Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2020 | Jun. 15, 2020 | |
Document And Entity Information | ||
Entity Registrant Name | XG SCIENCES INC | |
Entity Central Index Key | 0001435375 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2020 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity File Number | 333-209131 | |
Entity Incorporation, State or Country Code | MI | |
Entity's Reporting Status Current | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | true | |
Entity Ex Transition Period | true | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 3,949,443 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2020 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 |
CURRENT ASSETS | ||
Cash | $ 458,845 | $ 1,129,702 |
Accounts receivable, less allowance for doubtful accounts of $158,600 at March 31, 2020 and 179,600 at December 31, 2019 | 121,331 | 72,227 |
Inventories | 874,710 | 891,587 |
Other current assets | 317,288 | 334,493 |
Total current assets | 1,772,174 | 2,428,009 |
LEASEHOLD IMPROVEMENTS AND EQUIPMENT, NET | 3,466,419 | 3,676,142 |
LEASE DEPOSIT | 61,467 | 77,544 |
INTANGIBLE ASSETS, NET | 770,746 | 753,862 |
RIGHT OF USE ASSET | 1,486,112 | 1,606,443 |
TOTAL ASSETS | 7,556,918 | 8,542,000 |
CURRENT LIABILITIES | ||
Accounts payable | 892,700 | 634,564 |
Other current liabilities | 171,493 | 238,554 |
Deferred revenue | 10,310 | |
Current portion of long-term debt | ||
Current portion of lease liabilities | 536,786 | 520,197 |
Total current liabilities | 1,611,289 | 1,393,315 |
LONG-TERM LIABILITIES | ||
Long-term portion of lease liabilities | 1,042,745 | 1,183,872 |
Long term debt | 9,219,420 | 8,111,610 |
Total long-term liabilities | 10,262,165 | 9,295,482 |
TOTAL LIABILITIES | 11,873,454 | 10,688,797 |
STOCKHOLDERS' EQUITY | ||
Series A convertible preferred stock, 3,000,000 shares authorized, 1,890,354 shares issued and outstanding, liquidation value of $22,684,248 at March 31, 2020 and December 31, 2019 | 22,307,480 | 22,307,480 |
Common stock, no par value, 25,000,000 shares authorized, 4,024,443 shares issued and outstanding at March 31, 2020 and December 31, 2019 | 32,376,876 | 32,351,876 |
Additional paid-in capital | 8,931,527 | 8,774,975 |
Accumulated deficit | (67,932,419) | (65,581,128) |
Total stockholders' equity | (4,316,536) | (2,146,797) |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 7,556,918 | $ 8,542,000 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 |
Statement of Financial Position [Abstract] | ||
Allowance for doubtful accounts | $ 158,600 | $ 179,600 |
Series A convertible preferred stock, authorized | 3,000,000 | 3,000,000 |
Series A convertible Preferred stock, issued | 1,890,354 | 1,890,354 |
Series A convertible preferred stock, outstanding | 1,890,354 | 1,890,354 |
Series A convertible preferred stock liquidation value | $ 22,684,248 | $ 22,684,248 |
Common stock, no par value (in dollars per share) | $ 0 | $ 0 |
Common stock, authorized | 25,000,000 | 25,000,000 |
Common stock, issued | 4,024,443 | 4,024,443 |
Common stock, outstanding | 4,024,443 | 4,024,443 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
REVENUE | ||
Total Revenues | $ 167,063 | $ 857,278 |
COST OF GOODS SOLD | ||
Direct costs | 103,570 | 681,153 |
Unallocated manufacturing expenses | 658,913 | 493,469 |
Total cost of goods sold | 762,483 | 1,174,622 |
GROSS LOSS | (595,420) | (317,344) |
OPERATING EXPENSES | ||
Research and development | 285,727 | 385,245 |
Sales, general and administrative | 1,292,135 | 1,420,922 |
Total operating expenses | 1,577,862 | 1,806,167 |
OPERATING LOSS | (2,173,282) | (2,123,511) |
OTHER INCOME (EXPENSE) | ||
Interest expense, net | (178,009) | (76,665) |
Total other expense | (178,009) | (76,665) |
NET LOSS | $ (2,351,291) | $ (2,200,176) |
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING - Basic and diluted (in shares) | 4,024,443 | 3,774,879 |
NET LOSS PER SHARE - Basic and diluted (in dollars per share) | $ (0.58) | $ (0.58) |
Product sales [Member] | ||
REVENUE | ||
Total Revenues | $ 167,063 | $ 857,278 |
Grant [Member] | ||
REVENUE | ||
Total Revenues |
CONSOLIDATED STATEMENT OF CHANG
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) - USD ($) | Preferred stock A | Common Stock [Member] | Additional Paid-In Capital | Accumulated Deficit | Total |
Balances at beginning at Dec. 31, 2018 | $ 22,307,480 | $ 30,268,476 | $ 8,101,923 | $ (55,687,160) | $ 4,990,719 |
Balances at beginning (in shares) at Dec. 31, 2018 | 1,890,354 | 3,760,268 | |||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Stock issued for cash | $ 410,000 | 410,000 | |||
Stock issued for cash (in shares) | 51,250 | ||||
Stock issuance fees and expenses | $ (16,000) | (16,000) | |||
Transition adjustment for adoption of ASC 842 | (116,319) | (116,319) | |||
Stock-based compensation expense | 20,000 | 88,288 | 108,288 | ||
Warrants issued with Dow financing | 0 | 0 | |||
Net loss | (2,200,176) | (2,200,176) | |||
Balances at ending at Mar. 31, 2019 | $ 22,307,480 | $ 30,682,476 | 8,190,211 | (58,003,655) | 3,176,512 |
Balances at ending (in shares) at Mar. 31, 2019 | 1,890,354 | 3,811,518 | |||
Balances at beginning at Dec. 31, 2019 | $ 22,307,480 | $ 32,351,876 | 8,774,975 | (65,581,128) | (2,146,797) |
Balances at beginning (in shares) at Dec. 31, 2019 | 1,890,354 | 4,024,443 | |||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Stock issued for cash | 0 | ||||
Stock issuance fees and expenses | $ 0 | 0 | |||
Stock-based compensation expense | 25,000 | 85,276 | 110,276 | ||
Warrants issued with Dow financing | 0 | 71,276 | |||
Net loss | (2,200,176) | (2,351,291) | |||
Balances at ending at Mar. 31, 2020 | $ 22,307,480 | $ 30,682,476 | $ 8,190,211 | $ (58,003,655) | $ (4,316,536) |
Balances at ending (in shares) at Mar. 31, 2020 | 1,890,354 | 4,024,443 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Net loss | $ (2,351,291) | $ (2,200,176) |
Depreciation | 216,013 | 194,055 |
Amortization of intangible assets | 18,047 | 15,858 |
Stock-based compensation expense | 110,276 | 108,288 |
Non-cash interest expense | 179,086 | 13,166 |
Changes in current assets and liabilities: | ||
Accounts receivable | (49,104) | 393,201 |
Inventory | 16,876 | (45,688) |
Other current and non-current assets | 29,075 | (2,613) |
Accounts payable and other liabilities | 201,385 | (313,986) |
NET CASH USED IN OPERATING ACTIVITIES | (1,629,637) | (1,837,895) |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Purchases of property and equipment | (6,290) | (217,021) |
Purchases of intangible assets | (34,929) | (25,623) |
NET CASH USED IN INVESTING ACTIVITIES | (41,219) | (242,644) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Repayments of capital lease obligations | (15,527) | |
Repayments of long-term loan debt | (157,200) | |
Proceeds from issuance of common stock | 410,000 | |
Common stock issuance fees and expenses | (16,000) | |
Proceeds from long-term loan | 1,000,000 | |
NET CASH PROVIDED BY FINANCING ACTIVITIES | 1,000,000 | 221,273 |
NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | (670,857) | (1,859,266) |
