Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2017 | Aug. 11, 2017 | |
Document And Entity Information | ||
Entity Registrant Name | XG SCIENCES INC | |
Entity Central Index Key | 1,435,375 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2017 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity a Well-known Seasoned Issuer | No | |
Entity a Voluntary Filer | No | |
Entity's Reporting Status Current | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 2,100,225 | |
Document Fiscal Period Focus | Q2 | |
Document Fiscal Year Focus | 2,017 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) - USD ($) | Jun. 30, 2017 | Dec. 31, 2016 |
CURRENT ASSETS | ||
Cash | $ 431,107 | $ 1,785,343 |
Accounts receivable, less allowance for doubtful accounts of $10,000 at June 30, 2017 and December 31, 2016 | 131,607 | 99,078 |
Inventory | 193,109 | 205,973 |
Incentive refunds receivable | 165,635 | |
Other current assets | 213,789 | 174,495 |
Total current assets | 969,612 | 2,430,524 |
PROPERTY, PLANT AND EQUIPMENT, NET | 2,799,346 | 2,886,421 |
RESTRICTED CASH FOR LETTER OF CREDIT | 195,644 | 195,499 |
INTANGIBLE ASSETS, NET | 551,462 | 478,019 |
TOTAL ASSETS | 4,516,064 | 5,990,463 |
CURRENT LIABILITIES | ||
Accounts payable and other liabilities | 750,359 | 964,757 |
Deferred revenue | 7,120 | 6,428 |
Current portion of capital lease obligations | 200,768 | 268,667 |
Total current liabilities | 958,247 | 1,239,852 |
LONG TERM LIABILITIES | ||
Long term portion of capital lease obligations | 59,867 | 115,106 |
Long term debt | 1,918,461 | 1,862,120 |
Derivative liability - warrants | 7,798,653 | 7,900,249 |
Total long term liabilities | 9,776,981 | 9,877,475 |
TOTAL LIABILITIES | 10,735,228 | 11,117,327 |
STOCKHOLDERS' DEFICIT | ||
Common stock, no par value, 25,000,000 shares authorized, 2,100,225 and 1,885,175 shares issued and outstanding at June 30, 2017 and December 31, 2016, respectively | 17,134,739 | 15,647,839 |
Additional paid in capital | 6,666,972 | 6,490,230 |
Accumulated deficit | (51,826,815) | (48,899,530) |
Total stockholders' deficit | (6,219,164) | (5,126,864) |
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | 4,516,064 | 5,990,463 |
Series A Convertible Preferred Stock [Member] | ||
STOCKHOLDERS' DEFICIT | ||
Preferred stock, value | 21,805,940 | 21,634,597 |
Series B Preferred stock [Member] | ||
STOCKHOLDERS' DEFICIT | ||
Preferred stock, value |
CONDENSED CONSOLIDATED BALANCE3
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) (Parenthetical) - USD ($) | Jun. 30, 2017 | Dec. 31, 2016 |
Allowance for doubtful accounts | $ 10,000 | $ 10,000 |
Common stock, no par value (in dollars per share) | $ 0 | $ 0 |
Common stock, authorized | 25,000,000 | 25,000,000 |
Common stock, issued | 2,100,225 | 1,885,175 |
Common stock, outstanding | 2,100,225 | 1,885,175 |
Series A Convertible Preferred Stock [Member] | ||
Preferred stock, authorized | 3,000,000 | 3,000,000 |
Preferred stock, issued | 1,843,536 | 1,829,256 |
Preferred stock, outstanding | 1,843,536 | 1,829,256 |
Preferred stock, liquidation value | $ 22,122,432 | $ 21,951,072 |
Series B Preferred stock [Member] | ||
Preferred stock, authorized | 1,500,000 | 1,500,000 |
Preferred stock, issued | 0 | 0 |
Preferred stock, outstanding | 0 | 0 |
Preferred stock, liquidation value | $ 0 | $ 0 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
REVENUE | ||||
Product sales | $ 259,079 | $ 82,035 | $ 416,779 | $ 141,777 |
Grants | 137,055 | 99,489 | 158,365 | |
Licensing revenue | 25,000 | 25,000 | 50,000 | 50,000 |
Total revenue | 284,079 | 244,090 | 566,268 | 350,142 |
COST OF GOODS SOLD | ||||
Direct costs | 93,542 | 25,020 | 210,312 | 57,052 |
Unallocated manufacturing expenses | 415,152 | 404,232 | 786,302 | 747,947 |
Total cost of goods sold | 508,694 | 429,252 | 996,614 | 804,999 |
GROSS LOSS | (224,615) | (185,162) | (430,346) | (454,857) |
OPERATING EXPENSES | ||||
Research and development | 227,062 | 419,007 | 490,626 | 635,357 |
Sales, general and administrative | 923,765 | 625,381 | 1,920,352 | 1,721,603 |
Total operating expenses | 1,150,827 | 1,044,388 | 2,410,978 | 2,356,960 |
OPERATING LOSS | (1,375,442) | (1,229,550) | (2,841,324) | (2,811,817) |
OTHER INCOME (EXPENSE) | ||||
Interest expense, net | (54,445) | (101,123) | (113,533) | (184,774) |
Gain (Loss) from change in fair value of derivative liability - warrants | (53,056) | 142,848 | 101,596 | 232,614 |
Government incentives, net | (74,000) | 24,000 | (74,024) | 48,000 |
Total other income (expense) | (181,501) | 65,725 | (85,961) | 95,840 |
NET LOSS | $ (1,556,943) | $ (1,163,825) | $ (2,927,285) | $ (2,715,977) |
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING - Basic and diluted (in shares) | 2,054,999 | 887,595 | 1,951,406 | 862,069 |
NET LOSS PER SHARE - Basic and diluted (in dollars per share) | $ (0.76) | $ (1.31) | $ (1.47) | $ (3.15) |
CONDENSED CONSOLIDATED STATEME5
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' (DEFICIT) (unaudited) - 6 months ended Jun. 30, 2017 - USD ($) | Series A Preferred stock [Member] | Series B Preferred stock [Member] | Common stock [Member] | Additional paid-in capital [Member] | Accumulated deficit [Member] | Total |
Balances at beginning at Dec. 31, 2016 | $ 21,634,597 | $ 15,647,839 | $ 6,490,230 | $ (48,899,530) | $ (5,126,864) | |
Balances at beginning (in shares) at Dec. 31, 2016 | 1,829,256 | 1,885,175 | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Stock issued for cash | $ 1,720,400 | $ 1,720,400 | ||||
Stock issued for cash (in shares) | 215,050 | 14,280 | ||||
Stock issuance fees and expenses | $ (233,500) | $ (233,500) | ||||
Preferred stock issued to pay capital lease obligations | $ 171,343 | 171,343 | ||||
Preferred stock issued to pay capital lease obligations (in shares) | 14,280 | |||||
Employee stock option expense | 176,742 | 176,742 | ||||
Net loss | (2,927,285) | (2,927,285) | ||||
Balances at ending at Jun. 30, 2017 | $ 21,805,940 | $ 17,134,739 | $ 6,666,972 | $ (51,826,815) | $ (6,219,164) | |
Balances at ending (in shares) at Jun. 30, 2017 | 1,843,536 | 2,100,225 |
CONDENSED CONSOLIDATED STATEME6
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) - USD ($) | 6 Months Ended | |
Jun. 30, 2017 | Jun. 30, 2016 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net loss | $ (2,927,285) | $ (2,715,977) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization | 439,078 | 456,133 |
Amortization of intangible assets | 21,180 | 17,904 |
Stock-based compensation expense | 176,742 | 228,126 |
Non-cash interest expense | 114,295 | 157,903 |
Gain from change in fair value of derivative liability - warrants | (101,596) | (232,614) |
(Increase) Decrease in: | ||
Accounts receivable | (32,529) | 5,930 |
Inventory | 12,864 | 12,624 |
Other current and non-current assets | 126,196 | (79,461) |
Increase (Decrease) in: | ||
Accounts payable and other liabilities | (213,705) | 371,606 |
NET CASH USED IN OPERATING ACTIVITIES | (2,384,760) | (1,777,826) |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Purchases of property and equipment | (352,003) | (39,314) |
Purchases of intangible assets | (94,623) | (53,647) |
NET CASH USED IN INVESTING ACTIVITIES | (446,626) | (92,961) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Repayments of capital lease obligations | (9,750) | (2,832) |
Repayments of short-term notes | (750,000) | |
Advances on short-term notes | 574,750 | |
Proceeds from issuance of common stock | 1,720,400 | 2,285,032 |
