Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2018 | Apr. 01, 2019 | Jun. 30, 2018 | |
Document And Entity Information | |||
Entity Registrant Name | XG SCIENCES INC | ||
Entity Central Index Key | 0001435375 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2018 | ||
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 | Non-accelerated Filer | ||
Entity Small Business | true | ||
Entity Emerging Growth Company | false | ||
Entity Ex Transition Period | true | ||
Entity Shell Company | false | ||
Entity Public Float | $ 17,081,528 | ||
Entity Common Stock, Shares Outstanding | 3,811,518 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2018 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
CURRENT ASSETS | ||
Cash | $ 4,703,834 | $ 2,845,798 |
Accounts receivable, less allowance for doubtful accounts of $85,000 in 2018 and $40,000 in 2017, respectively | 859,054 | 468,623 |
Inventories | 660,217 | 171,864 |
Other current assets | 114,453 | 15,781 |
Total current assets | 6,337,558 | 3,502,066 |
PROPERTY, PLANT AND EQUIPMENT, NET | 4,223,650 | 2,601,571 |
RESTRICTED CASH FOR LETTER OF CREDIT | 190,140 | 195,792 |
LEASE DEPOSIT | 20,156 | 20,156 |
INTANGIBLE ASSETS, NET | 690,646 | 571,938 |
TOTAL ASSETS | 11,462,150 | 6,891,523 |
CURRENT LIABILITIES | ||
Accounts payable | 1,102,910 | 561,368 |
Other current liabilities | 429,573 | 296,709 |
Deferred revenue | 832 | 7,298 |
Current portion of long-term debt | 196,723 | |
Current portion of capital lease obligations | 3,613 | 118,553 |
Total current liabilities | 1,733,651 | 983,928 |
LONG-TERM LIABILITIES | ||
Long-term portion of capital lease obligations | 11,914 | 15,527 |
Long term debt | 4,725,866 | 4,794,596 |
Total long-term liabilities | 4,737,780 | 4,810,123 |
TOTAL LIABILITIES | 6,471,431 | 5,794,051 |
STOCKHOLDERS' EQUITY | ||
Common stock, no par value, 25,000,000 shares authorized, 3,760,268 and 2,353,350 shares issued and outstanding at December 31, 2018 and December 31, 2017, respectively | 30,268,476 | 19,116,012 |
Additional paid-in capital | 8,101,923 | 7,831,958 |
Accumulated deficit | (55,687,160) | (47,767,544) |
Total stockholders' equity | 4,990,719 | 1,097,472 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | 11,462,150 | 6,891,523 |
Series A Convertible Preferred Stock [Member] | ||
STOCKHOLDERS' EQUITY | ||
Preferred stock, value | 22,307,480 | 21,917,046 |
Series B Preferred Stock [Member] | ||
STOCKHOLDERS' EQUITY | ||
Preferred stock, value |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Allowance for doubtful accounts | $ 85,000 | $ 40,000 |
Common stock, no par value (in dollars per share) | $ 0 | $ 0 |
Common stock, authorized | 25,000,000 | 25,000,000 |
Common stock, issued | 3,760,268 | 2,353,350 |
Common stock, outstanding | 3,760,268 | 2,353,350 |
Series A Convertible Preferred Stock [Member] | ||
Preferred stock, authorized | 3,000,000 | 3,000,000 |
Preferred stock, issued | 1,890,354 | 1,857,816 |
Preferred stock, outstanding | 1,890,354 | 1,857,816 |
Preferred stock, liquidation value | $ 22,684,248 | $ 22,293,792 |
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 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
REVENUE | ||
Total revenue | $ 4,301,820 | $ 1,805,133 |
COST OF GOODS SOLD | ||
Direct costs | 2,344,937 | 911,115 |
Unallocated manufacturing expenses | 3,161,384 | 1,741,661 |
Total cost of goods sold | 5,506,321 | 2,652,776 |
GROSS LOSS | (1,204,501) | (847,643) |
OPERATING EXPENSES | ||
Research and development | 1,414,259 | 923,419 |
Sales, general and administrative | 4,972,595 | 4,434,322 |
Total operating expenses | 6,386,854 | 5,357,741 |
OPERATING LOSS | (7,591,355) | (6,205,384) |
OTHER EXPENSE | ||
Interest expense, net | (328,261) | (254,091) |
Gain (loss) from change in fair value of derivative liability - warrants | (46,612) | |
Government incentives, net | (72,606) | |
Total other expense | (328,261) | (373,309) |
NET LOSS | $ (7,919,616) | $ (6,578,693) |
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING - | ||
Basic and diluted (in shares) | 3,396,585 | 2,077,870 |
NET LOSS PER SHARE - Basic and diluted (in dollars per share) | $ (2.33) | $ (3.17) |
Product sales [Member] | ||
REVENUE | ||
Total revenue | $ 4,125,567 | $ 1,605,178 |
Grant [Member] | ||
REVENUE | ||
Total revenue | 176,253 | 124,955 |
Licensing revenue [Member] | ||
REVENUE | ||
Total revenue | $ 75,000 |
CONSOLIDATED STATEMENT OF CHANG
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) - USD ($) | Preferred stock (A) | Preferred stock (B) | 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 | ||||
Reclassification of Derivative Liability balance at end to Equity at Dec. 31, 2017 | $ (60,237) | 7,710,679 | 7,650,442 | |||
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] | ||||||
Stock issued for cash | $ 3,665,400 | 3,665,400 | ||||
Stock issued for cash (in shares) | 458,175 | |||||
Stock issuance fees and expenses | $ (237,227) | (237,227) | ||||
Reclassification of Derivative Liability Warrants to Equity | 296,419 | 296,419 | ||||
Warrants issued with Dow Financing | 229,225 | 229,225 | ||||
Preferred stock issued to pay capital lease obligations | $ 342,686 | 342,686 | ||||
Preferred stock issued to pay capital lease obligations (in shares) | 28,560 | |||||
Stock-based compensation | $ 40,000 | 816,084 | 856,084 | |||
Stock-based compensation (in shares) | 10,000 | |||||
Net loss | (6,578,693) | (6,578,693) | ||||
Balances at ending at Dec. 31, 2017 | $ 21,917,046 | $ 19,116,012 | 7,831,958 | (47,767,544) | 1,097,472 | |
Balances at ending (in shares) at Dec. 31, 2017 | 1,857,816 | 2,353,350 | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Stock issued for cash | $ 11,175,344 | $ 11,175,344 | ||||
Stock issued for cash (in shares) | 1,396,918 | 311,243 | ||||
Stock issuance fees and expenses | $ (102,880) | $ (102,880) | ||||
Preferred stock issued to pay capital lease obligations | $ 390,434 | 390,434 | ||||
Preferred stock issued to pay capital lease obligations (in shares) | 32,538 | |||||
Stock-based compensation | $ 80,000 | 269,965 | 349,965 | |||
Stock-based compensation (in shares) | 10,000 | |||||
Net loss | (7,919,616) | (7,919,616) | ||||
Balances at ending at Dec. 31, 2018 | $ 22,307,480 | $ 30,268,476 | $ 8,101,923 | $ (55,687,160) | $ 4,990,719 | |
Balances at ending (in shares) at Dec. 31, 2018 | 1,890,354 | 3,760,268 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net loss | $ (7,919,616) | $ (6,578,693) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation | 1,696,334 | 887,089 |
Amortization of intangible assets | 56,776 | 47,038 |
Loss on disposal of equipment and intangible assets | 45,130 | |
Provision for bad debts | 45,000 | 30,000 |
Stock-based compensation expense | 349,965 | 856,084 |
Non-cash interest expense | 331,526 | 255,221 |
Loss (gain) from change in fair value of derivative liability - warrants | 46,612 | |
Non-cash equipment rent expense | 106,164 | |
(Increase) Decrease in: | ||
Accounts receivable | (435,431) | (399,545) |
Inventories | (488,353) | 34,109 |
Incentive refund receivable | 165,635 | |
Other current assets | (98,672) | 138,557 |
Increase (Decrease) in: | ||
Accounts payable | 541,542 | (170,150) |
Accrued compensation | 113,282 | 74,173 |
Other current liabilities | 19,582 | (10,703) |
Deferred revenue | (6,466) | 870 |
NET CASH USED IN OPERATING ACTIVITIES | (5,643,238) | (4,623,703) |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Purchases of property and equipment | (3,209,632) | (602,239) |
Purchases of intangible assets | (175,482) | (140,957) |
NET CASH USED IN INVESTING ACTIVITIES | (3,385,114) | (743,196) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Repayments on line of credit | (178,490) | |
Repayments of capital lease obligations | (13,238) | (526) |
Proceeds from long-term debt | 3,000,000 | |
Proceeds from issuance of common stock | 11,175,344 | 3,665,400 |
Common stock issuance fees and expenses | (102,880) | (237,227) |
NET CASH PROVIDED BY FINANCING ACTIVITIES | 10,880,736 | 6,427,647 |
NET INCREASE IN CASH, CASH ON HAND AND CASH EQUIVALENTS | 1,852,384 | 1,060,748 |
CASH, CASH ON HAND AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 3,041,590 | 1,980,842 |
CASH, CASH ON HAND AND CASH EQUIVALENTS AT END OF PERIOD | 4,893,974 | 3,041,590 |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||
Cash paid for interest | 1,241 | |
Value of preferred stock issued for AAOF capital lease obligations | 390,434 | 342,686 |
Property and equipment additions under capital leases | 18,975 | |
Reclassification of derivative liability warrants to equity | 296,419 | |
Warrants issued with Dow financing | $ 229,225 |
NATURE OF BUSINESS AND BASIS OF
NATURE OF BUSINESS AND BASIS OF PRESENTATION | 12 Months Ended |
Dec. 31, 2018 | |
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, 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 consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”).. The consolidated financial statements include the accounts of XG Sciences, Inc. and our wholly owned subsidiary, XGS IP, LLC. We operate as one reportable segment. All intercompany accounts, transactions and profits have been eliminated in consolidation. Going Concern and Liquidity We have historically incurred losses from operations and we may continue to generate negative cash flows as we implement our business plan. Our 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, The Dow Chemical Company (“Dow”) agreed 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 pursuant to a draw loan note and agreement (the "Dow Facility"). We received $2 million at closing, $1 million on each of July 18, 2017, September 22, 2017, and December 4, 2017. We currently have an additional $5 million which became available under the Dow Facility since we have raised $10 million of equity capital after October 31, 2016. As of December 31, 2018 we had cash on hand of $4,703,834. We believe our cash is sufficient to fund our operations through April 2020 when taking into account various sources of funding and cash received from continued commercial sales transactions. We intend that the primary means for raising funds will be through our Offering of common stock until April 12, 2019 and the additional $5 million of proceeds from the Dow Facility available to us now that we have raised $10 million of equity capital as measured in the period beginning on November 1, 2016. Taking into account the cash position at March 28, 2019, noted above, we believe that we can fund our operations including planned capital expenditures through April 30, 2020. We filed an Registration Statement for an Offering of common stock on Form S-1, which was declared effective April 13, 2016 and was amended with Post-Effective Amendment No. 1 declared effective August 26, 2016, Post-Effective Amendment No. 2 declared effective August 31, 2016, Post-Effective Amendment No. 3 declared effective January 17, 2017, Post-Effective Amendment No. 4 dated April 12, 2017, Post-Effective Amendment No. 5 declared effective April 14, 2017 and Post-Effective Amendment No. 6 dated June1,2018 and declared effective June 26, 2018. No public market currently exists for the securities being offered. The Registration Statement registered for sale a total of 3,000,000 shares of common stock at a fixed price of $8.00 per share to the general public in a self-underwritten, best efforts offering. . There can be no assurance that we will be able to raise additional equity capital in the Offering or in subsequent equity offerings or that the terms and conditions of any future financings will be workable or acceptable to us and our shareholders. 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 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. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Dec. 31, 2018 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Use of Estimates US GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, together with amounts disclosed in the related notes to the consolidated financial statements. Actual results and outcomes may differ from management’s estimates, judgments and assumptions. Significant estimates, judgments and assumptions used in these consolidated financial statements include, but are not limited to, those related to revenues, accounts receivable and related allowances, contingencies, useful lives and recovery of long-term assets, income taxes, and the fair values of stock-based compensation, warrants, 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. Revenue Recognition Revenues are recognized at a point in time, typically when control of the promised goods is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods. The Company does not recognize revenue in cases where collectability is not probable, and defers the recognition until collection is probable or payment is received. The Company generally expenses sales commissions when incurred because the amortization period would have been one year or less. These costs are recorded within selling, general and administrative expenses. Customer deposits, deferred revenue and other receipts are deferred and recognized when the revenue is realized and earned. Revenue related to licensing agreements is recorded upon substantial performance of the terms of the licensing contract. In the case of licensing arrangements that involve up-front payments, revenue is recorded when management determines that the appropriate terms of the contract have been fulfilled. For example, this may occur when technology has been transferred via written documents or, if training is involved, whenever all contracted training has occurred. In the case of licenses where product delivery is also embedded in the deliverable, a portion of revenue would be recognized when products are delivered. We have also out-licensed certain of our intellectual property to licensees under terms and conditions of license agreements that specify the intellectual property licensed, the territory, and the type of license. In exchange for these licenses, we have recorded revenues associated with the initial granting of the license and expect to receive royalties based on sales of products produced under these licenses. License revenues are recorded to reflect our performance of requirements under these license agreements. In addition, we record royalty revenues from licensees at the time they are earned. Grant contract revenue is recognized over the life of the contracts as the services are performed. Amounts received in excess of revenues earned are recorded as deferred revenue. Cost of Products Sold We use a standard cost system to estimate the direct costs of products sold. Variances between the standard costs and the actual costs are then properly prorated to the inventories and to the cost of goods sold. Direct costs include estimates of raw material costs, packaging, freight charges net of those billed to customers, and an allocation for direct labor and manufacturing overhead. Because of the nature of our production processes, there is a substantial fixed manufacturing expense requirement that represents the ongoing cost of maintaining production facilities that are not directly related to products sold, so we use a “full capacity” allocation of overhead based on an estimate of what product costs would be if the manufacturing facilities were operating on a full-time basis and producing products at the designed capacity. The remaining costs of operating the Company’s manufacturing facilities are recorded as Unallocated Manufacturing Expenses. Manufacturing expense includes the costs of operating our manufacturing facilities including personnel costs, rent, utilities, indirect supplies, depreciation, and related indirect expenses. Manufacturing expenses are expensed as incurred. Research and Development Research and development expenses include the compensation costs of research personnel, laboratory rent and utilities, depreciation of laboratory equipment, travel and laboratory supplies and are expensed as incurred. General and Administrative Expense General and administrative expenses include the compensation costs of personnel, rent, utilities, supplies, travel, depreciation of office equipment, and related expenses not included in other expense categories. General and