XG Sciences 10-Q 13 Nov 17 2017 Q3 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2017	Nov. 13, 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	Sep. 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		2,213,350
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2,017

CONDENSED CONSOLIDATED BALANCE

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) - USD ($)	Sep. 30, 2017	Dec. 31, 2016
CURRENT ASSETS
Cash	$ 1,317,761	$ 1,785,343
Accounts receivable, less allowance for doubtful accounts of $10,000 at September 30, 2017 and December 31, 2016	378,686	99,078
Inventory	193,223	205,973
Incentive refunds receivable		165,635
Other current assets	194,864	174,495
Total current assets	2,084,534	2,430,524
PROPERTY, PLANT AND EQUIPMENT, NET	2,648,624	2,886,421
RESTRICTED CASH FOR LETTER OF CREDIT	195,718	195,499
INTANGIBLE ASSETS, NET	561,719	478,019
TOTAL ASSETS	5,490,595	5,990,463
CURRENT LIABILITIES
Accounts payable and other liabilities	667,605	964,757
Deferred revenue		6,428
Current portion of capital lease obligations	159,628	268,667
Total current liabilities	827,233	1,239,852
LONG TERM LIABILITIES
Long term portion of capital lease obligations	31,311	115,106
Long term debt	3,814,703	1,862,120
Derivative liability - warrants		249,807
Total long term liabilities	3,846,014	2,227,033
TOTAL LIABILITIES	4,673,247	3,466,885
STOCKHOLDERS' EQUITY
Common stock, no par value, 25,000,000 shares authorized, 2,155,225 and 1,885,175 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively	17,562,267	15,647,839
Additional paid in capital	7,677,319	6,490,230
Accumulated (deficit)	(46,253,612)	(41,188,851)
Total stockholders' equity	817,348	2,523,578
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	5,490,595	5,990,463
Series A Convertible Preferred Stock [Member]
STOCKHOLDERS' EQUITY
Preferred stock, value	21,831,374	21,574,360
Series B Preferred stock [Member]
STOCKHOLDERS' EQUITY
Preferred stock, value

CONDENSED CONSOLIDATED BALANCE3

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) (Parenthetical) - USD ($)	Sep. 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	2,162,725	1,885,175
Common stock, outstanding	2,162,725	1,885,175
Series A Convertible Preferred Stock [Member]
Preferred stock, authorized	3,000,000	3,000,000
Preferred stock, issued	1,850,676	1,829,256
Preferred stock, outstanding	1,850,676	1,829,256
Preferred stock, liquidation value	$ 22,208,112	$ 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		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
REVENUE
Product sales	$ 446,795	$ 88,856	$ 863,574	$ 230,635
Grants	25,466	50,111	124,955	208,475
Licensing revenue		25,000	50,000	75,000
Total revenue	472,261	163,967	1,038,529	514,110
COST OF GOODS SOLD
Direct costs	266,462	44,344	476,774	101,397
Unallocated manufacturing expenses	449,799	323,051	1,236,101	1,071,000
Total cost of goods sold	716,261	367,395	1,712,875	1,172,397
GROSS LOSS	(244,000)	(203,428)	(674,346)	(658,287)
OPERATING EXPENSES
Research and development	215,949	231,312	706,575	866,668
Sales, general and administrative	1,466,505	896,650	3,386,857	2,618,252
Total operating expenses	1,682,454	1,127,962	4,093,432	3,484,920
OPERATING LOSS	(1,926,454)	(1,331,390)	(4,767,778)	(4,143,207)
OTHER INCOME (EXPENSE)
Interest expense, net	(62,814)	(55,816)	(176,347)	(240,588)
Gain (Loss) from change in fair value of derivative liability - warrants	(43,154)	26,738	(46,612)	50,799
Government incentives		24,000	(74,024)	72,000
Loss on disposal of intangible assets		(18,609)		(18,609)
Total other income (expense)	(105,968)	(23,687)	(296,983)	(136,398)
NET LOSS	$ (2,032,422)	$ (1,355,077)	$ (5,064,761)	$ (4,279,605)
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING - Basic and diluted	2,110,546	914,648	2,028,373	959,904
NET LOSS PER SHARE - Basic and diluted (in dollars per share)	$ (.96)	$ (1.48)	$ (2.50)	$ (4.46)

CONDENSED CONSOLIDATED STATEME5

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) (unaudited) - 9 months ended Sep. 30, 2017 - USD ($)	Series A Preferred stock [Member]	Common Stock [Member]	Additional Paid-In Capital [Member]	Accumulated Deficit [Member]	Total
Balances at beginning at Dec. 31, 2016	$ 21,574,360	$ 15,647,839	$ 6,490,230	$ (41,188,851)	$ 2,523,578
Balances at beginning (in shares) at Dec. 31, 2016	1,829,256	1,885,175
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Reclassification of warrant liabilities to equity			296,419		296,419
Stock issued for cash		$ 2,140,400			$ 2,140,400
Stock issued for cash (in shares)		267,550			14,280
Stock issuance fees and expenses		$ (245,972)			$ (245,972)
Preferred stock issued to pay capital lease obligations	$ 257,014				257,014
Preferred stock issued to pay capital lease obligations (in shares)	21,420
Stock-based compensation expense		$ 20,000	744,870		764,870
Stock-based compensation (in shares)		10,000
Net loss				(5,064,761)	(5,064,761)
Balances at ending at Sep. 30, 2017	$ 21,831,374	$ 17,562,267	$ 7,677,319	$ (46,253,612)	$ 817,348
Balances at ending (in shares) at Sep. 30, 2017	1,850,676	2,162,725

