measurement of tax positions taken or expected to be taken in tax returns, the effective settlement of matters subject to audit, new audit activity and changes in facts or circumstances related to a tax position. We evaluate this tax position on a quarterly basis. We also accrue for potential interest and penalties, if applicable, related to unrecognized tax benefits in income tax expense. As of December 31, 2018 and March 31, 2018, we had no material unrecognized tax benefits and no adjustments to liabilities or operations were required. On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the Tax Act) was signed into law making significant changes to the Internal Revenue Code. Changes include, but are not limited to, a federal corporate tax rate decrease from 35% to 21% for tax years beginning after December 31, 2017, the transition of U.S international taxation from a worldwide tax system to a territorial system, and a one-time transition tax on the mandatory deemed repatriation of foreign earnings. We have estimated our provision for income taxes in accordance with the Tax Act and guidance available as of the date of this filing but have kept the full valuation allowance. On December 22, 2017, Staff Accounting Bulletin No. 118 ("SAB 118") was issued to address the application of US GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Act. The deferred tax expense recorded in connection with the remeasurement of deferred tax assets is a provisional amount and a reasonable estimate at December 31, 2017 based upon the best information currently available. The ultimate impact may differ from these provisional amounts, possibly materially, due to, among other things, additional analysis, changes in interpretations and assumptions the Company has made, additional regulatory guidance that may be issued, and actions the Company may take as a result of the Tax Act. Any subsequent adjustment to these amounts will be recorded to current tax expense in the quarter of 2018 when the analysis is complete. The accounting is expected to be complete when the 2017 U.S. corporate income tax return is filed in 2018. |
Notes Payable
Notes Payable | 9 Months Ended |
Dec. 31, 2018 | |
Notes | |
Notes Payable | 12. Notes Payable On April 26, 2016, we entered into Promissory Notes in the aggregate principal amount of $50,000 (the Notes) with Khristine Carroll, our Executive VP of Commercial Operations and an affiliate of Michael Adams, our Chief Executive Officer (the Affiliate) (collectively, the Investors). The Notes were initially due on May 25, 2016 and are currently being extended for consecutive monthly periods as mutually agreed upon by the parties and provided for by the terms of the Notes. The Notes bear interest at the rate of 10% per annum and all principal and accrued interest, if any, is due on demand. During the fiscal year ended March 31, 2018, we repaid $5,000 of principal to Ms. Carroll. As of December 31, 2018 and March 31, 2018, the aggregate principal balance outstanding was $45,000 and $50,000, respectively. During the three months ended December 31, 2018 and 2017, we recorded interest expense of approximately $1,000 and $1,000, respectively, on the Notes. During the nine months ended December 31, 2018 and 2017, we recorded interest expense of approximately $3,000 and $3,000, respectively, on the Notes. As of December 31, 2018 and March 31, 2018, we recorded interest payable of $0 and $0, respectively. On December 5, 2016, we entered into an additional Promissory Note in the principal amount of $100,000 (the Second Note) with the Affiliate. The Second Note bears interest at the rate of 12% per annum, provides for a $3,000 commitment fee, which fee was paid in February 2017. Additionally, all principal and accrued interest, if any, which is due on demand, has been extended for consecutive month-to-month periods as mutually agreed to by the parties. As of December 31, 2018 and March 31, 2018, the principal balance outstanding was $100,000 and $100,000, respectively. During the three months ended December 31, 2018 and 2017 we recorded interest expense of $3,000 and $3,000, respectively, on the Second Note. During the nine months ended December 31, 2018 and 