administrative expenses also include non-cash compensation expenses related to the Company’s deferred compensation, management incentive bonus, and employee stock option programs. Sales and Marketing Expense Sales and marketing costs include compensation, travel, and business development expenses including free samples provided to customers. These costs are expensed as incurred. Product marketing allowances are recorded at the estimated out of pocket cost necessary to produce the product in the period the allowance is granted. Advertising costs are expensed at the time they are incurred and were not material for the years ended December 31, 2018 and 2017. Income Taxes It is our policy to provide for uncertain tax positions and the related interest and penalties based upon management’s assessment of whether a tax benefit is more likely than not to be sustained upon examination by tax authorities. To the extent that the probable tax outcome of these uncertain tax position changes, such changes in estimate will impact the income tax provision in the period in which such determination is made. At December 31, 2018, we believe we have appropriately accounted for any unrecognized tax benefits. We are not aware of any uncertain tax positions. To the extent we prevail in matters for which a liability for an unrecognized tax benefit is established or we are required to pay amounts in excess of the liability, our effective tax rate in a given financial statement period may be affected. We account for income taxes using an asset and liability approach. The difference between the financial statement and tax basis of assets and liabilities is determined annually. Deferred income tax assets and liabilities are computed for those differences that have future tax consequences using the currently enacted tax laws and rates that apply to the periods in which they are expected to affect taxable income. Income tax expense is the current tax payable or refundable for the period plus or minus the net change in the deferred tax assets and liabilities. The deferred tax effects of state and local income taxes are considered immaterial and have not been recorded. Valuation allowances are established, if necessary, to reduce deferred tax assets to the amount that is estimated to be realized. Because of the uncertainty related to future realization of deferred tax assets (see Note 14), we have established a valuation allowance equal to one hundred percent of the deferred tax assets. The Tax Cuts and Jobs Act (the Tax Act) was signed into law on December 22, 2017. The law includes significant changes to the U.S. corporate income tax system, including a federal corporate rate reduction from 35% to 21%, limitations on the deductibility of interest expense and executive compensation, and the transition of U.S. international taxation from a worldwide tax system to a territorial tax system. The rate reduction resulted in a $5,635,000 decrease in both the deferred tax asset and valuation allowance with no net impact on the 2017 or 2018 financial statements. The Company will continue to assess its provision for income taxes as future guidance is issued but does not currently anticipate significant revisions will be necessary. Any such revisions will be treated in accordance with the measurement period guidance outlined in Staff Accounting Bulletin No. 118. Net Income (Loss) Per Common Share We compute net income or (loss) per share in accordance with Financial Accounting Standards Board (“FASB”) Accountings Standards Codification (“ASC”) Topic 260: Earnings Per Share. Under the provisions of ASC 260, basic net income (loss) per share is computed by dividing the net income (loss) available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted net loss per share is computed using the weighted average number of shares outstanding during the applicable period, plus the effect of potentially dilutive securities. Potentially dilutive securities consist of shares potentially issuable pursuant to stock options and warrants as well as shares that would result from full conversion of all outstanding convertible securities. These potentially dilutive securities were 3,006,487 and 3,081,487 as of December 31, 2018 and 2017 and are excluded from diluted net loss per share calculations because they are anti-dilutive. As a result, for the years ended December 31, 2018 and 2017, basic and diluted net loss per share was the same. Accounts Receivable and Allowance for Doubtful Accounts Accounts receivable are stated at the amount management expects to collect from outstanding balances. Management provides for probable uncollectible amounts through a provision for bad debt expense and an adjustment to a valuation allowance based on their assessment of the current status of individual accounts. Balances that are still outstanding after management has used reasonable collection efforts are written off through a charge to the allowance account and a credit to accounts receivable. Statements of Cash Flows For the purposes of the statements of cash flows, we consider all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Fair Value of Financial Instruments and Concentrations of Credit Risk Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of cash and accounts receivable. The Company places its cash with FDIC insured financial institutions. Although such balances may exceed the federally insured limits at certain times, in the opinion of management they are subject to minimal risk. The Company has established policies for extending credit to customers based upon factors including the customers’ credit worthiness, historical trends and other information. Nonetheless the collectability of accounts receivable is affected by regional economic conditions and other factors. Inventory Inventory consists of raw materials, consumables inventory and finished goods, all of which are stated at the lower of cost or net realizable value. Cost is determined on a first in, first out basis. We inventory media use in the production process of the newly constructed facility as a Consumables inventory. Property and Equipment Property and equipment are recorded at cost, net of accumulated depreciation and amortization. Property and equipment generally includes purchases of items with a cost greater than $3,000 and a useful life greater than one year. Depreciation and amortization are computed on the straight-line basis over the estimated useful lives of the assets. Leasehold improvements are amortized over the shorter of the related lease terms or their estimated useful lives. We periodically review the estimated useful lives of property and equipment. Changes to the estimated useful lives are recorded prospectively from the date of the change. Upon retirement or sale, the cost of the assets disposed of and the related accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the statement of operations. Repairs and maintenance costs are expensed as incurred. Recoverability and Impairment of Long-Lived Assets Land, buildings and equipment and certain other assets, including definite-lived intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The judgments we make related to the expected useful lives of long-lived assets, definitions of lease terms and our ability to realize undiscounted cash flows in excess of the carrying amounts of these assets are affected by factors such as the ongoing maintenance and improvements of the assets, changes in economic conditions, changes in usage or operating performance, and other factors, such as our ability to sell our assets held for sale. As we assess the ongoing expected cash flows and carrying amounts of our long-lived assets, significant adverse changes in these factors could cause us to realize an impairment loss. Based on a review of operating results, we believe the carrying values of our long-lived assets are recoverable at December 31, 2018 and 2017. Per ASC 360-10-35-47, a long-lived asset to be abandoned is disposed of when it ceases to be used. In the year ended December 31, 2018, management has decided not to pursue the XGnP Leaf line business. The asset line has not produced a saleable product for over a year. The Leaf inventory value was written off at the end of 2017. Any sales recorded of Leaf products has been nominal and is from the existing inventory with no plans to restart production. It has determined that the seven (7) year estimated useful life determined in late 2013 should be revised to reflect the use of the asset over a shortened useful life ending December 31, 2018. Depreciation estimates have been revised in the current period in accordance with the change in accounting estimate standards at ASC 250-10-45-17 through 45-20. The amount of acceleration of depreciation reported in operations is $681,975. No prior period adjustments or restatements are required. Intangible Assets We have entered into a license agreement with Michigan State University under which we have licensed certain intellectual property in the form of patents and patent applications and invention disclosures. We are responsible for managing the patent process and ongoing filings for this licensed intellectual property and for bearing the cost thereof. We capitalize all costs related to the acquisition and ongoing administration of this license agreement and we amortize these costs over 15 years or the remaining life of the license agreement, whichever is shorter. In addition to the costs of managing in-licensed intellectual property, we also file for patent protection for inventions and other intellectual property generated by our employees. All patents are evaluated for filing in international markets on a case-by-case basis and are filed in the United States and in selected international markets as considered appropriate. All external legal and filing costs related to patent applications, patent filings, ongoing registrations, overseas filings, and legal opinions related thereto are capitalized as intangible assets at cost and amortized over a period of 15 years from the date incurred, or the remaining useful life of the associated patent, whichever is shorter. The cost of royalties or minimum payments specified under the license agreement for in-licensed technology is expensed as incurred. Stock-Based Compensation We recognize compensation expense in our statement of operations for all share-based option and stock awards, based on estimated grant-date fair values. We estimate the grant-date fair value of stock-based compensation awards using the Black-Scholes option valuation model. This model is affected by the estimated value of our common stock on the date of the grant as well as assumptions regarding a number of highly complex and subjective variables. These variables include the expected term of the option, the exercise price, expected risk-free rates of return, the expected volatility of our common stock, and expected dividend yield, each of which is more fully described below. The assumptions for the estimated value of our common stock, expected term and expected volatility are the assumptions that most significantly affect the grant date fair value. Expected Term Risk-free Interest Rate Expected Stock Price Volatility Dividend Yield The grant-date fair value of the award is recognized as expense over the requisite service period using the straight-line method. Fair Value Measurements FASB ASC 820: “Fair Value Measurements and Disclosures” defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value: Level 1 Level 2 Level 3 A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. 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. 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”). This update changes the classification analysis of certain equity-linked financial instruments with down-round features. When determining whether certain financial instruments should be classified as liabilities or equity instrument, securities with anti-dilution features no longer preclude equity classification when assessing whether the instrument is indexed to an entity’s own stock. As a result, freestanding equity-linked financial instruments (or embedded conversion features) would no longer be accounted for as derivative liabilities at fair value because of the existence of an anti-dilution feature. For freestanding equity classified financial instruments, ASU 2017-11 requires entities that present earnings per share in accordance with ASC Topic 260 to recognize the effect of the anti-dilution feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS. The guidance in this Update is effective for fiscal years, and interim period within those fiscal years, beginning after December 15, 2018, with earlier adoption permitted. When adopted in an interim period, any adjustments are reflected as of the beginning of the fiscal year that includes that interim period. We elected to early adopt ASU 2017-11 at September 30, 2017 by applying the standard retrospectively to outstanding financial instruments with a down round feature by means of a cumulative-effect adjustment to the Company’s beginning accumulated deficit as of January 1, 2017 (see Note 9). There were 972,720, warrants indexed to Series A Preferred Stock which were originally recorded as derivative liabilities because of their anti-dilution features. We chose to early adopt ASU 2017-11 because it permitted these warrants to be recorded as equity rather than derivative liabilities. Fair Value Measurements The liabilities measured at fair value on a recurring basis using significant unobservable inputs during the year ended December 31, 2018 and 2017 is as follows: 2018 2017 Balance at January 1 $ — $ 249,807 (Gain) Loss recognized in earnings — 46,612 Reclass to equity-Series B Amendment — (296,419 ) Balance at December 1 $ — $ — As mentioned in further detail in Notes 8 and 9, the warrants issued in connection with the Series B Units were classified as liabilities until September 30, 2017 when they were reclassified to equity after it was determined they no longer required liability classification. Recent Accounting Pronouncements On February 24, 2016, the FASB issued ASU No. 2016-02, Leases, requiring lessees to recognize a right-of-use asset and a lease liability on the balance sheet for all leases with the exception of short-term leases. For lessees, leases will continue to be classified as either operating or finance leases in the income statement. Lessor accounting is similar to the current model but updated to align with certain changes to the lessee model. Lessors will continue to classify leases as operating, direct financing or sales-type leases. The effective date of the new standard for public companies is for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. Early adoption is permitted. The new standard must be adopted using a modified retrospective transition and requires application of the new guidance at the beginning of the earliest comparative period presented. We are currently evaluating the effect that the updated standard will have on our consolidated financial statements and related disclosures. In August 2016, the FASB issued ASU No. 2016-18, Restricted Cash Flows. With the exception of the standards discussed above, we believe there have been no new accounting pronouncements effective or not yet effective that have significance, or potential significance, to our Consolidated Financial Statements. |
INVENTORY
INVENTORY | 12 Months Ended |
Dec. 31, 2018 | |
Inventory | |
INVENTORY | NOTE 3 — INVENTORY Inventory is carried at the lower of cost or net realizable value. Cost is determined using the first-in, first-out method for raw material and finished goods inventory. Market is based on current replacement cost for raw materials and net realizable value for finished goods. Raw materials include all components used in the production of our finished goods, which are our four major product lines, bulk materials, energy storage materials, thermal management materials and inks and coatings. The following amounts were included in inventory at the end of the period: Year Ended December 31 2018 2017 Raw materials $ 48,371 $ 39,841 Consumables 188,764 — Finished goods 423,082 132,023 Total $ 660,217 $ 171,864 |
PROPERTY, PLANT AND EQUIPMENT
PROPERTY, PLANT AND EQUIPMENT | 12 Months Ended |