CONDENSED CONSOLIDATED STATEME6

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) - USD ($)	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$ (5,064,761)	$ (4,279,605)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	665,813	684,199
Amortization of intangible assets	31,770	26,856
Loss on disposal of intangible assets		18,609
Stock-based compensation expense	764,870	342,189
Non-cash interest expense	177,188	213,906
Gain from change in fair value of derivative liability - warrants	46,612	(50,799)
Changes in current assets and liabilities:
Accounts receivable	(279,608)	(4,044)
Inventory	12,750	2,434
Other current and non-current assets	145,047	(101,216)
Accounts payable and other liabilities	(303,580)	480,164
NET CASH USED IN OPERATING ACTIVITIES	(3,803,899)	(2,667,307)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment	(428,016)	(84,187)
Purchases of intangible assets	(115,470)	(89,264)
NET CASH USED IN INVESTING ACTIVITIES	(543,486)	(173,451)
CASH FLOWS FROM FINANCING ACTIVITIES
Advances (repayments) of capital lease obligations, net	(14,625)	29,896
Repayments of short-term notes, net		(175,250)
Proceeds from long-term loan	2,000,000
Proceeds from issuance of common stock	2,140,400	3,102,032
Common stock issuance fees and expenses	(245,972)	(538,640)
NET CASH PROVIDED BY FINANCING ACTIVITIES	3,879,803	2,418,038
NET DECREASE IN CASH	(467,582)	(422,720)
CASH AT BEGINNING OF PERIOD	1,785,343	1,060,224
CASH AT END OF PERIOD	1,317,761	637,504
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest		27,107
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING:
Value of preferred stock issued for AAOF capital lease obligations	257,014	257,014
Property and equipment under capital leases		38,998
Reclassification of derivative liability warrants to equity ASU 2017-11 (see note 2)	7,650,442
Reclassification of derivative liability warrants to equity - Series B Amendment	296,419	51,418
Warrants issued with long and short-term financings	$ 145,800	$ 24,060

NATURE OF BUSINESS AND BASIS OF

NATURE OF BUSINESS AND BASIS OF PRESENTATION	9 Months Ended
	Sep. 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	9 Months Ended
	Sep. 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, $1 million on July 18, 2017, and $1 million on September 22, 2017. We currently have $1 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 November 10, 2017, we had cash on hand of $1,226,776 and currently available funds of $1 million under the Dow Facility. Our financial projections show that we may need to raise an additional $6-8 million 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 $1 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 approximately $3 million through the sale of 376,078 shares of common stock between November 1, 2016 and September 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, including intangible assets, income taxes, the fair value of stock-based compensation. 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 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: September 30, December 31, 2017 2016 Raw materials $ 48,450 $ 45,964 Finished goods 144,773 160,009 Total $ 193,223 $ 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 were classified as derivative instrument liabilities measured at fair value. The fair values of these derivative liabilities were revalued at each reporting date, with the change in fair value recognized in earnings. See Note 5 for additional information. In July 2017, the FASB issued Accounting Standards Update No. 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities From Equity (Topic 480), Derivatives and Hedging (Topic 815) (“ASU 2017-11”) Three months ended September 30, 2016 As previously As reported Adjusted Operating loss $ (1,331,390 ) $ (1,331,390 ) Other income (expense): Interest expense, net (56,013 ) (55,816 ) Gain from change in fair value of derivative warrants 108,056 26,738 Government incentives 24,197 24,000 Loss on disposal of intangible assets (18,609 ) (18,609 ) Total other income (expense) 57,631 (23,687 ) Net loss $ (1,273,759 ) $ (1,355,077 ) Nine months ended September 30, 2016 As previously As reported Adjusted Operating loss $ (4,143,207 ) $ (4,143,207 ) Other income (expense): Interest expense, net (241,011 ) (240,588 ) Gain from change in fair value of derivative warrants 340,669 50,799 Government incentives 72,423 72,000 Loss on disposal of intangible assets (18,609 ) (18,609 ) Total other income (expense) 153,472 (136,398 ) Net loss $ (3,989,735 ) $ (4,279,605 ) The impact to the balance sheet as of December 31, 2016 is as follows: As previously As reported Adjusted Derivative liability-warrants $ 7,900,249 $ 249,807 Total long-term liabilities $ 9,877,475 $ 2,227,033 Total liabilities $ 11,117,327 $ 3,466,885 Series A convertible preferred stock $ 21,634,597 $ 21,574,360 Accumulated deficit $ (48,899,530 ) $ (41,188,851 ) Total stockholders’ (deficit) equity $ (5,126,864 ) $ 2,523,578 Total liabilities and stockholder’s deficit $ 5,990,463 $ 5,990,463

WARRANTS AND FINANCING AGREEMEN

WARRANTS AND FINANCING AGREEMENTS	9 Months Ended
	Sep. 30, 2017
Debt Disclosure [Abstract]
WARRANTS AND FINANCING AGREEMENTS	NOTE 3 — WARRANTS AND FINANCING AGREEMENTS Dow Loan 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 and September 22, 2017, respectively. We currently have $1 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 of the initial $2 million draw. After the initial closing, the strike price of future warrants issued are subject to adjustment if we sell shares of common stock at a lower price. As of September 30, 2017, we had issued 100,000 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. Proceeds were allocated between the debt and the warrants at their relative fair value. During the nine months ended September 30, 2017, amortization expense of $98,384 was recognized resulting in a carrying value of $3,814,703 for the Dow Loan as of September 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	9 Months Ended
	Sep. 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 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. Although the stock was cancelled all of the 224,897 warrants issued in connection with the Series B Units remain outstanding at September 30, 2017. Such warrants have an exercise price of $16.00 per share and expire between April 21 and June 30, 2022. These warrants were classified as derivative liabilities until September 30, 2017; at which time they were reclassified to equity (additional paid in capital). The reclassification was made on September 30, 2017 after determining that the exchange rights as defined in the Michigan “Certificate of Amendment – Corporation”, filed on August 19, 2016 no longer required liability classification (see Note 2).

