Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2019 | Aug. 14, 2019 | |
Document and Entity Information | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Jun. 30, 2019 | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q2 | |
Entity Registrant Name | CLEARSIGN COMBUSTION CORP | |
Entity Central Index Key | 0001434524 | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Trading Symbol | CLIR | |
Entity Common Stock, Shares Outstanding | 26,702,261 | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Small Business | true |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) | Jun. 30, 2019 | Dec. 31, 2018 |
Current Assets: | ||
Cash and cash equivalents | $ 9,657,000 | $ 8,949,000 |
Short-term investments | 1,988,000 | 6,923,000 |
Contract assets | 42,000 | 39,000 |
Prepaid expenses and other assets | 629,000 | 500,000 |
Total current assets | 12,316,000 | 16,411,000 |
Fixed assets, net | 384,000 | 457,000 |
Patents and other intangible assets, net | 1,530,000 | 1,759,000 |
Other assets | 10,000 | 10,000 |
Total Assets | 14,240,000 | 18,637,000 |
Current Liabilities: | ||
Accounts payable and accrued liabilities | 946,000 | 1,080,000 |
Current portion of lease liabilities | 190,000 | 216,000 |
Accrued compensation and taxes | 321,000 | 341,000 |
Total current liabilities | 1,457,000 | 1,637,000 |
Long Term Liabilities: | ||
Long term lease liabilities | 79,000 | 91,000 |
Total liabilities | 1,536,000 | 1,728,000 |
Stockholders' Equity: | ||
Preferred stock, $0.0001 par value, zero shares issued and outstanding | 0 | 0 |
Common stock, $0.0001 par value, 26,702,261 and 26,697,261 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively | 3,000 | 3,000 |
Additional paid-in capital | 76,967,000 | 76,417,000 |
Accumulated deficit | (64,266,000) | (59,511,000) |
Total stockholders' equity | 12,704,000 | 16,909,000 |
Total Liabilities and Stockholders' Equity | $ 14,240,000 | $ 18,637,000 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Jun. 30, 2019 | Dec. 31, 2018 |
Condensed Consolidated Balance Sheets | ||
Preferred stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Common stock, shares issued | 26,702,261 | 26,697,261 |
Common stock, shares outstanding | 26,702,261 | 26,697,261 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Condensed Consolidated Statements of Operations | ||||
Sales | $ 0 | $ 0 | $ 0 | $ 530,000 |
Cost of goods sold | 0 | 20,000 | 1,000 | 415,000 |
Gross profit (loss) | 0 | (20,000) | (1,000) | 115,000 |
Operating expenses: | ||||
Research and development, net of grants | 864,000 | 1,019,000 | 1,766,000 | 2,153,000 |
General and administrative | 1,583,000 | 1,351,000 | 3,057,000 | 2,630,000 |
Total operating expenses | 2,447,000 | 2,370,000 | 4,823,000 | 4,783,000 |
Loss from operations | (2,447,000) | (2,390,000) | (4,824,000) | (4,668,000) |
Other income: | ||||
Interest income | 21,000 | 1,000 | 69,000 | 1,000 |
Net loss | $ (2,426,000) | $ (2,389,000) | $ (4,755,000) | $ (4,667,000) |
Net loss per share - basic and fully diluted | $ (0.09) | $ (0.11) | $ (0.18) | $ (0.24) |
Weighted average number of shares outstanding - basic and fully diluted | 26,699,788 | 21,362,596 | 26,698,546 | 19,549,975 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Stockholders' Equity - USD ($) | Common Stock [Member] | Additional Paid-In Capital [Member] | Retained Earnings [Member] | Total |
Balances at Dec. 31, 2017 | $ 2,000 | $ 52,441,000 | $ (50,011,000) | $ 2,432,000 |
Balances (in shares) at Dec. 31, 2017 | 15,608,853 | |||
Shares issued in stock offering ($2.25 per share) | 12,937,000 | 0 | 12,937,000 | |
Shares issued in stock offering ($2.25 per share) | 5,750,000 | |||
Issuance costs of rights offering | (1,014,000) | 0 | (1,014,000) | |
Shares issued for services | 9,000 | 0 | 9,000 | |
Shares issued for services (in shares) | 2,500 | |||
Share Based Compensation | 50,000 | 0 | 50,000 | |
Net loss | (2,278,000) | (2,278,000) | ||
Balances at Mar. 31, 2018 | $ 2,000 | 64,423,000 | (52,289,000) | 12,136,000 |
Balances (in shares) at Mar. 31, 2018 | 21,361,353 | |||
Balances at Dec. 31, 2017 | $ 2,000 | 52,441,000 | (50,011,000) | 2,432,000 |
Balances (in shares) at Dec. 31, 2017 | 15,608,853 | |||
Net loss | (4,667,000) | |||
Balances at Jun. 30, 2018 | $ 2,000 | 64,592,000 | (54,678,000) | 9,916,000 |
Balances (in shares) at Jun. 30, 2018 | 21,417,909 | |||
Balances at Mar. 31, 2018 | $ 2,000 | 64,423,000 | (52,289,000) | 12,136,000 |
Balances (in shares) at Mar. 31, 2018 | 21,361,353 | |||
Shares issued for services | $ 0 | 8,000 | 0 | 8,000 |
Shares issued for services (in shares) | 2,500 | |||
Shares issued for board service ($1.85 per share) | $ 0 | 100,000 | 0 | 100,000 |
Shares issued for board service ($1.85 per share) (in Shares) | 54,056 | |||
Share Based Compensation | 61,000 | 0 | 61,000 | |
Net loss | $ 0 | 0 | (2,389,000) | (2,389,000) |
Balances at Jun. 30, 2018 | $ 2,000 | 64,592,000 | (54,678,000) | 9,916,000 |
Balances (in shares) at Jun. 30, 2018 | 21,417,909 | |||
Balances at Dec. 31, 2018 | $ 3,000 | 76,417,000 | (59,511,000) | 16,909,000 |
Balances (in shares) at Dec. 31, 2018 | 26,697,261 | |||
Shares issued for services | 3,000 | 3,000 | ||
Shares issued for services (in shares) | 2,500 | |||
Fair value of stock options issued in payment of accrued compensation | $ 0 | 100,000 | 0 | 100,000 |
Share Based Compensation | 233,000 | 233,000 | ||
Net loss | (2,329,000) | (2,329,000) | ||
Balances at Mar. 31, 2019 | $ 3,000 | 76,753,000 | (61,840,000) | 14,916,000 |
Balances (in shares) at Mar. 31, 2019 | 26,699,761 | |||
Balances at Dec. 31, 2018 | $ 3,000 | 76,417,000 | (59,511,000) | 16,909,000 |
Balances (in shares) at Dec. 31, 2018 | 26,697,261 | |||
Net loss | (4,755,000) | |||
Balances at Jun. 30, 2019 | $ 3,000 | 76,967,000 | (64,266,000) | 12,704,000 |
Balances (in shares) at Jun. 30, 2019 | 26,702,261 | |||
Balances at Mar. 31, 2019 | $ 3,000 | 76,753,000 | (61,840,000) | 14,916,000 |
Balances (in shares) at Mar. 31, 2019 | 26,699,761 | |||
Shares issued for services | 4,000 | 4,000 | ||
Shares issued for services (in shares) | 2,500 | |||
Fair value of stock options issued in payment of accrued compensation | 69,000 | 69,000 | ||
Share Based Compensation | 141,000 | 141,000 | ||
Net loss | (2,426,000) | (2,426,000) | ||
Balances at Jun. 30, 2019 | $ 3,000 | $ 76,967,000 | $ (64,266,000) | $ 12,704,000 |
Balances (in shares) at Jun. 30, 2019 | 26,702,261 |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Stockholders' Equity (Parenthetical) - $ / shares | 3 Months Ended | |||
Jun. 30, 2019 | Mar. 31, 2019 | Jun. 30, 2018 | Mar. 31, 2018 | |
Condensed Consolidated Statements of Stockholders' Equity | ||||
Common stock for services per share issue one | $ (1.44) | $ (1.44) | $ (3.50) | $ (3.50) |
Stock Issued During Period Board Services Per Share | $ (1.85) | |||
Stock Issued During Period Rights Offering Per Share | $ (2.25) |
Condensed Consolidated Statem_4
Condensed Consolidated Statements of Cash Flows - USD ($) | 6 Months Ended | |
Jun. 30, 2019 | Jun. 30, 2018 | |
Cash flows from operating activities: | ||
Net loss | $ (4,755,000) | $ (4,667,000) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Common stock issued for services | 7,000 | 117,000 |
Share based compensation | 443,000 | 111,000 |
Depreciation and amortization | 130,000 | 167,000 |
Abandonment and impairment of capitalized patent costs | 396,000 | 0 |
Change in operating assets and liabilities: | ||
Contract assets | (3,000) | 145,000 |
Prepaid expenses and other assets | (129,000) | (327,000) |
Accounts payable and accrued liabilities | (136,000) | 41,000 |
Accrued compensation and taxes | 80,000 | (168,000) |
Net cash used in operating activities | (3,967,000) | (4,581,000) |
Cash flows from investing activities: | ||
Acquisition of fixed assets | (17,000) | (19,000) |
Disbursements for patents and other intangible assets | (243,000) | (211,000) |
Maturity of short term treasury bills | 4,935,000 | 0 |
Net cash provided by (used in) investing activities | 4,675,000 | (230,000) |
Cash flows from financing activities: | ||
Proceeds from issuance of common stock, net of offering costs | 0 | 11,923,000 |
Net cash provided by financing activities | 0 | 11,923,000 |
Net increase in cash and cash equivalents | 708,000 | 7,112,000 |
Cash and cash equivalents, beginning of year | 8,949,000 | 1,247,000 |
Cash and cash equivalents, end of year | $ 9,657,000 | $ 8,359,000 |
Condensed Consolidated Statem_5
Condensed Consolidated Statements of Cash Flows (Parenthetical) - USD ($) | 6 Months Ended | |
Jun. 30, 2019 | Dec. 31, 2018 | |
Cash Flow Noncash Operating Activities Disclosure [Abstract] | ||
Stock Issued During Period, Shares, Share-based Compensation, Net of Forfeitures | 159,100 | |
Due to Officers or Stockholders, Current | $ 100,000 |
Organization and Description of
Organization and Description of Business | 6 Months Ended |
Jun. 30, 2019 | |
Organization and Description of Business | |