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD | 1,129,702 | 4,893,974 |
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD | 458,845 | 3,034,708 |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||
Cash paid for interest | ||
Value of preferred stock issued for AAOF capital lease obligations | ||
Value of Warrants issued with Dow financing | $ 71,276 | $ 0 |
NATURE OF BUSINESS AND BASIS OF
NATURE OF BUSINESS AND BASIS OF PRESENTATION | 3 Months Ended |
Mar. 31, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
NATURE OF BUSINESS AND BASIS OF PRESENTATION | NOTE 1 – NATURE OF BUSINESS AND BASIS OF PRESENTATION XG Sciences, Inc., a Michigan company located in Lansing, Michigan and its subsidiary, XG Sciences IP, LLC (collectively referred to as “we”, “us”, “our”, or the “Company”) manufactures graphene nanoplatelets made from graphite, using two proprietary manufacturing processes to split natural flakes of crystalline graphite into very small and thin particles, which we sell as xGnP ® Basis of Presentation The accompanying interim condensed consolidated financial statements are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the instructions to Form 10-Q and do not include all of the information and footnotes required by GAAP for complete financial statements. All intercompany transactions have been eliminated in consolidation. Certain information and footnote disclosures normally included in our annual audited consolidated financial statements and accompanying notes have been condensed or omitted in these interim condensed consolidated financial statements. Accordingly, the unaudited condensed consolidated financial statements included herein should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2019, as filed with the Securities and Exchange Commission (“SEC”) on Form 10-K on April 29, 2020. The results of operations presented in this quarterly report are not necessarily indicative of the results of operations that may be expected for any future periods. In the opinion of management, these unaudited condensed consolidated financial statements include all adjustments and accruals, consisting only of normal recurring adjustments that are necessary for a fair statement of the results of all interim periods reported herein. Use of Estimates The preparation of our condensed consolidated financial statements in conformity with GAAP requires us to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, together with amounts disclosed in the related notes to the financial statements. Actual results and outcomes may differ from our estimates, judgments and assumptions. Significant estimates, judgments and assumptions used in these condensed consolidated financial statements include, but are not limited to, those related to revenue, accounts receivable and related allowances, inventory valuations, contingencies, useful lives and recovery of long-term assets, including intangible assets, income taxes, and the fair value of stock-based compensation. These estimates, judgments, and assumptions are reviewed periodically and the effects of material revisions in estimates are reflected in the financial statements prospectively from the date of the change in estimate. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended |
Mar. 31, 2020 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Liquidity We have historically incurred losses from operations and we may continue to generate negative cash flows as we implement our business plan. Our consolidated financial statements are prepared using US GAAP as applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. In December 2016, we entered into a Draw Loan Note and Agreement with The Dow Chemical Company (the “Dow Facility”) to provide up to $10 million of secured debt financing at an interest rate of 5% per year, drawable at our request under certain conditions. We drew $2 million at closing, $1 million on each of July 18, 2017, September 22, 2017 and December 4, 2017. After December 1, 2017, an additional $5 million became available under the Dow Facility as a result of the Company having raised $10 million of equity capital after October 31, 2016. We drew $2 million on July 8, 2019, an additional $2 million on November 19, 2019 and, on February 12,2020, we drew the remaining $1 million. As of June 10, 2020, we had cash on hand of $969,716. Due to lower than expected revenue in 2019 and the current COVID-19 global pandemic impacting both our operations and that of our customers, Management has taken several steps to ensure we are able to fund our operations from existing cash on hand, operating cash flows, additional borrowings and restructured debt obligations. In March of 2020, we restructured our organization by reducing headcount by 45%, by furloughing substantially all manufacturing employees, and by implementing temporary salary reductions ranging from 15-20% which has resulted in a 58% reduction in annual payroll and related costs. In April 2020, we furloughed additional employees in our R&D and Engineering departments. We also reduced our annual cash run rate for all other expenses by 17%. Salary reductions will be in place until the Company has recorded quarterly revenue of at least $1 million for two consecutive quarters, at which time salaries will return to their previous levels. In late March / early April of 2020, we applied for relief under the Coronavirus Aid, Relief and Economic Security Act (CARES) by submitting an application with the Small Business Administration (SBA) for an Economic Injury Disaster Loan (“EIDL”) and by submitting an application to an SBA lender bank, PNC, for a Paycheck Protection Plan (“PPP”) loan. On April 18, 2020, we received an approved and fully executed PPP Term Note for $825,200 with a term of two years, a six-month repayment deferral period, and an annual rate of interest of 1%, with a potential for some or all of the loan to be forgiven, dependent upon use of the loan proceeds. On April 20, 2020, we received the $825,200 of proceeds under the PPP loan. On May 17, 2020, the SBA issued us a decline letter for the EIDL for which we have requested reconsideration. On April 23, 2020, we entered into an amended and restated Draw Loan Note and Agreement and related transaction documents (collectively, the “Amended Dow Facility”) with the Dow Chemical Company to amend the terms of our current loan facility to allow us to structure a private placement of units (“Units”) comprised (in part) of subordinated, secured convertible notes (“Convertible Notes” and such offering, the “Unit Offering”), to support ongoing cash needs. In the Amended Dow Facility, the Company and Dow agreed to 1) extend the term of such loan facility by two years to December 1, 2023, 2) significantly reduce any required prepayment to Dow from the proceeds of new equity or equity-linked financings from the current 30-50% prepayment requirement on the pre-existing Dow Facility to a 10% prepayment requirement in the Amended Dow Facility, which does not begin until after we have raised an additional $7 million