DERIVATIVE LIABILITY WARRANTS

DERIVATIVE LIABILITY WARRANTS	9 Months Ended
	Sep. 30, 2017
Derivative Instruments and Hedging Activities Disclosure [Abstract]
DERIVATIVE LIABILITY WARRANTS	NOTE 5 – DERIVATIVE LIABILITY WARRANTS At inception, 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 were derivative liabilities which require re-measurement at fair value each reporting period. As mentioned in Note 2, during the three months ended September 30, 2017, we chose to adopt ASU 2017-11 which changed the classification analysis of certain warrants with anti-dilution features. Since we chose to early adopt ASU 2017-11 in an interim period, the adjustments were reflected as of the beginning of the fiscal year as a cumulative-effect adjustment to the Company’s beginning accumulated deficit as of January 1, 2016. As a result of adopting ASU 2017-11, the Company no longer recognizes a liability related to 972,720 warrants, which were only classified as liabilities a result of having anti-dilution features. As mentioned in Note 4, 224,897 warrants related to the Series B offering were reclassified from derivative liabilities on the balance sheet to equity at September 30, 2017 because the requirement to classify them as liabilities was removed when we amended the Series B Certificate of Designation in August of 2016. 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 of Series B Units 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 September 30, 2017, the total number of Stock Warrants issued due to the preemptive rights offerings was 58,689. The following table summarizes the fair value of the derivative liabilities as of September 30, 2017 and December 31, 2016: September 30, 2017 December 31, 2016 Warrants issued with Secured Convertible Notes $ — $ 6,554,160 Warrants issued with equipment financing leases — 655,418 Warrants issued with preemptive rights — 443,790 Warrants issued with April 2015 private placement of Series B Units — 246,881 Adoption of accounting standard ASU 2017-11 — (7,650,442 ) Total derivative liabilities $ — $ 249,807 The Company estimated the fair value of their warrant derivative liabilities as of September 30, 2017 and December 31, 2016, using a lattice model and the following assumptions: December 31, 2016 Fair value of underlying stock $7.63 - $12.64 Equivalent risk free interest rate 1.27%- 1.46% Expected term (in years) 5.33- 7.04 Equivalent stock price volatility 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 the Company is not publicly traded on a national exchange or to our knowledge, an over-the-counter market, the expected volatility of the Company’s 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. Comparative prior periods were prepared using the newly adopted ASU 2017-11 as follows: Three months ended September 30, 2017 2016 Warrants issued with preemptive rights $ (506 ) $ 26,423 Warrants issued with April 2015 private placement of Series B Units (42,648 ) 315 Total Derivative Gain (Loss) $ (43,154 ) $ 26,738 Nine months ended September 30, 2017 2016 Warrants issued with preemptive rights $ (545 ) $ 48,964 Warrants issued with April 2015 private placement of Series B Units (46,067 ) 577 Warrants issued with Bridge Financing 1,258 Total Derivative Gain (Loss) $ (46,612 ) $ 50,799 Subsequent to the Company’s early adoption of ASU 2017-11, which effected 972,720 warrants related to Series A Preferred stock, and the Company’s reclassification of 224,897 warrants related to Series B Preferred stock on September 30, 2017 (from derivative liabilities to equity) we are no longer required to record the change in fair values for these instruments.

STOCK WARRANTS ACCOUNTED FOR AS

STOCK WARRANTS ACCOUNTED FOR AS EQUITY INSTRUMENTS	9 Months Ended
	Sep. 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 common stock warrants (including the warrants previously accounted for as derivatives) outstanding at September 30, 2017, which are accounted for as equity instruments, all of which are exercisable: Date Issued Expiration Date Exercise Price Number of 07/01/2009 07/01/2019 $ 8.00 6,000 10/08/2012 10/08/2027 $ 12.00 5,000 01/15/2014 - 12/31/2014 01/15/2024 $ 6.40 972,720 04/30/2015- 05/26/2015 04/30/2022 $ 16.00 218,334 06/30/2015 06/30/2022 $ 16.00 6,563 12/14/2016 12/01/2023 $ 8.00 50,000 07/18/2017 12/01/2023 $ 8.00 25,000 09/22/2017 12/01/2023 $ 8.00 25,000 1,308,617

EQUITY INCENTIVE PLAN

EQUITY INCENTIVE PLAN	9 Months Ended
	Sep. 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 replacement stock option awards have an exercise price of $8.00 per share, a seven-year term, are vested 50% on date of grant with the remaining vesting over a 4 year period from the date issued, and are subject to certain other terms. Each option holder received options equal to 150% of the number of cancelled stock options. The cancellation and reissuance of the stock options were treated as a modification under ASC 718, Compensation-Stock Compensation. On August 10, 2017, the Company granted stock options and restricted stock to each of its board members as part of their compensation package. Each of the 4 board members received 2,500 stock options and 2,500 shares of restricted stock for their board services. The options were granted at a price of $8.00 per share and had an aggregate grant date fair value of $26,120. The options vest ratably over a four-year period beginning on the one-year anniversary. The restricted stock issued to the board members have an aggregate fair value of $80,000 and vest ratably in arrears on the last day of each fiscal quarter following the grant date. As of September 30, 2017, 2,500 shares of restricted stock had vested resulting in compensation expense of $20,000 A summary of the stock option activity for the nine months ended September 30, 2017 is as follows: Weighted Number Average Of Exercise Options Price Options outstanding at beginning of year 369,750 $ 11.89 Changes during the year: Expired (12,000 ) 12.00 Cancellation of existing options (357,750 ) 12.00 Issuance of replacement options 536,625 8.00 New Options Granted – at market price 108,000 8.00 Exercised — — Options outstanding at end of Period 644,625 8.00 Options exercisable at end of Period 322,158 8.00 The fair values of options granted are estimated on the dates of grant using the Black Scholes option-pricing model. Vesting of the options granted range from immediately to 25% per year, with most of the replacement options vesting 50% on date of grant with the remaining vesting over a 4 year period from the date issued. The options expire in seven years from date of grant.