Common stock issuance fees and expenses | (233,500) | (336,600) |
NET CASH PROVIDED BY FINANCING ACTIVITIES | 1,477,150 | 1,770,350 |
NET DECREASE IN CASH | (1,354,236) | (100,437) |
CASH AT BEGINNING OF PERIOD | 1,785,343 | 1,060,224 |
CASH AT END OF PERIOD | 431,107 | 959,787 |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||
Cash paid for interest | 77,646 | |
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING: | ||
Value of preferred stock issued for AAOF capital lease obligations | $ 171,343 | $ 171,343 |
NATURE OF BUSINESS AND BASIS OF
NATURE OF BUSINESS AND BASIS OF PRESENTATION | 6 Months Ended |
Jun. 30, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
NATURE OF BUSINESS AND BASIS OF PRESENTATION | NOTE 1 - NATURE OF BUSINESS AND BASIS OF PRESENTATION XG Sciences, Inc., a Michigan company located in Lansing, Michigan and its subsidiary, XG Sciences IP, LLC (collectively referred to as “we”, “us”, “our”, or the “Company”) manufactures graphene nanoplatelets made from graphite, using two proprietary manufacturing processes to split natural flakes of crystalline graphite into very small and thin particles, which we sell as xGnP ® Basis of Presentation The accompanying interim condensed consolidated financial statements are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the instructions to Form 10-Q and do not include all of the information and footnotes required by GAAP for complete financial statements. All intercompany transactions have been eliminated in consolidation. Certain information and footnote disclosures normally included in our annual audited consolidated financial statements and accompanying notes have been condensed or omitted in these interim condensed consolidated financial statements. Accordingly, the unaudited condensed consolidated financial statements included herein should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2016, as filed with the Securities and Exchange Commission (“SEC”) on Form 10-K on March 31, 2017. The results of operations presented in this quarterly report are not necessarily indicative of the results of operations that may be expected for any future periods. In the opinion of management, these unaudited condensed consolidated financial statements include all adjustments and accruals, consisting only of normal recurring adjustments that are necessary for a fair statement of the results of all interim periods reported herein. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 6 Months Ended |
Jun. 30, 2017 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Liquidity We have historically incurred losses from operations and we may continue to generate negative cash flows as we implement our business plan. Our condensed consolidated financial statements are prepared using US GAAP as applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. In December 2016, we entered into a draw loan note and agreement (the “Dow Facility”) with The Dow Chemical Company (“Dow”) to provide up to $10 million of secured debt financing at an interest rate of 5% per year, drawable at our request under certain conditions. We received $2 million at closing and an additional $1 million on July 18, 2017. We currently have $2 million of additional funding available on or before December 1, 2017 under the Dow Facility. After December 1, 2017, an additional $5 million becomes available under the Dow Facility if we have raised $10 million of equity capital after October 31, 2016. As of July 31, 2017, we had cash on hand of $1,000,702, and currently available funds of $2 million under the Dow Facility, which we believe will fund our operations for at least the next 12 months. We also have a commitment from a shareholder group, dated March 27, 2017, to provide up to $1 million of additional equity capital in the event we are unable to raise such funds from third party investors through the sale of our common stock in our initial public offering conducted pursuant to a Registration Statement on S-1 (Registration No. 333-209131) (the “IPO”). Our financial projections show that we may need to raise an additional $15 million or more before we are capable of achieving sustainable free cash flow after capital expenditures. We intend that the primary means for raising such funds will be through our IPO, the additional $2 million of currently available funds under the Dow Facility, and up to an additional $5 million of proceeds from the Dow Facility in the event that we raise $10 million of additional equity capital after October 31, 2016. Thus far, we have raised $2.6 million through the sale of 323,578 shares of common stock between November 1, 2016 and June 30, 2017 towards the requirement to raise $10 million of additional equity capital in order to open up the remaining $5 million of availability on the Dow Facility. There can be no assurance that we will be able to raise additional equity capital in the IPO or in subsequent equity offerings or that the terms and conditions of any future financings will be workable or acceptable to us and our stockholders. In the event we are unable to fund our operations from existing cash on hand, operating cash flows, additional borrowings or raising equity capital, we may be forced to reduce our expenses, slow down our growth rate, or discontinue operations. Our condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern. Use of Estimates The preparation of our condensed consolidated financial statements in conformity with GAAP requires us to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, together with amounts disclosed in the related notes to the financial statements. Actual results and outcomes may differ from our estimates, judgments and assumptions. Significant estimates, judgments and assumptions used in these condensed consolidated financial statements include, but are not limited to, those related to revenue, accounts receivable and related allowances, contingencies, useful lives and recovery of long-term assets, income taxes, the fair value of stock-based compensation and derivative financial instrument liabilities. These estimates, judgments, and assumptions are reviewed periodically and the effects of material revisions in estimates are reflected in the financial statements prospectively from the date of the change in estimate. Inventory Inventory consists of raw materials, work-in-process and finished goods, all of which are valued at standard cost, which approximates average cost. The following amounts were included in inventory at the end of the period: June 30, December 31, 2017 2016 Raw materials $ 37,411 $ 45,964 Finished goods 155,698 160,009 Total $ 193,109 $ 205,973 Derivative Financial Instruments We do not use derivative instruments to hedge exposures to cash flow, market or foreign currency risk. The terms of convertible preferred stock and convertible notes that we issue are reviewed to determine whether or not they contain embedded derivative instruments that are required by ASC 815: “Derivatives and Hedging” to be accounted for separately from the host contract, and recorded at fair value. In addition, freestanding warrants are also reviewed to determine if they achieve equity classification. Certain stock warrants that we have issued did not meet the conditions for equity classification and are classified as derivative instrument liabilities measured at fair value. The fair values of these derivative liabilities are revalued at each reporting date, with the change in fair value recognized in earnings. See Note 5 for additional information. Fair Value Measurements The following is a reconciliation of the beginning and ending balances for liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the six months ended June 30, 2017 and 2016: 2017 2016 Balance at January 1 $ 7,900,249 $ 8,235,163 Warrants reclassified to equity — (51,417 ) Gain recognized in earnings (101,596 ) (232,614 ) Balance at June 30 $ 7,798,653 $ 7,951,132 |