2017 we recorded interest expense of $9,000 and $9,000, respectively, on the Second Note. As of December 31, 2018 and March 31, 2018, we recorded interest payable of $0 and $0, respectively. On April 3, 2017, Michael Adams, our CEO and President, advanced and committed to us $20,000 pursuant to a promissory note, as amended (the Advance Note). The Advance Note provided the availability of up to $20,000 at the sole discretion of Mr. Adams through April 2, 2018, bears interest at the rate of 10% per annum, and provides for a $2,000 commitment fee and guaranteed interest of $2,000 payable upon execution of the Advance Note. On April 19, 2017 we paid the commitment fee and guaranteed interest of $2,000 and $2,000, respectively. Additionally, on April 19, 2017 we paid down the $20,000 advance. As of December 31, 2018 and March 31, 2018, the principal balance outstanding on the Advance Note was $0. |
Long-Term Financing Obligation
Long-Term Financing Obligation | 9 Months Ended |
Dec. 31, 2018 | |
Notes | |
Long-Term Financing Obligation | 13. Long-Term Financing Obligation On December 22, 2011, we entered into an agreement with an independent third-party under which we sold and leased back our land and building generating gross proceeds of $2,000,000. Pursuant to a lease agreement, the initial minimum lease term is 15 years. At the end of the initial minimum lease term, we have the option to renew the lease for three periods of five years each. In addition, we provided, as collateral, a security interest in all furnishings, fixtures and equipment owned and used by us, having a net book value of approximately $0 as of December 31, 2018. For accounting purposes, the provision of such collateral constitutes continuing involvement with the associated property. Due to this continuing involvement, this sale-leaseback transaction is accounted for under the financing method, rather than as a completed sale. Under the financing method, we include the sales proceeds received as a financing obligation. As of December 31, 2018 and March 31, 2018, the total financing obligation was $1,986,000, respectively, and accrued interest on financing obligation was approximately $172,000 and $175,000, respectively. Through December 2018, interest on the financing obligation exceeds the minimum lease payments, accordingly the principal remains constant through that date. After December 2018, the minimum lease payment will exceed interest and principal will be reduced by the excess of minimum lease payment over interest. The building, building improvements and land remain on the condensed balance sheet and the building and building improvements will continue to be depreciated over their remaining useful lives. Payments made under the lease are applied as payments of imputed interest and deemed principal on the underlying financing obligation. |
Contingencies
Contingencies | 9 Months Ended |
Dec. 31, 2018 | |
Notes | |
Contingencies | 14. Contingencies We are not a party to any legal proceedings, other than ordinary routine litigation incidental to our business, which we believe will not have a material effect on our financial position or results of operations. |
Concentrations of Credit Risk a
Concentrations of Credit Risk and Major Customers | 9 Months Ended |
Dec. 31, 2018 | |
Notes | |
Concentrations of Credit Risk and Major Customers | 15. Concentrations of Credit Risk and Major Customers For the three months ended December 31, 2018 and 2017, three customers represented approximately 66% of our total revenues and four customers represented approximately 61% of our total revenues, respectively. For the nine months ended December 31, 2018 and 2017, three customers represented approximately 53% of our total revenues and four customers represented approximately 65% of our total revenues, respectively. As of December 31, 2018, we had accounts receivable-trade, net, of approximately $290,000, or 66%, due from two customers. As of March 31, 2018, we had accounts receivable-trade, net, of approximately $102,000, or 51%, due from three customers. As of December 31, 2018, we had approximately $241,000 due from two customer related to receivables on royalties, license and annual usage fees. As of March 31, 2018, we had approximately $368,000 due from two customers related to receivables on royalties, license and annual usage fees. These amounts are classified as accounts receivable-other in the accompanying condensed balance sheets. |