CAPITAL LEASES

CAPITAL LEASES	9 Months Ended
	Sep. 30, 2017
Capital Leases of Lessee [Abstract]
CAPITAL LEASES	NOTE 8 – CAPITAL LEASES As of September 30, 2017 and December 31, 2016, we have capital lease obligations as follows: September 30, 2017 December 31, 2016 Capital lease obligations $ 214,191 $ 449,368 Unamortized warrant discount (23,252 ) (65,595 ) Net obligations 190,939 383,773 Short-term portion of obligations (159,628 ) (268,667 ) Long-term portion of obligations $ 31,311 $ 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	9 Months Ended
	Sep. 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 For the three months ended September 30, 2017, one grantor accounted for 100% of the total grant revenue. During the nine months ended September 30, 2017, two grantors accounted for 25% and 75% of total grant revenue. During the three months ended September 30, 2016, two grantors accounted for 50% each of the total grant revenue, and for the nine months ended September 30, 2016, two grantors accounted for 12% and 88% of the total grant revenue in each period. There was no licensing revenue for the three months ended September 30, 2017. Licensing revenue for the nine months ended September 30, 2017, and for the three and nine months ended 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 of products offered. For the Three Months Ended For the Nine Months Ended 2017 2016 2017 2016 Grade C-300 HP * * 14% * Grade C-500 66% * 41% * Grade R-10 * 16% * 12% Grade M-15 * 16% * 14% * Denotes less than 10% of product sales. Customer Concentration During the three months ended September 30, 2017 we had two customers whose purchases accounted for 19% and 65% of product sales. During the three months ended September 30, 2016 we had three customers who accounted for 10%, 12% and 21% of product sales. For the nine months ended September 30, 2017 we had two customers whose purchases accounted for 17%, and 36% of product sales. During the nine months ended September 30, 2016 we had two customers whose purchases accounted for 11% each of product sales. At September 30, 2017, there were two customers who had an accounts receivable balance greater than 10% of our total outstanding receivable balance. At September 30, 2016, there were two customers 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 September 30, 2017 were 33% of product sales as compared with 54% for the three months ended September 30, 2016. One country, China, accounted for 19% of product sales for the three months ended September 30, 2017 and three countries, China, the United Kingdom and South Korea, accounted for 10%, 14%, and 20%, respectively, of product sales for the three months ended September 30, 2016. International sales for the nine months ended September 30, 2017 were 34% of product sales as compared with 66% for the nine months ended September 30, 2016. One country, China, accounted for approximately 17% of product sales for the nine months ended September 30, 2017 and two countries, the United Kingdom and South Korea, accounted for 10% and 30%, respectively, of product sales for the nine months ended September 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 nine months ended September 30, 2017 and 2016.

RELATED PARTY TRANSACTIONS

RELATED PARTY TRANSACTIONS	9 Months Ended
	Sep. 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 September 30, 2017 and 2016 we recorded licensing expense of $12,500 per quarter. During the nine months ended September 30, 2017 and 2016 we recorded licensing expense of $37,500 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 nine months ended September 30, 2017 and 2016. The Company and POSCO, a shareholder of the Company, entered into a license agreement dated June 8, 2011, pursuant to which POSCO agreed to pay a minimum annual royalty of $100,000 per year if certain circumstances existed, among other things. The Company believed that this minimum annual royalty became due annually beginning on February 28, 2015, and up until June 30, 2017, recorded this royalty revenue at a rate of $25,000 per quarter. POSCO disputed its obligation to pay this minimum annual royalty, and did not pay the royalty in any prior year. We filed a demand for arbitration in the International Court of Arbitration on March 9, 2016, in an effort to resolve the dispute. Pursuant to a confidential settlement, on November 3, 2017, the Company and POSCO agreed to settle the dispute and to dismiss the arbitration. Based on terms of the settlement, no allowance is considered necessary. At September 30, 2017 we have a balance of $175,000 reflected in other current assets on the condensed consolidated balance sheet. This represents an accrual of licensing revenue of $100,000 for three and a half years less 50% to reflect an estimate of the portion of 2017, 2016, 2015, and 2014 licensing fees we believed to be not collectible. At December 31, 2016 the accrued licensing fees and allowance netted together was $150,000. 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 September 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 nine months ended September 30, 2017 and 2016 we issued a total of 21,420 shares per period as payment for lease obligations. On August 10, 2017 restricted common stock in the amount of 2,500 shares, vesting at 25% or 625 shares on September 30, 2017, December 31, 2017, March 31, 2017, and June 30, 2017 was granted to each of four Board members: Steven C. Jones, Arnold Allemang, Dave Pendell, and Peifeng (Molly) Zhang. These awards were pursuant to the 2017 Equity Incentive Plan. In addition to the restricted stock, these Board members also received 2,500 stock options granted on August 10, 2017. These options vest equally over four years starting on the 1 st

OTHER SUBSEQUENT EVENTS

OTHER SUBSEQUENT EVENTS	9 Months Ended
	Sep. 30, 2017
Other Subsequent Events
OTHER SUBSEQUENT EVENTS	NOTE 11 – OTHER SUBSEQUENT EVENTS During the period from October 1 through November 13, 2017, we received common stock proceeds of $405,000 for the sale of 50,625 shares.

SUMMARY OF SIGNIFICANT ACCOUN18

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)	9 Months Ended
	Sep. 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, $1 million on July 18, 2017, and $1 million on September 22, 2017. We currently have $1 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 November 10, 2017, we had cash on hand of $1,226,776 and currently available funds of $1 million under the Dow Facility. Our financial projections show that we may need to raise an additional $6-8 million 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 $1 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 approximately $3 million through the sale of 376,078 shares of common stock between November 1, 2016 and September 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, including intangible assets, income taxes, the fair value of stock-based compensation. 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 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: September 30, December 31, 2017 2016 Raw materials $ 48,450 $ 45,964 Finished goods 144,773 160,009 Total $ 193,223 $ 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 were classified as derivative instrument liabilities measured at fair value. The fair values of these derivative liabilities were revalued at each reporting date, with the change in fair value recognized in earnings. See Note 5 for additional information. In July 2017, the FASB issued Accounting Standards Update No. 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities From Equity (Topic 480), Derivatives and Hedging (Topic 815) (“ASU 2017-11”) Three months ended September 30, 2016 As previously As reported Adjusted Operating loss $ (1,331,390 ) $ (1,331,390 ) Other income (expense): Interest expense, net (56,013 ) (55,816 ) Gain from change in fair value of derivative warrants 108,056 26,738 Government incentives 24,197 24,000 Loss on disposal of intangible assets (18,609 ) (18,609 ) Total other income (expense) 57,631 (23,687 ) Net loss $ (1,273,759 ) $ (1,355,077 ) Nine months ended September 30, 2016 As previously As reported Adjusted Operating loss $ (4,143,207 ) $ (4,143,207 ) Other income (expense): Interest expense, net (241,011 ) (240,588 ) Gain from change in fair value of derivative warrants 340,669 50,799 Government incentives 72,423 72,000 Loss on disposal of intangible assets (18,609 ) (18,609 ) Total other income (expense) 153,472 (136,398 ) Net loss $ (3,989,735 ) $ (4,279,605 ) The impact to the balance sheet as of December 31, 2016 is as follows: As previously As reported Adjusted Derivative liability-warrants $ 7,900,249 $ 249,807 Total long-term liabilities $ 9,877,475 $ 2,227,033 Total liabilities $ 11,117,327 $ 3,466,885 Series A convertible preferred stock $ 21,634,597 $ 21,574,360 Accumulated deficit $ (48,899,530 ) $ (41,188,851 ) Total stockholders’ (deficit) equity $ (5,126,864 ) $ 2,523,578 Total liabilities and stockholder’s deficit $ 5,990,463 $ 5,990,463