in equity or equity-linked capital from the date of the amendment, 3) capitalize all interest payable until such time as we have recorded GAAP revenue of at least $2 million for two consecutive calendar quarters 4) increase the rate of interest to 6.5% per annum from 5% in the pre-existing Dow Facility, and 5) allow for a subordinated security interest to be granted to new investors in the Unit Offering. Immediately after the execution of the transaction documents related to the Amended Dow Facility, we commenced the Unit Offering in a private placement to accredited investors. The Unit Offering is comprised of the Convertible Notes and a right to exchange two shares of previously issued Common Stock of the Company for two shares of Series B Convertible Preferred Stock of the Company (“Series B Preferred Stock”) for every $8.00 invested in the Unit Offering (the “Exchange Rights”). The Convertible Notes are secured by a junior security interest in all the assets of the Company, bear an interest rate of 7.5% per annum and mature on December 31, 2024. Each investor’s Exchange Rights are exercisable for a period of thirty (30) days after acceptance by the Company of a fully executed subscription agreement. At the option of each holder, the Convertible Notes are convertible into either i) Series B Preferred Stock at a conversion price of $8.00/share; or ii) any other form of preferred or common stock (“Subsequent Stock”) issued by the Company at a conversion price per share equal to 80% of the purchase price per share at which such Subsequent Stock is sold (or if the value per share is fixed, 120% of the number of shares that might otherwise be issuable). If and when we raise at least $15 million of equity capital (excluding capital raised in this Unit Offering), the Convertible Notes will be automatically converted into whichever of the following equity securities would result in the greatest number of shares of Common Stock being issued to the holders on an “as-if-converted” basis at such time: (i) Series B Preferred Stock at a note conversion price of $8.00/share; or (ii) Subsequent Stock at a note conversion price per share equal to 80% of the purchase price per share at which such Subsequent Stock is sold (or if the value per share is fixed, 120% of the number of shares that might otherwise be issuable); provided, however, in the event the Company raises at least $15 million of equity capital within one hundred and twenty (120) days after the first issue date of Convertible Notes, such percentages will be changed to 90% of the purchase price per share at which such Subsequent Stock is sold (or, if the value per share is fixed, 110% of the number of shares that might otherwise be issuable). Each share of Series B Preferred Stock has an original issue price of $8.00 per share (the “Series B Original Issue Price”) and a liquidation preference of $8.00 per share, with both the Series B Original Issue Price and the liquidation preference per share subject to adjustment for stock splits, recapitalizations, and the like. The Series B Preferred Stock will be senior to the Company’s Common Stock and pari-passu with the Series A Preferred Stock in terms of right of repayment in a liquidation. The Series B Preferred Stock has full ratchet antidilution protection that provides that each share of Series B Preferred Stock outstanding may be converted by an Investor at any time into that number of shares of Common Stock determined by dividing the then current Series B Original Issue Price by the applicable Conversion Price (as defined below) with the resulting fraction equal to the “Series B Conversion Rate”. The total number of shares of Common Stock issuable will be equal to the number of shares of Series B Preferred Stock being converted multiplied by the Series B Conversion Rate. The “Conversion Price” is, at any time, the price per share equal to the lesser of a) the Series B Original Issue Price per share and b) the lowest price per share at which the Company has sold equity or equity-linked securities (other than customary exclusions) at any future date while any shares of the Series B Preferred Stock remain outstanding. The Series B Original Issue Price and Conversion Price in effect at any time are also subject to proportional adjustment for share splits, share dividends, recapitalizations and the like. On April 23, 2020, certain members of our Board of Directors and their affiliates purchased $550,000 of Units. In additions, these Board members and their affiliates have made additional commitments to the Company to match any purchases of Units by disinterested third parties on a dollar for dollar basis up to an additional $1.5 million of Units purchased by such disinterested parties. Taking into consideration our current cash on hand, we estimate that we will need to raise approximately $500,000- $1,000,000 of additional capital in order to continue our operations for the next twelve months in a minimal to no revenue growth environment. If we are able to raise $1.5 million of capital from disinterested third parties, the commitments from our Board members to match this amount would result in $3.0 million of total capital to the Company, which we estimate would allow the Company to continue operating for 24 months in a minimal to no revenue growth environment. There has been no public market for our securities and a public market may never develop, or, if any market does develop, it may not be sustained. Our Common Stock is not currently quoted on or traded on any exchange or on any over-the-counter market. In the event we are unable to fund our operations from existing cash on hand, operating cash flows, additional borrowings or raising equity capital, we may be forced to reduce our expenses, slow down our growth rate, or discontinue operations. Our condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern. Inventory The following amounts were included in inventory at the end of the period: March 31, December 31, 2020 2019 Raw Materials $ 57,779 $ 68,784 Consumables 70,103 70,103 Finished Goods 746,828 752,700 Total $ 874,710 $ 891,587 874,710 891,587 Recent Accounting Pronouncements In December 2019, the FASB issued ASU 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes," which simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. ASU 2019-12 is effective for us for annual periods beginning January 1, 2021. We are currently reviewing the provisions of this new pronouncement, and the impact, if any, the adoption of this guidance has on our financial position and results of operations. In January 2020, the FASB issued ASU 2020-01, "Investments—Equity Securities (Topic 321)", "Investments—Equity Method and Joint Ventures (Topic 323)", and "Derivatives and Hedging (Topic 815): Clarifying the Interactions between Topic 321, Topic 323, and Topic 815", which clarifies that an entity should consider observable transactions when either applying or discontinuing the equity method of accounting for the purposes of applying the measurement alternative in accordance with Topic 321. ASU 2020-01 clarifies that for certain forward contracts or purchased options to acquire investments, an entity should not consider whether, upon settlement of the forward contract or exercise of the purchased option, the underlying securities would be accounted for under the equity method or the fair value option. ASU 2020-01 is effective for us for annual periods beginning January 1, 2021. Early adoption is permitted. We are currently reviewing the provisions of this new pronouncement and the impact, if any, the adoption of this guidance has on our financial position and results of operations. 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. |