Organization and Description of Business | Note 1 – Organization and Description of Business ClearSign Combustion Corporation (ClearSign or the Company) designs and develops technologies for the purpose of improving key performance characteristics of combustion systems, including emission and operational performance, energy efficiency and overall cost-effectiveness. The Company’s primary technologies include its Duplex™ technology, which achieves very low emissions without the need of external flue gas recirculation, selective catalytic reduction, or higher excess air operation, and its Electrodynamic Combustion Control™ or ECC™ technology, which introduces a computer-controlled electric field into the combustion region that may better control gas-phase chemical reactions and improve system performance and cost-effectiveness. The Company is headquartered in Seattle, Washington and was incorporated in the state of Washington in 2008. On July 28, 2017, the Company incorporated a subsidiary, ClearSign Asia Limited, in Hong Kong to represent the Company’s business and technological interests throughout Asia. Through ClearSign Asia Limited, the Company has established a Wholly Foreign Owned Enterprise (WFOE) in China – ClearSign Combustion (Beijing) Environmental Technologies Co., LTD. Liquidity The Company’s technologies are currently in field development and have generated nominal revenues from operations to date to meet operating expenses. In order to generate meaningful revenues, the technologies must be fully developed, gain market recognition and acceptance, and develop a critical level of successful sales and product installations. The Company has historically financed its operations primarily through issuances of equity securities, including $11.9 million in proceeds, net of offering costs, from a stock offering completed on February 27, 2018 and $11.6 million in proceeds, net of offering costs, from a stock offering completed on July 20, 2018. The Company has incurred losses since its inception totaling $64,266,000 and expects to experience operating losses and negative cash flows for the foreseeable future. Management believes that the successful growth and operation of the Company’s business is dependent upon its ability to obtain adequate sources of funding through co-development agreements, strategic partnering agreements, or equity or debt financing to adequately support research and development efforts, protect intellectual property, form relationships with strategic partners, and provide for working capital and general corporate purposes. There can be no assurance that the Company will be successful in achieving its long-term plans as set forth above, or that such plans, if consummated, will result in profitable operations or enable the Company to continue in the long-term as a going concern. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 6 Months Ended |
Jun. 30, 2019 | |
Summary of Significant Accounting Policies | |
Summary of Significant Accounting Policies | Note 2 – Summary of Significant Accounting Policies Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”) for Form 10‑Q. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. The condensed balance sheet at December 31, 2018 has been derived from the Company’s audited financial statements. In the opinion of management, these consolidated financial statements reflect all normal recurring and other adjustments necessary for a fair presentation. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company's Annual Report on Form 10‑K for the year ended December 31, 2018. Operating results for interim periods are not necessarily indicative of operating results for an entire fiscal year or any other future periods. The accompanying unaudited condensed consolidated financial statements include the accounts of ClearSign and its subsidiary. Intercompany balances and transactions have been eliminated in consolidation. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Revenue Recognition and Cost of Sales The Company recognizes revenue and related cost of goods sold in accordance with FASB ASC 606 Revenue from Contracts with Customers (ASC 606). Revenues and cost of goods sold are recognized once the goods or services are delivered to the customer’s control and performance obligations are satisfied. Typically, the Company’s contracts with customers have performance obligations regarding air emissions and operational performance that are satisfied upon completion of service. Since this is the singular performance obligation and cannot be achieved until the air emissions and operational performance have been successfully tested, revenue related to the contracts is recognized upon project completion. The Company’s contracts generally include progress payments from the customer upon completion of defined milestones. As these payments are received they are offset against accumulated project costs and recorded as either contract assets or contract liabilities. Upon completion of the performance obligations and acceptance by the customer the projects can be recorded as revenue. The Company’s contracts with customers contain no variable considerations or incentives or discounts that would cause revenue to be allocated or adjusted over time. Therefore, no separate methods of evaluating the contracts other than consideration of the price at achievement of the performance objectives was used in satisfying the review requirements of ASC 606. Contract Acquisition Costs and Practical Expedients For contracts that have a duration of less than one year, the Company follows ASC 606, practical expedients and expenses those costs when incurred; for contracts with a life exceeding one year, the Company records those costs when performance obligations related to the contract are completed. The Company generally expenses sales commissions when earned. The Company records those costs within general and administrative expenses. Product Warranties The Company warrants all installed products against defects in materials and workmanship for a period specified in each contract by replacing failed parts. Accruals for product warranties are based on historical warranty experience and current product performance trends, and are recorded at the time revenue is recognized as a component of cost of sales. The warranty liabilities are reduced by material and labor costs used to replace parts over the warranty period in the periods in which the costs are incurred. The Company periodically assesses the adequacy of its recorded warranty liabilities and adjusts the amounts as necessary, and such adjustments could be material in the future if estimates differ significantly from actual warranty expense. The warranty liabilities are included in accrued liabilities in the balance sheets. Cash and Cash Equivalents Highly liquid investments purchased with an original maturity of three months or less are considered cash equivalents. Cash is maintained with a commercial bank where accounts are generally guaranteed by the Federal Deposit Insurance Corporation up to $250,000. The Company’s deposits may at times exceed this limit. The Company also maintains a cash balance in China which is insured up to $75,000 (500,000RMB). The Company has not experienced losses in such accounts and believes it is not exposed to any significant credit risk on cash and cash equivalents. Short-Term Investments Short-term investments consist of U.S. treasury bills with original maturities of twelve months or less and greater than three months. These short-term investments are classified as held to maturity and are recorded on an amortized cost basis which approximates fair value. Accounts Receivable and Allowance for Doubtful Accounts Accounts receivable are recorded at the invoiced amount. An allowance for doubtful accounts is established, as necessary, based on past experience and other factors which, in management’s judgment, deserve current recognition in estimating bad debts. The determination of the collectability of amounts due from customer accounts requires the Company to make judgments regarding future events and trends. Allowances for doubtful accounts are determined based on assessing the Company’s portfolio on an individual customer and on an overall basis. This process consists of a review of historical collection experience, current aging status of the customer accounts, and the financial condition of the Company’s customers. Based on a review of these factors, the Company may establish or adjust the allowance for specific customers and the accounts receivable portfolio as a whole. Fixed Assets and Leases Fixed assets are recorded at cost. Leases are recorded in accordance with FASB ASC 842 Leases . For those leases with a term greater than one year, the Company recognizes on the balance sheet at the time of lease inception or modification a right-of-use asset and a lease liability, initially measured at the present value of the lease payments. Lease costs are recognized in the income statement over the lease term on a straight-line basis. Operating leases with a term of 1 year or less are recognized on a straight line basis over the term. Depreciation is computed using the straight-line method over the estimated useful lives of the respective assets. Leasehold improvements are depreciated over the life of the lease or their useful life, whichever is shorter. All other fixed assets are depreciated over two to four years. Maintenance and repairs are expensed as incurred. Patents and Trademarks Patents and trademarks are recorded at cost. Amortization is computed using the straight-line method over the estimated useful lives of the assets once they are awarded. Impairment of Long-Lived Assets The Company tests long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable through the estimated undiscounted cash flows expected to result from the use and eventual disposition of the assets. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair value of the long-lived assets. Fair value is determined based on the present value of estimated expected cash flows using a discount rate commensurate with the risks involved, quoted market prices, or appraised values depending upon the nature of the assets. Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair values are reduced for the cost of disposal. Fair Value of Financial Instruments Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities measured at fair value are categorized based on whether or not the inputs are observable in the market and the degree that the inputs are observable. The categorization of financial assets and liabilities within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The three levels of inputs used to establish fair value are the following: · Level 1 – Quoted prices in active markets for identical assets or liabilities; · Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and · Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The Company’s financial instruments primarily consist of cash and cash equivalents, short-term investments, accounts payable and accrued expenses. As of the balance sheet dates, the estimated fair values of the financial instruments were not materially different from their carrying values as presented on the balance sheets. This is primarily attributable to the short-term maturities of these instruments. The Company did not identify any other non-recurring assets and liabilities that are required to be presented in the balance sheets at fair value. Research and Development The cost of research and development is expensed as incurred. Research and development costs consist of salaries, benefits, share based compensation, consulting fees, rent, utilities, depreciation, and consumables. During the six months ended June 30, 2019, the Company received $108,000 to partially fund specific research and development activity relating to its ECC technology. Since these funds were provided without expectation of reciprocation, except notification of research results, the funds received were offset against the related research and development costs incurred. Income Taxes The Company accounts for income taxes using an asset and liability approach which allows for the recognition and measurement of deferred tax assets based upon the likelihood of realization of tax benefits in future years. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or that future deductibility is uncertain. Tax benefits from an uncertain tax position are recognized only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a position are measured based on the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate resolution. Stock-Based Compensation The costs of all employee stock options, as well as other equity-based compensation arrangements, are reflected in the consolidated financial statements based on the estimated fair value of the awards on the grant date. That cost is recognized over the period during which an employee is required to provide service in exchange for the award. Stock compensation for stock granted to non-employees is determined as the fair value of the consideration received or the fair value of equity instruments issued, whichever is more reliably measured. Foreign Operations The accompanying consolidated financial statements as of June 30, 2019 and December 31, 2018 include assets amounting to approximately $231,000 and $199,000, respectively, relating to operations of the Company in China. It is always possible unanticipated events in foreign countries could disrupt the Company’s operations. Foreign Currency The functional currency of ClearSign Asia Limited is the U.S. dollar. The Company remeasures the transactions denominated in Chinese Yuan at the average exchange rate in effect during the period. At the end of each reporting period, the Company remeasures ClearSign Asia Limited’s monetary assets and liabilities to the U.S. dollar using exchange rates in effect at the end of the reporting period. The Company remeasures its non-monetary assets and liabilities at historical exchange rates. The Company records gains and losses related to remeasurement in other income (expense), net in the consolidated statements of operations. Foreign currency exchange gain (losses) has not been significant in any period presented and the Company has not undertaken any hedging transactions related to foreign currency exposure. Net Loss per Common Share Basic loss per share is computed by dividing loss available to common stockholders by the weighted-average number of common shares outstanding. Diluted loss per share is computed similar to basic loss per share except that the denominator is increased to include additional common shares available upon exercise of stock options and warrants using the treasury stock method, except for periods for which no common share equivalents are included because their effect would be anti-dilutive. At June 30, 2019 and 2018, potentially dilutive shares outstanding amounted to 2,253,033 and 3,500,619, respectively. Recently Adopted Standards In June 2018 FASB issued ASU No. 2018‑07 Compensation-Stock Compensation. The amendments in this update expand the scope of Topic 718 to include share based payment transactions for acquiring goods and services from nonemployees. An entity should apply the requirements of Topic 718 to nonemployee awards except for specific guidance on inputs to an option pricing model and the attribution of cost (that is, the period of time over which share-based payment awards vest and the pattern of cost recognition over that period). The amendments specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The amendments also clarify that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under Topic 606, Revenue from Contracts with Customers. The ASU is effective for all entities for fiscal years beginning after December 15, 2018, including interim periods within those years. The Company currently does not believe this amendment applies to any of its transactions at this time. Management does not believe that any other recently issued, but not yet effective, authoritative guidance, if currently adopted, would have a material impact on the Company’s consolidated financial statement presentation or disclosures. |
Fixed Assets
Fixed Assets | 6 Months Ended |
Jun. 30, 2019 | |
Fixed Assets | |
Fixed Assets | Note 3 – Fixed Assets Fixed assets are summarized as follows: June 30, December 31, 2019 2018 (unaudited) Machinery and equipment $ 863,000 $ 853,000 Office furniture and equipment 193,000 186,000 Leasehold improvements 150,000 150,000 Right of use asset-operating leases 710,000 637,000 Accumulated depreciation and amortization (1,532,000) (1,369,000) $ 384,000 $ 457,000 The Company has a triple net operating lease for office and laboratory space in Seattle, Washington through March 2020 with rent of approximately $12,000 per month plus triple net operating costs. The Company also has a triple net operating lease for office space in Tulsa, Oklahoma through August 2019 with monthly rent of approximately $2,000 per month plus triple net operating costs. Both leases include lessee renewal options for three years at the then prevailing market rate. The Company exercised the option to renew the Tulsa lease for three additional years in August 2019. The rent for the Tulsa lease will be approximately $2,200 a month beginning September 2019 through August 2022 with an annual 2.5% increase. The Company has an operating lease for office space in Beijing, China through November 2020 with a monthly rent of approximately $6,000. Lease costs for the six months ended June 30, 2019 and 2018 and other quantitative disclosures are as follows (unaudited): For the three months ended June 30, For the six months ended June 30, 2019 2018 2019 2018 Lease cost: Operating lease cost $ 58,000 $ 53,000 $ 117,000 $ 106,000 Total lease cost $ 58,000 $ 53,000 $ 117,000 $ 106,000 Other information: Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 119,000 Right-of-use assets obtained in exchange for new operating lease liabilities $ 73,000 For operating lease: Weighted average remaining lease term (in years) Weighted average discount rate 5.71 % At June 30, 2019, the Company recorded a right-of-use asset and operating lease liability amounting to $73,000 upon extension of the lease for its office space in Tulsa, Oklahoma through August 2022. Minimum future payments under the Company’s leases at June 30, 2019 and their application to the corresponding lease liabilities are as follows (unaudited): Discounted lease Payments due under liability payments lease agreements 2019 (remaining 6 months) 112,000 119,000 2020 114,000 121,000 2021 25,000 27,000 2022 18,000 19,000 Total $ 269,000 $ 286,000 |
Patents and Other Intangible As
Patents and Other Intangible Assets | 6 Months Ended |