SUMMARY OF SIGNIFICANT ACCOUN19

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)	9 Months Ended
	Sep. 30, 2017
Accounting Policies [Abstract]
Schedule of inventory	Inventory consists of raw materials 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: September 30, December 31, 2017 2016 Raw materials $ 48,450 $ 45,964 Finished goods 144,773 160,009 Total $ 193,223 $ 205,973
Schedule of financial statements	The impact to the financial statements as of the three and nine-months ended September 30, 2016 is as follows: Three months ended September 30, 2016 As previously As reported Adjusted Operating loss $ (1,331,390 ) $ (1,331,390 ) Other income (expense): Interest expense, net (56,013 ) (55,816 ) Gain from change in fair value of derivative warrants 108,056 26,738 Government incentives 24,197 24,000 Loss on disposal of intangible assets (18,609 ) (18,609 ) Total other income (expense) 57,631 (23,687 ) Net loss $ (1,273,759 ) $ (1,355,077 ) Nine months ended September 30, 2016 As previously As reported Adjusted Operating loss $ (4,143,207 ) $ (4,143,207 ) Other income (expense): Interest expense, net (241,011 ) (240,588 ) Gain from change in fair value of derivative warrants 340,669 50,799 Government incentives 72,423 72,000 Loss on disposal of intangible assets (18,609 ) (18,609 ) Total other income (expense) 153,472 (136,398 ) Net loss $ (3,989,735 ) $ (4,279,605 ) The impact to the balance sheet as of December 31, 2016 is as follows: As previously As reported Adjusted Derivative liability-warrants $ 7,900,249 $ 249,807 Total long-term liabilities $ 9,877,475 $ 2,227,033 Total liabilities $ 11,117,327 $ 3,466,885 Series A convertible preferred stock $ 21,634,597 $ 21,574,360 Accumulated deficit $ (48,899,530 ) $ (41,188,851 ) Total stockholders’ (deficit) equity $ (5,126,864 ) $ 2,523,578 Total liabilities and stockholder’s deficit $ 5,990,463 $ 5,990,463

DERIVATIVE LIABILITY WARRANTS (

DERIVATIVE LIABILITY WARRANTS (Tables)	9 Months Ended
	Sep. 30, 2017
Derivative Instruments and Hedging Activities Disclosure [Abstract]
Schedule of fair value of derivative liabilities	The following table summarizes the fair value of the derivative liabilities as of September 30, 2017 and December 31, 2016: September 30, 2017 December 31, 2016 Warrants issued with Secured Convertible Notes $ — $ 6,554,160 Warrants issued with equipment financing leases — 655,418 Warrants issued with preemptive rights — 443,790 Warrants issued with April 2015 private placement of Series B Units — 246,881 Adoption of accounting standard ASU 2017-11 — (7,650,442 ) Total derivative liabilities $ — $ 249,807
Schedule of warrant derivative liabilities	The Company estimated the fair value of their warrant derivative liabilities as of September 30, 2017 and December 31, 2016, using a lattice model and the following assumptions: December 31, 2016 Fair value of underlying stock $7.63 - $12.64 Equivalent risk free interest rate 1.27%- 1.46% Expected term (in years) 5.33- 7.04 Equivalent stock price volatility 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. Comparative prior periods were prepared using the newly adopted ASU 2017-11 as follows: Three months ended September 30, 2017 2016 Warrants issued with preemptive rights $ (506 ) $ 26,423 Warrants issued with April 2015 private placement of Series B Units (42,648 ) 315 Total Derivative Gain (Loss) $ (43,154 ) $ 26,738 Nine months ended September 30, 2017 2016 Warrants issued with preemptive rights $ (545 ) $ 48,964 Warrants issued with April 2015 private placement of Series B Units (46,067 ) 577 Warrants issued with Bridge Financing 1,258 Total Derivative Gain (Loss) $ (46,612 ) $ 50,799

STOCK WARRANTS ACCOUNTED FOR 21

STOCK WARRANTS ACCOUNTED FOR AS EQUITY INSTRUMENTS (Tables)	9 Months Ended
	Sep. 30, 2017
Stock Warrants Accounted For As Equity Instruments Tables
Schedule of common stock warrants (including the warrants previously accounted for as derivatives) outstanding	The following table summarizes the common stock warrants (including the warrants previously accounted for as derivatives) outstanding at September 30, 2017, which are accounted for as equity instruments, all of which are exercisable: Date Issued Expiration Date Exercise Price Number of 07/01/2009 07/01/2019 $ 8.00 6,000 10/08/2012 10/08/2027 $ 12.00 5,000 01/15/2014 - 12/31/2014 01/15/2024 $ 6.40 972,720 04/30/2015- 05/26/2015 04/30/2022 $ 16.00 218,334 06/30/2015 06/30/2022 $ 16.00 6,563 12/14/2016 12/01/2023 $ 8.00 50,000 07/18/2017 12/01/2023 $ 8.00 25,000 09/22/2017 12/01/2023 $ 8.00 25,000 1,308,617

EQUITY INCENTIVE PLAN (Tables)

EQUITY INCENTIVE PLAN (Tables)	9 Months Ended
	Sep. 30, 2017
Equity Incentive Plan Tables
Schedule of summary of the stock option activity	A summary of the stock option activity for the nine months ended September 30, 2017 is as follows: Weighted Number Average Of Exercise Options Price Options outstanding at beginning of year 369,750 $ 11.89 Changes during the year: Expired (12,000 ) 12.00 Cancellation of existing options (357,750 ) 12.00 Issuance of replacement options 536,625 8.00 New Options Granted – at market price 108,000 8.00 Exercised — — Options outstanding at end of Period 644,625 8.00 Options exercisable at end of Period 322,158 8.00

CAPITAL LEASES (Tables)

CAPITAL LEASES (Tables)	9 Months Ended
	Sep. 30, 2017
Capital Leases of Lessee [Abstract]
Schedule of capital lease obligations	As of September 30, 2017 and December 31, 2016, we have capital lease obligations as follows: September 30, 2017 December 31, 2016 Capital lease obligations $ 214,191 $ 449,368 Unamortized warrant discount (23,252 ) (65,595 ) Net obligations 190,939 383,773 Short-term portion of obligations (159,628 ) (268,667 ) Long-term portion of obligations $ 31,311 $ 115,106

CUSTOMER, SUPPLIER, COUNTRY A24

CUSTOMER, SUPPLIER, COUNTRY AND PRODUCT CONCENTRATIONS (Tables)	9 Months Ended
	Sep. 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 of products offered. For the Three Months Ended For the Nine Months Ended 2017 2016 2017 2016 Grade C-300 HP * * 14% * Grade C-500 66% * 41% * Grade R-10 * 16% * 12% Grade M-15 * 16% * 14% * Denotes less than 10% of product sales.