FINANCING AGREEMENTS
FINANCING AGREEMENTS | 3 Months Ended |
Mar. 31, 2020 | |
Warrants And Financing Agreements | |
FINANCING AGREEMENTS | NOTE 3 –FINANCING AGREEMENT Dow Facility In December 2016, we entered into the Dow Facility which provided 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 each of July 18, 2017, September 22, 2017 and December 4, 2017. After December 1, 2017, an additional $5 million became available under the Dow Facility as a result of the Company having raised $10 million of equity capital after October 31, 2016. We drew $2 million on July 8, 2019, an additional $2 million on November 19, 2019 and, on February 12,2020, we drew the remaining $1 million and issued warrants to purchase up to 25,000 more of our shares of Common Stock. The Dow Facility is senior to 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). Under the original terms, the loan matured on December 1, 2021 (subject to certain mandatory prepayments based on our equity financing activities). In addition, after we raised a cumulative amount of equity capital exceeding $15 million, we were 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 was payable beginning January 1, 2017 although we 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 was payable in cash on the first day of following the 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 March 31, 2020, we have issued 250,000 warrants to Dow, which are exercisable on or before the expiration date of December 1, 2023. On April 23, 2020, we entered into an amended and restated Draw Loan Note and Agreement and related transaction documents (collectively, the “Amended Dow Facility”) whereby the Company and Dow agreed to 1) extend the term of such loan facility by two years to December 1, 2023, 2) significantly reduce any required prepayment to Dow from the proceeds of new equity or equity-linked financings from the current 30-50% prepayment requirement on the pre-existing Dow Facility to a 10% prepayment requirement in the Amended Dow Facility, which does not begin until after we have raised an additional $7 million in equity or equity-linked capital from the date of the amendment, 3) capitalize all interest payable until such time as we have recorded GAAP revenue of at least $2 million for two consecutive calendar quarters, 4) increase the rate of interest to 6.5% per annum from 5% in the pre-existing Dow Facility, and 5) allow for a subordinated security interest to be granted to new investors in the Unit Offering. 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 on the date of issue. The total debt discount on the Dow Facility was approximately $676,000. This 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 8.2%. During the three months ended March 31, 2020, we recognized $179,085 of amortization expense consisting of $115,318 of interest expense accrued and $63,767 of amortization from debt discount accretion related to the Dow Facility warrants. We borrowed an additional $1,000,000 in the three months ended March 31, 2020, resulting in a carrying value of $9,219,420 for the Dow Facility as of March 31, 2020. The Dow Facility entitles Dow to appoint an observer to our Board. Dow will maintain this observation right until the amount of principal and interest outstanding under the Dow Facility is less than $5 million. |
STOCK WARRANTS ACCOUNTED FOR AS
STOCK WARRANTS ACCOUNTED FOR AS EQUITY INSTRUMENTS | 3 Months Ended |
Mar. 31, 2020 | |
Equity [Abstract] | |
STOCK WARRANTS ACCOUNTED FOR AS EQUITY INSTRUMENTS | NOTE 4 – STOCK WARRANTS ACCOUNTED FOR AS EQUITY INSTRUMENTS The following table summarizes the warrants (including the warrants previously accounted for as derivatives) outstanding at March 31, 2020, which are accounted for as equity instruments, all of which are exercisable: Date Issued Expiration Date Indexed Stock Exercise Price Number of 10/08/2012 10/08/2027 Common $ 12.00 5,000 01/15/2014 - 12/31/2014 01/15/2024 Series A Convertible Preferred $ 12.00 972,720 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 07/08/2019 12/01/2023 Common $ 8.00 50,000 11/01/2019 12/01/2023 Common $ 8.00 50,000 02/12/2020 12/01/2023 Common $ 8.00 25,000 1,484,737 Each warrant indexed to Series A Convertible Preferred Stock is currently exercisable and exchangeable into 1.875 shares of common stock. On a common stock equivalent basis, the exercise price would equal $6.40/common share. |
STOCKHOLDERS' EQUITY (DEFICIT)
STOCKHOLDERS' EQUITY (DEFICIT) | 3 Months Ended |
Mar. 31, 2020 | |
Stockholders Equity Deficit | |
STOCKHOLDERS' EQUITY (DEFICIT) | NOTE 5 – STOCKHOLDERS’ EQUITY (DEFICIT) Series B Convertible Preferred Stock As of March 31, 2020, and December 31, 2019, the Company was authorized to issue up to 1,500,000 shares Series B Preferred Stock, of which none were issued and outstanding as of March 31, 2020 and December 31, 2019. Each share of the Series B Preferred, is convertible at any time, at the option of the holder, into one share of common stock. 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. On April 27, 2020, the Company filed the Second Amended and Restated Certificate of Designations of the Series B Preferred Stock in connection with the Unit Offering and the Amended Dow Facility, lowering the liquidation preference from $16.00 per share to $8.00 per share, and lowering the conversion price from $16.00 per share to $8.00 per share, among other things. The Company also adjusted certain provisions to harmonize the rights of the Series B Preferred with the rights in the Series A Certificate of Designations. 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. |
EQUITY INCENTIVE PLAN
EQUITY INCENTIVE PLAN | 3 Months Ended |
Mar. 31, 2020 | |
Share-based Payment Arrangement [Abstract] | |
EQUITY INCENTIVE PLAN | NOTE 6 – EQUITY INCENTIVE PLAN On September 30, 2019 and September 30, 2018, 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 $38,295 and $29,580 on September 30, 2019 and September 30, 2018, respectively. The restricted stock issued to the Board members has an aggregate fair value of $260,000 and vests ratably in arrears over four quarters on the last day of each fiscal quarter following the grant date. As of March 31, 2020, and 2019, 29,375 and 17,500 of the 32,500 shares of restricted stock issued had vested, resulting in compensation expense of $25,000 and $20,000 for the three months ended March 31, 2020 and March 31, 2019 and 2018, respectively. The following table shows the stock options activity as of March 31, 2020 is as follows: Weighted Number Average Of Exercise Options Price Options outstanding at December 31, 2019 839,625 $ 8.00 Changes during the period: Expired (65,000 ) 8.00 New Options Granted – at market price 8.00 Options outstanding at March 31, 2020 774,625 $ 8.00 Options exercisable at March 31, 2020 514,011 $ 8.00 |