Dec. 31, 2018 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY, PLANT AND EQUIPMENT | NOTE 4 — PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment as of December 31 consist of the following: Depreciable life (years) 2018 2017 Plant and equipment not yet placed in service $ 1,194,417 $ 183,964 Leasehold improvements 5-10 702,362 399,060 Lab equipment 3-7 1,107,603 884,548 Production and other equipment 3-7 7,487,707 6,264,376 Software 3 14,177 39,144 10,506,266 7,771,092 Less accumulated depreciation and amortization (6,282,616 ) (5,169,521 ) Net property, plant and equipment $ 4,223,650 $ 2,601,571 Depreciation expense on property and equipment, including leased assets, for the years ended December 31, 2018 and 2017, was $1,696,334 $887,089, respectively. These amounts are included as part of our statement of operations in Cost of Goods Sold, Research and Development, and General and Administrative Expenses. For the year ended December 31, 2018, $1,607,313 was recorded in Cost of Goods Sold, $85,289 in Research and Development, and $3,732 in General and Administrative Expenses. For the year ended December 31, 2017, $770,290 was recorded in Cost of Goods Sold, $99,487 in Research and Development, $17,312 in General and Administrative Expenses. Plant, Property and Equipment under Capital Leases 2018 2017 Lab equipment — $ — Production and other equipment — 448,293 — 448,293 Less accumulated depreciation — (175,173 ) Net property, plant and equipment under capital leases — $ 273,120 As of December 31, 2018, there were no capital leases for property or equipment: |
INTANGIBLE ASSETS
INTANGIBLE ASSETS | 12 Months Ended |
Dec. 31, 2018 | |
Intangible Assets | |
INTANGIBLE ASSETS | NOTE 6 — OTHER CURRENT LIABILITIES As of December 31, 2018, and 2017, our and other current liabilities on our balance sheet consisted of the following: 2018 2017 Accrued compensation $ 331,589 $ 218,307 Accrued expenses 59,818 3,089 401(k) employer contribution expense 38,166 75,313 Accounts payable and other liabilities $ 429,573 $ 296,709 |
OTHER CURRENT LIABILITIES
OTHER CURRENT LIABILITIES | 12 Months Ended |
Dec. 31, 2018 | |
Other Current Liabilities | |
OTHER CURRENT LIABILITIES | NOTE 6 — OTHER CURRENT LIABILITIES As of December 31, 2018, and 2017, our accounts payable and other current liabilities consisted of the following: 2018 2017 Accrued compensation $ 331,589 $ 218,307 Accrued expenses 59,818 3,089 401(k) employer contribution expense 38,166 75,313 Accounts payable and other liabilities $ 429,573 $ 296,709 |
WARRANTS AND FINANCING AGREEMEN
WARRANTS AND FINANCING AGREEMENTS | 12 Months Ended |
Dec. 31, 2018 | |
Warrants And Financing Agreements | |
WARRANTS AND FINANCING AGREEMENTS | NOTE 7 —WARRANTS AND 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, September 22, 2017 and December 4, 2017, respectively. After December 1, 2017, an additional $5 million became available when we raised $10 million of equity capital after October 31, 2016. As of September 30, 2018, we had raised in excess of $10,000,000 from our IPO since November 1, 2016, and thus have met this requirement. Therefore, the remaining $5 million under the Dow Facility is now available to us. The Dow Facility is senior to most of our other debt and is secured by all of our assets (Dow was subordinate only to the capital leases with AAOF which was paid off and closed December 31, 2018, see Note 13). The loan matures on December 1, 2021 (subject to certain mandatory prepayments based on our equity financing activities). When we raise a cumulative amount of equity capital exceeding $15 million, we are required to prepay an amount equal to 30% of the amount raised over $15 million, but less than $25 million. We began these prepayments on equity raised as of September 10, 2018. Interest is payable beginning January 1, 2017 although we have elected, per the loan documents, to capitalize the interest as part of the outstanding debt through January 1, 2019. Beginning April 1, 2019, current interest is payable in cash on the first day of each quarter. 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 is subject to adjustment if we sell shares of common stock at a lower price. As of December 31, 2018, we had issued 125,000 warrants to Dow, which are exercisable on or before the expiration date of December 1, 2023. The aforementioned warrants meet the criteria for classification within stockholders’ equity. Proceeds were allocated between the debt and the warrants at their relative fair value. The total debt discount on the Dow Facility was approximately $372,000. The debt discount is being amortized to interest expense using the effective interest method over the term of the loans using an average effective interest rate of 6.3%. During the year ended December 31, 2018, we recognized $306,482 of amortization expense consisting of $264,117 of non-cash interest expense paid with shares of Preferred Stock and $42,305 of amortization from debt discount accretion related to the Dow Facility Loan. We repaid $178,490 of outstanding principal on the debt, resulting in a carrying value of $4,922,589 for the Dow Facility as of December 31, 2018. The Dow Facility entitles Dow to appoint an observer to our Board. Dow will maintain this 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. 2014 Samsung Financing and Warrants On January 15, 2014, we sold $3,000,000 of Secured Convertible Notes to SVIC No. 15 New Technology Business Investment L.L.P, a subsidiary of the Samsung Group (“Samsung”). The Notes were converted into Series A Convertible Preferred Stock on December 31, 2015. In connection with the sale of the Notes, the Company issued to Samsung a total of 100,000 warrants with a term of 4 years that were exercisable into shares of Series A Convertible Preferred Stock at a price of $12.00. These warrants vested in four annual installments according to the amount of future cash payments made by Samsung for licensing, royalties and product purchases. As of December 31, 2018, no payments had been made by Samsung and none of the warrants associated with the Samsung note had vested. The warrants expired on January 15, 2018. |
PRIVATE PLACEMENT
PRIVATE PLACEMENT | 12 Months Ended |
Dec. 31, 2018 | |
Warrants and Rights Note Disclosure [Abstract] | |
PRIVATE PLACEMENT | NOTE 8 — PRIVATE PLACEMENT All of the previously issued Series B Preferred Stock was cancelled. Although the stock was cancelled, all of the warrants to purchase 222,262 shares of common stock and preemptive rights warrants to purchase 2,635 shares of common stock issued in connection with the Series B Units remain outstanding at December 31, 2018. 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 no longer required liability classification under ASU 2017-11. |
DERIVATIVE LIABILITY WARRANTS
DERIVATIVE LIABILITY WARRANTS | 12 Months Ended |
Dec. 31, 2018 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
DERIVATIVE LIABILITY WARRANTS | NOTE 9 - DERIVATIVE LIABILITY WARRANTS On the date of their issuances, the Series A Convertible Preferred Stock warrants issued in conjunction with convertible notes issued in 2013 (subsequently converted into Series A Convertible Preferred Stock on December 31, 2015), 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, in September 2017, we chose to adopt ASU 2017-11 which changed the classification analysis of certain warrants with anti-dilution features. Since we adopted 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 8, 224,897 warrants related to the Series B Unit 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 13). In 2014 when we entered into financing agreements with Samsung, AAOF and XGS II, and 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 December 31, 2017, the total number of warrants issued due to the preemptive rights offerings was 58,689. 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: Year ended December 31, 2018 2017 Warrants issued with preemptive rights $ — $ (545 ) Warrants issued with April 2015 private placement of Series B Units — (46,067 ) Total Derivative Gain (Loss) $ — $ (46,612 ) As a result of the Company’s early adoption of ASU 2017-11 at September 30, 2017, which effected warrants to purchase 972,720 shares of Series A Convertible Preferred Stock and warrants to purchase 224,897 shares of common stock that were issuance in connection with the Series B Unit Offering, we reclassified $7,650,442 of derivative liabilities to shareholders equity as 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 | 12 Months Ended |
Dec. 31, 2018 | |
Equity [Abstract] | |
STOCK WARRANTS ACCOUNTED FOR AS EQUITY INSTRUMENTS | NOTE 10 – STOCK WARRANTS ACCOUNTED FOR AS EQUITY INSTRUMENTS The following table summarizes the warrants (including the warrants previously accounted for as derivatives) outstanding at December 31, 2018, which are accounted for as equity instruments, all of which are exercisable: Date Issued Expiration Date Indexed Stock Exercise Price Number of Warrants 07/01/2009 07/01/2019 Common $ 8.00 6,000 10/08/2012 10/08/2027 Common $ 12.00 5,000 01/15/2014 - 12/31/2014 01/15/2024 Series A Convertible Preferred $ 6.40 972,720 04/30/2015- 05/26/2015 04/30/2022 Common $ 16.00 218,334 06/30/2015 06/30/2022 Common $ 16.00 6,563 12/31/2015 12/31/2020 Common $ 8.00 20,625 03/31/2016 03/31/2021 Common $ 10.00 10,600 04/30/2016 04/30/2021 Common $ 10.00 895 12/14/2016 12/01/2023 Common $ 8.00 50,000 07/18/2017 12/01/2023 Common $ 8.00 25,000 09/22/2017 12/01/2023 Common $ 8.00 25,000 12/04/2017 12/01/2023 Common $ 8.00 25,000 1,365,737 The warrants indexed to Series A Convertible Preferred Stock are currently exercisable and are exchangeable into 1.875 shares of common stock for each share of Series A Preferred. |
STOCKHOLDERS' EQUITY (DEFICIT)
STOCKHOLDERS' EQUITY (DEFICIT) | 12 Months Ended |
Dec. 31, 2018 | |
Stockholders Equity Deficit | |
STOCKHOLDERS' EQUITY (DEFICIT) | NOTE 11 — STOCKHOLDERS’ EQUITY (DEFICIT) Series A Convertible Preferred Stock As of December 31, 2018, the Company is authorized to issue up to 3,000,000 shares of Series A Convertible Preferred Stock, or Series A Preferred. Each share of the Series A Preferred, which has a liquidation preference of $12.00 per share, is convertible at any time, at the option of the holder, into one share of Common Stock at the lower of: (a) $12.00 per share, or (b) 80% of the price at which the Company sells any equity or equity-linked securities in the future. The Series A Preferred also contains typical anti-dilution provisions that provide for adjustment of the conversion price to reflect stock splits, stock dividends, or similar events. The Series A Preferred is subject to mandatory conversion into Common Stock upon the listing of the Company’s Common Stock on a Qualified National Exchange. However, the Series A Preferred is not subject to the mandatory conversion until all outstanding Convertible Securities are also converted into common stock. The Series A Preferred ranks senior to all other equity or equity equivalent securities of the Company other than those securities which are explicitly senior or pari passu in rights and liquidation preference to the Series A Preferred The Company issued 1,456,126 shares of Series A Preferred in connection with the conversion of certain convertible notes on December 31, 2015. There were 1,890,354 and 1,857,816 shares of Series A Convertible Preferred Stock outstanding as of December 31, 2018 and 2017, respectively. Series B Convertible Preferred Stock As of December 31, 2018, 1,500,000 shares have been designated as Series B Convertible Preferred Stock, or Series B Preferred, of which none were issued and outstanding. Each share of the Series B Preferred, which has a liquidation preference of $16.00 per share, is convertible at any time, at the option of the holder, into one share of common stock at $16.00 per share. The Series B Preferred also contains typical anti-dilution provisions that provide for adjustment of the conversion price to reflect stock splits, stock dividends, or similar events. Each share of Series B Preferred is subject to mandatory conversion into common stock at the then-effective Series B conversion rate upon the public listing by the Company of its common stock on a Qualified National Exchange. However, the Series B Preferred is not subject to the mandatory conversion until all outstanding Convertible Securities are also converted into common stock. The Series B Preferred ranks senior to all other equity or equity equivalent securities of the Company other than those securities which are explicitly senior or pari passu in rights and liquidation preference to the Series B Preferred and pari passu with the Company’s Series A Preferred. Investors in the Series B Unit offering in April 2014 had the right to exchange their Series B Preferred on a price per share basis into new securities on the relative price per share terms as new securities sold to a third party on the earlier of i) December 31, 2017 and ii) the date the Company consummates the sale of new securities resulting in gross proceeds of at least $18 million. As discussed in further detail in Note 8, as of December 31, 2017, all holders of Series B Preferred exercised their exchange rights and had exchanged all their Series B Preferred for shares of common stock. The Series A Preferred and Series B Preferred are not redeemable for cash and the Company concluded that they are more akin to equity-type instruments than debt-type instruments. Accordingly, the embedded conversion option in each agreement is clearly and closely related to an equity-type host and the conversion option does not require classification and measurement as a derivative financial instrument. Therefore, the securities meet the conditions for stockholders’ equity classification. Common Stock The Company is authorized to issue 25,000,000 shares of common stock, no par value per share. During the years ended December 31, 2018 and 2017, the Company issued 1,406,918 and 468,175 shares of common stock, respectively. There were 3,760,268 and 2,353,350 shares of common stock issued and outstanding at December 31, 2018 and 2017, respectively. Each outstanding shares of common stock is entitled to one vote on each matter submitted to a vote, unless provided in our Articles of Incorporation, as amended. Each common stockholder is entitled to receive dividends, if declared. Holders of the common stock have no other preemptive or preferential rights to purchase additional shares of any class of the Company’s capital stock in subsequent stock offerings. |
EQUITY INCENTIVE PLAN
EQUITY INCENTIVE PLAN | 12 Months Ended |
Dec. 31, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