Subsequent Events
Subsequent Events | 9 Months Ended |
Dec. 31, 2018 | |
Notes | |
Subsequent Events | 16. Subsequent Events We evaluated all events or transactions that occurred after the balance sheet date through the date when we issued these unaudited condensed financial statements. During this period, we did not have any material recognizable subsequent events. |
Significant Accounting Policies
Significant Accounting Policies (Policies) | 9 Months Ended |
Dec. 31, 2018 | |
Policies | |
Significant Accounting Policies | Other than as stated below, our significant accounting policies are described in Note 3 to the financial statements included in Item 8 of our annual report on Form 10-K as of March 31, 2018. |
Revenue Recognition (Policies)
Revenue Recognition (Policies) | 9 Months Ended |
Dec. 31, 2018 | |
Policies | |
Revenue Recognition | Revenue Recognition We adopted the Accounting Standard Codification (ASC) 606, Revenue from Contracts with Customers as of April 1, 2018, using the modified retrospective method, and concluded that, consistent with prior reporting, we have two separate revenue streams: (i) product sales, and (ii) royalty and licensing revenues. Results for reporting periods after April 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported in accordance with legacy accounting guidance under ASC 605, Revenue Recognition. The adoption of ASC 606 had no impact upon adoption, to our net income (loss) for the three and nine months ended December 31, 2018. ASC 606 defines a five-step process to recognize revenues at the time and in an amount that reflects the consideration expected to be received for the performance obligations that have been provided. ASC 606 defines contracts as written, oral and through customary business practice. Under this definition, the Company considers contracts to be created at the time that an order to purchase product is agreed upon regardless of whether or not there is a written contract or when a contract is entered into for licensing and royalties. We have two separate and distinct performance obligations offered to our customers: a product sales performance obligation and a licensing and royalty performance obligation. These performance obligations are related to separate revenue streams and at no point are they combined into a single transaction. We generate the majority of our revenue from product sales, and to a lesser extent from fees generated from licensing and royalty arrangements primarily with two customers. Our revenue related to product sales is recognized upon shipment, provided that a purchase order has been received or a contract has been executed, there are no uncertainties regarding customer acceptance, the sales price is fixed or determinable and collection is deemed reasonably assured. If uncertainties regarding customer acceptance exist, we recognize revenues when those uncertainties are resolved and title has been transferred to the customer. Amounts collected or billed prior to satisfying the above revenue recognition criteria are recorded as deferred revenue. Our revenue related to licensing and royalty arrangements is recognized in accordance with the terms of the arrangements which typically provide for quarterly payment of exclusivity fees and royalties earned on the sale of customer products on a quarterly basis. |
Equity-Based Compensation_ Sche
Equity-Based Compensation: Schedule of Share-Based Compensation Activity (Tables) | 9 Months Ended |
Dec. 31, 2018 | |
Tables/Schedules | |
Schedule of Share-Based Compensation Activity | Options Outstanding Weighted-Average Exercise Price per Share Weighted-Average Remaining Contractual Term in Years Aggregate Intrinsic Value (in thousands) Options outstanding as of April 1, 2018 1,813,750 $ 0.21 3.00 $ - Granted - Exercised Cancelled or forfeited (25,000) $ 0.42 - $ - Options outstanding as of December 31, 2018 (unaudited) 1,788,750 $ 0.20 2.28 $ - Options exercisable as of December 31, 2018 (unaudited) 1,788,750 $ 0.20 2.28 $ - Options vested or expected to vest as of December 31, 2018 (unaudited) 1,788,750 $ 0.20 2.28 $ - |