LEASES
LEASES | 3 Months Ended |
Mar. 31, 2020 | |
Capital Leases of Lessee [Abstract] | |
LEASES | NOTE 7 – LEASES Right of Use Asset and Leased Liability: Estimated Lease Life – Lease term through December 2022 Three Months Ended March 31, 2019 Three Months Ended March 31, 2020 Right-of-use lease assets- operating as of January 1, 2019 and 2020, respectively $ 1,982,739 $ 1,606,443 Less: Accumulated amortization (111,373 ) (120,332 ) Right-of-use lease assets- operating as of current qtr-end $ 1,871,366 $ 1,486,112 Lease liability-operating as of January 1, 2019 and 2020, respectively $ 2,094,958 $ 1,704,068 Less: Accumulated Amortization (113,163 ) (124,538 ) Lease liability operating-as of current qtr-end $ 1,981,795 $ 1,579,531 Operating lease expense for the twelve months ended March 31 $ 150,557 $ 159,958 Actual remaining lease payments $ 2,369,312 $ 1,800,209 Present value of remaining payments $ 1,981,795 $ 1,579,531 Supplemental cash flow information related to leases: Leases Three Months Ended March 31, 2019 Leases Three Months Ended March 31, 2020 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 152,347 $ 164,164 The undiscounted annual future lease payments summarized by year in the table below: Maturities of leases liabilities were as follows: Year ending December 31, 2019 (excluding the three months ended March 31, 2019) $ 464,708 Year ending December 31, 2020 622,878 $ 496,223 Year ending December 31, 2021 638,178 660,438 Year ending December 31, 2022 643,548 643,548 Total Lease payments $ 2,369,312 $ 1,800,209 Less imputed interest (387,517 ) (220,678 ) Total $ 1,981,795 $ 1,579,531 Weighted average remaining lease term- operating leases ( in months) 41.2 28.5 Weighted average discount rate- operating leases (annual) 9.98 % 9.98 % |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 3 Months Ended |
Mar. 31, 2020 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | NOTE 8 – RELATED PARTY TRANSACTIONS We have a licensing agreement for exclusive use of patents and pending patents with Michigan State University (“MSU”), a shareholder of the Company via the MSU Foundation. During the three months ended March 31, 2020 and 2019 we recorded licensing expense of zero and $12,500 per quarter, respectively. Effective January 1, 2020, we have suspended accruing any royalty payable under this license as we renegotiate the agreement. During the three months ended March 31, 2020 we did not issue any Series A Preferred or Series B Preferred stock. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 3 Months Ended |
Mar. 31, 2020 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | NOTE 9 – SUBSEQUENT EVENTS On April 1, 2020, we capitalized the Dow Facility interest expense of $115,318 for the three months ended March 30, 2020, which would normally have been payable on April 1, 2020 but was permitted to be capitalized and included in the opening loan balance for purposes of the Amended Dow Facility effective April 22, 2020. During the period from April 1 through the filing date of this report, we entered into the Amended Dow Facility, commenced the Unit Offering and received $550,000 in funding therefrom, we amended and restated our Certificate of Designation of Series B Preferred Stock, received a Paycheck Protection Program loan of $825,200, and received a $10,000 Economic Industry Disaster Loan grant, all of which was disclosed in detail in the Company’s Annual Report on Form 10-K as filed April 29, 2020. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 3 Months Ended |
Mar. 31, 2020 | |
Accounting Policies [Abstract] | |
Liquidity | Liquidity We have historically incurred losses from operations and we may continue to generate negative cash flows as we implement our business plan. Our consolidated financial statements are prepared using US GAAP as applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. In December 2016, we entered into a Draw Loan Note and Agreement with The Dow Chemical Company (the “Dow Facility”) to provide up to $10 million of secured debt financing at an interest rate of 5% per year, drawable at our request under certain conditions. We drew $2 million at closing, $1 million on each of July 18, 2017, September 22, 2017 and December 4, 2017. After December 1, 2017, an additional $5 million became available under the Dow Facility as a result of the Company having raised $10 million of equity capital after October 31, 2016. We drew $2 million on July 8, 2019, an additional $2 million on November 19, 2019 and, on February 12,2020, we drew the remaining $1 million. As of June 10, 2020, we had cash on hand of $969,716. Due to lower than expected revenue in 2019 and the current COVID-19 global pandemic impacting both our operations and that of our customers, Management has taken several steps to ensure we are able to fund our operations from existing cash on hand, operating cash flows, additional borrowings and restructured debt obligations. In March of 2020, we restructured our organization by reducing headcount by 45%, by furloughing substantially all manufacturing employees, and by implementing temporary salary reductions ranging from 15-20% which has resulted in a 58% reduction in annual payroll and related costs. In April 2020, we furloughed additional employees in our R&D and Engineering departments. We also reduced our annual cash run rate for all other expenses by 17%. Salary reductions will be in place until the Company has recorded quarterly revenue of at least $1 million for two consecutive quarters, at which time salaries will return to their previous levels. In late March / early April of 2020, we applied for relief under the Coronavirus Aid, Relief and Economic Security Act (CARES) by submitting an application with the Small Business Administration (SBA) for an Economic Injury Disaster Loan (“EIDL”) and by submitting an application to an SBA lender bank, PNC, for a Paycheck Protection Plan (“PPP”) loan. On April 18, 2020, we received an approved and fully executed PPP Term Note for $825,200 with a term of two years, a six-month repayment deferral period, and an annual rate of interest of 1%, with a potential for some or all of the loan to be forgiven, dependent upon use of the loan proceeds. On April 20, 2020, we received the $825,200 of proceeds under the PPP loan. On May 17, 2020, the SBA issued us a decline letter for the EIDL for which we have requested reconsideration. On April 23, 2020, we entered into an amended and restated Draw Loan Note and Agreement and related transaction documents (collectively, the “Amended Dow Facility”) with the Dow Chemical Company to amend the terms of our current loan facility to allow us to structure a private placement of units (“Units”) comprised (in part) of subordinated, secured convertible notes (“Convertible Notes” and such offering, the “Unit Offering”), to support ongoing cash needs. In the Amended Dow Facility, the Company and Dow agreed to 1) extend the term of such loan facility by two years to December 1, 2023, 2) significantly reduce any required prepayment to Dow from the proceeds of new equity or equity-linked financings from the current 30-50% prepayment requirement on the pre-existing Dow Facility to a 10% prepayment requirement in the Amended Dow Facility, which does not begin until after we have raised an additional $7 million in equity or equity-linked capital from the date of the amendment, 3) capitalize all interest payable until such time as we have recorded GAAP revenue of at least $2 million for two consecutive calendar quarters 4) increase the rate of interest to 6.5% per annum from 5% in the pre-existing Dow Facility, and 5) allow for a subordinated security interest to be granted to new investors in the Unit Offering. Immediately after the execution of the transaction documents related to the Amended Dow Facility, we commenced the Unit Offering in a private placement to accredited investors. The Unit Offering is comprised of the Convertible Notes and a right to exchange two shares of previously issued Common Stock of the Company for two shares of Series B Convertible Preferred Stock of the Company (“Series B Preferred Stock”) for every $8.00 invested in the Unit Offering (the “Exchange Rights”). The Convertible Notes are secured by a junior security interest in all the assets of the Company, bear an interest rate of 7.5% per annum and mature on December 31, 2024. Each investor’s Exchange Rights are exercisable for a period of thirty (30) days after acceptance by the Company of a fully executed subscription agreement. At the option of each holder, the Convertible Notes are convertible into either i) Series B Preferred Stock at a conversion price of $8.00/share; or ii) any other form of preferred or common stock (“Subsequent Stock”) issued by the Company at a conversion price per share equal to 80% of the purchase price per share at which such Subsequent Stock is sold (or if the value per share is fixed, 120% of the number of shares that might otherwise be issuable). If and when we raise at least $15 million of equity capital (excluding capital raised in this Unit Offering), the Convertible Notes will be automatically converted into whichever of the following equity securities would result in the greatest number of shares of Common Stock being issued to the holders on an “as-if-converted” basis at such time: (i) Series B Preferred Stock at a note conversion price of $8.00/share; or (ii) Subsequent Stock at a note conversion price per share equal to 80% of the purchase price per share at which such Subsequent Stock is sold (or if the value per share is fixed, 120% of the number of shares that might otherwise be issuable); provided, however, in the event the Company raises at least $15 million of equity capital within one hundred and twenty (120) days after the first issue date of Convertible Notes, such percentages will be changed to 90% of the purchase price per share at which such Subsequent Stock is sold (or, if the value per share is fixed, 110% of the number of shares that might otherwise be issuable). Each share of Series B Preferred Stock has an original issue price of $8.00 per share (the “Series B Original Issue Price”) and a liquidation preference of $8.00 per share, with both the Series B Original Issue Price and the liquidation preference per share subject to adjustment for stock splits, recapitalizations, and the like. The Series B Preferred Stock will be senior to the Company’s Common Stock and pari-passu with the Series A Preferred Stock in terms of right of repayment in a liquidation. The Series B Preferred Stock has full ratchet antidilution protection that provides that each share of Series B Preferred Stock outstanding may be converted by an Investor at any time into that number of shares of Common Stock determined by dividing the then current Series B Original Issue Price by the applicable Conversion Price (as defined below) with the resulting fraction equal to the “Series B Conversion Rate”. The total number of shares of Common Stock issuable will be equal to the number of shares of Series B Preferred Stock being converted multiplied by the Series B Conversion Rate. The “Conversion Price” is, at any time, the price per share equal to the lesser of a) the Series B Original Issue Price per share and b) the lowest price per share at which the Company has sold equity or equity-linked securities (other than customary exclusions) at any future date while any shares of the Series B Preferred Stock remain outstanding. The Series B Original Issue Price and Conversion Price in effect at any time are also subject to proportional adjustment for share splits, share dividends, recapitalizations and the like. On April 23, 2020, certain members of our Board of Directors and their affiliates purchased $550,000 of Units. In additions, these Board members and their affiliates have made additional commitments to the Company to match any purchases of Units by disinterested third parties on a dollar for dollar basis up to an additional $1.5 million of Units purchased by such disinterested parties. Taking into consideration our current cash on hand, we estimate that we will need to raise approximately $500,000- $1,000,000 of additional capital in order to continue our operations for the next twelve months in a minimal to no revenue growth environment. If we are able to raise $1.5 million of capital from disinterested third parties, the commitments from our Board members to match this amount would result in $3.0 million of total capital to the Company, which we estimate would allow the Company to continue operating for 24 months in a minimal to no revenue growth environment. There has been no public market for our securities and a public market may never develop, or, if any market does develop, it may not be sustained. Our Common Stock is not currently quoted on or traded on any exchange or on any over-the-counter market. In the event we are unable to fund our operations from existing cash on hand, operating cash flows, additional borrowings or raising equity capital, we may be forced to reduce our expenses, slow down our growth rate, or discontinue operations. Our condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern. |