EQUITY INCENTIVE PLAN | NOTE 12 — 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 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. On July 24, 2017, certain stock options from the 2007 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 September 30, 2018 and August 10, 2017, the Company granted each Board member 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 vest ratably over a four-year period beginning on the one-year anniversary. The options had an aggregate grant date fair value of $29,580 and $26,120 on September 30, 2018 and August 10, 2017, respectively. The restricted stock issued to the Board members has an aggregate fair value of $160,000 and vest ratably in arrears over four quarters on the last day of each fiscal quarter following the grant date. As of December 31, 2018, and 2017, 10,000 and 5,000 of the 20,000 shares of restricted stock issued had vested, resulting in compensation expense of $80,000 and $40,000 for the years ended December 31, 2018 and 2017, respectively. The Company granted 32,500 employee stock options on November 1, 2017. The options were granted at a price of $8.00 per share and had an aggregate grant date fair value of $88,946. The options vest ratably over a four-year period beginning on the one-year anniversary. The following table shows the stock option activity during the years ended December 31, 2018 and 2017: 2018 2017 Number Of Options Weighted Average Exercise Price Number Of Options Weighted Average Exercise Price Options outstanding at beginning of year 677,125 $ 8.00 369,750 $ 11.86 Changes during the year: Cancelled (27,500 ) 8.00 (357,750 ) 12.00 Replacement options granted- at market price — 536,625 8.00 New options granted- at market price 148,250 8.00 140,500 8.00 Expired — (12,000 ) 12.00 Options outstanding at end of year 797,875 8.00 677,125 8.00 Options exercisable at end of year 396,525 8.00 322,158 8.00 Weighted average fair value exercise price of options granted during the year $ 8.00 $ 8.00 Weighted average remaining contractual term (in months) 16 80 Costs incurred in respect of stock-based compensation for employees and directors, for the years ended December 31, 2018 and 2017 were $349,963 and $856,084, respectively. Unrecognized compensation cost as of December 31, 2018 and 2017 was $362,462 and $935,363, respectively . Unrecognized compensation expense includes options which have not yet vested. Unrecognized compensation expense is $362,462 and is expected to be recognized over the next four years. As of December 31, 2018, none of the currently exercisable stock options had intrinsic value. The intrinsic value of each option share is the difference between the fair value of our common stock and the exercise price of such option share to the extent it is “in-the-money”. Aggregate intrinsic value represents the value that would have been received by the holders of in-the-money options had they exercised their options on the last trading day of the year and sold the underlying shares at the closing stock price on such day. The intrinsic value calculation is based on the assumed market value of our common stock on December 31, 2018 of $8.00 per share, which is the price per share at which we have been selling shares of common stock to third parties in our Offering. There were no in-the-money options outstanding and exercisable as of December 31, 2018, since the exercise prices of the stock options outstanding and expected to vest were all equal to the fair value of our common stock. The following table presents changes in the number of non-exercisable options during 2018: 2018 Total- non-exercisable options outstanding- December 31, 2017 354,967 Options granted 148,250 Options vested (86,867 ) Options cancelled/forfeited (15,000 ) Outstanding non-exercisable options outstanding as of December 31, 2018 401,350 Weighted average grant date fair value $ 8.00 Weighted average remaining vested period (in months) 16 The fair value of options granted during the year ended December 31, 2018 totaled $437,817. The total fair value of options granted during the year ended December 31, 2017 was $1,673,476 with $1,302,627 of this amount being related to options that were issued to replace options which were cancelled on July 24, 2017. The fair value of the options granted during the years ended December 31, 2018 and 2017 was estimated on the grant date using the Black-Scholes option-pricing model with the following assumptions: 2018 2017 Fair value of underlying stock $8.00 $8.00 Expected option life 4.75 years 3.50 years – 4.75 years Expected stock price volatility 37.34% – 39.09% 34.81% – 36.85% Risk free interest rate 2.51%- 2.94% 1.49%- 2.01% Expected dividend yield 0.00% 0.00% Information with respect to restricted stock awards outstanding was as follows: 2018 2017 Outstanding non-vested restricted stock at beginning of year: — — Granted 10,000 10,000 Vested 10,000 5,000 Cancelled/forfeited — — Outstanding non-vested restricted stock 5,000 5,000 Weighted average grant date fair value $ 8.00 $ 8.00 Weighted average remaining vested period (in months) 4.5 6 |
CAPITAL LEASES
CAPITAL LEASES | 12 Months Ended |
Dec. 31, 2018 | |
Capital Leases of Lessee [Abstract] | |
CAPITAL LEASES | NOTE 13 — CAPITAL LEASES Lease obligations on December 31, 2018 consisted of a minimal amount of equipment leases. As of December 31, 2017, we had capital lease obligations to AAOF (see Note 9) and other lessors as follows: December 31, 2018 December 31, 2017 Capital lease obligations $ 15,527 $ 149,120 Unamortized warrant discount — (15,040 ) Net obligations 15,527 134,080 Short-term portion of obligations (3,613 ) (118,553 ) Long-term portion of obligations $ 11,914 $ 15,527 In connection with the lease agreements with AAOF, we issued to them preferred stock warrants with an initial fair value of $156,043 and $147,496 in 2015 and 2014, respectively (see Note 9). The initial fair value has been accounted for as a discount on the capital lease obligation and is being amortized as part of the interest expense on the leases. Initially the warrants were accounted for as derivative instrument liabilities at fair value. With the early adoption of ASU 2017-11 (see Note 2) these were reclassified to equity. Our AAOF capital lease obligations are four-year leases starting on January 1, 2014 and January 1, 2015. The effective interest rates on the leases are 50% and 32% for the leases executed in 2015 and 2014, respectively. The present value of the lease payments are more than 90% of the fair value of the equipment and therefore the leases were capitalized. The AAOF capital lease obligations were paid through the issuance of 32,538 shares of Preferred Series A stock for the year ended December 31,2018. Our other capital leases expire at various dates in 2018 and 2022, have average effective interest rates of 1.54% and contain bargain purchase options that allow us to purchase the leased property for a minimal amount upon the expiration of the lease term. Future minimum lease payments under capital lease obligations are as follows: For the year ending December 31: 2019 4,266 2020 4,266 2021 4,266 2022 4,266 Total future minimum lease payments 17,063 Less amount representing interest (1,536 ) Present value of future minimum lease payments 15,527 Less current maturities (3,613 ) Obligations under capital leases – long term $ 11,914 Property and equipment acquired under capital lease agreements is pledged as collateral to secure the performance of the future minimum lease payments above. |
INCOME TAXES
INCOME TAXES | 12 Months Ended |
Dec. 31, 2018 | |
Income Taxes | |
INCOME TAXES | NOTE 14 — INCOME TAXES Deferred tax assets (liabilities) consist of the following at December 31: 2018 2017 Deferred tax assets: Net operating loss carry forwards $ 11,330,000 $ 9,230,000 Miscellaneous temporary differences 55,000 5,000 Research and development credits 635,000 600,000 Deferred tax liabilities: Property and equipment (120,000 ) Net deferred tax asset $ 12,065,000 $ 9,715,000 Valuation allowance $ (12,065,000 ) $ (9,715,000 ) Net deferred tax asset $ — $ — Federal net operating loss carry forwards of $50,700,000 and $44,000,000 exist at December 31, 2018 and 2017, respectively. State net operating loss carry forwards of $9,900,000 and $4,900,000 exist at December 31, 2018 and 2017, respectively. The primary difference between the net operating loss carry forwards and the accumulated deficit arises from certain stock option, warrants and other debt and equity transactions that are considered permanent differences. These losses were incurred in the years 2006 through 2018 and will expire between 2026 and 2037 and their utilization may be limited if we experience significant ownership changes. The Company has not conducted a full IRC Section 382 analysis to determine if a reduction in net operating loss carry forwards is required due to ownership changes. The analysis has not been undertaken due to the financial burden it would cause and changes, if any, resulting in a reduction to the deferred tax asset and related valuation would have no impact on the net deferred tax asset or expense recognized. The research and development credits will expire between 2028 and 2038. A rate of 28% has been used to calculate the deferred tax assets and liabilities based on the expected effective tax rates, net of applicable credits, upon reversal of the differences above. A valuation allowance has been established against the entire deferred tax asset at December 31, 2018 and 2017. The Tax Cuts and Jobs Act of 2017 was signed into law on December 22, 2017. The law includes significant changes to the U.S. corporate income tax system, including a federal corporate rate reduction from 35% to 21%, limitations on the deductibility of interest expense and executive compensation, and the transition of U.S. international taxation from a worldwide tax system to a territorial tax system. The rate reduction resulted in a $5,635,000 decrease in both the deferred tax asset and valuation allowance with no net impact on the 2017 financial statement amounts. The Company will continue to assess its provision for income taxes as future guidance is issued but does not currently anticipate significant revisions will be necessary. Any such revisions will be treated in accordance with the measurement period guidance outlined in Staff Accounting Bulletin No. 118. Below is a reconciliation of the statutory federal and state income tax rates to our effective tax rate for the fiscal years ended December 31, 2018 and 2017: 2018 2017 Federal tax provision 21.0 % 32.0 % State tax provision 7.0 % 6.0 % Non-deductible compensation expense 3.4 % 13.3 % Valuation allowance (31.4 )% (51.3 )% 0.0 % 0.0 % We file income tax returns in the U.S. federal jurisdiction and in the states of Massachusetts and Michigan. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. Beginning in 2016 we began filing under the corporate income tax (CIT) versus the Michigan Business Tax (MBT) structure. Net operating losses incurred in 2015 and prior will not carry forward to the CIT tax structure, accordingly all losses prior to 2016 are considered a permanent timing difference for state deferred tax calculations. For federal and state purposes, we have open tax years for all years in which we have filed tax returns. We are not currently subject to any ongoing income tax examinations. |
CUSTOMER, SUPPLIER, COUNTRY AND
CUSTOMER, SUPPLIER, COUNTRY AND PRODUCT CONCENTRATIONS | 12 Months Ended |
Dec. 31, 2018 | |
Customer Supplier Country And Product Concentrations | |
CUSTOMER, SUPPLIER, COUNTRY AND PRODUCT CONCENTRATIONS | NOTE 15 — Customer, Supplier, country and Product Concentrations Grants and Licensing Revenue Concentration One grantor accounted for 98% of total grant revenue in 2018. Two grantors accounted for 75% and 25% respectively of total grant revenue in 2017. The company’s licensing revenue in 2017 came from one licensor. Product Concentration For 2018, we had a concentration of product revenue from one product that was greater than 10% of total product revenues. Revenue from one of the Company’s graphene nanoplatelets materials, Grade C 500 m²/g, was 74%. For 2017, we had concentrations of product revenue from two products that were greater than 10% of total product revenues. Revenue from two of the Company’s graphene nanoplatelets materials, Grade C 300 m²/g – HP, was 14% and Grade C 500 m²/g, was 55%. We attempt to minimize the risk associated with product concentrations by continuing to develop new products to add to our portfolio. Customer Concentration For 2018 we had one customer whose purchases accounted for 72% of total product revenues. For 2017 we had three customers whose purchases accounted for 10%, 12% and 53% of total product revenues. At December 31, 2018, there were three customers who had an accounts receivable balance greater than 10% of our outstanding receivable balance. At December 31, 2017, there was one customer who had an accounts receivable balance greater than 10% of our outstanding receivable balance. Country Concentration We sell our products on a worldwide basis. International revenues in 2018 and 2017, as a percentage of total product revenue, were 12% and 30%, respectively. All of these sales are denominated in U.S. dollars. For 2018, no country other than the United States accounted for more than 5% of total product revenue. For 2017, one country other than the United States (China) accounted for approximately 13% of total product revenue. Suppliers We buy raw materials used in manufacturing from several sources. These materials are available from a large number of sources. A change in suppliers has no material effect on the Company’s operations. We did not have any purchases to one supplier that were more than 10% of total purchases in either 2018 or 2017. |
RELATED PARTY TRANSACTIONS AND
RELATED PARTY TRANSACTIONS AND COMMITMENTS | 12 Months Ended |
Dec. 31, 2018 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS AND COMMITMENTS | NOTE 16 — RELATED PARTY TRANSACTIONS AND COMMITMENTS We have a licensing agreement for exclusive use of patents and pending patents with Michigan State University (MSU), a stockholder via the MSU Foundation. During 2018 and 2017, we incurred $50,000 each year for royalties for these licenses. We have also entered into product licensing agreements with certain other stockholders. No royalty expenses have been recognized related to these agreements during 2018 and 2017. 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. On November 3, 2017, the Company and POSCO agreed to modify the terms of the initial agreement and dismiss the arbitration. Amounts owed to us were paid by POSCO in November 2017. There were no amounts due and recorded on our balance sheet at December 31, 2017. During the years ended December 31, 2018 and 2017, we issued 32,538 and 28,560 shares, respectively, of Series A Preferred to AAOF as payment under the terms of a Master Leasing Agreement. During 2018, Mr. Allemang, Jones and Pendell and certain of their affiliates invested the following amounts into our Offering and purchased the number of shares indicated below. Purchase Dates (2018) Amount Invested Shares Purchased Arnold Allemang and affiliates June 23 – 28 and Sept. 30, 2018 $ 1,500,000 187,500 Steven C. Jones and affiliates June 24 – 27, 2018 $ 969,944 121,243 David G. Pendell and affiliates June 27 and Dec. 5, 2018 $ 20,000 2,500 Total $ 2,489,944 311,243 During 2017, Mr. Allemang, Jones and Pendell and certain of their affiliates invested the following amounts into our Offering and purchased the number of shares indicated below. . Purchase Dates (2017) Amount Invested Shares Purchased Arnold Allemang and affiliates Sept. 6 and Dec. 28, 2017 $ 560,000 70,000 Steven C. Jones and affiliates April 3 and Sept. 29, 2017 $ 252,400 31,550 David G. Pendell and affiliates February 9, 2017 $ 16,000 2,000 Total $ 828,400 103,550 In conjunction with a financing with AAOF, we and our stockholders listed therein entered into a Shareholder Agreement on March 18, 2013 that contains a number of specific provisions pertaining to the Board of Directors as well as individual Directors. On February 26, 2016, we amended the Shareholder Agreement. Among other things, the Shareholder Agreement provides for certain voting and nomination rights to be calculated on the basis of “Full Conversion” stock ownership (under which calculation, all convertible notes, preferred shares, or other convertible equity securities are deemed converted into common stock) as follows: • So long as AAOF or its affiliates own 10% of more of the aggregate outstanding Shareholder Stock (as defined in the Shareholder Agreement): - the size of the Board of Directors shall be set at seven individuals. - one person nominated by AAOF shall be elected to the Board of Directors. - two members of the Board of Directors, other than those nominated by AAOF, POSCO or Hanwha Chemical, shall qualify as independent Directors. • So long as POSCO owns 10% of more of the aggregate outstanding Shareholder Stock, one person nominated by POSCO shall be elected to the Board of Directors. POSCO does not currently own at least 10% of the aggregate outstanding Shareholder Stock and therefore, there is no POSCO representative on the Board of Directors. • So long as Hanwha Chemical owns 10% of more of the aggregate outstanding Shareholder Stock, one person nominated by Hanwha Chemical shall be elected to the Board of Directors. Hanwha does not currently own at least 10% of the aggregate outstanding Shareholder Stock and therefore, there is no Hanwha representative on the Board of Directors. As of December 31, 2016, the ownership percentage of AAOF, as calculated for purposes of director voting, required the shareholders bound by the Shareholder Agreement to vote for a director nominated by AAOF. Mr. Jones