Inventories_ Schedule of Invent
Inventories: Schedule of Inventory, Current (Tables) | 9 Months Ended |
Dec. 31, 2018 | |
Tables/Schedules | |
Schedule of Inventory, Current | (in thousands) December 31, 2018 (unaudited) March 31, 2018 Raw materials $ 182 $ 215 Work in progress 43 64 Finished goods 129 130 354 409 Less: allowance for obsolete and excess inventory (112) (112) Total inventories, net $ 242 $ 297 |
Property, Plant and Equipment_
Property, Plant and Equipment: Schedule of Property, Plant and Equipment (Tables) | Dec. 31, 2018 | Mar. 31, 2018 | Dec. 31, 2018 |
Tables/Schedules | |||
Schedule of Property, Plant and Equipment | 4,751 | 4,727 | (in thousands) December 31, 2018 (unaudited) March 31, 2018 Land $ 500 $ 500 Building 2,705 2,705 Machinery, equipment and tooling 1,248 1,224 Furniture, fixtures and office equipment 285 285 Office equipment under capital lease 13 13 4,751 4,727 Less: accumulated depreciation 2,946 2,904 $ 1,805 $ 1,823 |
Equity-Based Compensation_ Sc_2
Equity-Based Compensation: Schedule of Share-Based Compensation Activity (Details) - Employee Stock Option | 9 Months Ended |
Dec. 31, 2018$ / sharesshares | |
Disclosure of Share-based Compensation Arrangements by Share-based Payment Award | 2.28 |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number, Beginning Balance | 1,813,750 |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price, Beginning Balance | $ / shares | $ 0.21 |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Expirations in Period | (25,000) |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number, Ending Balance | 1,788,750 |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Number | 1,788,750 |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested and Expected to Vest, Outstanding, Number | 1,788,750 |
Inventories_ Schedule of Inve_2
Inventories: Schedule of Inventory, Current (Details) - USD ($) | Dec. 31, 2018 | Mar. 31, 2018 |
Details | ||
Inventory, Raw Materials, Net of Reserves | $ 182 | $ 215 |
Inventory, Work in Process, Net of Reserves | 43 | 64 |
Inventory, Finished Goods, Net of Reserves | 129 | 130 |
Inventory Valuation Reserves | $ (112) | $ (112) |
Property, Plant and Equipment (
Property, Plant and Equipment (Details) - USD ($) | Dec. 31, 2018 | Mar. 31, 2018 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 |
Details | ||||||
Schedule of Property, Plant and Equipment | 4,751 | 4,727 | (in thousands) December 31, 2018 (unaudited) March 31, 2018 Land $ 500 $ 500 Building 2,705 2,705 Machinery, equipment and tooling 1,248 1,224 Furniture, fixtures and office equipment 285 285 Office equipment under capital lease 13 13 4,751 4,727 Less: accumulated depreciation 2,946 2,904 $ 1,805 $ 1,823 | |||
Land | $ 500 | $ 500 | $ 500 | $ 500 | ||
Buildings and Improvements, Gross | 2,705 | 2,705 | 2,705 | 2,705 | ||
Machinery and Equipment, Gross | 1,248 | 1,224 | 1,248 | 1,248 | ||
Furniture and Fixtures, Gross | 285 | 285 | 285 | 285 | ||
Debt and Capital Lease Obligations | 13 | 13 | 13 | 13 | ||
Accumulated Depreciation, Depletion and Amortization, Property, Plant, and Equipment | 2,946 | 2,904 | 2,946 | 2,946 | ||
Property, plant and equipment, net | $ 1,805,000 | $ 1,823,000 | 1,805,000 | 1,805,000 | ||
Depreciation | $ 14,000 | $ 13,000 | $ 43,000 | $ 38,000 |
Long-Term Financing Obligation
Long-Term Financing Obligation (Details) - USD ($) | Dec. 22, 2011 | Dec. 31, 2018 | Mar. 31, 2018 |
Details | |||
Sale Leaseback Transaction, Date | December 22, 2011 | ||
Sale Leaseback Transaction, Historical Cost | $ 2,000,000 | ||
Interest Portion of Minimum Lease Payments, Sale Leaseback Transactions | $ 172,000 | $ 175,000 |
Concentrations of Credit Risk_2
Concentrations of Credit Risk and Major Customers (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | Mar. 31, 2018 | |
Details | |||||
Concentration Risk, Percentage | 66.00% | 61.00% | 53.00% | 65.00% | |
Fair Value, Concentration of Risk, Accounts Receivable | $ 290,000 | $ 290,000 | $ 102,000 | ||
Accrued Fees and Other Revenue Receivable | $ 241,000 | $ 241,000 | $ 368,000 |