FINANCING AGREEMENTS
FINANCING AGREEMENTS | 6 Months Ended |
Jun. 30, 2017 | |
Debt Disclosure [Abstract] | |
FINANCING AGREEMENTS | NOTE 3 — FINANCING AGREEMENTS Dow Facility In December 2016, we entered into the Dow Facility which provides us with up to $10 million of secured debt financing at an interest rate of 5% per year, drawable at our request under certain conditions. We received $2 million at closing and an additional $1 million on July 18, 2017. We currently have $2 million of additional funding available on or before December 1, 2017 under the Dow Facility. After December 1, 2017, an additional $5 million becomes available if we have raised $10 million of equity capital after October 31, 2016. The Dow Facility is senior to most of our other debt, and is secured by all of our assets (Dow is subordinate only to the capital leases with AAOF, see note 9). The loan does not mature until December 1, 2021 (subject to certain mandatory prepayments based on our equity financing activities). Interest is payable beginning January 1, 2017 although we may elect to capitalize interest through January 1, 2019. Dow received warrant coverage of one share of common stock for each $40 in loans received by us, equating to 20% warrant coverage, with an exercise price of $8.00 per share for the warrants issued at closing with the initial $2 million draw. After the initial closing, future warrants are subject to adjustment if we sell shares of common stock at a lower price. As of June 30, 2017, we had issued 50,000 warrants to Dow, which are exercisable on or before the expiration date of December 1, 2023. The warrants meet the criteria for classification within stockholders’ equity. During the six months ended June 30, 2017, amortization expense of $56,340 was recognized resulting in a carrying value of $1,918,461 for the Dow Facility as of June 30, 2017. The Dow Facility entitles Dow to appoint an observer to our board of directors (the “Board”). Dow will maintain their observation right until the later of December 1, 2019; or when the amount of principal and interest outstanding under the Dow Facility is less than $5 million. |
PRIVATE PLACEMENT AND PREEMPTIV
PRIVATE PLACEMENT AND PREEMPTIVE RIGHTS | 6 Months Ended |
Jun. 30, 2017 | |
Warrants and Rights Note Disclosure [Abstract] | |
PRIVATE PLACEMENT AND PREEMPTIVE RIGHTS | NOTE 4 — PRIVATE PLACEMENT AND PREEMPTIVE RIGHTS Private Placement In April 2015, we commenced a private placement offering of Series B Units consisting of shares of Series B Preferred Stock and warrants to purchase common stock at an offering price of $16.00 per Series B Unit. During the period April 2015 through December 2016, we sold 266,887 shares of Series B Convertible Preferred Stock and Warrants to purchase 222,262 shares of common stock, for aggregate gross proceeds of $4,270,192. The private placement Series B Unit offering was terminated on February 25, 2016. As a result of our IPO and pursuant to certain exchange rights granted to participants in the Series B Unit offering, holders of Series B Preferred Stock received the right to exchange each share of Series B Preferred Stock they owned into two shares of common stock. As of December 31, 2016, all holders of Series B Preferred Stock had exercised their Series B exchange rights, and as a result we issued 539,974 shares of restricted common stock in exchange for the 269,987 shares of Series B Preferred Stock that had been previously outstanding. All of the previously issued Series B Preferred Stock was cancelled. However, as of June 30, 2017, all of the 224,897 warrants issued in connection with the Series B Units remain outstanding. Such warrants have an exercise price of $16.00 per share and expire between April 21 and June 30, 2022. |
DERIVATIVE LIABILITY WARRANTS
DERIVATIVE LIABILITY WARRANTS | 6 Months Ended |
Jun. 30, 2017 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
DERIVATIVE LIABILITY WARRANTS | NOTE 5 – DERIVATIVE LIABILITY WARRANTS The Series A Convertible Preferred Stock warrants issued in conjunction with convertible notes issued in 2013 (subsequently converted into Series A Preferred Stock), equipment financing leases procured in 2013 and 2014, and certain other pre-emptive rights and the common stock warrants issued in connection with the 2015 Series B Unit offering are derivative liabilities which require re-measurement at fair value each reporting period. Liability classification is required because the terms of the underlying Series A Convertible Preferred Stock have a conversion price reset in the event we offer shares below the then current price of our common stock, and the exchange rights issued in connection with the Series B Unit offering are not consistent with the definition for financial instruments indexed only to a company’s own stock. The initial value of the stock warrants issued as consideration for the equipment financing leases in 2013 and 2014 was recorded as a reduction of the capital lease obligation and is being amortized as part of the effective interest cost on the capital lease obligation (see Note 8). In 2014 when we entered into financing agreements with Samsung, AAOF and XGS II, we provided our shareholders with preemptive rights to purchase shares of Series A Convertible Preferred Stock for every two shares of Series A Convertible Preferred Stock or Common Stock owned by the shareholder. In addition, for every two shares of Series A Convertible Preferred Stock purchased by a shareholder, we issued such shareholder a warrant to purchase one additional share of Series A Convertible Preferred Stock with the same terms as the warrants issued to AAOF and XGS II. Also, as part of our private placement in April 2015, shareholders and holders of our convertible notes were provided the right to purchase their pro rata share of any class of stock that the Company sells or issues. The sale of Series B Preferred Stock in the April 2015 offering triggered the preemptive rights resulting in the issuance of shares of Series B Preferred Stock and warrants. As of June 30, 2017, the total number of Stock Warrants issued due to the preemptive rights offerings was 58,689. Warrant shares indexed to derivative liabilities as of June 30, 2017 were as follows: Type of shares indexed Exercise Price Indexed Shares Warrants issued with Secured Convertible Notes Series A PS $ 6.40 833,333 Warrants issued with equipment financing leases Series A PS $ 6.40 83,333 Warrants issued with Series A preemptive rights Series A PS $ 6.40 56,054 Warrants issued with Series B preemptive rights Common $ 16.00 2,635 Warrants issued with Series B Units Common $ 16.00 222,262 Total shares indexed to derivative liabilities 1,197,617 The following table summarizes the fair value of the derivative liabilities as of June 30, 2017 and December 31, 2016: June 30, 2017 December 31,2016 Warrants issued with Secured Convertible Notes $ 6,464,160 $ 6,554,160 Warrants issued with equipment financing leases 646,418 655,418 Warrants issued with preemptive rights 437,775 443,790 Warrants