is the AAOF representative to the Board pursuant to the terms of the Shareholder Agreement. The Shareholder Agreement grants preemptive rights to shareholders and holders of convertible notes who are parties to the Shareholder Agreement. Pursuant to the terms therein, such shareholders and noteholders have the right to purchase their pro rata share of all shareholder stock that the Company may, from time to time, propose to sell, issue, or exchange after the date of the Shareholder Agreement, other than certain excluded stock which includes stock granted to employees or as merger consideration. Each shareholder’s pro rata shares shall be equal to the ratio of (i) the aggregate number of shares of the Company’s common stock on a fully diluted basis, owned by the such shareholder at the time of the delivery of a preemptive rights notice to (ii) the aggregate number of shares of Company’s common stock on a fully diluted basis owned by all of the Company’s shareholders at the time of the delivery of a preemptive rights notice. The Shareholder Agreement may be amended or terminated by agreement (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of (i) a majority of the Board, and (ii) persons holding, in the aggregate, shares of Shareholder Stock representing at least sixty percent (60%) of the voting power of all shares of Shareholder Stock then held by Shareholders and their permitted assignees. The February 26, 2016 amendment provides that holders of Excluded Stock are not subject to the terms of the Shareholders Agreement. Excluded Stock means shares of common stock that are subject to a registration statement that has been filed with the SEC and has been declared effective, and, for the avoidance of any doubt, includes the 3,000,000 shares being offered under the Registration Statement. This amendment took effect upon the effectiveness of our Registration Statement. The Amendment to the Shareholder Agreement further clarifies that preemptive rights shall not apply to Excluded Stock (including, without limitation, the 3,000,000 shares being offered under the Registration Statement) and amends the termination date of the Shareholders Agreement. The Shareholder Agreement will continue in effect, unless the Shareholder Agreement is earlier terminated in accordance with its terms until the date on which the Company’s common stock is listed on the NASDAQ Stock Market of the New York Stock Exchange. As a result, the Shareholder Agreement will continue to remain in effect and certain of our larger shareholders will be entitled to continue to exercise their rights under such Shareholder Agreement, but purchasers of shares of common stock under the registration statement filed in connection with our current offering are not required to adopt the Shareholder Agreement. |
OPERATING LEASES
OPERATING LEASES | 12 Months Ended |
Dec. 31, 2018 | |
Operating Leases | |
OPERATING LEASES | NOTE 17 — OPERATING LEASES We lease our primary manufacturing facility, laboratory and administrative office under two separate operating leases expiring in March 2022 and December 2022. A second manufacturing facility is leased on a month to month basis. We have a third manufacturing facility under an operating lease executed in October of 2017 and expiring December 31, 2022. We moved to this facility in mid-2018 and are currently fully operational. As of December 31, 2018, the facility with the month to month lease is empty and in the process of clean up as we plan to fully exit in the first half of 2019. Total rent expense, including common area maintenance costs, was $570,766 and $388,851 during the years ended December 31, 2018 and 2017, respectively. Operating lease commitments for the next 4 years are as follows: For the year ending December 31: 2019 $ 589,896 2020 $ 594,234 2021 $ 609,534 2022 $ 563,988 |
RETIREMENT PLAN
RETIREMENT PLAN | 12 Months Ended |
Dec. 31, 2018 | |
Retirement Plan | |
RETIREMENT PLAN | NOTE 18 — RETIREMENT PLAN We maintain a defined-contribution 401(k) retirement plan covering substantially all employees (as defined by our plan document). Employees may make voluntary contributions to the plan, subject to limitations based on IRS regulations and compensation. The plan allows for an employer match contribution. The employer match expense was $76,009 and $75,496 for the years ended December 31, 2018 and 2017, respectively. |
LETTER OF CREDIT
LETTER OF CREDIT | 12 Months Ended |
Dec. 31, 2018 | |
Letter Of Credit | |
LETTER OF CREDIT | NOTE 19 — LETTER OF CREDIT We are required by one of our lease agreements to maintain a letter of credit of approximately $190,000 through February 2022. To support this letter of credit, we are required to maintain an equivalent cash deposit. As of December 31, 2018, there were no amounts outstanding on the letter of credit. The cash deposit is restricted and classified as a non-current asset. As of December 31, 2018, and 2017, the cash deposit for the letter of credit was $190,140 and $195,792, respectively. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 12 Months Ended |
Dec. 31, 2018 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | NOTE 20 — SUBSEQUENT EVENTS During the period from January 1 through April 1, 2019, we received common stock proceeds of $410,000 for the sale of 51,250 shares. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Dec. 31, 2018 | |
Accounting Policies [Abstract] | |
Use of Estimates | Use of Estimates US GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, together with amounts disclosed in the related notes to the consolidated financial statements. Actual results and outcomes may differ from management’s estimates, judgments and assumptions. Significant estimates, judgments and assumptions used in these consolidated financial statements include, but are not limited to, those related to revenues, accounts receivable and related allowances, contingencies, useful lives and recovery of long-term assets, income taxes, and the fair values of stock-based compensation, warrants, 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. |
Revenue Recognition | Revenue Recognition Revenues are recognized at a point in time, typically when control of the promised goods is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods. The Company does not recognize revenue in cases where collectability is not probable, and defers the recognition until collection is probable or payment is received. The Company generally expenses sales commissions when incurred because the amortization period would have been one year or less. These costs are recorded within selling, general and administrative expenses. Customer deposits, deferred revenue and other receipts are deferred and recognized when the revenue is realized and earned. Revenue related to licensing agreements is recorded upon substantial performance of the terms of the licensing contract. In the case of licensing arrangements that involve up-front payments, revenue is recorded when management determines that the appropriate terms of the contract have been fulfilled. For example, this may occur when technology has been transferred via written documents or, if training is involved, whenever all contracted training has occurred. In the case of licenses where product delivery is also embedded in the deliverable, a portion of revenue would be recognized when products are delivered. We have also out-licensed certain of our intellectual property to licensees under terms and conditions of license agreements that specify the intellectual property licensed, the territory, and the type of license. In exchange for these licenses, we have recorded revenues associated with the initial granting of the license and expect to receive royalties based on sales of products produced under these licenses. License revenues are recorded to reflect our performance of requirements under these license agreements. In addition, we record royalty revenues from licensees at the time they are earned. Grant contract revenue is recognized over the life of the contracts as the services are performed. Amounts received in excess of revenues earned are recorded as deferred revenue. |
Cost of Products Sold | Cost of Products Sold We use a standard cost system to estimate the direct costs of products sold. Variances between the standard costs and the actual costs are then properly prorated to the inventories and to the cost of goods sold. Direct costs include estimates of raw material costs, packaging, freight charges net of those billed to customers, and an allocation for direct labor and manufacturing overhead. Because of the nature of our production processes, there is a substantial fixed manufacturing expense requirement that represents the ongoing cost of maintaining production facilities that are not directly related to products sold, so we use a “full capacity” allocation of overhead based on an estimate of what product costs would be if the manufacturing facilities were operating on a full-time basis and producing products at the designed capacity. The remaining costs of operating the Company’s manufacturing facilities are recorded as Unallocated Manufacturing Expenses. Manufacturing expense includes the costs of operating our manufacturing facilities including personnel costs, rent, utilities, indirect supplies, depreciation, and related indirect expenses. Manufacturing expenses are expensed as incurred. |
Research and Development | Research and Development Research and development expenses include the compensation costs of research personnel, laboratory rent and utilities, depreciation of laboratory equipment, travel and laboratory supplies and are expensed as incurred. |
General and Administrative Expense | General and Administrative Expense General and administrative expenses include the compensation costs of personnel, rent, utilities, supplies, travel, depreciation of office equipment, and related expenses not included in other expense categories. General and administrative expenses also include non-cash compensation expenses related to the Company’s deferred compensation, management incentive bonus, and employee stock option programs. |
Sales and Marketing Expense | Sales and Marketing Expense Sales and marketing costs include compensation, travel, and business development expenses including free samples provided to customers. These costs are expensed as incurred. Product marketing allowances are recorded at the estimated out of pocket cost necessary to produce the product in the period the allowance is granted. Advertising costs are expensed at the time they are incurred and were not material for the years ended December 31, 2018 and 2017. |
Income Taxes | Income Taxes It is our policy to provide for uncertain tax positions and the related interest and penalties based upon management’s assessment of whether a tax benefit is more likely than not to be sustained upon examination by tax authorities. To the extent that the probable tax outcome of these uncertain tax position changes, such changes in estimate will impact the income tax provision in the period in which such determination is made. At December 31, 2018, we believe we have appropriately accounted for any unrecognized tax benefits. We are not aware of any uncertain tax positions. To the extent we prevail in matters for which a liability for an unrecognized tax benefit is established or we are required to pay amounts in excess of the liability, our effective tax rate in a given financial statement period may be affected. We account for income taxes using an asset and liability approach. The difference between the financial statement and tax basis of assets and liabilities is determined annually. Deferred income tax assets and liabilities are computed for those differences that have future tax consequences using the currently enacted tax laws and rates that apply to the periods in which they are expected to affect taxable income. Income tax expense is the current tax payable or refundable for the period plus or minus the net change in the deferred tax assets and liabilities. The deferred tax effects of state and local income taxes are considered immaterial and have not been recorded. Valuation allowances are established, if necessary, to reduce deferred tax assets to the amount that is estimated to be realized. Because of the uncertainty related to future realization of deferred tax assets (see Note 14), we have established a valuation allowance equal to one hundred percent of the deferred tax assets. The Tax Cuts and Jobs Act (the Tax Act) was signed into law on December 22, 2017. The law includes significant changes to the U.S. corporate income tax system, including a federal corporate rate reduction from 35% to 21%, limitations on the deductibility of interest expense and executive compensation, and the transition of U.S. international taxation from a worldwide tax system to a territorial tax system. The rate reduction resulted in a $5,635,000 decrease in both the deferred tax asset and valuation allowance with no net impact on the 2017 or 2018 financial statements. The Company will continue to assess its provision for income taxes as future guidance is issued but does not currently anticipate significant revisions will be necessary. Any such revisions will be treated in accordance with the measurement period guidance outlined in Staff Accounting Bulletin No. 118. |
Net Income (Loss) Per Common Share | Net Income (Loss) Per Common Share We compute net income or (loss) per share in accordance with Financial Accounting Standards Board (“FASB”) Accountings Standards Codification (“ASC”) Topic 260: Earnings Per Share. Under the provisions of ASC 260, basic net income (loss) per share is computed by dividing the net income (loss) available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted net loss per share is computed using the weighted average number of shares outstanding during the applicable period, plus the effect of potentially dilutive securities. Potentially dilutive securities consist of shares potentially issuable pursuant to stock options and warrants as well as shares that would result from full conversion of all outstanding convertible securities. These potentially dilutive securities were 3,006,487 and 3,081,487 as of December 31, 2018 and 2017 and are excluded from diluted net loss per share calculations because they are anti-dilutive. As a result, for the years ended December 31, 2018 and 2017, basic and diluted net loss per share was the same. |
Accounts Receivable and Allowance for Doubtful Accounts | Accounts Receivable and Allowance for Doubtful Accounts Accounts receivable are stated at the amount management expects to collect from outstanding balances. Management provides for probable uncollectible amounts through a provision for bad debt expense and an adjustment to a valuation allowance based on their assessment of the current status of individual accounts. Balances that are still outstanding after management has used reasonable collection efforts are written off through a charge to the allowance account and a credit to accounts receivable. |
Statements of Cash Flows | Statements of Cash Flows For the purposes of the statements of cash flows, we consider all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. |
Fair Value of Financial Instruments and Concentrations of Credit Risk | Fair Value of Financial Instruments and Concentrations of Credit Risk Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of cash and accounts receivable. The Company places its cash with FDIC insured financial institutions. Although such balances may exceed the federally insured limits at certain times, in the opinion of management they are subject to minimal risk. The Company has established policies for extending credit to customers based upon factors including the customers’ credit worthiness, historical trends and other information. Nonetheless the collectability of accounts receivable is affected by regional economic conditions and other factors. |
Inventory | Inventory Inventory consists of raw materials, consumables inventory and finished goods, all of which are stated at the lower of cost or net realizable value. Cost is determined on a first in, first out basis. We inventory media use in the production process of the newly constructed facility as a Consumables inventory. |