Jun. 30, 2019 | |
Patents and Other Intangible Assets | |
Patents and Other Intangible Assets | Note 4 – Patents and Other Intangible Assets Patents and other intangible assets are summarized as follows: June 30, December 31, 2019 2018 (Unaudited) Patents Patents pending $ 1,063,000 $ 1,202,000 Issued patents 633,000 761,000 1,696,000 1,963,000 Trademarks Trademarks pending 63,000 55,000 Registered trademarks 23,000 23,000 86,000 78,000 Other 8,000 8,000 1,790,000 2,049,000 Accumulated amortization (260,000) (290,000) $ 1,530,000 $ 1,759,000 The Company monitors and assesses the net realizable value of the Company’s patent portfolio at each reporting period. As a result of management’s assessment of the Company’s patent portfolio in terms of cost-effectiveness and alignment with the focus on those patents that have significant future commercial value to the Company, an impairment charge of $396,000 was recorded during the quarter ended June 30, 2019. Future amortization expense associated with issued patents and registered trademarks as of June 30, 2019 is estimated as follows (unaudited): 2019 (remaining 6 months) $ 67,000 2020 130,000 2021 94,000 2022 66,000 2023 33,000 Thereafter 6,000 $ 396,000 |
Sales, Contract Assets and Cont
Sales, Contract Assets and Contract Liabilities | 6 Months Ended |
Jun. 30, 2019 | |
Sales, Contract Assets and Contract Liabilities | |
Sales, Contract Assets and Contract Liabilities | Note 5 – Sales, Contract Assets and Contract Liabilities The Company recognized no revenue during the six months ended June 30, 2019. For the six months ended June 30, 2018, the Company recognized revenues totaling $530,000 from completed flare projects. At June 30, 2019, the Company had contract assets of $42,000 and contract liabilities of $0. The cost of goods sold of $1,000, recognized during the six months ended June 30, 2019, related to additional warranty costs incurred for previously completed contracts. |
Stockholders' Equity
Stockholders' Equity | 6 Months Ended |
Jun. 30, 2019 | |
Stockholders' Equity | |
Stockholders' Equity | Note 6 – Stockholders’ Equity Common Stock and Preferred Stock The Company is authorized to issue 62,500,000 shares of common stock and 2,000,000 shares of preferred stock. Preferences, limitations, voting powers and relative rights of any preferred stock to be issued may be determined by the Company’s Board of Directors. The Company has not issued any shares of preferred stock. Equity Incentive Plan The Company has adopted and the Company’s shareholders have approved the ClearSign Combustion Corporation 2011 Equity Incentive Plan (the Plan) which permits the Company to grant to eligible participants, including officers, employees, directors, consultants and advisors, options to purchase shares of common stock, stock awards and stock bonuses. The Compensation Committee of the Board of Directors is authorized to administer the Plan and establish the grant terms, including the grant price, vesting period and exercise date. At the Company's Annual Meeting held on May 8, 2019, the shareholders approved an amendment to the Plan that (i) increased the number of shares of common stock in the reserve by 1,231,593 to a total of 4,004,214 shares of common stock, representing approximately 15% of the number of shares of the Company's stock outstanding and (ii) increased the number of shares that may be issued pursuant to the evergreen provision, if any, to the lesser of 15% of any new shares issued by the Company during the quarter immediately prior to the adjustment date or such lesser amount as the Board of Directors shall determine. Therefore, as of June 30, 2019, the number of shares of common stock reserved for issuance under the Plan totaled 4,004,214. In the six months ended June 30, 2019, the Company made awards of stock options for the purchase of an aggregate 1,298,718 shares of common stock to its employees and directors from the Plan. Of these awards, options covering 159,100 shares of common stock were awarded in lieu of cash bonuses for 2018 and the expense was recorded during the year ended December 31, 2018. An option for the purchase of 258,618 shares of common stock was issued from the Plan to the Company's Chief Executive Officer as part of options for the purchase of an aggregate 600,000 shares of common stock granted to him in conjunction with his recruitment and employment, as described below. Options covering an additional 381,000 shares of common stock have been issued as payment to the Company's directors and are described below. The remaining stock options awards covering 500,000 shares of common stock have exercise prices at the grant date fair value ranging from $0.87 to $2.25 per share, contractual lives of 10 years, and vest over 2 years. The fair value of the stock options estimated on the date of grant using the Black-Scholes option valuation model was $259,000. The following weighted-average assumptions were utilized in the calculation of the fair value of the stock options: Expected life 5.75 years Weighted average volatility 71 % Forfeiture rate 20 % Weighted average risk-free interest rate 2.51 % Expected dividend rate % Outstanding stock option awards at June 30, 2019 and December 31, 2018 totaled 2,173,033 shares and 880,277 shares, respectively, with the right to purchase 1,152,607 shares and 587,962 shares being vested and exercisable at June 30, 2019 and December 31, 2018, respectively. The recognized compensation expense associated with stock option awards for the three and six months ended June 30, 2019 and 2018 totaled $92,000 and $216,000 and $61,000 and $111,000, respectively. On June 30, 2019 the number of shares reserved under the Plan but unissued totaled 1,239,302. At June 30, 2019, there was $418,000 of total unrecognized compensation cost related to non-vested share based compensation arrangements granted under the Plan. That cost is expected to be recognized over a weighted average period of 2.0 years.The intrinsic value of outstanding stock options was $71,000 at June 30, 2019. During 2019, the Company’s directors are compensated solely in stock option awards. In addition to being paid for their services as directors, individual directors are paid for committee membership, for services as a committee chair and for services as a lead director. 381,000 options for the purchase of shares of common stock were granted to members of the Board of Directors for service during 2019. The options have an exercise price of $1 and vest in equal increments at the end of each quarter. The recognized expense associated with Board stock option awards for the three and six months ended June 30, 2019 and 2018 totaled $69,000 and $69,000, and $0 and $0, respectively. At June 30, 2019 there was $68,000 of unrecognized cost related to non-vested Board fees granted under the Plan. The following assumptions were utilized in the calculation of the fair value of the stock options: Expected life 5.75 years Weighted average volatility 71 % Forfeiture rate 20 % Weighted average risk-free interest rate 2.25 % Expected dividend rate % Consultant Stock Plan The Company has a Consultant Stock Plan (the Consultant Plan) which provides for the granting of shares of common stock to consultants who provide services related to capital raising, investor relations, and making a market in or promoting the Company’s securities. The Company’s officers, employees, and board members are not entitled to receive awards from the Consultant Plan. The Compensation Committee of the Board of Directors is authorized to administer the Consultant Plan and establish the grant terms. The number of shares reserved for issuance under the Consultant Plan on June 30, 2019 totaled 253,342 with 195,092 of those shares unissued. The Consultant Plan provides for quarterly increases in the available number of authorized shares equal to the lesser of 1% of any new shares issued by the Company during the quarter immediately prior to the adjustment date or such lesser amount as the Board of Directors shall determine. The Company granted 10,000 shares of common stock to a consultant under the Consultant Plan for services performed and to be performed during the period from August 13, 2018 to August 31, 2019. The fair value of the stock at the time of grant was $1.44 per share for a total value of $14,000. The Consultant Plan expense for the three and six months ended June 30, 2019 and 2018 was $4,000 and $7,000 and $8,000 and $17,000, respectively. Inducement Stock Options Pursuant to the rules of The Nasdaq Stock Market, and in compliance with those rules, the Company may issue equity awards, including stock options, as an inducement to an individual to accept employment with the Company. Inducement awards need not be approved by the Company’s shareholders. During the six months ending June 30, 2019 the Company granted options to purchase 600,000 shares of common stock as an inducement to its President and Chief Executive Officer to accept the Company’s offer of employment. (See Note 7.) The stock options have exercise prices at the award date fair value ranging from $1.16 to $2.25 per share, contractual lives of 10 years, and vest over 2 years. An option to purchase 258,618 shares was issued from the Company’s 2011 Equity Incentive Plan. Non-qualified stock options covering the remaining 341,382 shares were issued from the Company’s reserve of authorized but unissued shares of common stock. The fair value of the stock options estimated on the date of grant using the Black-Scholes option valuation model was $329,000. The recognized compensation expense associated with these awards for the three and six months ended June 30, 2019 was $49,000 and $158,000, respectively. The remaining unrecognized compensation expense associated with these awards is $171,000. The following weighted-average assumptions were utilized in the calculation of the fair value of the stock options: Expected life 5.75 years Weighted average volatility 71 % Forfeiture rate 20 % Weighted average risk-free interest rate 2.55 % Expected dividend rate % Warrants At June 30, 2019, warrants for the purchase of 80,000 shares of common stock at an exercise price of $1.80 per share were outstanding and had a remaining life of 1.64 years. The intrinsic value of the outstanding warrants was $0 at June 30, 2019. |