Inventory | Inventory The following amounts were included in inventory at the end of the period: March 31, December 31, 2020 2019 Raw Materials $ 57,779 $ 68,784 Consumables 70,103 70,103 Finished Goods 746,828 752,700 Total $ 874,710 $ 891,587 |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In December 2019, the FASB issued ASU 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes," which simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. ASU 2019-12 is effective for us for annual periods beginning January 1, 2021. We are currently reviewing the provisions of this new pronouncement, and the impact, if any, the adoption of this guidance has on our financial position and results of operations. In January 2020, the FASB issued ASU 2020-01, "Investments—Equity Securities (Topic 321)", "Investments—Equity Method and Joint Ventures (Topic 323)", and "Derivatives and Hedging (Topic 815): Clarifying the Interactions between Topic 321, Topic 323, and Topic 815", which clarifies that an entity should consider observable transactions when either applying or discontinuing the equity method of accounting for the purposes of applying the measurement alternative in accordance with Topic 321. ASU 2020-01 clarifies that for certain forward contracts or purchased options to acquire investments, an entity should not consider whether, upon settlement of the forward contract or exercise of the purchased option, the underlying securities would be accounted for under the equity method or the fair value option. ASU 2020-01 is effective for us for annual periods beginning January 1, 2021. Early adoption is permitted. We are currently reviewing the provisions of this new pronouncement and the impact, if any, the adoption of this guidance has on our financial position and results of operations. 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) | 3 Months Ended |
Mar. 31, 2020 | |
Accounting Policies [Abstract] | |
Schedule of inventory | The following amounts were included in inventory at the end of the period: March 31, December 31, 2020 2019 Raw Materials $ 57,779 $ 68,784 Consumables 70,103 70,103 Finished Goods 746,828 752,700 Total $ 874,710 $ 891,587 |
STOCK WARRANTS ACCOUNTED FOR _2
STOCK WARRANTS ACCOUNTED FOR AS EQUITY INSTRUMENTS (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
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 March 31, 2020, which are accounted for as equity instruments, all of which are exercisable: Date Issued Expiration Date Indexed Stock Exercise Price Number of 10/08/2012 10/08/2027 Common $ 12.00 5,000 01/15/2014 - 12/31/2014 01/15/2024 Series A Convertible Preferred $ 12.00 972,720 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 07/08/2019 12/01/2023 Common $ 8.00 50,000 11/01/2019 12/01/2023 Common $ 8.00 50,000 02/12/2020 12/01/2023 Common $ 8.00 25,000 1,484,737 |
EQUITY INCENTIVE PLAN (Tables)
EQUITY INCENTIVE PLAN (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Share-based Payment Arrangement [Abstract] | |
Schedule of summary of the stock option activity | The following table shows the stock options activity as of March 31, 2020 is as follows: Weighted Number Average Of Exercise Options Price Options outstanding at December 31, 2019 839,625 $ 8.00 Changes during the period: Expired (65,000 ) 8.00 New Options Granted – at market price 8.00 Options outstanding at March 31, 2020 774,625 $ 8.00 Options exercisable at March 31, 2020 514,011 $ 8.00 |
LEASES (Tables)
LEASES (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Capital Leases of Lessee [Abstract] | |
Right of Use Asset and Leased Liability | Estimated Lease Life – Lease term through December 2022 Three Months Ended March 31, 2019 Three Months Ended March 31, 2020 Right-of-use lease assets- operating as of January 1, 2019 and 2020, respectively $ 1,982,739 $ 1,606,443 Less: Accumulated amortization (111,373 ) (120,332 ) Right-of-use lease assets- operating as of current qtr-end $ 1,871,366 $ 1,486,112 Lease liability-operating as of January 1, 2019 and 2020, respectively $ 2,094,958 $ 1,704,068 Less: Accumulated Amortization (113,163 ) (124,538 ) Lease liability operating-as of current qtr-end $ 1,981,795 $ 1,579,531 Operating lease expense for the twelve months ended March 31 $ 150,557 $ 159,958 Actual remaining lease payments $ 2,369,312 $ 1,800,209 Present value of remaining payments $ 1,981,795 $ 1,579,531 |
Schedule of Future Minimum Rental Payments | Supplemental cash flow information related to leases: Leases Three Months Ended March 31, 2019 Leases Three Months Ended March 31, 2020 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 152,347 $ 164,164 The undiscounted annual future lease payments summarized by year in the table below: Maturities of leases liabilities were as follows: Year ending December 31, 2019 (excluding the three months ended March 31, 2019) $ 464,708 Year ending December 31, 2020 622,878 $ 496,223 Year ending December 31, 2021 638,178 660,438 Year ending December 31, 2022 643,548 643,548 Total Lease payments $ 2,369,312 $ 1,800,209 Less imputed interest (387,517 ) (220,678 ) Total $ 1,981,795 $ 1,579,531 Weighted average remaining lease term- operating leases ( in months) 41.2 28.5 Weighted average discount rate- operating leases (annual) 9.98 % 9.98 % |
SUMMARY OF SIGNIFICANT ACCOUN_4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 |
Accounting Policies [Abstract] | ||
Raw materials | $ 57,779 | $ 68,784 |
Consumables | 70,103 | 70,103 |
Finished goods | 746,828 | 752,700 |
Total | $ 874,710 | $ 891,587 |
SUMMARY OF SIGNIFICANT ACCOUN_5
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | Apr. 01, 2020 | Feb. 12, 2020 | Jul. 08, 2019 | Apr. 12, 2019 | Dec. 04, 2017 | Sep. 22, 2017 | Jul. 18, 2017 | Nov. 01, 2016 | Nov. 19, 2019 | Dec. 31, 2016 | Jun. 15, 2020 | Mar. 31, 2020 | Mar. 31, 2019 | Jun. 10, 2020 | Dec. 31, 2019 |
Cash on hand | $ 458,845 | $ 1,129,702 | |||||||||||||
Sale of common stock | 2,615,425 | 3,000,000 | |||||||||||||
Share price per share | $ 8 | ||||||||||||||
Proceeds from issuance of warrants | $ 1,000,000 | $ 410,000 | |||||||||||||
Proceeds from loan | 1,000,000 | ||||||||||||||
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 | $ 9,219,420 | |||||||||||||
Proceeds from secured debt | $ 2,000,000 | $ 1,000,000 | $ 1,000,000 | $ 1,000,000 | $ 2,000,000 | $ 2,000,000 | |||||||||
Interest rate | 5.00% | ||||||||||||||
Subsequent Event [Member] | |||||||||||||||
Cash on hand | $ 969,716 | ||||||||||||||
CARES Description | In late March / early April of 2020, we applied for relief under the Coronavirus Aid, Relief and Economic Security Act (CARES) by submitting an application with the Small Business Administration (SBA) for an Economic Injury Disaster Loan (“EIDL”) and by submitting an application to an SBA lender bank, PNC, for a Paycheck Protection Plan (“PPP”) loan. On April 18, 2020, we received an approved and fully executed PPP Term Note for $825,200 with a term of two years, a six-month repayment deferral period, and an annual rate of interest of 1%, with a potential for some or all of the loan to be forgiven, dependent upon use of the loan proceeds. On April 20, 2020, we received the $825,200 under the PPP loan. On May 17, 2020, the SBA issued us a decline letter for the EIDL for which we have requested reconsideration. | ||||||||||||||
Proceeds from loan | $ 825,200 | ||||||||||||||
Subsequent Event [Member] | Board of Directors [Member] | |||||||||||||||
Value of units purchased | $ 550,000 |
FINANCING AGREEMENT (Details Na
FINANCING AGREEMENT (Details Narrative) - USD ($) | Feb. 12, 2020 | Jul. 08, 2019 | Dec. 04, 2017 | Sep. 22, 2017 | Jul. 18, 2017 | Nov. 01, 2016 | Jan. 15, 2014 | Nov. 19, 2019 | Dec. 31, 2016 | Mar. 31, 2020 | Mar. 31, 2019 |