SUMMARY OF SIGNIFICANT ACCOUN25

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($)	Sep. 30, 2017	Dec. 31, 2016
Accounting Policies [Abstract]
Raw materials	$ 48,450	$ 45,964
Finished goods	144,773	160,009
Total	$ 193,223	$ 205,973

SUMMARY OF SIGNIFICANT ACCOUN26

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 1) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016
Operating loss	$ (1,926,454)	$ (1,331,390)	$ (4,767,778)	$ (4,143,207)
Other income (expense):
Interest expense, net	62,814	55,816	176,347	240,588
Gain from change in fair value of derivative warrants	(43,154)	26,738	(46,612)	50,799
Government incentives		24,000	(74,024)	72,000
Loss on disposal of intangible assets		(18,609)		(18,609)
Total other income (expense)	(105,968)	(23,687)	(296,983)	(136,398)
Net loss	(2,032,422)	(1,355,077)	(5,064,761)	(4,279,605)
Derivative liability-warrants					$ 249,807
Total long-term liabilities	3,846,014		3,846,014		2,227,033
Total liabilities	4,673,247		4,673,247		3,466,885
Accumulated deficit	(46,253,612)		(46,253,612)		(41,188,851)
Total stockholders' (deficit) equity	817,348		817,348		2,523,578
Total liabilities and stockholder's deficit	$ 5,490,595		$ 5,490,595		5,990,463
Scenario, Previously Reported [Member]
Operating loss		(1,331,390)		(4,143,207)
Other income (expense):
Interest expense, net		(56,013)		(241,011)
Gain from change in fair value of derivative warrants		108,056		340,669
Government incentives		24,197		72,423
Loss on disposal of intangible assets		(18,609)		(18,609)
Total other income (expense)		57,631		153,472
Net loss		(1,273,759)		(3,989,735)
Derivative liability-warrants					7,900,249
Total long-term liabilities					9,877,475
Total liabilities					11,117,327
Series A convertible preferred stock					21,634,597
Accumulated deficit					(48,899,530)
Total stockholders' (deficit) equity					(5,126,864)
Total liabilities and stockholder's deficit					5,990,463
As Adjusted [Member]
Operating loss		(1,331,390)		(4,143,207)
Other income (expense):
Interest expense, net		(55,816)		(240,588)
Gain from change in fair value of derivative warrants		26,738		50,799
Government incentives		24,000		72,000
Loss on disposal of intangible assets		(18,609)		(18,609)
Total other income (expense)		(23,687)		(136,398)
Net loss		$ (1,355,077)		$ (4,279,605)
Derivative liability-warrants					249,807
Total long-term liabilities					2,227,033
Total liabilities					3,466,885
Series A convertible preferred stock					21,574,360
Accumulated deficit					(41,188,851)
Total stockholders' (deficit) equity					2,523,578
Total liabilities and stockholder's deficit					$ 5,990,463

SUMMARY OF SIGNIFICANT ACCOUN27

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($)	Nov. 10, 2017	Sep. 22, 2017	Jul. 18, 2017	Nov. 13, 2017	Dec. 31, 2016	Sep. 30, 2017	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2015
Cash in hand					$ 1,785,343	$ 1,317,761	$ 1,317,761	$ 637,504	$ 1,060,224
Funds available from operations							5,000,000
Additional fund required for next 12 months							$ 10,000,000
Description of raising fund						Additional $1 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	376,078
Value of common shares sold						$ 2,140,400	$ 3,000,000
Minimum [Member]
Additional fund required for sustainable cash flow						6,000,000
Maximum [Member]
Additional fund required for sustainable cash flow						$ 8,000,000
Warrant [Member]
Anti-dilution features shares						972,720
Decrease in accumulated deficit						$ 7,582,158	$ 7,582,158
Subsequent Event [Member]
Cash in hand	$ 1,226,776
Funds available from operations	$ 1,000,000
Number of common shares sold				50,625
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		$ 1,000,000	$ 1,000,000		$ 2,000,000
Interest rate					5.00%

WARRANTS AND FINANCING AGREEM28

WARRANTS AND FINANCING AGREEMENTS (Details Narrative) - USD ($)	Sep. 22, 2017	Jul. 18, 2017	Dec. 31, 2016	Sep. 30, 2017	Dec. 31, 2016
Number of common stock warrants issued				1,308,617
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	$ 1,000,000	$ 1,000,000	$ 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					100,000
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				98,384
Secured debt carrying amount				$ 3,814,703

PRIVATE PLACEMENT AND PREEMPT29

PRIVATE PLACEMENT AND PREEMPTIVE RIGHTS (Details Narrative) - USD ($)	Feb. 25, 2016	Sep. 30, 2017	Sep. 30, 2017	Dec. 31, 2016	Dec. 31, 2016	Apr. 30, 2015
Number of shares issued		14,280	376,078
Warrant [Member]
Number of shares issued
Exercise price (in dollars per share)		$ 8	$ 8
Number of warrants cancelled		224,897
Private Placement [Member] | Warrant [Member]
Proceeds from private placement		$ 4,270,192
Number of shares issued	222,262
Exercise price (in dollars per share)		$ 16	$ 16
Number of warrants cancelled		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 WARRANTS30