Commitments and Contingencies
Commitments and Contingencies | 6 Months Ended |
Jun. 30, 2019 | |
Commitments and Contingencies | |
Commitments and Contingencies | Note 7 – Commitments and Contingencies On January 28, 2019 (the “Effective Date”), the Company and Colin James Deller entered into an employment agreement (the “Agreement”) pursuant to which the Company employed Dr. Deller as its President until April 1, 2019, at which time Dr. Deller became the Company’s Chief Executive Officer. Pursuant to the Agreement, the Company pays Dr. Deller an annual salary of $350,000. As an inducement to accept employment with the Company, Dr. Deller was also granted an incentive option to purchase 400,000 shares of the Company’s common stock at an exercise price of $1.16 per share and an incentive option to purchase 200,000 shares of the Company’s common stock at an exercise price of $2.25 per share. Each option has a term of 10 years and will vest as follows: the right to purchase one-third of the shares of common stock subject to the option vested on the Effective Date; the right to purchase one-third of the shares will vest on the first anniversary of the grant date; and the right to purchase one-third of the shares will vest on the second anniversary of the grant date. The Company also agreed to pay certain expenses, not to exceed the sum of $100,000, related to Dr. Deller’s move from Tulsa, Oklahoma to Seattle, Washington, including reasonable expenses related to the sale of his home in Tulsa. As a temporary adjustment for the difference in the cost of living between Tulsa and Seattle (the “Relocation Adjustment”), for a period of four years (the “Payment Period”) from the Effective Date, the Company has also agreed to pay up to $6,000 a month to Dr. Deller for expenses related to temporary housing and travel to and from Tulsa to Seattle. If Dr. Deller purchases a home in the Seattle area, the Relocation Adjustment will continue to be paid through the expiration of the Payment Period, although the Relocation Adjustment may be adjusted or terminated upon mutual agreement of Dr. Deller and the Company. The Agreement may be terminated by the Company for cause, as defined in the Agreement, due to Dr. Deller’s death or disability, upon 30 days’ notice to Dr. Deller or as a result of a change in control, as defined in the Agreement. With the exception of a termination for cause, if Dr. Deller’s employment is terminated by the Company, aside from accrued but unpaid salary, bonus (if any) and business expenses, Dr. Deller will receive the balance of the unpaid Relocation Adjustment and six months of his annual salary. Through June 30, 2019, the Company has paid Dr. Deller $16,000 in Relocation Adjustment payments to reimburse temporary housing costs. Litigation From time to time the Company may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. Litigation is subject to inherent uncertainties and an adverse result in any such matter may harm the Company’s business. As of the date of this report, the Company is not a party to any material pending legal proceedings. Indemnification Agreements The Company maintains indemnification agreements with its directors and officers that may require the Company to indemnify these individuals against liabilities that arise by reason of their status or service as directors or officers, except as prohibited by law. Subsequent Event The Company received a letter from Nasdaq on July 9, 2019 stating that it has regained compliance with all listing requirements. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 6 Months Ended |
Jun. 30, 2019 | |
Summary of Significant Accounting Policies | |
Basis of Presentation | Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”) for Form 10‑Q. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. The condensed balance sheet at December 31, 2018 has been derived from the Company’s audited financial statements. In the opinion of management, these consolidated financial statements reflect all normal recurring and other adjustments necessary for a fair presentation. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company's Annual Report on Form 10‑K for the year ended December 31, 2018. Operating results for interim periods are not necessarily indicative of operating results for an entire fiscal year or any other future periods. The accompanying unaudited condensed consolidated financial statements include the accounts of ClearSign and its subsidiary. Intercompany balances and transactions have been eliminated in consolidation. |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. |
Revenue Recognition and Cost of Sales | Revenue Recognition and Cost of Sales The Company recognizes revenue and related cost of goods sold in accordance with FASB ASC 606 Revenue from Contracts with Customers (ASC 606). Revenues and cost of goods sold are recognized once the goods or services are delivered to the customer’s control and performance obligations are satisfied. Typically, the Company’s contracts with customers have performance obligations regarding air emissions and operational performance that are satisfied upon completion of service. Since this is the singular performance obligation and cannot be achieved until the air emissions and operational performance have been successfully tested, revenue related to the contracts is recognized upon project completion. The Company’s contracts generally include progress payments from the customer upon completion of defined milestones. As these payments are received they are offset against accumulated project costs and recorded as either contract assets or contract liabilities. Upon completion of the performance obligations and acceptance by the customer the projects can be recorded as revenue. The Company’s contracts with customers contain no variable considerations or incentives or discounts that would cause revenue to be allocated or adjusted over time. Therefore, no separate methods of evaluating the contracts other than consideration of the price at achievement of the performance objectives was used in satisfying the review requirements of ASC 606. |
Contract acquisition costs and practical expedients | Contract Acquisition Costs and Practical Expedients For contracts that have a duration of less than one year, the Company follows ASC 606, practical expedients and expenses those costs when incurred; for contracts with a life exceeding one year, the Company records those costs when performance obligations related to the contract are completed. The Company generally expenses sales commissions when earned. The Company records those costs within general and administrative expenses. |
Product Warranties | Product Warranties The Company warrants all installed products against defects in materials and workmanship for a period specified in each contract by replacing failed parts. Accruals for product warranties are based on historical warranty experience and current product performance trends, and are recorded at the time revenue is recognized as a component of cost of sales. The warranty liabilities are reduced by material and labor costs used to replace parts over the warranty period in the periods in which the costs are incurred. The Company periodically assesses the adequacy of its recorded warranty liabilities and adjusts the amounts as necessary, and such adjustments could be material in the future if estimates differ significantly from actual warranty expense. The warranty liabilities are included in accrued liabilities in the balance sheets. |
Cash and Cash Equivalents | Cash and Cash Equivalents Highly liquid investments purchased with an original maturity of three months or less are considered cash equivalents. Cash is maintained with a commercial bank where accounts are generally guaranteed by the Federal Deposit Insurance Corporation up to $250,000. The Company’s deposits may at times exceed this limit. The Company also maintains a cash balance in China which is insured up to $75,000 (500,000RMB). The Company has not experienced losses in such accounts and believes it is not exposed to any significant credit risk on cash and cash equivalents. |