Property and Equipment | Property and Equipment Property and equipment are recorded at cost, net of accumulated depreciation and amortization. Property and equipment generally includes purchases of items with a cost greater than $3,000 and a useful life greater than one year. Depreciation and amortization are computed on the straight-line basis over the estimated useful lives of the assets. Leasehold improvements are amortized over the shorter of the related lease terms or their estimated useful lives. We periodically review the estimated useful lives of property and equipment. Changes to the estimated useful lives are recorded prospectively from the date of the change. Upon retirement or sale, the cost of the assets disposed of and the related accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the statement of operations. Repairs and maintenance costs are expensed as incurred. |
Recoverability and Impairment of Long-Lived Assets | Recoverability and Impairment of Long-Lived Assets Land, buildings and equipment and certain other assets, including definite-lived intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The judgments we make related to the expected useful lives of long-lived assets, definitions of lease terms and our ability to realize undiscounted cash flows in excess of the carrying amounts of these assets are affected by factors such as the ongoing maintenance and improvements of the assets, changes in economic conditions, changes in usage or operating performance, and other factors, such as our ability to sell our assets held for sale. As we assess the ongoing expected cash flows and carrying amounts of our long-lived assets, significant adverse changes in these factors could cause us to realize an impairment loss. Based on a review of operating results, we believe the carrying values of our long-lived assets are recoverable at December 31, 2018 and 2017. Per ASC 360-10-35-47, a long-lived asset to be abandoned is disposed of when it ceases to be used. In the year ended December 31, 2018, management has decided not to pursue the XGnP Leaf line business. The asset line has not produced a saleable product for over a year. The Leaf inventory value was written off at the end of 2017. Any sales recorded of Leaf products has been nominal and is from the existing inventory with no plans to restart production. It has determined that the seven (7) year estimated useful life determined in late 2013 should be revised to reflect the use of the asset over a shortened useful life ending December 31, 2018. Depreciation estimates have been revised in the current period in accordance with the change in accounting estimate standards at ASC 250-10-45-17 through 45-20. The amount of acceleration of depreciation reported in operations is $681,975. No prior period adjustments or restatements are required. |
Intangible Assets | Intangible Assets We have entered into a license agreement with Michigan State University under which we have licensed certain intellectual property in the form of patents and patent applications and invention disclosures. We are responsible for managing the patent process and ongoing filings for this licensed intellectual property and for bearing the cost thereof. We capitalize all costs related to the acquisition and ongoing administration of this license agreement and we amortize these costs over 15 years or the remaining life of the license agreement, whichever is shorter. In addition to the costs of managing in-licensed intellectual property, we also file for patent protection for inventions and other intellectual property generated by our employees. All patents are evaluated for filing in international markets on a case-by-case basis and are filed in the United States and in selected international markets as considered appropriate. All external legal and filing costs related to patent applications, patent filings, ongoing registrations, overseas filings, and legal opinions related thereto are capitalized as intangible assets at cost and amortized over a period of 15 years from the date incurred, or the remaining useful life of the associated patent, whichever is shorter. The cost of royalties or minimum payments specified under the license agreement for in-licensed technology is expensed as incurred. |
Stock-Based Compensation | Stock-Based Compensation We recognize compensation expense in our statement of operations for all share-based option and stock awards, based on estimated grant-date fair values. We estimate the grant-date fair value of stock-based compensation awards using the Black-Scholes option valuation model. This model is affected by the estimated value of our common stock on the date of the grant as well as assumptions regarding a number of highly complex and subjective variables. These variables include the expected term of the option, the exercise price, expected risk-free rates of return, the expected volatility of our common stock, and expected dividend yield, each of which is more fully described below. The assumptions for the estimated value of our common stock, expected term and expected volatility are the assumptions that most significantly affect the grant date fair value. Expected Term Risk-free Interest Rate Expected Stock Price Volatility Dividend Yield The grant-date fair value of the award is recognized as expense over the requisite service period using the straight-line method. |
Fair Value Measurements | Fair Value Measurements FASB ASC 820: “Fair Value Measurements and Disclosures” defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value: Level 1 Level 2 Level 3 A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. |
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. 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”). This update changes the classification analysis of certain equity-linked financial instruments with down-round features. When determining whether certain financial instruments should be classified as liabilities or equity instrument, securities with anti-dilution features no longer preclude equity classification when assessing whether the instrument is indexed to an entity’s own stock. As a result, freestanding equity-linked financial instruments (or embedded conversion features) would no longer be accounted for as derivative liabilities at fair value because of the existence of an anti-dilution feature. For freestanding equity classified financial instruments, ASU 2017-11 requires entities that present earnings per share in accordance with ASC Topic 260 to recognize the effect of the anti-dilution feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS. The guidance in this Update is effective for fiscal years, and interim period within those fiscal years, beginning after December 15, 2018, with earlier adoption permitted. When adopted in an interim period, any adjustments are reflected as of the beginning of the fiscal year that includes that interim period. We elected to early adopt ASU 2017-11 at September 30, 2017 by applying the standard retrospectively to outstanding financial instruments with a down round feature by means of a cumulative-effect adjustment to the Company’s beginning accumulated deficit as of January 1, 2017 (see Note 9). There were 972,720, warrants indexed to Series A Preferred Stock which were originally recorded as derivative liabilities because of their anti-dilution features. We chose to early adopt ASU 2017-11 because it permitted these warrants to be recorded as equity rather than derivative liabilities. Fair Value Measurements The liabilities measured at fair value on a recurring basis using significant unobservable inputs during the year ended December 31, 2018 and 2017 is as follows: 2018 2017 Balance at January 1 $ — $ 249,807 (Gain) Loss recognized in earnings — 46,612 Reclass to equity-Series B Amendment — (296,419 ) Balance at December 1 $ — $ — As mentioned in further detail in Notes 8 and 9, the warrants issued in connection with the Series B Units were classified as liabilities until September 30, 2017 when they were reclassified to equity after it was determined they no longer required liability classification. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements On February 24, 2016, the FASB issued ASU No. 2016-02, Leases, requiring lessees to recognize a right-of-use asset and a lease liability on the balance sheet for all leases with the exception of short-term leases. For lessees, leases will continue to be classified as either operating or finance leases in the income statement. Lessor accounting is similar to the current model but updated to align with certain changes to the lessee model. Lessors will continue to classify leases as operating, direct financing or sales-type leases. The effective date of the new standard for public companies is for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. Early adoption is permitted. The new standard must be adopted using a modified retrospective transition and requires application of the new guidance at the beginning of the earliest comparative period presented. We are currently evaluating the effect that the updated standard will have on our consolidated financial statements and related disclosures. In August 2016, the FASB issued ASU No. 2016-18, Restricted Cash Flows. With the exception of the standards discussed above, we believe there have been no new accounting pronouncements effective or not yet effective that have significance, or potential significance, to our Consolidated Financial Statements. |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Accounting Policies [Abstract] | |
Schedule of liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) | The liabilities measured at fair value on a recurring basis using significant unobservable inputs during the year ended December 31, 2018 and 2017 is as follows: 2018 2017 Balance at January 1 $ — $ 249,807 (Gain) Loss recognized in earnings — 46,612 Reclass to equity-Series B Amendment — (296,419 ) Balance at December 1 $ — $ — |
INVENTORY (Tables)
INVENTORY (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Inventory Tables | |
Schedule of inventory | The following amounts were included in inventory at the end of the period: Year Ended December 31 2018 2017 Raw materials $ 48,371 $ 39,841 Consumables 188,764 — Finished goods 423,082 132,023 Total $ 660,217 $ 171,864 |
PROPERTY, PLANT AND EQUIPMENT (
PROPERTY, PLANT AND EQUIPMENT (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Property Plant And Equipment Tables | |
Schedule of property, plant and equipment | Property, plant and equipment as of December 31 consist of the following: Depreciable life (years) 2018 2017 Plant and equipment not yet placed in service $ 1,194,417 $ 183,964 Leasehold improvements 5-10 702,362 399,060 Lab equipment 3-7 1,107,603 884,548 Production and other equipment 3-7 7,487,707 6,264,376 Software 3 14,177 39,144 10,506,266 7,771,092 Less accumulated depreciation and amortization (6,282,616 ) (5,169,521 ) Net property, plant and equipment $ 4,223,650 $ 2,601,571 |
Schedule of property and equipment under capital leases | Plant, Property and Equipment under Capital Leases 2018 2017 Lab equipment — $ — Production and other equipment — 448,293 — 448,293 Less accumulated depreciation — (175,173 ) Net property, plant and equipment under capital leases — $ 273,120 |
INTANGIBLE ASSETS (Tables)
INTANGIBLE ASSETS (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Intangible Assets Tables | |
Schedule of Intangible assets and related accumulated amortization | Intangible assets and related accumulated amortization as of December 31, 2018 and 2017 are as follows: Year Ended December 31 2018 2017 Licenses $ 159,868 $ 137,533 Patents 775,838 608,757 Trademarks, other intangibles 5,698 19,631 Total Carrying Amount 941,404 765,921 Less: Accumulated Amortization – Licenses (99,206 ) (88,100 ) Less: Accumulated Amortization – Patents (148,500 ) (103,217 ) Less: Accumulated Amortization – Trademarks, other intangibles (3,053 ) (2,666 ) Total Accumulated Amortization (250,759 ) (193,983 ) Net Carrying Amount – Licenses 60,662 49,433 Net Carrying Amount – Patents 627,338 505,540 Net Carrying Amount – Trademarks, other intangibles 2,645 16,965 Total Net Carrying Amount $ 690,645 $ 571,938 |
OTHER CURRENT LIABILITIES (Tabl
OTHER CURRENT LIABILITIES (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Other Current Liabilities Tables | |
Schedule of accounts payable and other current liabilities | As of December 31, 2018, and 2017, our and other current liabilities on our balance sheet consisted of the following: 2018 2017 Accrued compensation $ 331,589 $ 218,307 Accrued expenses 59,818 3,089 401(k) employer contribution expense 38,166 75,313 Accounts payable and other liabilities $ 429,573 $ 296,709 |
DERIVATIVE LIABILITY WARRANTS (
DERIVATIVE LIABILITY WARRANTS (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Schedule of change in fair value of derivative liability - warrants | Comparative prior periods were prepared using the newly adopted ASU 2017-11 as follows: Year ended December 31, 2018 2017 Warrants issued with preemptive rights $ — $ (545 ) Warrants issued with April 2015 private placement of Series B Units — (46,067 ) Total Derivative Gain (Loss) $ — $ (46,612 ) |
STOCK WARRANTS ACCOUNTED FOR _2
STOCK WARRANTS ACCOUNTED FOR AS EQUITY INSTRUMENTS (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
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 warrants (including the warrants previously accounted for as derivatives) outstanding at December 31, 2018, which are accounted for as equity instruments, all of which are exercisable: Date Issued Expiration Date Indexed Stock Exercise Price Number of Warrants 07/01/2009 07/01/2019 Common $ 8.00 6,000 10/08/2012 10/08/2027 Common $ 12.00 5,000 01/15/2014 - 12/31/2014 01/15/2024 Series A Convertible Preferred $ 6.40 972,720 04/30/2015- 05/26/2015 04/30/2022 Common $ 16.00 218,334 06/30/2015 06/30/2022 Common $ 16.00 6,563 12/31/2015 12/31/2020 Common $ 8.00 20,625 03/31/2016 03/31/2021 Common $ 10.00 10,600 04/30/2016 04/30/2021 Common $ 10.00 895 12/14/2016 12/01/2023 Common $ 8.00 50,000 07/18/2017 12/01/2023 Common $ 8.00 25,000 09/22/2017 12/01/2023 Common $ 8.00 25,000 12/04/2017 12/01/2023 Common $ 8.00 25,000 1,365,737 |
EQUITY INCENTIVE PLAN (Tables)
EQUITY INCENTIVE PLAN (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Equity Incentive Plan Tables | |
Schedule of stock option activity | The following table shows the stock option activity during the years ended December 31, 2018 and 2017: 2018 2017 Number Of Options Weighted Average Exercise Price Number Of Options Weighted Average Exercise Price Options outstanding at beginning of year 677,125 $ 8.00 369,750 $ 11.86 Changes during the year: Cancelled (27,500 ) 8.00 (357,750 ) 12.00 Replacement options granted- at market price — 536,625 8.00 New options granted- at market price 148,250 8.00 140,500 8.00 Expired — (12,000 ) 12.00 Options outstanding at end of year 797,875 8.00 677,125 8.00 Options exercisable at end of year 396,525 8.00 322,158 8.00 Weighted average fair value exercise price of options granted during the year $ 8.00 $ 8.00 Weighted average remaining contractual term (in months) 16 80 |
Schedule of non-exercisable options | The following table presents changes in the number of non-exercisable options during 2018: 2018 Total- non-exercisable options outstanding- December 31, 2017 354,967 Options granted 148,250 Options vested (86,867 ) Options cancelled/forfeited (15,000 ) Outstanding non-exercisable options outstanding as of December 31, 2018 401,350 Weighted average grant date fair value $ 8.00 Weighted average remaining vested period (in months) 16 |
Schedule of Black-Scholes option-pricing model | The fair value of the options granted during the years ended December 31, 2018 and 2017 was estimated on the grant date using the Black-Scholes option-pricing model with the following assumptions: 2018 2017 Fair value of underlying stock $8.00 $8.00 Expected option life 4.75 years 3.50 years – 4.75 years Expected stock price volatility 37.34% – 39.09% 34.81% – 36.85% Risk free interest rate 2.51%- 2.94% 1.49%- 2.01% Expected dividend yield 0.00% 0.00% |