DERIVATIVE LIABILITY WARRANTS (Details) - USD ($)	Sep. 30, 2017	Dec. 31, 2016
Total derivative liabilities		$ 249,807
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		443,790
Warrant [Member] | Adoption of accounting standard ASU 2017-11 [Member]
Total derivative liabilities		(7,650,442)
Warrant [Member] | Private Placement [Member]
Total derivative liabilities		246,881
Secured Convertible Notes [Member] | Warrant [Member]
Total derivative liabilities		6,554,160
Equipment Financing Leases [Member] | Warrant [Member]
Total derivative liabilities		$ 655,418

DERIVATIVE LIABILITY WARRANTS31

DERIVATIVE LIABILITY WARRANTS (Details 1)	12 Months Ended
	Dec. 31, 2016$ / shares
Expected dividend yield
Minimum [Member]
Fair value of underlying stock	$ 7.63
Equivalent risk free interest rate	1.27%
Expected term (in years)	5 years 3 months 29 days
Equivalent stock price volatility	37.44%
Maximum [Member]
Fair value of underlying stock	$ 12.64
Equivalent risk free interest rate	1.46%
Expected term (in years)	7 years 14 days
Equivalent stock price volatility	37.92%

DERIVATIVE LIABILITY WARRANTS32

DERIVATIVE LIABILITY WARRANTS (Details 2) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Total Derivative Gain	$ (43,154)	$ 26,738	$ (46,612)	$ 50,799
Warrant [Member] | Bridge Financing [Member]
Total Derivative Gain				1,258
Private Placement [Member] | Warrant [Member]
Total Derivative Gain	(42,648)	315	(46,067)	577
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] | Warrant [Member]
Total Derivative Gain	$ (506)	$ 26,423	$ (545)	$ 48,964

DERIVATIVE LIABILITY WARRANTS33

DERIVATIVE LIABILITY WARRANTS (Details Narrative) - shares	9 Months Ended	11 Months Ended
	Sep. 30, 2017	Sep. 30, 2017
Number of shares issued	14,280	376,078
Warrant [Member]
Number of shares issued
Number of warrants cancelled	224,897
Anti-dilution features shares	972,720
Warrant [Member] | Preemptive Rights Offering [Member]
Number of shares issued	58,689

STOCK WARRANTS ACCOUNTED FOR 34

STOCK WARRANTS ACCOUNTED FOR AS EQUITY INSTRUMENTS (Details)	9 Months Ended
	Sep. 30, 2017$ / sharesshares
Number of Warrants	1,308,617
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]
Expiration Date	Jan. 15, 2024
Exercise Price | $ / shares	$ 6.40
Number of Warrants	972,720
Warrant 2 [Member] | Minimum [Member]
Date Issued	Jan. 15, 2014
Warrant 2 [Member] | Maximum [Member]
Date Issued	Dec. 31, 2014
Warrant 3 [Member]
Expiration Date	Apr. 30, 2022
Exercise Price | $ / shares	$ 16
Number of Warrants	218,334
Warrant 3 [Member] | Minimum [Member]
Date Issued	Apr. 30, 2015
Warrant 3 [Member] | Maximum [Member]
Date Issued	May 26, 2015
Warrant 4 [Member]
Date Issued	Jun. 30, 2015
Expiration Date	Jun. 30, 2022
Exercise Price | $ / shares	$ 16
Number of Warrants	6,563
Warrant 5 [Member]
Date Issued	Dec. 14, 2016
Expiration Date	Dec. 1, 2023
Exercise Price | $ / shares	$ 8
Number of Warrants	50,000
Warrant 6 [Member]
Date Issued	Jul. 18, 2017
Expiration Date	Dec. 1, 2023
Exercise Price | $ / shares	$ 8
Number of Warrants	25,000
Warrant 7 [Member]
Date Issued	Sep. 22, 2017
Expiration Date	Dec. 1, 2023
Exercise Price | $ / shares	$ 8
Number of Warrants	25,000

EQUITY INCENTIVE PLAN (Details)

EQUITY INCENTIVE PLAN (Details)	9 Months Ended
	Sep. 30, 2017$ / sharesshares
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward]
Options outstanding at beginning of year | shares	369,750
Changes during the year:
Expired | shares	(12,000)
Cancellation of existing options | shares	(357,750)
Issuance of replacement options | shares	536,625
New Options Granted - at market price | shares	108,000
Exercised | shares
Options outstanding at end of Period | shares	644,625
Options exercisable at end of Period | shares	322,158
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [RollForward]
Options outstanding at beginning of year | $ / shares	$ 11.89
Changes during the year:
Expired | $ / shares	12
Cancellation of existing options | $ / shares	12
Issuance of replacement options | $ / shares	8
New Options Granted - at market price | $ / shares	8
Exercised | $ / shares
Options outstanding at end of Period | $ / shares	8
Options exercisable at end of Period | $ / shares	$ 8

EQUITY INCENTIVE PLAN (Details

EQUITY INCENTIVE PLAN (Details Narrative)	9 Months Ended
	Sep. 30, 2017USD ($)$ / sharesshares
Number of option granted | shares	108,000
Exercise price (in dollars per share) | $ / shares	$ 8
Incentive Stock Option Plan [Member]
Vesting percent, per year	25.00%
Description of vesting terms	Vesting of the options granted range from immediately to 25% per year, with most of the replacement options vesting 50% on date of grant with the remaining vesting over a 4 year period from the date issued.
Description of vesting terms of replacement options	Vesting of the options granted range from immediately to 25% per year, with most of the replacement options vesting 50% on date of grant with the remaining vesting over a 4 year period from the date issued.
Options expiration year	7 years
2007 Stock Option Plan [Member]
Exercise price (in dollars per share) | $ / shares	$ 8
Vesting period	7 years
Compensation cost	$ 1,015,758
Description of cancellation terms	Each option holder received options equal to 150% of the number of cancelled stock options.
Compensation cost for cancelled stock options	$ 501,071
2007 Stock Option Plan [Member] | Stock Option [Member] | Four Diretors [Member]
Number of option granted | shares	2,500
Description of vesting terms	The options vest ratably over a four-year period beginning on the one-year anniversary.
Options expiration year	7 years
Exercise price (in dollars per share) | $ / shares	$ 8
Aggregate grant date fair value	$ 26,120
2007 Stock Option Plan [Member] | Restricted Stock [Member] | Four Diretors [Member]
Number of option granted | shares	2,500
Description of vesting terms	Vesting at 25% or 625 shares on September 30, 2017, December 31, 2017, March 31, 2017, and June 30, 2017 was granted to each of four Board members: Steven C. Jones, Arnold Allemang, Dave Pendell, and Peifeng (Molly) Zhang.
Compensation cost	$ 20,000
Aggregate grant date fair value	$ 80,000
2007 Stock Option Plan [Member] | Maximum [Member]
Maximum number of options authorized | shares	1,200,000
Unvested awards, compensation cost	$ 514,687
Stock price | $ / shares	$ 8
Exercise Price | $ / shares	$ 8
Expected Term	4 years 9 months 10 days
Volatility	36.87%
Risk free rate	1.83%
2007 Stock Option Plan [Member] | Minimum [Member]
Expected Term	3 years 6 months 3 days
Volatility	34.78%
Risk free rate	1.53%