issued with 2015 Series B Unit private placement 250,300 246,881 Total derivative liabilities $ 7,798,653 $ 7,900,249 We estimated the fair value of their warrant derivative liabilities as of June 30, 2017 and December 31, 2016, using a lattice model and the following assumptions: June 30, 2017 December 31, 2016 Fair value of underlying stock $8.00 - $12.64 $7.63 - $12.64 Equivalent risk free interest rate 1.43% - 1.56% 1.27%- 1.46% Expected term (in years) 4.84 – 6.55 5.33- 7.04 Equivalent stock price volatility 37.49% - 37.69% 37.44%- 37.92% Expected dividend yield — — The value of the warrants is estimated using a binomial lattice model. Equivalent amounts reflect the net results of multiple modeling simulations that the lattice model applies to underlying assumptions. Because we are not publicly traded on a national exchange or to our knowledge, an over-the-counter market, the expected volatility of our common stock was developed using historical volatility for a peer group for a period equal to the expected term of the warrants. The fair value of the warrants will be significantly influenced by the fair value of our common stock, stock price volatility, and the risk-free interest components of the lattice technique. Changes in the fair value of Derivative Liabilities, carried at fair value, are reported as “Change in fair value of derivative liability — warrants” in the Statement of Operations, and were as follows: For the Three Months Ended June 30, For the Six Months Ended June 30, 2017 2016 2017 2016 Warrants issued with Secured Convertible Notes $ (17,500 ) $ 103,084 $ 90,000 $ 178,671 Warrants issued with equipment financing leases (1,750 ) 10,308 9,000 17,862 Warrants issued with preemptive rights (1,559 ) 7,197 6,015 12,281 Warrants issued with 2015 private placement (32,247 ) 22,259 (3,419 ) 22,541 Warrants issued with Bridge Financings — — — 1,259 Total Derivative Gain (Loss) $ (53,056 ) $ 142,848 $ 101,596 $ 232,614 |
STOCK WARRANTS ACCOUNTED FOR AS
STOCK WARRANTS ACCOUNTED FOR AS EQUITY INSTRUMENTS | 6 Months Ended |
Jun. 30, 2017 | |
Equity [Abstract] | |
STOCK WARRANTS ACCOUNTED FOR AS EQUITY INSTRUMENTS | NOTE 6 – STOCK WARRANTS ACCOUNTED FOR AS EQUITY INSTRUMENTS The following table summarizes the warrants outstanding at June 30, 2017, which are accounted for as equity instruments, all of which are exercisable: Date Issued Expiration Date Exercise Price Number of 7/1/2009 7/1/2019 $ 8.00 6,000 10/8/2012 10/8/2027 $ 12.00 5,000 12/14/2016 12/1/2023 $ 8.00 50,000 61,000 |
EQUITY INCENTIVE PLAN
EQUITY INCENTIVE PLAN | 6 Months Ended |
Jun. 30, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
EQUITY INCENTIVE PLAN | NOTE 7 – EQUITY INCENTIVE PLAN We previously established the 2007 Stock Option Plan (the “2007 Plan”), which was scheduled to expire on October 30, 2017 and under which we granted key employees and directors options to purchase shares of our common stock at not less than fair market value as of the grant date. On May 4, 2017, the Board approved the 2017 Equity Incentive Plan (the “2017 Plan”) to replace the 2007 Stock Option Plan, which became effective upon the approval of the stockholders holding a majority of the voting power in the Company on July 18, 2017. The 2017 Plan replaces the 2007 Plan and authorizes us to issue awards (stock options and restricted stock) with respect of a maximum of 1,200,000 shares of our common stock, which equals the number of shares authorized under the 2007 Plan, as amended. On July 24, 2017, certain stock options from the prior incentive stock option plan were cancelled and replacement stock options were awarded. The new stock option awards have an exercise price of $8 per share, a seven-year term, are vested to the same extent as the cancelled stock options, and are subject to certain other terms. The cancellation and reissuance of the stock options were treated as a modification under ASC 718, Compensation-Stock Compensation. The fair values of options granted are estimated on the dates of grant using the Black Scholes option-pricing model. As of June 30, 2017, 369,750 options to acquire shares have been granted cumulatively. Vesting of the options granted range from immediately to 20% per year, with most new options vesting on a straight-line basis over a four year period from the date issued. Rights to exercise the options that would have vested in any current service year vest immediately upon a change in control of the Company. The options expire at various dates through October 2023. |
CAPITAL LEASES
CAPITAL LEASES | 6 Months Ended |
Jun. 30, 2017 | |
Capital Leases of Lessee [Abstract] | |
CAPITAL LEASES | NOTE 8 – CAPITAL LEASES As of June 30, 2017 and December 31, 2016, we have capital lease obligations as follows: June 30, 2017 December 31, 2016 Capital lease obligations $ 295,340 $ 449,368 Unamortized warrant discount (34,705 ) (65,595 ) Net obligations 260,635 383,773 Short-term portion of obligations (200,768 ) (268,667 ) Long-term portion of obligations $ 59,867 $ 115,106 Our AAOF capital lease obligations are four year leases starting on January 1, 2014 and January 1, 2015. Our other capital leases expire at various dates in 2018, have average effective interest rates of 0% and contain bargain purchase options that allow us to purchase the leased property for a minimal amount upon the expiration of the lease term. |
CUSTOMER, SUPPLIER, COUNTRY AND
CUSTOMER, SUPPLIER, COUNTRY AND PRODUCT CONCENTRATIONS | 6 Months Ended |
Jun. 30, 2017 | |
Risks and Uncertainties [Abstract] | |
CUSTOMER, SUPPLIER, COUNTRY AND PRODUCT CONCENTRATIONS | NOTE 9 — Customer, Supplier, country, and Product Concentrations Grants and Licensing Revenue Concentration There was no grant revenue for the three months ended June 30, 2017. During the six months ended June 30, 2017, one grantor accounted for 94% of total grant revenue. During the three months ended June 30, 2016 and the six months ended June 30, 2016, one grantor accounted for 100% of the total grant revenue in each period. Our licensing revenue for the three months ended June 30, 2017 and 2016, and for the six months ended June 30, 2017 and 2016 came from one licensor. Product Concentration Concentrations of product sales greater than 10% of total product sales are shown in the table below. We attempt to minimize the risk associated with product concentrations by continuing to develop new products to add to our portfolio. For the Three Months Ended June 30, For the Six Months Ended June 30, 2017 2016 2017 2016 Grade C-300 HP 39% * 24% * Grade C-500 * * 15% * Grade C-750 * 11% * 11% Grade R-10 15% 14% 12% 12% Grade M-15 * * * 16% Grade M-25 * 10% * * * Denotes less than 10% of product sales. Customer Concentration During the three months ended June 30, 2017 we had two customers whose purchases accounted for 34% and 24% of product sales. During the three months ended June 30, 2016 we had one customer who accounted for 30% of product sales. For the six months ended June 30, 2017 we had two customers whose purchases accounted for 15%, and 11% of product sales. During the six months ended June 30, 2016 we had two customers whose purchases accounted for 17% and 15% of product sales. At June 30, 2017, there were two customers who each had an accounts receivable balance greater than 10% of our total outstanding receivable balance. At June 30, 2016, there was only one customer who had an accounts receivable balance greater than 10% of our total outstanding receivable balance. Country