Short-Term Investments | Short-Term Investments Short-term investments consist of U.S. treasury bills with original maturities of twelve months or less and greater than three months. These short-term investments are classified as held to maturity and are recorded on an amortized cost basis which approximates fair value. |
Accounts Receivable and Allowance for Doubtful Accounts | Accounts Receivable and Allowance for Doubtful Accounts Accounts receivable are recorded at the invoiced amount. An allowance for doubtful accounts is established, as necessary, based on past experience and other factors which, in management’s judgment, deserve current recognition in estimating bad debts. The determination of the collectability of amounts due from customer accounts requires the Company to make judgments regarding future events and trends. Allowances for doubtful accounts are determined based on assessing the Company’s portfolio on an individual customer and on an overall basis. This process consists of a review of historical collection experience, current aging status of the customer accounts, and the financial condition of the Company’s customers. Based on a review of these factors, the Company may establish or adjust the allowance for specific customers and the accounts receivable portfolio as a whole. |
Fixed Assets and Leases | Fixed Assets and Leases Fixed assets are recorded at cost. Leases are recorded in accordance with FASB ASC 842 Leases . For those leases with a term greater than one year, the Company recognizes on the balance sheet at the time of lease inception or modification a right-of-use asset and a lease liability, initially measured at the present value of the lease payments. Lease costs are recognized in the income statement over the lease term on a straight-line basis. Operating leases with a term of 1 year or less are recognized on a straight line basis over the term. Depreciation is computed using the straight-line method over the estimated useful lives of the respective assets. Leasehold improvements are depreciated over the life of the lease or their useful life, whichever is shorter. All other fixed assets are depreciated over two to four years. Maintenance and repairs are expensed as incurred. |
Patents and Trademarks | Patents and Trademarks Patents and trademarks are recorded at cost. Amortization is computed using the straight-line method over the estimated useful lives of the assets once they are awarded. |
Impairment of Long-Lived Assets | Impairment of Long-Lived Assets The Company tests long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable through the estimated undiscounted cash flows expected to result from the use and eventual disposition of the assets. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair value of the long-lived assets. Fair value is determined based on the present value of estimated expected cash flows using a discount rate commensurate with the risks involved, quoted market prices, or appraised values depending upon the nature of the assets. Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair values are reduced for the cost of disposal. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities measured at fair value are categorized based on whether or not the inputs are observable in the market and the degree that the inputs are observable. The categorization of financial assets and liabilities within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The three levels of inputs used to establish fair value are the following: · Level 1 – Quoted prices in active markets for identical assets or liabilities; · Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and · Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The Company’s financial instruments primarily consist of cash and cash equivalents, short-term investments, accounts payable and accrued expenses. As of the balance sheet dates, the estimated fair values of the financial instruments were not materially different from their carrying values as presented on the balance sheets. This is primarily attributable to the short-term maturities of these instruments. The Company did not identify any other non-recurring assets and liabilities that are required to be presented in the balance sheets at fair value. |
Research and Development | Research and Development The cost of research and development is expensed as incurred. Research and development costs consist of salaries, benefits, share based compensation, consulting fees, rent, utilities, depreciation, and consumables. During the six months ended June 30, 2019, the Company received $108,000 to partially fund specific research and development activity relating to its ECC technology. Since these funds were provided without expectation of reciprocation, except notification of research results, the funds received were offset against the related research and development costs incurred. |
Income Taxes | Income Taxes The Company accounts for income taxes using an asset and liability approach which allows for the recognition and measurement of deferred tax assets based upon the likelihood of realization of tax benefits in future years. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or that future deductibility is uncertain. Tax benefits from an uncertain tax position are recognized only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a position are measured based on the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate resolution. |
Stock-Based Compensation | Stock-Based Compensation The costs of all employee stock options, as well as other equity-based compensation arrangements, are reflected in the consolidated financial statements based on the estimated fair value of the awards on the grant date. That cost is recognized over the period during which an employee is required to provide service in exchange for the award. Stock compensation for stock granted to non-employees is determined as the fair value of the consideration received or the fair value of equity instruments issued, whichever is more reliably measured. |
Foreign Operations | Foreign Operations The accompanying consolidated financial statements as of June 30, 2019 and December 31, 2018 include assets amounting to approximately $231,000 and $199,000, respectively, relating to operations of the Company in China. It is always possible unanticipated events in foreign countries could disrupt the Company’s operations. |
Foreign Currency | Foreign Currency The functional currency of ClearSign Asia Limited is the U.S. dollar. The Company remeasures the transactions denominated in Chinese Yuan at the average exchange rate in effect during the period. At the end of each reporting period, the Company remeasures ClearSign Asia Limited’s monetary assets and liabilities to the U.S. dollar using exchange rates in effect at the end of the reporting period. The Company remeasures its non-monetary assets and liabilities at historical exchange rates. The Company records gains and losses related to remeasurement in other income (expense), net in the consolidated statements of operations. Foreign currency exchange gain (losses) has not been significant in any period presented and the Company has not undertaken any hedging transactions related to foreign currency exposure. |
Net Loss per Common Share | Net Loss per Common Share Basic loss per share is computed by dividing loss available to common stockholders by the weighted-average number of common shares outstanding. Diluted loss per share is computed similar to basic loss per share except that the denominator is increased to include additional common shares available upon exercise of stock options and warrants using the treasury stock method, except for periods for which no common share equivalents are included because their effect would be anti-dilutive. At June 30, 2019 and 2018, potentially dilutive shares outstanding amounted to 2,253,033 and 3,500,619, respectively. |
Recently Adopted Standards | Recently Adopted Standards In June 2018 FASB issued ASU No. 2018‑07 Compensation-Stock Compensation. The amendments in this update expand the scope of Topic 718 to include share based payment transactions for acquiring goods and services from nonemployees. An entity should apply the requirements of Topic 718 to nonemployee awards except for specific guidance on inputs to an option pricing model and the attribution of cost (that is, the period of time over which share-based payment awards vest and the pattern of cost recognition over that period). The amendments specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The amendments also clarify that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under Topic 606, Revenue from Contracts with Customers. The ASU is effective for all entities for fiscal years beginning after December 15, 2018, including interim periods within those years. The Company currently does not believe this amendment applies to any of its transactions at this time. Management does not believe that any other recently issued, but not yet effective, authoritative guidance, if currently adopted, would have a material impact on the Company’s consolidated financial statement presentation or disclosures. |
Fixed Assets (Tables)