Schedule of options outstanding | Information with respect to restricted stock awards outstanding was as follows: 2018 2017 Outstanding non-vested restricted stock at beginning of year: — — Granted 10,000 10,000 Vested 10,000 5,000 Cancelled/forfeited — — Outstanding non-vested restricted stock 5,000 5,000 Weighted average grant date fair value $ 8.00 $ 8.00 Weighted average remaining vested period (in months) 4.5 6 |
CAPITAL LEASES (Tables)
CAPITAL LEASES (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Capital Leases of Lessee [Abstract] | |
Schedule of capital lease obligations | As of December 31, 2017, we had capital lease obligations to AAOF (see Note 9) and other lessors as follows: December 31, 2018 December 31, 2017 Capital lease obligations $ 15,527 $ 149,120 Unamortized warrant discount — (15,040 ) Net obligations 15,527 134,080 Short-term portion of obligations (3,613 ) (118,553 ) Long-term portion of obligations $ 11,914 $ 15,527 |
Schedule of future minimum lease payments | Future minimum lease payments under capital lease obligations are as follows: For the year ending December 31: 2019 4,266 2020 4,266 2021 4,266 2022 4,266 Total future minimum lease payments 17,063 Less amount representing interest (1,536 ) Present value of future minimum lease payments 15,527 Less current maturities (3,613 ) Obligations under capital leases – long term $ 11,914 |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Income Taxes Tables | |
Schedule of deferred tax assets liabilities | Deferred tax assets (liabilities) consist of the following at December 31: 2018 2017 Deferred tax assets: Net operating loss carry forwards $ 11,330,000 $ 9,230,000 Miscellaneous temporary differences 55,000 5,000 Research and development credits 635,000 600,000 Deferred tax liabilities: Property and equipment (120,000 ) Net deferred tax asset $ 12,065,000 $ 9,715,000 Valuation allowance $ (12,065,000 ) $ (9,715,000 ) Net deferred tax asset $ — $ — |
Schedule of statutory income tax rate | Below is a reconciliation of the statutory federal and state income tax rates to our effective tax rate for the fiscal years ended December 31, 2018 and 2017: 2018 2017 Federal tax provision 21.0 % 32.0 % State tax provision 7.0 % 6.0 % Non-deductible compensation expense 3.4 % 13.3 % Valuation allowance (31.4 )% (51.3 )% 0.0 % 0.0 % |
RELATED PARTY TRANSACTIONS AN_2
RELATED PARTY TRANSACTIONS AND COMMITMENTS (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Related Party Transactions And Commitments Tables | |
Schedule of purchased the number of shares | During 2018, Mr. Allemang, Jones and Pendell and certain of their affiliates invested the following amounts into our Offering and purchased the number of shares indicated below. Purchase Dates (2018) Amount Invested Shares Purchased Arnold Allemang and affiliates June 23 – 28 and Sept. 30, 2018 $ 1,500,000 187,500 Steven C. Jones and affiliates June 24 – 27, 2018 $ 969,944 121,243 David G. Pendell and affiliates June 27 and Dec. 5, 2018 $ 20,000 2,500 Total $ 2,489,944 311,243 During 2017, Mr. Allemang, Jones and Pendell and certain of their affiliates invested the following amounts into our Offering and purchased the number of shares indicated below. . Purchase Dates (2017) Amount Invested Shares Purchased Arnold Allemang and affiliates Sept. 6 and Dec. 28, 2017 $ 560,000 70,000 Steven C. Jones and affiliates April 3 and Sept. 29, 2017 $ 252,400 31,550 David G. Pendell and affiliates February 9, 2017 $ 16,000 2,000 Total $ 828,400 103,550 |
OPERATING LEASES (Tables)
OPERATING LEASES (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Operating Leases Tables | |
Schedule of operating lease commitments | Operating lease commitments for the next 4 years are as follows: For the year ending December 31: 2019 $ 589,896 2020 $ 594,234 2021 $ 609,534 2022 $ 563,988 |
NATURE OF BUSINESS AND BASIS _2
NATURE OF BUSINESS AND BASIS OF PRESENTATION (Details Narrative) - USD ($) | Sep. 22, 2017 | Jul. 18, 2017 | Nov. 01, 2016 | Dec. 31, 2016 | Dec. 31, 2018 | Dec. 04, 2017 | Dec. 31, 2017 |
Cash on hand | $ 4,703,834 | $ 2,845,798 | |||||
Sale of common stock | 3,000,000 | ||||||
Share price per share | $ 8 | ||||||
The Dow Chemical Company [Member] | |||||||
Description of raising fund | Additional $5 million which became available under the Dow Facility since we have raised $10 million of equity capital after October 31, 2016. | ||||||
Draw Loan Note And Agreement [Member] | Senior Secured Debt Financing [Member] | |||||||
Proceeds from secured debt | $ 5,000,000 | ||||||
Additional equity capital | $ 10,000,000 | ||||||
Draw Loan Note And Agreement [Member] | Senior Secured Debt Financing [Member] | The Dow Chemical Company [Member] | |||||||
Face amount | $ 10,000,000 | $ 4,922,589 | |||||
Proceeds from secured debt | $ 1,000,000 | $ 1,000,000 | $ 2,000,000 | $ 1,000,000 | |||
Interest rate | 5.00% |
SUMMARY OF SIGNIFICANT ACCOUN_4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - Significant Unobservable Inputs (Level 3) [Member] - Recurring [Member] - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Roll Forward] | ||
Balance at beginning | $ 249,807 | |
Gain recognized in earnings | 46,612 | |
Reclass to equity-Series B Amendment | (296,419) | |
Balance at ending |
SUMMARY OF SIGNIFICANT ACCOUN_5
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Potentially dilutive securities (in shares) | 3,006,487 | 3,081,487 |
Property and equipment | $ 3,000 | |
Useful life of property and equipment | 1 year | |
Dividend yield (in percent) | 0.00% | 0.00% |
Federal tax provision (in percent) | 21.00% | 32.00% |
Previously federal statutory rate (in percent) | 35.00% | |
Rate reduction effect | $ 5,635,000 | |
Leasehold Improvements [Member] | ||
Description of useful life | Shorter of the related lease terms or their estimated useful lives | |
Patents [Member] | ||
Amortization period of intangible assets | 15 years |
INVENTORY (Details)
INVENTORY (Details) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Inventory Details | ||
Raw materials | $ 48,371 | $ 39,841 |
Consumables | 188,764 | 0 |
Finished goods | 423,082 | 132,023 |
Total | $ 660,217 | $ 171,864 |
PROPERTY, PLANT AND EQUIPMENT_2
PROPERTY, PLANT AND EQUIPMENT (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Gross property, plant and equipment | $ 10,506,266 | $ 7,771,092 |
Less accumulated depreciation and amortization | (6,282,616) | (5,169,521) |
Net property, plant and equipment | 4,223,650 | $ 2,601,571 |
Depreciable life | 1 year | |
Leasehold Improvements [Member] | ||
Gross property, plant and equipment | $ 702,362 | $ 399,060 |
Leasehold Improvements [Member] | Minimum [Member] | ||
Depreciable life | 5 years | |
Leasehold Improvements [Member] | Maximum [Member] | ||
Depreciable life | 10 years | |
Lab Equipment [Member] | ||
Gross property, plant and equipment | $ 1,107,603 | 884,548 |
Lab Equipment [Member] | Minimum [Member] | ||
Depreciable life | 3 years | |
Lab Equipment [Member] | Maximum [Member] | ||
Depreciable life | 7 years | |
Production and Other Equipment [Member] | ||
Gross property, plant and equipment | $ 7,487,707 | 6,264,376 |
Production and Other Equipment [Member] | Minimum [Member] | ||
Depreciable life | 3 years | |
Production and Other Equipment [Member] | Maximum [Member] | ||
Depreciable life | 7 years | |
Software [Member] | ||
Gross property, plant and equipment | $ 14,177 | 39,144 |
Depreciable life | 3 years | |
Plant and Equipment Not Yet Placed in Service [Member] | ||
Gross property, plant and equipment | $ 1,194,417 | $ 183,964 |
PROPERTY, PLANT AND EQUIPMENT_3
PROPERTY, PLANT AND EQUIPMENT (Details 1) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Gross property, plant and equipment | $ 10,506,266 | $ 7,771,092 |
Less accumulated depreciation | (6,282,616) | (5,169,521) |
Net property, plant and equipment | 4,223,650 | 2,601,571 |
Lab Equipment [Member] | ||
Gross property, plant and equipment | 1,107,603 | 884,548 |
Production and Other Equipment [Member] | ||
Gross property, plant and equipment | 7,487,707 | 6,264,376 |
Capital Lease [Member] | ||
Gross property, plant and equipment | 448,293 | |
Less accumulated depreciation | (175,173) | |
Net property, plant and equipment | 273,120 | |
Capital Lease [Member] | Lab Equipment [Member] | ||
Gross property, plant and equipment | ||
Capital Lease [Member] | Production and Other Equipment [Member] | ||
Gross property, plant and equipment | $ 448,293 |
PROPERTY, PLANT AND EQUIPMENT_4
PROPERTY, PLANT AND EQUIPMENT (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Depreciation and amortization expense | $ 1,696,334 | $ 887,089 |
Cost of goods sold | 5,506,321 | 2,652,776 |
Research and development | 1,414,259 | 923,419 |
Cost of Goods Sold [Member] | ||
Cost of goods sold | 1,607,313 | 770,290 |
Research and Development [Member] | ||
Research and development | 85,289 | 99,487 |
General and Administrative [Member] | ||
General and administrative expenses | $ 3,732 | $ 17,312 |
INTANGIBLE ASSETS (Details)
INTANGIBLE ASSETS (Details) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Carrying Amount | $ 941,404 | $ 765,921 |
Less Accumulated Amortization | (250,759) | (193,983) |
Net Carrying Amount | 690,645 | 571,938 |
Licensing [Member] | ||
Carrying Amount | 159,868 | 137,533 |
Less Accumulated Amortization | (99,206) | (88,100) |
Net Carrying Amount | 60,662 | 49,433 |
Patents [Member] | ||
Carrying Amount | 775,838 | 608,757 |
Less Accumulated Amortization | (148,500) | (103,217) |
Net Carrying Amount | 627,338 | 505,540 |
Trademarks and Other Intangible Assets [Member] | ||
Carrying Amount | 5,698 | 19,631 |
Less Accumulated Amortization | (3,053) | (2,666) |
Net Carrying Amount | $ 2,645 | $ 16,965 |
INTANGIBLE ASSETS (Details Narr
INTANGIBLE ASSETS (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Intangible Assets Details Narrative | ||
Amortization expense | $ 56,776 | $ 47,038 |
Amortization expense year one | 55,000 | |
Amortization expense year two | 55,000 | |
Amortization expense year three | 55,000 | |
Amortization expense year four | 55,000 | |
Amortization expense year five | $ 55,000 |
OTHER CURRENT LIABILITIES (Deta
OTHER CURRENT LIABILITIES (Details) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Other Current Liabilities Details | ||
Accrued compensation | $ 331,589 | $ 218,307 |
Accrued expenses | 59,818 | 3,089 |
401(k) employer contribution expense | 38,166 | 75,313 |
Accounts payable and other liabilities | $ 429,573 | $ 296,709 |
WARRANTS AND FINANCING AGREEM_2
WARRANTS AND FINANCING AGREEMENTS (Details Narrative) - USD ($) | Sep. 22, 2017 | Jul. 18, 2017 | Nov. 01, 2016 | Dec. 31, 2016 | Dec. 31, 2018 | Dec. 04, 2017 | Jan. 15, 2015 | Jan. 15, 2014 |
Warrant [Member] | ||||||||
Exercise price (in dollars per share) | $ 8 | |||||||
The Dow Chemical Company [Member] | ||||||||
Description of raising fund | Additional $5 million which became available under the Dow Facility since we have raised $10 million of equity capital after October 31, 2016. | |||||||
12% Secured Convertible Notes Due March 18, 2018 [Member] | New Technology Business Investment L.L.P, a Subsidiary Samsung Group [Member] | ||||||||
Face amount | $ 3,000,000 | |||||||
12% Secured Convertible Notes Due March 18, 2018 [Member] | New Technology Business Investment L.L.P, a Subsidiary Samsung Group [Member] | Preferred stock (A) [Member] | Warrant [Member] | ||||||||
Number of shares purchased (in shares) | 100,000 | |||||||
Exercise price (in dollars per share) | $ 12 | |||||||
Warrant term | 4 years | |||||||
Senior Secured Debt Financing [Member] | Draw Loan Note And Agreement [Member] | ||||||||
Proceeds from secured debt | $ 5,000,000 | |||||||
Additional equity capital | $ 10,000,000 | |||||||
Senior Secured Debt Financing [Member] | The Dow Chemical Company [Member] | Draw Loan Note And Agreement [Member] | ||||||||
Face amount | $ 10,000,000 | 4,922,589 | ||||||
Proceeds from secured debt | $ 1,000,000 | $ 1,000,000 | $ 2,000,000 | $ 1,000,000 | ||||
Amortization expense of debt | $ 306,482 | |||||||
Number of shares purchased (in shares) | 125,000 | |||||||
Exercise price (in dollars per share) | $ 8 | |||||||
Description of conversion terms | Interest is payable beginning January 1, 2017 although we have elected, per the loan documents, to capitalize the interest as part of the outstanding debt through January 1, 2019. Beginning April 1, 2019, current interest is payable in cash on the first day of each quarter. 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. | |||||||
Unamortized discount | $ 372,000 | |||||||
Interest rate (in percent) | 5.00% | |||||||
Maturity date | Dec. 1, 2021 | |||||||
Effective intrest rate | 6.30% | |||||||
Non-cash interest expense | $ 264,117 | |||||||
Amortization from debt discount | 42,305 | |||||||
Repayment of debt | $ 178,490 | |||||||
Equity capital description | Equity capital exceeding $15 million, we are required to prepay an amount equal to 30% of the amount raised over $15 million, but less than $25 million. |
PRIVATE PLACEMENT AND PREEMPTIV
PRIVATE PLACEMENT AND PREEMPTIVE RIGHTS (Details Narrative) - $ / shares | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2017 | Dec. 31, 2018 | Dec. 31, 2015 | Dec. 31, 2014 | |
Number of shares issued | 311,243 | |||
Warrant [Member] | ||||
Number of shares issued | 156,043 | 147,496 | ||
Exercise price (in dollars per share) | $ 8 | |||
Number of warrants cancelled | 224,897 | |||
Private Placement [Member] | Warrant [Member] | ||||
Number of shares issued | 222,262 | |||
Exercise price (in dollars per share) | $ 16 | |||
Number of warrants cancelled | 2,635 |
DERIVATIVE LIABILITY WARRANTS_2
DERIVATIVE LIABILITY WARRANTS (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Total Derivative Gain | $ (46,612) | |
Private Placement [Member] | Warrant [Member] | ||
Total Derivative Gain | (46,067) | |
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 | $ (545) |
DERIVATIVE LIABILITY WARRANTS_3
DERIVATIVE LIABILITY WARRANTS (Details Narrative) - USD ($) | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2015 | Dec. 31, 2014 | |
Number of shares issued | 311,243 | ||||
Reclassification of derivative liability warrants to equity | $ 296,419 | ||||
Warrant [Member] | |||||
Number of shares issued | 156,043 | 147,496 | |||
Number of warrants cancelled | 224,897 | ||||
Anti-dilution features shares | 972,720 | ||||
Reclassification of derivative liability warrants to equity | $ 7,650,442 | ||||
Warrant [Member] | Preemptive Rights Offering [Member] | |||||
Number of shares issued | 58,689 |
STOCK WARRANTS ACCOUNTED FOR _3
STOCK WARRANTS ACCOUNTED FOR AS EQUITY INSTRUMENTS (Details) | 12 Months Ended |
Dec. 31, 2018$ / sharesshares | |
Number of Warrants | 1,365,737 |
Warrant [Member] | |
Date Issued | Jul. 1, 2009 |
Expiration Date | Jul. 1, 2019 |
Indexed stock | Common |
Exercise Price | $ / shares | $ 8 |
Number of Warrants | 6,000 |
Warrant 1 [Member] | |
Date Issued | Oct. 8, 2012 |
Expiration Date | Oct. 8, 2027 |
Indexed stock | Common |
Exercise Price | $ / shares | $ 12 |
Number of Warrants | 5,000 |
Warrant 2 [Member] | |
Expiration Date | Jan. 15, 2024 |
Indexed stock | Series A Convertible Preferred |
Exercise Price | $ / shares | $ 6.40 |
Number of Warrants | 972,720 |
Warrant 3 [Member] | |
Expiration Date | Apr. 30, 2022 |
Indexed stock | Common |
Exercise Price | $ / shares | $ 16 |
Number of Warrants | 218,334 |
Warrant 4 [Member] | |
Date Issued | Jun. 30, 2015 |
Expiration Date | Jun. 30, 2022 |
Indexed stock | Common |
Exercise Price | $ / shares | $ 16 |
Number of Warrants | 6,563 |
Warrant 5 [Member] | |
Date Issued | Dec. 31, 2015 |
Expiration Date | Dec. 31, 2020 |
Indexed stock | Common |
Exercise Price | $ / shares | $ 8 |
Number of Warrants | 20,625 |
Warrant 6 [Member] | |
Date Issued | Mar. 31, 2016 |
Expiration Date | Mar. 31, 2021 |
Indexed stock | Common |
Exercise Price | $ / shares | $ 10 |
Number of Warrants | 10,600 |
Warrant 7 [Member] | |
Date Issued | Apr. 30, 2016 |
Expiration Date | Apr. 30, 2021 |
Indexed stock | Common |
Exercise Price | $ / shares | $ 10 |
Number of Warrants | 895 |
Warrant 8 [Member] | |
Date Issued | Dec. 14, 2016 |
Expiration Date | Dec. 1, 2023 |
Indexed stock | Common |
Exercise Price | $ / shares | $ 8 |
Number of Warrants | 50,000 |
Warrant 9 [Member] | |
Date Issued | Jul. 18, 2017 |