Concentration We sell our products on a worldwide basis. All of these sales are denominated in U.S. dollars. International sales for the three months ended June 30, 2017 were 50% of product sales as compared with 72% for the three months ended June 30, 2016. One country, China, accounted for 25% of product sales for the three months ended June 30, 2017 and one country, South Korea, accounted for 40% of product sales for the three months ended June 30, 2016. International sales for the six months ended June 30, 2017 were 60% of product sales as compared with 74% for the six months ended June 30, 2016. Three countries, China, South Korea, and the United Kingdom accounted for approximately 15%, 16%, and 14%, respectively, of product sales for the six months ended June 30, 2017 and one country, South Korea, accounted for 37% of product sales for the six months ended June 30, 2016. Suppliers We buy raw materials used in manufacturing from several sources. These materials are available from a large number of sources. Thus, we believe a change in suppliers would have no material effect on our operations. We did not have any purchases from one supplier that were more than 10% of total purchases for the three months and six months ended June 30, 2017 and 2016. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 6 Months Ended |
Jun. 30, 2017 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | NOTE 10 - RELATED PARTY TRANSACTIONS We have a licensing agreement for exclusive use of patents and pending patents with Michigan State University (“MSU”), a shareholder of the Company via the MSU Foundation. During the three months ended June 30, 2017 and 2016 we recorded licensing expense of $12,500 per quarter. During the six months ended June 30, 2017 and 2016 we recorded licensing expense of $25,000 in each period. We have also entered into product licensing agreements with, POSCO, a shareholder. See below for POSCO. Other than MSU and POSCO, there were no other royalty expenses or revenue recognized during the three or six months ended June 30, 2017 and 2016. Beginning in 2014, POSCO, a licensee and shareholder of the Company, has had a contractual obligation to pay a minimum royalty of $100,000 per year to license certain technologies. This obligation is due annually on February 28 of the following year. We record this license revenue at a rate of $25,000 per quarter. POSCO is disputing its obligation to pay the minimum royalty and has not paid the royalty in any prior year. We filed a demand for arbitration in the International Court of Arbitration (ICA) on March 9, 2016 in an effort to resolve the dispute. The ICA has assigned an arbitrator, but no decision has been reached in the dispute. Allowances in the amounts of $175,000 and $150,000 were recorded at June 30, 2017 and December 31, 2016, respectively, to reflect an estimate of the portion of the 2017, 2016, 2015 and 2014 royalties that we believe may not be collectible. The accrued royalty and allowance are netted together and reflected in other current assets on the condensed consolidated balance sheet. On March 18, 2013, we entered into a series of agreements with two private investment funds: Aspen Advanced Opportunity Fund, LP (“AAOF”) and XGS II, LLC (“XGS II”), and pursuant to a Shareholders’ Agreement dated March 18, 2013 (as amended on February 26, 2016), a principal of each private fund serves as a member of our Board of Directors. These financing agreements were amended and restated on July 12, 2013 to provide for expanded financing commitments from AAOF and XGS II. Pursuant to these agreements, AAOF and XGS II agreed to provide $10 million of financing to the Company in the form of Secured Convertible Notes and AAOF agreed to provide an additional $1.0 million of lease financing arrangements. All of the principal and accrued interest on the Secured Convertible Notes issued to AAOF and XGS II were converted into Series A Preferred Stock in December 2016. During the three months ended June 30, 2017 and 2016 we issued 7,140 shares per period of Series A Preferred stock to AAOF as payment for lease financing obligations under the terms of the Master Lease Agreement, dated March 18, 2013. For the six months ended June 30, 2017 and 2016 we issued a total of 14,280 shares per period as payment for lease obligations. |
SUMMARY OF SIGNIFICANT ACCOUN17
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 6 Months Ended |
Jun. 30, 2017 | |
Accounting Policies [Abstract] | |
Liquidity | Liquidity We have historically incurred losses from operations and we may continue to generate negative cash flows as we implement our business plan. Our condensed consolidated financial statements are prepared using US GAAP as applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. In December 2016, we entered into a draw loan note and agreement (the “Dow Facility”) with The Dow Chemical Company (“Dow”) to provide up to $10 million of secured debt financing at an interest rate of 5% per year, drawable at our request under certain conditions. We received $2 million at closing and an additional $1 million on July 18, 2017. We currently have $2 million of additional funding available on or before December 1, 2017 under the Dow Facility. After December 1, 2017, an additional $5 million becomes available under the Dow Facility if we have raised $10 million of equity capital after October 31, 2016. As of July 31, 2017, we had cash on hand of $1,000,702, and currently available funds of $2 million under the Dow Facility, which we believe will fund our operations for at least the next 12 months. We also have a commitment from a shareholder group, dated March 27, 2017, to provide up to $1 million of additional equity capital in the event we are unable to raise such funds from third party investors through the sale of our common stock in our initial public offering conducted pursuant to a Registration Statement on S-1 (Registration No. 333-209131) (the “IPO”). Our financial projections show that we may need to raise an additional $15 million or more before we are capable of achieving sustainable free cash flow after capital expenditures. We intend that the primary means for raising such funds will be through our IPO, the additional $2 million of currently available funds under the Dow Facility, and up to an additional $5 million of proceeds from the Dow Facility in the event that we raise $10 million of additional equity capital after October 31, 2016. Thus far, we have raised $2.6 million through the sale of 323,578 shares of common stock between November 1, 2016 and June 30, 2017 towards the requirement to raise $10 million of additional equity capital in order to open up the remaining $5 million of availability on the Dow Facility. There can be no assurance that we will be able to raise additional equity capital in the IPO or in subsequent equity offerings or that the terms and conditions of any future financings will be workable or acceptable to us and our stockholders. In the event we are unable to fund our operations from existing cash on hand, operating cash flows, additional borrowings or raising equity capital, we may be forced to reduce our expenses, slow down our growth rate, or discontinue operations. Our condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern. |