CAPITAL LEASES (Details)

CAPITAL LEASES (Details) - USD ($)	Sep. 30, 2017	Dec. 31, 2016
Short-term portion of obligations	$ (159,628)	$ (268,667)
Long-term portion of obligations	31,311	115,106
Aspen Advance Opportunity Fund, LP [Member]
Capital lease obligations	214,191	449,368
Unamortized warrant discount	(23,252)	(65,595)
Net obligations	190,939	383,773
Short-term portion of obligations	(159,628)	(268,667)
Long-term portion of obligations	$ 31,311	$ 115,106

CUSTOMER, SUPPLIER, COUNTRY A38

CUSTOMER, SUPPLIER, COUNTRY AND PRODUCT CONCENTRATIONS (Details) - Product Concentration Risk [Member] - Total Product Revenues [Member]	3 Months Ended				9 Months Ended
	Sep. 30, 2017		Sep. 30, 2016		Sep. 30, 2017		Sep. 30, 2016
Grade C-300 HP [Member]
Concentration of risk		[1]		[1]	14.00%			[1]
Grade C-500 [Member]
Concentration of risk	66.00%			[1]	41.00%			[1]
Grade R-10 [Member]
Concentration of risk		[1]	16.00%			[1]	12.00%
Grade M-15 [Member]
Concentration of risk		[1]	16.00%			[1]	14.00%
[1]	Denotes less than 10% of product sales.

CUSTOMER, SUPPLIER, COUNTRY A39

CUSTOMER, SUPPLIER, COUNTRY AND PRODUCT CONCENTRATIONS (Details Narrative) - Customer	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Grants and Licensing Revenue Concentration [Member] | Total Grant Revenue [Member] | Grantor One [Member]
Concentration of risk	100.00%
Grants and Licensing Revenue Concentration [Member] | Total Grant Revenue [Member] | Grantor Two [Member]
Concentration of risk		50.00%
Grants and Licensing Revenue Concentration [Member] | Total Grant Revenue [Member] | Grantor Two [Member] | Minimum [Member]
Concentration of risk			25.00%	12.00%
Grants and Licensing Revenue Concentration [Member] | Total Grant Revenue [Member] | Grantor Two [Member] | Maximum [Member]
Concentration of risk			75.00%	88.00%
Customer Concentration Risk [Member] | Total Product Revenues [Member] | Customer One [Member]
Concentration of risk	19.00%	10.00%	17.00%	11.00%
Customer Concentration Risk [Member] | Total Product Revenues [Member] | Customer Two [Member]
Concentration of risk	65.00%	12.00%	36.00%	11.00%
Customer Concentration Risk [Member] | Total Product Revenues [Member] | Customer Three [Member]
Concentration of risk		21.00%
Customer Concentration Risk [Member] | Accounts Receivable Greater Than 10% [Member] | Customer [Member]
Number of customers	2	3	2	2
Country Concentration Risk [Member] | Total Product Revenues [Member] | China
Concentration of risk	19.00%	10.00%	17.00%
Country Concentration Risk [Member] | Total Product Revenues [Member] | Korea (South)
Concentration of risk		20.00%		30.00%
Country Concentration Risk [Member] | Total Product Revenues [Member] | United Kingdom
Concentration of risk		14.00%		10.00%
Country Concentration Risk [Member] | Total Product Revenues [Member] | Foreign [Member]
Concentration of risk	33.00%	54.00%	34.00%	66.00%

RELATED PARTY TRANSACTIONS (Det

RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended		11 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Dec. 31, 2016	Mar. 18, 2013
Number of shares issued			14,280		376,078
Number of option granted			108,000
Exercise price (in dollars per share)			$ 8
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
Master Leasing Agreement [Member] | Aspen Advance Opportunity Fund, LP (AAOF) [Member] | Series A Preferred stock [Member]
Number of shares issued	7,140	7,140	21,420	21,420
POSCO [Member] | Licensing Agreement [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
Description of accrual of royalty revenue			This represents an accrual of licensing revenue of $100,000 for three and a half years less 50% to reflect an estimate of the portion of 2017, 2016, 2015, and 2014 licensing fees we believed to be not collectible.
Michigan State University (Patents and Pending Patents) [Member] | Licensing Agreement [Member]
Licensing expenses	$ 12,500	$ 12,500	$ 37,500	$ 37,500
2007 Stock Option Plan [Member]
Exercise price (in dollars per share)			$ 8
2007 Stock Option Plan [Member] | Stock Option [Member] | Four Diretors [Member]
Number of option granted			2,500
Description of vesting terms			The options vest ratably over a four-year period beginning on the one-year anniversary.
Exercise price (in dollars per share)			$ 8
Options expiration year			7 years
2007 Stock Option Plan [Member] | Restricted Stock [Member] | Four Diretors [Member]
Number of option granted			2,500
Description of vesting terms			Vesting at 25% or 625 shares on September 30, 2017, December 31, 2017, March 31, 2017, and June 30, 2017 was granted to each of four Board members: Steven C. Jones, Arnold Allemang, Dave Pendell, and Peifeng (Molly) Zhang.

OTHER SUBSEQUENT EVENTS (Detail

OTHER SUBSEQUENT EVENTS (Details Narrative) - USD ($)	1 Months Ended	9 Months Ended		11 Months Ended
	Nov. 13, 2017	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017
Number of shares issued		14,280		376,078
Proceeds from issuance of common stock		$ 2,140,400	$ 3,102,032
Subsequent Event [Member]
Number of shares issued	50,625
Proceeds from issuance of common stock	$ 405,000