Number of common stock issued | 25,000 | ||||||||||
Proceeds from issuance of warrants | $ 1,000,000 | $ 410,000 | |||||||||
Warrant [Member] | |||||||||||
Exercise price (in dollars per share) | $ 12 | ||||||||||
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 | 9,219,420 | |||||||||
Proceeds from secured debt | $ 2,000,000 | $ 1,000,000 | $ 1,000,000 | $ 1,000,000 | $ 2,000,000 | $ 2,000,000 | |||||
Amortization expense of debt | $ 179,085 | ||||||||||
Number of shares purchased (in shares) | 250,000 | ||||||||||
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 | $ 676,000 | ||||||||||
Interest rate (in percent) | 5.00% | ||||||||||
Maturity date | Dec. 1, 2021 | ||||||||||
Effective intrest rate | 8.20% | ||||||||||
Non-cash interest expense | $ 115,318 | ||||||||||
Amortization from debt discount | $ 63,767 | ||||||||||
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. | ||||||||||
Additional borrowing | $ 1,000,000 |
STOCK WARRANTS ACCOUNTED FOR _3
STOCK WARRANTS ACCOUNTED FOR AS EQUITY INSTRUMENTS (Details) | 3 Months Ended |
Mar. 31, 2020$ / sharesshares | |
Number of Warrants | 1,484,737 |
Warrant [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 | $ 12 |
Number of Warrants | 972,720 |
Warrant 2 [Member] | Minimum [Member] | |
Date Issued | Jan. 15, 2014 |
Warrant 2 [Member] | Maximum [Member] | |
Date Issued | Dec. 31, 2014 |
Warrant 3 [Member] | |
Expiration Date | Apr. 30, 2022 |
Indexed stock | Common |
Exercise Price | $ / shares | $ 16 |
Number of Warrants | 218,334 |
Warrant 3 [Member] | Minimum [Member] | |
Date Issued | Apr. 30, 2015 |
Warrant 3 [Member] | Maximum [Member] | |
Date Issued | May 26, 2015 |
Warrant 4 [Member] | |
Date Issued | Jun. 30, 2015 |
Expiration Date | Jun. 30, 2022 |
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 |
Warrant 12 [Member] | |
Date Issued | Jul. 8, 2019 |
Expiration Date | Dec. 1, 2023 |
Indexed stock | Common |
Exercise Price | $ / shares | $ 8 |
Number of Warrants | 50,000 |
Warrant 13 [Member] | |
Date Issued | Nov. 1, 2019 |
Expiration Date | Dec. 1, 2023 |
Indexed stock | Common |
Exercise Price | $ / shares | $ 8 |
Number of Warrants | 50,000 |
Warrant 14 [Member] | |
Date Issued | Feb. 12, 2020 |
Expiration Date | Dec. 1, 2023 |
Indexed stock | Common |
Exercise Price | $ / shares | $ 8 |
Number of Warrants | 25,000 |
STOCKHOLDERS' EQUITY (DEFICIT)
STOCKHOLDERS' EQUITY (DEFICIT) (Details Narrative) - $ / shares | Mar. 31, 2020 | Dec. 31, 2019 |
Preferred stock, authorized | 3,000,000 | 3,000,000 |
Preferred stock, issued | 1,890,354 | 1,890,354 |
Preferred stock, outstanding | 1,890,354 | 1,890,354 |
Series B Preferred Stock [Member] | ||
Preferred stock, authorized | 1,500,000 | 1,500,000 |
Preferred stock, issued | 0 | 0 |
Preferred stock, outstanding | 0 | 0 |
Liquidation (in dollars per share) | $ 8 | $ 16 |
Conversion price (in dollars per share) | $ 8 | $ 16 |
EQUITY INCENTIVE PLAN (Details)
EQUITY INCENTIVE PLAN (Details) | 3 Months Ended |
Mar. 31, 2020$ / sharesshares | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward] | |
Options outstanding at beginning of year | shares | 839,625 |
Changes during the year: | |
Expired | shares | (65,000) |
New Options Granted - at market price | shares | 0 |
Options outstanding at end of Period | shares | 774,625 |
Options exercisable at end of Period | shares | 514,011 |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [RollForward] | |
Options outstanding at beginning of year | $ / shares | $ 8 |
Changes during the year: | |
Expired | $ / shares | 8 |
New Options Granted - at market price | $ / shares | 8 |
Options outstanding at end of Period | $ / shares | 8 |
Options exercisable at end of Period | $ / shares | $ 8 |
EQUITY INCENTIVE PLAN (Details
EQUITY INCENTIVE PLAN (Details Narrative) - USD ($) | 1 Months Ended | 3 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Mar. 31, 2020 | Mar. 31, 2019 | |
Number of options granted (in shares) | 0 | |||
Exercise price (in dollars per share) | $ 8 | |||
2007 Stock Option Plan [Member] | Restricted Common Stock [Member] | Directors [Member] | ||||
Number of options granted (in shares) | 2,500 | |||
Stock based compensation | $ 25,000 | $ 20,000 | ||
Exercise price (in dollars per share) | $ 8 | |||
Number of shares vested (in shares) | 20,000 | |||
Description of vesting terms | The options vest ratably over a four-year period beginning on the one-year anniversary. | |||
Aggregate grant date fair value | $ 38,295 | $ 260,000 | ||
Number of restricted stock issued | 29,375 | 17,500 | ||
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 |
LEASES (Details)
LEASES (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Capital Leases of Lessee [Abstract] | ||
Right-of-use lease assets- operating at beginning | $ 1,606,443 | $ 1,982,739 |
Less: Accumulated amortization | (120,332) | (111,373) |
Right-of-use lease assets- operating at end | 1,486,112 | 1,871,366 |
Lease liability-operating at beginning | 1,704,068 | 2,094,958 |
Less: Accumulated Amortization | (124,538) | (113,163) |
Lease liability operating at end | 1,579,531 | 1,981,795 |
Operating lease expense | 159,958 | 150,557 |
Actual remaining lease payments | 1,800,209 | 2,369,312 |
Present value of remaining payments | $ 1,579,531 | $ 1,981,795 |
LEASES (Details 1)
LEASES (Details 1) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Cash paid for amounts included in the measurement of lease liabilities: | ||
Operating cash flows from operating leases | $ 164,164 | $ 152,347 |
Maturities of leases liabilities | ||
Year ending December 31, 2019 (excluding the three months ended March 31, 2019) | 464,708 | |
Year ending December 31, 2020 | 496,223 | 622,878 |
Year ending December 31, 2021 | 660,438 | 638,178 |
Year ending December 31, 2022 | 643,548 | 643,548 |
Total Lease payments | 1,800,209 | 2,369,312 |
Less imputed interest | (220,678) | (387,517) |
Total | $ 1,579,531 | $ 1,981,795 |
Weighted average remaining lease term- operating leases ( in months) | 28 months 15 days | 41 months 6 days |
Weighted average discount rate- operating leases (annual) | 9.98% | 9.98% |
RELATED PARTY TRANSACTIONS AND
RELATED PARTY TRANSACTIONS AND COMMITMENTS (Details Narrative) - USD ($) | Feb. 12, 2020 | Mar. 31, 2020 | Mar. 31, 2019 |
Number of shares issued | 25,000 | ||
Licensing Agreement [Member] | Michigan State University (Patents and Pending Patents) [Member] | |||
Licensing expenses | $ 0 | $ 12,500 | |
Master Leasing Agreement [Member] | Aspen Advance Opportunity Fund, LP [Member] | Preferred stock (A) [Member] | |||
Number of shares issued | 0 |
SUBSEQUENT EVENTS (Details Narr
SUBSEQUENT EVENTS (Details Narrative) - USD ($) | Apr. 01, 2020 | Jun. 15, 2020 | Mar. 31, 2020 | Mar. 31, 2019 |
Interest expense | $ 178,009 | $ 76,665 | ||
Proceeds from loan | $ 1,000,000 | |||
Subsequent Event [Member] | ||||
Proceeds from loan | $ 825,200 | |||
Subsequent Event [Member] | Board of Directors [Member] | ||||
Interest expense | $ 115,318 | |||
Value of units purchased | $ 550,000 |