Use of Estimates | Use of Estimates The preparation of our condensed consolidated financial statements in conformity with GAAP requires us to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, together with amounts disclosed in the related notes to the financial statements. Actual results and outcomes may differ from our estimates, judgments and assumptions. Significant estimates, judgments and assumptions used in these condensed consolidated financial statements include, but are not limited to, those related to revenue, accounts receivable and related allowances, contingencies, useful lives and recovery of long-term assets, income taxes, the fair value of stock-based compensation and derivative financial instrument liabilities. These estimates, judgments, and assumptions are reviewed periodically and the effects of material revisions in estimates are reflected in the financial statements prospectively from the date of the change in estimate. |
Inventory | Inventory Inventory consists of raw materials, work-in-process and finished goods, all of which are valued at standard cost, which approximates average cost. The following amounts were included in inventory at the end of the period: June 30, December 31, 2017 2016 Raw materials $ 37,411 $ 45,964 Finished goods 155,698 160,009 Total $ 193,109 $ 205,973 |
Derivative Financial Instruments | Derivative Financial Instruments We do not use derivative instruments to hedge exposures to cash flow, market or foreign currency risk. The terms of convertible preferred stock and convertible notes that we issue are reviewed to determine whether or not they contain embedded derivative instruments that are required by ASC 815: “Derivatives and Hedging” to be accounted for separately from the host contract, and recorded at fair value. In addition, freestanding warrants are also reviewed to determine if they achieve equity classification. Certain stock warrants that we have issued did not meet the conditions for equity classification and are classified as derivative instrument liabilities measured at fair value. The fair values of these derivative liabilities are revalued at each reporting date, with the change in fair value recognized in earnings. See Note 5 for additional information. |
Fair Value Measurements | Fair Value Measurements The following is a reconciliation of the beginning and ending balances for liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the six months ended June 30, 2017 and 2016: 2017 2016 Balance at January 1 $ 7,900,249 $ 8,235,163 Warrants reclassified to equity — (51,417 ) Gain recognized in earnings (101,596 ) (232,614 ) Balance at June 30 $ 7,798,653 $ 7,951,132 |
SUMMARY OF SIGNIFICANT ACCOUN18
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Accounting Policies [Abstract] | |
Schedule of inventory | The following amounts were included in inventory at the end of the period: June 30, December 31, 2017 2016 Raw materials $ 37,411 $ 45,964 Finished goods 155,698 160,009 Total $ 193,109 $ 205,973 |
Schedule of liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) | The following is a reconciliation of the beginning and ending balances for liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the six months ended June 30, 2017 and 2016: 2017 2016 Balance at January 1 $ 7,900,249 $ 8,235,163 Warrants reclassified to equity — (51,417 ) Gain recognized in earnings (101,596 ) (232,614 ) Balance at June 30 $ 7,798,653 $ 7,951,132 |
DERIVATIVE LIABILITY WARRANTS (
DERIVATIVE LIABILITY WARRANTS (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Schedule of shares indexed to derivative liabilities | Warrant shares indexed to derivative liabilities as of June 30, 2017 were as follows: Type of Exercise Indexed Warrants issued with Secured Convertible Notes Series A PS $ 6.40 833,333 Warrants issued with equipment financing leases Series A PS $ 6.40 83,333 Warrants issued with Series A preemptive rights Series A PS $ 6.40 56,054 Warrants issued with Series B preemptive rights Common $ 16.00 2,635 Warrants issued with Series B Units Common $ 16.00 222,262 Total shares indexed to derivative liabilities 1,197,617 |
Schedule of fair value of derivative liabilities | The following table summarizes the fair value of the derivative liabilities as of June 30, 2017 and December 31, 2016: June 30, 2017 December 31,2016 Warrants issued with Secured Convertible Notes $ 6,464,160 $ 6,554,160 Warrants issued with equipment financing leases 646,418 655,418 Warrants issued with preemptive rights 437,775 443,790 Warrants issued with 2015 Series B Unit private placement 250,300 246,881 Total derivative liabilities $ 7,798,653 $ 7,900,249 |
Schedule of warrant derivative liabilities | We estimated the fair value of their warrant derivative liabilities as of June 30, 2017 and December 31, 2016, using a lattice model and the following assumptions: June 30, 2017 December 31, 2016 Fair value of underlying stock $8.00 - $12.64 $7.63 - $12.64 Equivalent risk free interest rate 1.43% - 1.56% 1.27%- 1.46% Expected term (in years) 4.84 – 6.55 5.33- 7.04 Equivalent stock price volatility 37.49% - 37.69% 37.44%- 37.92% Expected dividend yield — — |
Schedule of changes in fair value of derivative liability - warrants | Changes in the fair value of Derivative Liabilities, carried at fair value, are reported as “Change in fair value of derivative liability — warrants” in the Statement of Operations, and were as follows: For the Three Months Ended For the Six Months Ended 2017 2016 2017 2016 Warrants issued with Secured Convertible Notes $ (17,500 ) $ 103,084 $ 90,000 $ 178,671 Warrants issued with equipment financing leases (1,750 ) 10,308 9,000 17,862 Warrants issued with preemptive rights (1,559 ) 7,197 6,015 12,281 Warrants issued with 2015 private placement (32,247 ) 22,259 (3,419 ) 22,541 Warrants issued with Bridge Financings — — — 1,259 Total Derivative Gain (Loss) $ (53,056 ) $ 142,848 $ 101,596 $ 232,614 |
STOCK WARRANTS (Tables)
STOCK WARRANTS (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Stock Warrants Tables | |
Schedule of warrants outstanding | The following table summarizes the warrants outstanding at June 30, 2017, which are accounted for as equity instruments, all of which are exercisable: Date Issued Expiration Date Exercise Price Number of 7/1/2009 7/1/2019 $ 8.00 6,000 10/8/2012 10/8/2027 $ 12.00 5,000 12/14/2016 12/1/2023 $ 8.00 50,000 61,000 |
CAPITAL LEASES (Tables)
CAPITAL LEASES (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Capital Leases of Lessee [Abstract] | |
Schedule of capital lease obligations | As of June 30, 2017 and December 31, 2016, we have capital lease obligations as follows: June 30, 2017 December 31, 2016 Capital lease obligations $ 295,340 $ 449,368 Unamortized warrant discount (34,705 ) (65,595 ) Net obligations 260,635 383,773 Short-term portion of obligations (200,768 ) (268,667 ) Long-term portion of obligations $ 59,867 $ 115,106 |
CUSTOMER, SUPPLIER, COUNTRY A22
CUSTOMER, SUPPLIER, COUNTRY AND PRODUCT CONCENTRATIONS (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Customer Supplier Country And Product Concentrations Tables | |
Concentrations of product sales | Concentrations of product sales greater than 10% of total product sales are shown in the table below. We attempt to minimize the risk associated with product concentrations by continuing to develop new products to add to our portfolio. For the Three Months Ended June 30, For the Six Months Ended June 30, 2017 2016 2017 2016 Grade C-300 HP 39% * 24% * Grade C-500 * * 15% * Grade C-750 * 11% * 11% Grade R-10 15% 14% 12% 12% Grade M-15 * * * 16% Grade M-25 * 10% * * * Denotes less than 10% of product sales. |