Fixed Assets (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Fixed Assets | |
Summary of Fixed Assets | Fixed assets are summarized as follows: June 30, December 31, 2019 2018 (unaudited) Machinery and equipment $ 863,000 $ 853,000 Office furniture and equipment 193,000 186,000 Leasehold improvements 150,000 150,000 Right of use asset-operating leases 710,000 637,000 Accumulated depreciation and amortization (1,532,000) (1,369,000) $ 384,000 $ 457,000 |
Schedule Of Leases Cost | Lease costs for the six months ended June 30, 2019 and 2018 and other quantitative disclosures are as follows (unaudited): For the three months ended June 30, For the six months ended June 30, 2019 2018 2019 2018 Lease cost: Operating lease cost $ 58,000 $ 53,000 $ 117,000 $ 106,000 Total lease cost $ 58,000 $ 53,000 $ 117,000 $ 106,000 Other information: Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 119,000 Right-of-use assets obtained in exchange for new operating lease liabilities $ 73,000 For operating lease: Weighted average remaining lease term (in years) Weighted average discount rate 5.71 % At June 30, 2019, the Company recorded a right-of-use asset and operating lease liability amounting to $73,000 upon extension of the lease for its office space in Tulsa, Oklahoma through August 2022. |
Schedule of Future Minimum Rental Payments for Operating Leases | At June 30, 2019, the Company recorded a right-of-use asset and operating lease liability amounting to $73,000 upon extension of the lease for its office space in Tulsa, Oklahoma through August 2022. Minimum future payments under the Company’s leases at June 30, 2019 and their application to the corresponding lease liabilities are as follows (unaudited): Discounted lease Payments due under liability payments lease agreements 2019 (remaining 6 months) 112,000 119,000 2020 114,000 121,000 2021 25,000 27,000 2022 18,000 19,000 Total $ 269,000 $ 286,000 |
Patents and Other Intangible _2
Patents and Other Intangible Assets (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Patents and Other Intangible Assets | |
Schedule of Patents and other intangible assets | Patents and other intangible assets are summarized as follows: June 30, December 31, 2019 2018 (Unaudited) Patents Patents pending $ 1,063,000 $ 1,202,000 Issued patents 633,000 761,000 1,696,000 1,963,000 Trademarks Trademarks pending 63,000 55,000 Registered trademarks 23,000 23,000 86,000 78,000 Other 8,000 8,000 1,790,000 2,049,000 Accumulated amortization (260,000) (290,000) $ 1,530,000 $ 1,759,000 |
Schedule of future amortization expense | Future amortization expense associated with issued patents and registered trademarks as of June 30, 2019 is estimated as follows (unaudited): 2019 (remaining 6 months) $ 67,000 2020 130,000 2021 94,000 2022 66,000 2023 33,000 Thereafter 6,000 $ 396,000 |
Stockholders' Equity (Tables)
Stockholders' Equity (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Equity Incentive Plan [Member] | |
Schedule of weighted-average assumptions used in calculation of fair value of stock options | . The following weighted-average assumptions were utilized in the calculation of the fair value of the stock options: Expected life 5.75 years Weighted average volatility 71 % Forfeiture rate 20 % Weighted average risk-free interest rate 2.51 % Expected dividend rate % |
Board of Directors [Member] | |
Schedule of weighted-average assumptions used in calculation of fair value of stock options | Expected life 5.75 years Weighted average volatility 71 % Forfeiture rate 20 % Weighted average risk-free interest rate 2.25 % Expected dividend rate % |
Employee Stock Option [Member] | |
Schedule of weighted-average assumptions used in calculation of fair value of stock options | Expected life 5.75 years Weighted average volatility 71 % Forfeiture rate 20 % Weighted average risk-free interest rate 2.55 % Expected dividend rate % |
Organization and Description _2
Organization and Description of Business (Details) - USD ($) | 1 Months Ended | |||
Jul. 20, 2018 | Feb. 27, 2018 | Jun. 30, 2019 | Dec. 31, 2018 | |
Organization and Description of Business | ||||
Proceeds from Issuance of Common Stock | $ 11,600,000 | $ 11,900,000 | ||
Accumulated deficit | $ (64,266,000) | $ (59,511,000) |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies - Contract acquisition costs (Details) | 6 Months Ended |
Jun. 30, 2019 | |
Summary of Significant Accounting Policies | |
Revenue, Practical Expedient, Incremental Cost of Obtaining Contract [true false] | true |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies - Cash (Details) - Jun. 30, 2019 | CNY (¥) | USD ($) |
Cash and Cash Equivalents [Line Items] | ||
Cash, FDIC Insured Amount | $ 250,000 | |
CHINA | ||
Cash and Cash Equivalents [Line Items] | ||
Cash, FDIC Insured Amount | ¥ 500,000 | $ 75,000 |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies - Fixed Assets and Leases (Details) - Leasehold Improvements [Member] | 6 Months Ended |
Jun. 30, 2019 | |
Minimum [Member] | |
Property, Plant and Equipment [Line Items] | |
Property, Plant and Equipment, Estimated Useful Lives | P2Y |
Maximum [Member] | |
Property, Plant and Equipment [Line Items] | |
Property, Plant and Equipment, Estimated Useful Lives | P4Y |
Summary of Significant Accoun_6
Summary of Significant Accounting Policies - Other (Details) - USD ($) | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Dec. 31, 2018 | |
Variable Interest Entity [Line Items] | |||
Weighted Average Number of Shares Outstanding, Diluted | 2,253,033 | 3,500,619 | |
Tax Benefits Recognized (in Percent) | 50.00% | ||
Assets | $ 14,240,000 | $ 18,637,000 | |
Funds Received | 108,000 | ||
CHINA | |||
Variable Interest Entity [Line Items] | |||
Assets | $ 231,000 | $ 199,000 |
Fixed Assets - Summary (Details
Fixed Assets - Summary (Details) - USD ($) | Jun. 30, 2019 | Dec. 31, 2018 |
Fixed Assets | ||
Machinery and equipment | $ 863,000 | $ 853,000 |
Office furniture and equipment | 193,000 | 186,000 |
Leasehold improvements | 150,000 | 150,000 |
Right of use asset-operating leases | 710,000 | 637,000 |
Accumulated depreciation and amortization | (1,532,000) | (1,369,000) |
Property, Plant and Equipment, Net, Total | $ 384,000 | $ 457,000 |
Fixed Assets - Lease costs (Det
Fixed Assets - Lease costs (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Lease cost: | ||||
Operating lease cost | $ 58,000 | $ 53,000 | $ 117,000 | $ 106,000 |
Total lease cost | 58,000 | 53,000 | 117,000 | $ 106,000 |
Cash paid for amounts included in the measurement of lease liabilities: | ||||
Operating cash flows from operating leases | 119,000 | |||
Right-of-use assets obtained in exchange for new operating lease liabilities | $ 73,000 | |||
For operating lease: | ||||
Weighted average remaining lease term (in years) | 1 year 7 months 2 days | |||
Weighted average discount rate | 5.71% | |||
Right of use asset | 73,000 | 73,000 | ||
Operating lease liability | $ 73,000 | $ 73,000 |
Fixed Assets - Minimum future p
Fixed Assets - Minimum future payments (Details) | Jun. 30, 2019USD ($) |
Payments Due Under Lease Agreement [Member] | |
2019 (remaining 6 months) | $ 119,000 |
2020 | 121,000 |
2021 | 27,000 |
2022 | 19,000 |
Total | 286,000 |
Discounted Lease Liabilities Payments [Member] | |
2019 (remaining 6 months) | 112,000 |
2020 | 114,000 |
2021 | 25,000 |
2022 | 18,000 |
Total | $ 269,000 |
Fixed Assets - Lease descriptio
Fixed Assets - Lease descriptions (Details) | 6 Months Ended |
Jun. 30, 2019USD ($) | |
Operating Lease, Cost | $ 6,000 |
Lease One [Member] | |
Triple Net Operating Cost | 12,000 |
Lease Two [Member] | |
Triple Net Operating Cost | 2,000 |
Future Operating Lease Cost | $ 2,200 |
Operating Lease Rent Annual Increased Percentage | 2.5 |
Patents and Other Intangible _3
Patents and Other Intangible Assets - Summary (Details) - USD ($) | 6 Months Ended | |
Jun. 30, 2019 | Dec. 31, 2018 | |
Patents | $ 1,696,000 | $ 1,963,000 |
Trademarks | 86,000 | 78,000 |
Other | 8,000 | 8,000 |
Patents and other intangible assets | 1,790,000 | 2,049,000 |
Accumulated amortization | (260,000) | (290,000) |
Finite-Lived Intangible Assets, Net | 1,530,000 | 1,759,000 |
Amount charge for patent process of reassessing | 396,000 | |
Patents Pending [Member] | ||
Patents | 1,063,000 | 1,202,000 |
Issued Patents [Member] | ||
Patents | 633,000 | 761,000 |
Trademarks Pending [Member] | ||
Trademarks | 63,000 | 55,000 |
Registered Trademarks [Member] | ||
Trademarks | $ 23,000 | $ 23,000 |
Patents and Other Intangible _4
Patents and Other Intangible Assets - Future amortization expense (Details) | Jun. 30, 2019USD ($) |
Patents and Other Intangible Assets | |
2019 (remaining 6 months) | $ 67,000 |
2020 | 130,000 |
2021 | 94,000 |
2022 | 66,000 |
2023 | 33,000 |
Thereafter | 6,000 |
Finite-Lived Intangible Assets, Net | $ 396,000 |
Sales, Contract Assets and Co_2
Sales, Contract Assets and Contract Liabilities (Details) - USD ($) | 3 Months Ended | 6 Months Ended | |
Jun. 30, 2019 | Jun. 30, 2019 | Dec. 31, 2018 | |
Cost of Goods and Services Sold | $ 1,000 | ||
Contract with Customer, Asset, Net, Current | $ 42,000 | 42,000 | $ 39,000 |
Contract with Customer, Liability, Current | 0 | 0 | |
Flare Projects [Member] | |||
Revenue from Contract with Customer, Including Assessed Tax | $ 0 | $ 530,000 |