Expiration Date | Dec. 1, 2023 |
Indexed stock | Common |
Exercise Price | $ / shares | $ 8 |
Number of Warrants | 25,000 |
Warrant 10 [Member] | |
Date Issued | Sep. 22, 2017 |
Expiration Date | Dec. 1, 2023 |
Indexed stock | Common |
Exercise Price | $ / shares | $ 8 |
Number of Warrants | 25,000 |
Warrant 11 [Member] | |
Date Issued | Dec. 4, 2017 |
Expiration Date | Dec. 1, 2023 |
Indexed stock | Common |
Exercise Price | $ / shares | $ 8 |
Number of Warrants | 25,000 |
Minimum [Member] | Warrant 2 [Member] | |
Date Issued | Jan. 15, 2014 |
Minimum [Member] | Warrant 3 [Member] | |
Date Issued | Apr. 30, 2015 |
Maximum [Member] | Warrant 2 [Member] | |
Date Issued | Dec. 31, 2014 |
Maximum [Member] | Warrant 3 [Member] | |
Date Issued | May 26, 2015 |
STOCKHOLDERS' EQUITY (DEFICIT)
STOCKHOLDERS' EQUITY (DEFICIT) (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Common stock, authorized | 25,000,000 | 25,000,000 |
Common stock, issued | 3,760,268 | 2,353,350 |
Common stock, outstanding | 3,760,268 | 2,353,350 |
Stock issued for cash (in shares) | 311,243 | |
Common Stock [Member] | ||
Stock issued for cash (in shares) | 1,396,918 | 458,175 |
Series A Convertible Preferred Stock [Member] | ||
Preferred stock, authorized | 3,000,000 | 3,000,000 |
Liquidation (in dollars per share) | $ 12 | |
Description of conversion of stock | One share of Common Stock at the lower of: (a) $12.00 per share, or (b) 80% of the price at which the Company sells any equity or equity-linked securities in the future. | |
Conversion price (in dollars per share) | $ 12 | |
Series B Preferred Stock [Member] | ||
Preferred stock, authorized | 1,500,000 | 1,500,000 |
Liquidation (in dollars per share) | $ 16 | |
Conversion price (in dollars per share) | $ 16 | |
Proceeds from sale of stock | $ 18,000,000 |
EQUITY INCENTIVE PLAN (Details)
EQUITY INCENTIVE PLAN (Details) - $ / shares | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward] | ||
Options outstanding at beginning of year | 677,125 | 369,750 |
Changes during the year: | ||
Cancelled | (27,500) | (357,750) |
Replacement options granted- at market price | 536,625 | |
New Options Granted - at market price | 148,250 | 140,500 |
Expired | (12,000) | |
Options outstanding at end of Period | 797,875 | 677,125 |
Options exercisable at end of Period | 396,525 | 322,158 |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [RollForward] | ||
Options outstanding at beginning of year | $ 8 | $ 11.86 |
Changes during the year: | ||
Cancelled | 8 | 12 |
Replacement options granted- at market price | 8 | |
New Options Granted - at market price | 8 | 8 |
Expired | 12 | |
Options outstanding at end of Period | 8 | 8 |
Options exercisable at end of Period | 8 | 8 |
Weighted average fair value of options granted during the year | $ 8 | $ 8 |
Weighted average remaining contractual term (in months) | 16 months | 80 months |
EQUITY INCENTIVE PLAN (Details
EQUITY INCENTIVE PLAN (Details 1) - $ / shares | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Share-based Compensation Arrangement by Share-based Payment Award, Non-Exercisable Options, Outstanding [Roll Forward] | ||
Total non-exercisable options outstanding at beginning | 354,967 | |
Options granted | 148,250 | |
Options vested | (86,867) | |
Options cancelled/forfeited | (15,000) | |
Total non-exercisable options outstanding at end | 401,350 | 354,967 |
Weighted average grant date fair value | $ 8 | $ 8 |
Weighted average remaining vested period (in months) | 16 months | 80 months |
EQUITY INCENTIVE PLAN (Detail_2
EQUITY INCENTIVE PLAN (Details 2) - $ / shares | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Fair value of underlying stock | $ 8 | $ 8 |
Expected option life | 4 years 9 months | |
Expected dividend yield | 0.00% | 0.00% |
Minimum [Member] | ||
Expected option life | 4 years 9 months | |
Expected stock price volatility | 37.34% | 36.85% |
Risk free interest rate | 2.51% | 2.01% |
Maximum [Member] | ||
Expected option life | 3 years 6 months | |
Expected stock price volatility | 39.09% | 34.81% |
Risk free interest rate | 2.94% | 1.49% |
EQUITY INCENTIVE PLAN (Detail_3
EQUITY INCENTIVE PLAN (Details 3) - $ / shares | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Nonvested, Number of Shares [Roll Forward] | ||
Granted | 148,250 | 140,500 |
Weighted average grant date fair value | $ 8 | $ 8 |
Weighted average remaining vested period (in months) | 16 months | 80 months |
Restricted Common Stock [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Nonvested, Number of Shares [Roll Forward] | ||
Outstanding non-vested restricted stock at beginning of year | 5,000 | |
Granted | 10,000 | 10,000 |
Vested | 10,000 | 5,000 |
Cancelled/forfeited | ||
Outstanding non-vested restricted stock at end | 5,000 | 5,000 |
Weighted average grant date fair value | $ 8 | $ 8 |
Weighted average remaining vested period (in months) | 4 months 15 days | 6 months |
EQUITY INCENTIVE PLAN (Detail_4
EQUITY INCENTIVE PLAN (Details Narrative) - USD ($) | Nov. 01, 2017 | Aug. 10, 2017 | Dec. 31, 2018 | Dec. 31, 2017 |
Number of options granted (in shares) | 148,250 | 140,500 | ||
Stock based compensation | $ 349,963 | $ 856,084 | ||
Unrecognized compensation cost | $ 362,462 | $ 935,363 | ||
Intrinsic value (in dollars per share) | $ 8 | |||
Exercise price (in dollars per share) | 8 | $ 8 | ||
Exercise Price (in dollars per share) | $ 8 | $ 8 | ||
Expected Term | 4 years 9 months | |||
Aggregate grant date fair value | $ 437,817 | $ 1,673,476 | ||
Unrecognized compensation expense period | 4 years | |||
Stock Option [Member] | ||||
Number of options granted (in shares) | 32,500 | |||
Exercise price (in dollars per share) | $ 8 | |||
Description of vesting terms | The options vest ratably over a four-year period beginning on the one-year anniversary. | |||
Aggregate grant date fair value | $ 88,946 | $ 1,302,627 | ||
Restricted Common Stock [Member] | ||||
Number of options granted (in shares) | 10,000 | 10,000 | ||
Number of shares vested (in shares) | 10,000 | 5,000 | ||
Maximum [Member] | ||||
Expected Term | 3 years 6 months | |||
2007 Stock Option Plan [Member] | ||||
Stock based compensation | $ 1,015,758 | |||
Exercise price (in dollars per share) | $ 8 | |||
Vesting period | 7 years | |||
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] | Directors [Member] | ||||
Number of options granted (in shares) | 2,500 | |||
Exercise price (in dollars per share) | $ 8 | |||
Description of vesting terms | The options vest ratably over a four-year period beginning on the one-year anniversary. | |||
Aggregate grant date fair value | $ 29,580 | |||
2007 Stock Option Plan [Member] | Restricted Common Stock [Member] | Directors [Member] | ||||
Number of options granted (in shares) | 2,500 | |||
Stock based compensation | $ 80,000 | $ 40,000 | ||
Exercise price (in dollars per share) | $ 8 | |||
Number of shares vested (in shares) | 10,000 | 5,000 | ||
Description of vesting terms | The options vest ratably over a four-year period beginning on the one-year anniversary. | |||
Aggregate grant date fair value | $ 26,120 | $ 160,000 | ||
2007 Stock Option Plan [Member] | Maximum [Member] | ||||
Number of shares awarded (in shares) | 1,200,000 | |||
Unvested awards, compensation cost | $ 514,687 |
CAPITAL LEASES (Details)
CAPITAL LEASES (Details) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Net obligations | $ 15,527 | |
Short-term portion of obligations | (3,613) | $ (118,553) |
Long-term portion of obligations | 11,914 | 15,527 |
Aspen Advance Opportunity Fund, LP [Member] | ||
Capital lease obligations | 15,527 | 149,120 |
Unamortized warrant discount | (15,040) | |
Net obligations | 15,527 | 134,080 |
Short-term portion of obligations | (3,613) | (118,553) |
Long-term portion of obligations | $ 11,914 | $ 15,527 |
CAPITAL LEASES (Details 1)
CAPITAL LEASES (Details 1) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
For the year ending December 31: | ||
2019 | $ 4,266 | |
2020 | 4,266 | |
2021 | 4,266 | |
2022 | 4,266 | |
Total future minimum lease payments | 17,063 | |
Less amount representing interest | (1,536) | |
Present value of future minimum lease payments | 15,527 | |
Less current maturities | (3,613) | $ (118,553) |
Obligations under capital leases - long term | $ 11,914 | $ 15,527 |
CAPITAL LEASES (Details Narrati
CAPITAL LEASES (Details Narrative) - shares | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2015 | Dec. 31, 2014 | |
Number of shares issued | 311,243 | ||
Preffered stock issued for capital lease obligations | 32,538 | ||
Warrant [Member] | |||
Number of shares issued | 156,043 | 147,496 | |
Interest rate | 50.00% | 32.00% | |
Capital lease effective interest rate | 1.54% |
INCOME TAXES (Details)
INCOME TAXES (Details) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Deferred tax assets: | ||
Net operating loss carry forwards | $ 11,330,000 | $ 9,230,000 |
Miscellaneous temporary differences | 55,000 | 5,000 |
Research and development credits | 635,000 | 600,000 |
Deferred tax liabilities: | ||
Property and equipment | (120,000) | |
Net deferred tax asset | 12,065,000 | 9,715,000 |
Valuation allowance | (12,065,000) | (9,715,000) |
Net deferred tax asset |
INCOME TAXES (Details 1)
INCOME TAXES (Details 1) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Income Taxes Details 1 | ||
Federal tax provision | 21.00% | 32.00% |
State tax provision | 7.00% | 6.00% |
Non-deductible compensation expense | 3.40% | 13.30% |
Valuation allowance | (31.40%) | (51.30%) |
Total effective tax rate | 0.00% | 0.00% |
INCOME TAXES (Details Narrative
INCOME TAXES (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Fedral operating loss carryforward | $ 50,700,000 | $ 44,000,000 |
State net operating loss carry forwards | $ 9,900,000 | 4,900,000 |
Previously federal statutory rate | 35.00% | |
Description of expire date | These losses were incurred in the years 2006 through 2018 and will expire between 2026 and 2037 and their utilization may be limited if we experience significant ownership changes. The Company has not conducted a full IRC Section 382 analysis to determine if a reduction in net operating loss carry forwards is required due to ownership changes. | |
Valuation allowance | $ (12,065,000) | $ (9,715,000) |
Research and Development [Member] | ||
Description of expire date | The research and development credits will expire between 2028 and 2038. A rate of 28% has been used to calculate the deferred tax assets and liabilities based on the expected effective tax rates, net of applicable credits, upon reversal of the differences above. |
CUSTOMER, SUPPLIER, COUNTRY A_2
CUSTOMER, SUPPLIER, COUNTRY AND PRODUCT CONCENTRATIONS (Details Narrative) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Grants and Licensing Revenue Concentration [Member] | Total Grant Revenue [Member] | One Grantor [Member] | ||
Concentration of risk | 98.00% | |
Grants and Licensing Revenue Concentration [Member] | Total Grant Revenue [Member] | Grantor One [Member] | ||
Concentration of risk | 75.00% | |
Grants and Licensing Revenue Concentration [Member] | Total Grant Revenue [Member] | Grantor Two [Member] | ||
Concentration of risk | 25.00% | |
Product Concentration Risk [Member] | Total Product Revenues [Member] | One Product [Member] | ||
Concentration of risk | 74.00% | |
Product Concentration Risk [Member] | Total Product Revenues [Member] | Product One [Member] | ||
Concentration of risk | 14.00% | |
Product Concentration Risk [Member] | Total Product Revenues [Member] | Product Two [Member] | ||
Concentration of risk | 55.00% | |
Customer Concentration Risk [Member] | Total Product Revenues [Member] | One Customer [Member] | ||
Concentration of risk | 72.00% | |
Customer Concentration Risk [Member] | Total Product Revenues [Member] | Customer One [Member] | ||
Concentration of risk | 10.00% | |
Customer Concentration Risk [Member] | Total Product Revenues [Member] | Customer Two [Member] | ||
Concentration of risk | 12.00% | |
Customer Concentration Risk [Member] | Total Product Revenues [Member] | Customer Three [Member] | ||
Concentration of risk | 53.00% | |
Country Concentration Risk [Member] | Total Product Revenues [Member] | United States (China) | ||
Concentration of risk | 5.00% | 13.00% |
Country Concentration Risk [Member] | Total Product Revenues [Member] | Foreign [Member] | ||
Concentration of risk | 12.00% | 30.00% |
RELATED PARTY TRANSACTIONS AN_3
RELATED PARTY TRANSACTIONS AND COMMITMENTS (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Amount Invested | $ 2,489,944 | $ 828,400 |
Shares Purchased | 311,243 | 103,550 |
Mr. Arnold Allemang [Member] | ||
Purchase Dates | June 23 – 28 and Sept. 30, 2018 | Sept. 6 and Dec. 28, 2017 |
Amount Invested | $ 1,500,000 | $ 560,000 |
Shares Purchased | 187,500 | 70,000 |
Mr. Steven Jones [Member] | ||
Purchase Dates | June 24 – 27, 2018 | April 3 and Sept. 29, 2017 |
Amount Invested | $ 969,944 | $ 252,400 |
Shares Purchased | 121,243 | 31,550 |
Mr. Dave Pendell [Member] | ||
Purchase Dates | June 27 and Dec. 5, 2018 | 9-Feb-17 |
Amount Invested | $ 20,000 | $ 16,000 |
Shares Purchased | 2,500 | 2,000 |
RELATED PARTY TRANSACTIONS AN_4
RELATED PARTY TRANSACTIONS AND COMMITMENTS (Details Narrative) - USD ($) | Feb. 26, 2016 | Dec. 31, 2018 | Dec. 31, 2017 | Jan. 15, 2014 |
Transaction amount | $ 2,489,944 | $ 828,400 | ||
Number of shares issued | 311,243 | |||
New Technology Business Investment L.L.P, a Subsidiary Samsung Group [Member] | 12% Secured Convertible Notes Due March 18, 2018 [Member] | ||||
Debt face amount | $ 3,000,000 | |||
Licensing Agreement [Member] | Michigan State University (Patents and Pending Patents) [Member] | ||||
Licensing expenses | $ 50,000 | $ 50,000 | ||
Licensing Agreement [Member] | POSCO [Member] | ||||
Minimum yearly contractual obligation | 100,000 | |||
Quarterly license revenue | $ 25,000 | |||
Shareholders Agreement [Member] | ||||
Number of excluded stock offered | 3,000,000 | |||
Description of excluded stock | The Amendment to the Shareholder Agreement further clarifies that preemptive rights shall not apply to Excluded Stock (including, without limitation, the 3,000,000 shares being offered under the Registration Statement) and amends the termination date of the Shareholders Agreement. The Shareholder Agreement will continue in effect, unless the Shareholder Agreement is earlier terminated in accordance with its terms until the date on which the Company’s common stock is listed on the NASDAQ Stock Market of the New York Stock Exchange. | |||
Master Leasing Agreement [Member] | Aspen Advance Opportunity Fund, LP [Member] | Preferred stock (A) [Member] | ||||
Number of shares issued | 32,538 | 28,560 |
OPERATING LEASES (Details)
OPERATING LEASES (Details) | Dec. 31, 2018USD ($) |
For the year ending December 31: | |
2019 | $ 589,896 |
2020 | 594,234 |
2021 | 609,534 |
2022 | $ 563,988 |
OPERATING LEASES (Details Narra
OPERATING LEASES (Details Narrative) | 12 Months Ended | |
Dec. 31, 2018USD ($)Number | Dec. 31, 2017USD ($) | |
Number of separate operating leases | Number | 2 | |
Total rent expense | $ | $ 570,766 | $ 388,851 |
Operating Lease One [Member] | ||
Lease expiration date | Mar. 31, 2022 | |
Operating Lease Two [Member] | ||
Lease expiration date | Dec. 31, 2022 | |
Operating Lease Three [Member] | ||
Lease executed date | Oct. 31, 2017 | |
Lease expiration date | Dec. 31, 2022 |
RETIREMENT PLAN (Details Narrat
RETIREMENT PLAN (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Retirement Plan Details Narrative | ||
Employer contribution expense | $ 76,009 | $ 75,496 |
LETTER OF CREDIT (Details Narra
LETTER OF CREDIT (Details Narrative) - USD ($) | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Cash deposit | $ 4,893,974 | $ 3,041,590 | $ 1,980,842 |
Letter of Credit [Member] | |||
Letter of credit | $ 190,000 | ||
Expiration date | Feb. 28, 2022 | ||
Cash deposit | $ 190,140 | $ 195,792 |
SUBSEQUENT EVENTS (Details Narr
SUBSEQUENT EVENTS (Details Narrative) - USD ($) | 3 Months Ended | 12 Months Ended | |
Apr. 01, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Number of shares issued | 311,243 | ||
Proceeds from of common stock | $ 11,175,344 | $ 3,665,400 | |
Subsequent Event [Member] | |||
Number of shares issued | 51,250 | ||
Proceeds from of common stock | $ 410,000 |