SUMMARY OF SIGNIFICANT ACCOUN23
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($) | Jun. 30, 2017 | Dec. 31, 2016 |
Accounting Policies [Abstract] | ||
Raw materials | $ 37,411 | $ 45,964 |
Finished goods | 155,698 | 160,009 |
Total | $ 193,109 | $ 205,973 |
SUMMARY OF SIGNIFICANT ACCOUN24
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 1) - Significant Unobservable Inputs (Level 3) [Member] - Recurring [Member] - USD ($) | 6 Months Ended | |
Jun. 30, 2017 | Jun. 30, 2016 | |
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Roll Forward] | ||
Balance at beginning | $ 7,900,249 | $ 8,235,163 |
Warrants reclassified to equity | (51,417) | |
Gain recognized in earnings | (101,596) | (232,614) |
Balance at ending | $ 7,798,653 | $ 7,951,132 |
SUMMARY OF SIGNIFICANT ACCOUN25
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | Jul. 31, 2017 | Jul. 18, 2017 | Dec. 31, 2016 | Jun. 30, 2017 | Jun. 30, 2017 | Jun. 30, 2016 | Dec. 31, 2015 |
Cash in hand | $ 1,785,343 | $ 431,107 | $ 431,107 | $ 959,787 | $ 1,060,224 | ||
Funds available from operations | 5,000,000 | ||||||
Additional fund required for next 12 months | $ 10,000,000 | ||||||
Additional fund required for sustainable cash flow | $ 15,000,000 | ||||||
Description of raising fund | Additional $2 million of currently available funds under the Dow Facility, and up to an additional $5 million of proceeds from the Dow Facility in the event that we raise $10 million of additional equity capital after October 31, 2016. | ||||||
Number of common shares sold | 14,280 | 323,578 | |||||
Value of common shares sold | $ 1,720,400 | $ 2,600,000 | |||||
Subsequent Event [Member] | |||||||
Cash in hand | $ 1,000,702 | ||||||
Funds available from operations | $ 2,000,000 | ||||||
The Dow Chemical Company [Member] | |||||||
Description of raising fund | Additional $5 million becomes available under the Dow Facility if we have raised $10 million of equity capital after October 31, 2016. | ||||||
The Dow Chemical Company [Member] | Draw Loan Note And Agreement [Member] | Senior Secured Debt Financing [Member] | |||||||
Face amount | 10,000,000 | ||||||
Proceeds from secured debt | $ 2,000,000 | ||||||
Interest rate | 5.00% | ||||||
The Dow Chemical Company [Member] | Draw Loan Note And Agreement [Member] | Senior Secured Debt Financing [Member] | Subsequent Event [Member] | |||||||
Proceeds from secured debt | $ 1,000,000 |
FINANCING AGREEMENTS (Details N
FINANCING AGREEMENTS (Details Narrative) - USD ($) | 1 Months Ended | 6 Months Ended | 12 Months Ended |
Dec. 31, 2016 | Jun. 30, 2017 | Dec. 31, 2016 | |
Number of common stock warrants issued | 61,000 | ||
Warrant [Member] | |||
Exercise price (in dollars per share) | $ 12 | ||
Number of common stock warrants issued | 5,000 | ||
Senior Secured Debt Financing [Member] | Draw Loan Note And Agreement [Member] | The Dow Chemical Company [Member] | |||
Maturity date | Dec. 1, 2021 | ||
Interest rate | 5.00% | 5.00% | |
Face amount | $ 10,000,000 | $ 10,000,000 | |
Proceeds from secured debt | $ 2,000,000 | ||
Description of funding | Additional $1 million on July 18, 2017. We currently have $2 million of additional funding available on or before December 1, 2017 under the Dow Facility. After December 1, 2017, an additional $5 million becomes available if we have raised $10 million of equity capital after October 31, 2016. | ||
Description of collateral | Secured by all of our assets. | ||
Description of interest payable terms | Payable beginning January 1, 2017 although we may elect to capitalize interest through January 1, 2019. | ||
Amount of principal and interest outstanding | $ 5,000,000 | ||
Senior Secured Debt Financing [Member] | Warrant [Member] | Draw Loan Note And Agreement [Member] | The Dow Chemical Company [Member] | |||
Percentage of common stock warrant coverage | 20.00% | ||
Exercise price (in dollars per share) | $ 8 | $ 8 | |
Number of common stock warrants issued | 50,000 | ||
Description of warrant coverage | One share of common stock for each $40 in loans received by us, equating to 20% warrant coverage, with an exercise price of $8.00 per share for the warrants issued at closing with the initial $2 million draw. | ||
Warrant expiration date | Dec. 1, 2023 | ||
Amortization expense | 56,340 | ||
Secured debt carrying amount | $ 1,918,461 |
PRIVATE PLACEMENT AND PREEMPT27
PRIVATE PLACEMENT AND PREEMPTIVE RIGHTS (Details Narrative) - USD ($) | Feb. 25, 2016 | Jun. 30, 2017 | Jun. 30, 2017 | Dec. 31, 2016 | Dec. 31, 2016 | Apr. 30, 2015 |
Number of shares issued | 14,280 | 323,578 | ||||
Warrant [Member] | ||||||
Number of shares issued | 1,197,617 | |||||
Exercise price (in dollars per share) | $ 8 | $ 8 | ||||
Private Placement [Member] | Warrant [Member] | ||||||
Proceeds from private placement | $ 4,270,192 | |||||
Number of shares issued | 222,262 | 222,262 | ||||
Exercise price (in dollars per share) | $ 16 | $ 16 | ||||
Number of warrants outstanding | 224,897 | 224,897 | ||||
Private Placement [Member] | Warrant [Member] | ||||||
Share price (in dollars per unit) | $ 16 | |||||
Private Placement [Member] | Series B Preferred stock [Member] | ||||||
Number of shares issued | 266,887 | |||||
Number of shares converted | 269,987 | |||||
Private Placement [Member] | Series B Preferred stock [Member] | Restricted Common Stock [Member] | ||||||
Number of shares issued | 539,974 |
DERIVATIVE LIABILITY WARRANTS28
DERIVATIVE LIABILITY WARRANTS (Details) - $ / shares | Feb. 25, 2016 | Jun. 30, 2017 | Jun. 30, 2017 |
Number of shares issued | 14,280 | 323,578 | |
Warrant [Member] | |||
Number of shares issued | 1,197,617 | ||
Exercise Price | $ 8 | $ 8 | |
Warrant [Member] | Preemptive Rights Offering [Member] | |||
Number of shares issued | 58,689 | ||
Warrant [Member] | Private Placement [Member] | |||
Number of shares issued | 222,262 | 222,262 | |
Exercise Price | $ 16 | 16 | |
Type of shares indexed | Common | ||
Warrant [Member] | Private Placement [Member] | Existing Stockholders [Member] | |||
Number of shares issued | 2,635 | ||
Exercise Price | $ 16 | 16 | |
Type of shares indexed | Common | ||
Warrant [Member] | Financing Agreements With Samsung, Ventures And Aspen Advanced Opportunity Fund LP, AAOF and XGS II [Member] | Preemptive Rights Offering [Member] | Series A Convertible Preferred Stock [Member] | |||
Number of shares issued | 56,054 | ||
Exercise Price | $ 6.40 | 6.40 | |
Type of shares indexed | Series A PS | ||
Secured Convertible Notes [Member] | Warrant [Member] | |||
Number of shares issued | 833,333 | ||
Exercise Price | $ 6.40 | 6.40 | |
Type of shares indexed | Series A PS | ||
Equipment Financing Leases [Member] | Warrant [Member] | |||
Number of shares issued | 83,333 | ||
Exercise Price | $ 6.40 | $ 6.40 | |
Type of shares indexed | Series A PS |
DERIVATIVE LIABILITY WARRANTS29
DERIVATIVE LIABILITY WARRANTS (Details 1) - USD ($) | Jun. 30, 2017 | Dec. 31, 2016 |
Total derivative liabilities | $ 7,798,653 | $ 7,900,249 |
Financing Agreements With Samsung, Ventures And Aspen Advanced Opportunity Fund LP, AAOF and XGS II [Member] | Preemptive Rights Offering [Member] | Series A Convertible Preferred Stock [Member] | ||
Total derivative liabilities | 437,775 | 443,790 |
Warrant [Member] | Private Placement [Member] | ||
Total derivative liabilities | 250,300 | 246,881 |
Secured Convertible Notes [Member] | Warrant [Member] | ||
Total derivative liabilities | 6,464,160 | 6,554,160 |
Equipment Financing Leases [Member] | Warrant [Member] | ||