Stockholders' Equity - Equity I
Stockholders' Equity - Equity Incentive Plan Assumptions (Details) - Equity Incentive Plan [Member] | 6 Months Ended |
Jun. 30, 2019 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Expected life | 5 years 9 months |
Weighted average volatility | 71.00% |
Forfeiture rate | 20.00% |
Weighted average risk-free interest rate | 2.51% |
Expected dividend rate | 0.00% |
Board of Directors [Member] | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Expected life | 5 years 9 months |
Weighted average volatility | 71.00% |
Forfeiture rate | 20.00% |
Weighted average risk-free interest rate | 2.25% |
Expected dividend rate | 0.00% |
Stockholders' Equity - Incentiv
Stockholders' Equity - Incentive Stock Options Assumptions (Details) - Employee Stock Option [Member] | 6 Months Ended |
Jun. 30, 2019 | |
Weighted average volatility | 71.00% |
Forfeiture rate | 20.00% |
Weighted average risk-free interest rate | 2.55% |
Expected dividend rate | 0.00% |
Stockholders' Equity - Grants a
Stockholders' Equity - Grants and Expense (Details) - USD ($) | May 08, 2019 | Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | Dec. 31, 2018 |
Class of Stock [Line Items] | ||||||
Common Stock, Shares Authorized | 62,500,000 | 62,500,000 | ||||
Preferred Stock, Shares Authorized | 2,000,000 | 2,000,000 | ||||
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized | $ 418,000 | $ 418,000 | ||||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross | 259,000 | |||||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Intrinsic Value | $ 71,000 | $ 71,000 | ||||
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ 1.80 | $ 1.80 | ||||
Warrants Intrinsic Value Outstanding | $ 0 | $ 0 | ||||
Class of Warrant or Right, Number of Securities Called by Warrants or Rights | 80,000 | 80,000 | ||||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested and Expected to Vest, Exercisable, Number | 1,152,607 | 1,152,607 | 587,962 | |||
Stock Issued During Period In Lieu of Cash Bonus | 159,100 | |||||
Warrants and Rights Remaining Term | 1 year 7 months 21 days | |||||
Employee Stock Option [Member] | ||||||
Class of Stock [Line Items] | ||||||
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized | $ 171,000 | $ 171,000 | ||||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross | 600,000 | |||||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Remaining Contractual Term2 | 10 years | |||||
Share-based Compensation Arrangements by Share-based Payment Award, Options, Grants in Period, Weighted Average Exercise Price | $ 2.25 | |||||
Allocated Share-based Compensation Expense | $ 49,000 | $ 158,000 | ||||
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period1 | 2 years | |||||
Employee Stock Option [Member] | Minimum [Member] | ||||||
Class of Stock [Line Items] | ||||||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value | $ 1.16 | |||||
Consultant Plan [Member] | ||||||
Class of Stock [Line Items] | ||||||
Common Stock, Capital Shares Reserved for Future Issuance | 253,342 | 253,342 | ||||
Increase Decrease Of Share Based Compensation Arrangement By Share Based Payment Award Percentage | 1.00% | |||||
Consultant Plan Expenses | $ 4,000 | $ 8,000 | $ 7,000 | $ 17,000 | ||
Shares Reserved Unissued | 195,092 | 195,092 | ||||
Consultant Plan [Member] | Employee Stock Option [Member] | ||||||
Class of Stock [Line Items] | ||||||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross | 329,000 | |||||
Consultant Plan Two [Member] | ||||||
Class of Stock [Line Items] | ||||||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross | 10,000 | |||||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value | $ 1.44 | |||||
Share Based Compensation Arrangement By Share Based Payment Award Options Value Grants In Period Weighted Average Grant Date Fair Value | $ 14,000 | |||||
2011 Equity Incentive Plan [Member] | Employee Stock Option [Member] | ||||||
Class of Stock [Line Items] | ||||||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross | 258,618 | |||||
Non-Qualified Stock Option [Member] | Employee Stock Option [Member] | ||||||
Class of Stock [Line Items] | ||||||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross | 341,382 | |||||
Equity Incentive Plan [Member] | ||||||
Class of Stock [Line Items] | ||||||
Share-based Compensation Arrangement by Share-based Payment Award, Number of Additional Shares Authorized | 1,231,593 | |||||
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized | 4,004,214 | |||||
Share-based Compensation Arrangement by Share-based Payment Award, Percentage of Outstanding Stock Maximum | 15.00% | |||||
Common Stock, Capital Shares Reserved for Future Issuance | 4,004,214 | 4,004,214 | ||||
Increase Decrease Of Share Based Compensation Arrangement By Share Based Payment Award Percentage | 15.00% | |||||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross | 1,298,718 | |||||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Remaining Contractual Term2 | 10 years | |||||
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ 1 | $ 1 | ||||
Allocated Share-based Compensation Expense | $ 92,000 | 61,000 | $ 216,000 | 111,000 | ||
Share-based Compensation Outstanding - Reserved but unissued shares under the Plan | 2,173,033 | 2,173,033 | 880,277 | |||
Shares Reserved Unissued | 1,239,302 | 1,239,302 | ||||
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period1 | 2 years | |||||
Equity Incentive Plan [Member] | Minimum [Member] | ||||||
Class of Stock [Line Items] | ||||||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value | $ 0.87 | |||||
Equity Incentive Plan [Member] | Maximum [Member] | ||||||
Class of Stock [Line Items] | ||||||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value | $ 2.25 | |||||
Equity Incentive Plan [Member] | Employee Stock Option [Member] | ||||||
Class of Stock [Line Items] | ||||||
Estimated common stock subject to options issued | 381,000 | |||||
Equity Incentive Plan [Member] | Chief Executive Officer [Member] | Employee Stock Option [Member] | ||||||
Class of Stock [Line Items] | ||||||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross | 258,618 | |||||
Equity Incentive Plan [Member] | Director [Member] | Employee Stock Option [Member] | ||||||
Class of Stock [Line Items] | ||||||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross | 381,000 | |||||
Equity Incentive Plan [Member] | Other Employees [Member] | Employee Stock Option [Member] | ||||||
Class of Stock [Line Items] | ||||||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross | 500,000 | |||||
Equity Incentive Plan [Member] | Board of Directors [Member] | ||||||
Class of Stock [Line Items] | ||||||
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized | $ 68,000 | $ 68,000 | ||||
Equity Incentive Plan [Member] | Board of Directors [Member] | Employee Stock Option [Member] | ||||||
Class of Stock [Line Items] | ||||||
Allocated Share-based Compensation Expense | $ 69,000 | $ 0 | $ 69,000 | $ 0 |
Commitments and Contingencies (
Commitments and Contingencies (Details) - USD ($) | Jan. 28, 2019 | Jun. 30, 2019 |
Loss Contingencies [Line Items] | ||
Relocation Expenses | $ 16,000 | |
Employment Agreement [Member] | ||
Loss Contingencies [Line Items] | ||
Salary and Wage, Excluding Cost of Good and Service Sold | $ 350,000 | |
Labor and Related Expense | $ 100,000 | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested and Expected to Vest, Exercisable, Weighted Average Remaining Contractual Term | 10 years | |
Employment Early Termination Living Allowance Per Month | $ 6,000 | |
Payment period | 4 years | |
Termination notification period | 30 days | |
Salary payment period, early termination | 6 months | |
Employment Agreement [Member] | Share-based Compensation Award, Tranche One [Member] | ||
Loss Contingencies [Line Items] | ||
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage | 33.33% | |
Employment Agreement [Member] | Share-based Compensation Award, Tranche Two [Member] | ||
Loss Contingencies [Line Items] | ||
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period | 1 year | |
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage | 33.33% | |
Employment Agreement [Member] | Share-based Compensation Award, Tranche Three [Member] | ||
Loss Contingencies [Line Items] | ||
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period | 2 years | |
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage | 33.33% | |
Employment Agreement [Member] | Exercise Price $1.16 per share [Member] | Share-based Compensation Award, Tranche One [Member] | ||
Loss Contingencies [Line Items] | ||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested and Expected to Vest, Outstanding, Number | 400,000 | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested and Expected to Vest, Exercisable, Weighted Average Exercise Price | $ 1.16 | |
Employment Agreement [Member] | Exercise Price $2.25 per share [Member] | Share-based Compensation Award, Tranche Two [Member] | ||
Loss Contingencies [Line Items] | ||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested and Expected to Vest, Outstanding, Number | 200,000 | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested and Expected to Vest, Exercisable, Weighted Average Exercise Price | $ 2.25 |