Total derivative liabilities | $ 646,418 | $ 655,418 |
DERIVATIVE LIABILITY WARRANTS30
DERIVATIVE LIABILITY WARRANTS (Details 2) - $ / shares | 6 Months Ended | 12 Months Ended |
Jun. 30, 2017 | Dec. 31, 2016 | |
Expected dividend yield | ||
Minimum [Member] | ||
Fair value of underlying stock | $ 8 | $ 7.63 |
Equivalent risk free interest rate | 1.43% | 1.27% |
Expected term (in years) | 4 years 10 months 2 days | 6 years 6 months 18 days |
Equivalent stock price volatility | 37.49% | 37.44% |
Maximum [Member] | ||
Fair value of underlying stock | $ 12.64 | $ 12.64 |
Equivalent risk free interest rate | 1.56% | 1.46% |
Expected term (in years) | 5 years 6 months 18 days | 7 years 4 months 24 days |
Equivalent stock price volatility | 37.69% | 37.92% |
DERIVATIVE LIABILITY WARRANTS31
DERIVATIVE LIABILITY WARRANTS (Details 3) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Total Derivative Gain | $ (53,056) | $ 142,848 | $ 101,596 | $ 232,614 |
Warrant [Member] | Private Placement [Member] | ||||
Total Derivative Gain | (32,247) | 22,259 | (3,419) | 22,541 |
Warrant [Member] | Financing Agreements With Samsung, Ventures And Aspen Advanced Opportunity Fund LP, AAOF and XGS II [Member] | Preemptive Rights Offering [Member] | Series A Convertible Preferred Stock [Member] | ||||
Total Derivative Gain | (1,559) | 7,197 | 6,015 | 12,281 |
Secured Convertible Notes [Member] | Warrant [Member] | ||||
Total Derivative Gain | (17,500) | 103,084 | 90,000 | 178,671 |
Equipment Financing Leases [Member] | Warrant [Member] | ||||
Total Derivative Gain | (1,750) | 10,308 | 9,000 | 17,862 |
Bridge Financings [Member] | Warrant [Member] | 15 Investors [Member] | ||||
Total Derivative Gain | $ 1,259 |
DERIVATIVE LIABILITY WARRANTS32
DERIVATIVE LIABILITY WARRANTS (Details Narrative) - shares | 6 Months Ended | 8 Months Ended |
Jun. 30, 2017 | Jun. 30, 2017 | |
Number of shares issued | 14,280 | 323,578 |
Warrant [Member] | ||
Number of shares issued | 1,197,617 | |
Warrant [Member] | Preemptive Rights Offering [Member] | ||
Number of shares issued | 58,689 |
STOCK WARRANTS ACCOUNTED FOR 33
STOCK WARRANTS ACCOUNTED FOR AS EQUITY INSTRUMENTS (Details) | 6 Months Ended |
Jun. 30, 2017$ / sharesshares | |
Number of Warrants | 61,000 |
Warrant [Member] | |
Date Issued | Jul. 1, 2009 |
Expiration Date | Jul. 1, 2019 |
Exercise Price | $ / shares | $ 8 |
Number of Warrants | 6,000 |
Warrant 1 [Member] | |
Date Issued | Oct. 8, 2012 |
Expiration Date | Oct. 8, 2027 |
Exercise Price | $ / shares | $ 12 |
Number of Warrants | 5,000 |
Warrant 2 [Member] | |
Date Issued | Dec. 14, 2016 |
Expiration Date | Dec. 1, 2023 |
Exercise Price | $ / shares | $ 8 |
Number of Warrants | 50,000 |
EQUITY INCENTIVE PLAN (Details
EQUITY INCENTIVE PLAN (Details Narrative) | 6 Months Ended |
Jun. 30, 2017USD ($)$ / sharesshares | |
Incentive Stock Option Plan [Member] | |
Number of option granted | 369,750 |
Vesting percent, per year | 20.00% |
Description of vesting terms | Vesting of the options granted range from immediately to 20% per year, with most new options vesting on a straight-line basis over a four year period from the date issued. |
2007 Stock Option Plan [Member] | |
Exercise price (in dollars per share) | $ / shares | $ 8 |
Vesting period | 7 years |
Compensation cost | $ | $ 330,000 |
2007 Stock Option Plan [Member] | Maximum [Member] | |
Maximum number of options authorized | 1,200,000 |
CAPITAL LEASES (Details)
CAPITAL LEASES (Details) - USD ($) | Jun. 30, 2017 | Dec. 31, 2016 |
Short-term portion of obligations | $ (200,768) | $ (268,667) |
Long-term portion of obligations | 59,867 | 115,106 |
Aspen Advance Opportunity Fund, LP [Member] | ||
Capital lease obligations | 295,340 | 449,368 |
Unamortized warrant discount | (34,705) | (65,595) |
Net obligations | 260,635 | 383,773 |
Short-term portion of obligations | (200,768) | (268,667) |
Long-term portion of obligations | $ 59,867 | $ 115,106 |
CUSTOMER, SUPPLIER, COUNTRY A36
CUSTOMER, SUPPLIER, COUNTRY AND PRODUCT CONCENTRATIONS (Details) - Product Concentration Risk [Member] - Total Product Revenues [Member] | 3 Months Ended | 6 Months Ended | ||||||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |||||
Grade C-300 HP [Member] | ||||||||
Concentration of risk | 39.00% | [1] | 24.00% | [1] | ||||
Grade C-500 [Member] | ||||||||
Concentration of risk | [1] | [1] | 15.00% | [1] | ||||
Grade C-750 [Member] | ||||||||
Concentration of risk | [1] | 11.00% | [1] | 11.00% | ||||
Grade R-10 [Member] | ||||||||
Concentration of risk | 15.00% | 14.00% | 12.00% | 12.00% | ||||
Grade M-15 [Member] | ||||||||
Concentration of risk | [1] | [1] | [1] | 16.00% | ||||
Grade M-25 [Member] | ||||||||
Concentration of risk | [1] | 10.00% | [1] | [1] | ||||
[1] | Denotes less than 10% of product sales. |
CUSTOMER, SUPPLIER, COUNTRY A37
CUSTOMER, SUPPLIER, COUNTRY AND PRODUCT CONCENTRATIONS (Details Narrative) - Customer | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Grants and Licensing Revenue Concentration [Member] | Total Grant Revenue [Member] | Grantor One [Member] | ||||
Concentration of risk | 100.00% | 94.00% | 100.00% | |
Customer Concentration Risk [Member] | Total Product Revenues [Member] | Customer One [Member] | ||||
Concentration of risk | 34.00% | 15.00% | 17.00% | |
Customer Concentration Risk [Member] | Total Product Revenues [Member] | Customer Two [Member] | ||||
Concentration of risk | 24.00% | 11.00% | 15.00% | |
Customer Concentration Risk [Member] | Total Product Revenues [Member] | Customer [Member] | ||||
Concentration of risk | 30.00% | |||
Number of customers | 2 | 2 | 2 | 2 |
Customer Concentration Risk [Member] | Accounts Receivable Greater Than 10% [Member] | Customer [Member] | ||||
Number of customers | 2 | 1 | 2 | 1 |
Country Concentration Risk [Member] | Total Product Revenues [Member] | China | ||||
Concentration of risk | 25.00% | 15.00% | ||
Country Concentration Risk [Member] | Total Product Revenues [Member] | Korea (South) | ||||
Concentration of risk | 40.00% | 16.00% | 37.00% | |
Country Concentration Risk [Member] | Total Product Revenues [Member] | United Kingdom | ||||
Concentration of risk | 14.00% | |||
Country Concentration Risk [Member] | Total Product Revenues [Member] | Foreign [Member] | ||||
Concentration of risk | 50.00% | 72.00% | 60.00% | 74.00% |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | 8 Months Ended | ||||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Dec. 31, 2016 | Mar. 18, 2013 | |
Number of shares issued | 14,280 | 323,578 | |||||
Licensing Agreement [Member] | Aspen Advance Opportunity Fund, LP (AAOF) [Member] | |||||||
Lease financing | $ 1,000,000 | ||||||
Licensing Agreement [Member] | Aspen Advanced Opportunity Fund, LP ("AAOF") and XGS II, LLC ("XGS II") [Member] | Secured Convertible Notes [Member] | |||||||
Lease financing | $ 10,000,000 | ||||||
Licensing Agreement [Member] | Michigan State University (Patents and Pending Patents) [Member] | |||||||
Licensing expenses | $ 12,500 | $ 12,500 | $ 25,000 | $ 25,000 | |||
Licensing Agreement [Member] | POSCO [Member] | |||||||
Minimum yearly contractual obligation | 100,000 | 100,000 | $ 100,000 | ||||
Quarterly license revenue | 25,000 | 25,000 | 25,000 | ||||
Allowance contractual obligation | $ 175,000 | $ 175,000 | $ 175,000 | $ 150,000 | |||
Master Leasing Agreement [Member] | Aspen Advance Opportunity Fund, LP (AAOF) [Member] | Series A Preferred stock [Member] | |||||||
Number of shares issued | 7,140 | 7,140 | 14,280 | 14,280 |