Nanophase Technologies (NANX) 10-Q 15 May 19 2019 Q1 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2019	May 15, 2019
Document And Entity Information [Abstract]
Entity Registrant Name	NANOPHASE TECHNOLOGIES Corp
Entity Central Index Key	0000883107
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2019
Trading Symbol	NANX
Current Fiscal Year End Date	--12-31
Entity Reporting Status Current	Yes
Entity Small Business	true
Entity Filer Category	Non-accelerated Filer
Entity Emerging Growth	false
Entity Common Stock, Shares Outstanding		38,000,792
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2019

CONSOLIDATED BALANCE SHEETS (Un

CONSOLIDATED BALANCE SHEETS (Unaudited Consolidated Condensed) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Current assets:
Cash	$ 632	$ 1,345
Tradeaccounts receivable, less allowance for doubtful accounts of $9 on March 31, 2019 and December 31, 2018, respectively	2,105	829
Inventories, net	2,228	2,242
Prepaid expenses and other current assets	409	273
Total current assets	5,374	4,689
Equipment and leasehold improvements, net	2,055	1,865
Operating lease right-of-use assets	2,122
Other assets, net	14	15
Total assets	9,565	6,569
Current liabilities:
Line of credit, related party	1,448	832
Line of credit, bank	500
Current portion of finance lease obligations	223	218
Current portion of operating lease obligations	331
Accounts payable	1,781	1,608
Accrued expenses	1,088	979
Total current liabilities	5,371	3,637
Long-term portion of finance lease obligations	449	506
Long-term portion of operating lease obligations	2,117
Long-term loan, related party	500	500
Long-term deferred rent		344
Asset retirement obligations	200	198
Total long-term liabilities	3,266	1,548
Contingent liabilities:
Stockholders' equity:
Preferred stock, $.01 par value, 24,088 shares authorized, and no shares issued and outstanding
Common stock, $.01 par value, 42,000,000 shares authorized; 33,911,792 shares issued and outstanding on March 31, 2019 and December 31, 2018, respectively	339	339
Additional paid-in capital	98,852	98,795
Accumulated deficit	(98,263)	(97,750)
Total stockholders' equity	928	1,384
Total liabilities and stockholders' equity	$ 9,565	$ 6,569

CONSOLIDATED BALANCE SHEETS (_2

CONSOLIDATED BALANCE SHEETS (Unaudited Consolidated Condensed) (Parenthetical) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Statement of Financial Position [Abstract]
Allowance for doubtful accounts	$ 9	$ 9
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, authorized	24,088	24,088
Preferred stock, issued	0	0
Preferred stock, outstanding	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, authorized	42,000,000	42,000,000
Common stock, issued	33,911,792	33,911,792
Common stock, outstanding	33,911,792	33,911,792

CONSOLIDATED STATEMENTS OF OPER

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited Consolidated Condensed) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Revenue:
Total revenue	$ 3,755	$ 2,898
Operating expense:
Cost of revenue	2,871	2,488
Gross profit	884	410
Research and development expense	477	558
Selling, general and administrative expense	877	765
Loss from operations	(470)	(913)
Interest expense	43	11
Loss before provision for income taxes	(513)	(924)
Net loss	$ (513)	$ (924)
Net loss per share-basic and diluted (in dollar per share)	$ (0.02)	$ (0.03)
Weighted average number of basic and diluted common shares outstanding (in shares)	33,911,792	33,847,793
Product Revenue [Member]
Revenue:
Total revenue	$ 3,497	$ 2,867
Other Revenue [Member]
Revenue:
Total revenue	$ 258	$ 31

CONSOLIDATED STATEMENTS OF STOC

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited Consolidated Condensed) - USD ($) $ in Thousands	Common Stock [Member]	Additional Paid-In Capital [Member]	Accumulated Deficit [Member]	Total
Balance at beginning at Dec. 31, 2017	$ 338	$ 98,563	$ (95,669)	$ 3,232
Balance at beginning (in shares) at Dec. 31, 2017	33,847,793
Stock-based compensation		43		43
Net loss			(924)	(924)
Balance at ending at Mar. 31, 2018	$ 338	98,606	(96,593)	2,351
Balance at ending (in shares) at Mar. 31, 2018	33,847,793
Balance at beginning at Dec. 31, 2018	$ 339	98,795	(97,750)	1,384
Balance at beginning (in shares) at Dec. 31, 2018	33,911,792
Stock-based compensation		57		57
Net loss			(513)	(513)
Balance at ending at Mar. 31, 2019	$ 339	$ 98,852	$ (98,263)	$ 928
Balance at ending (in shares) at Mar. 31, 2019	33,911,792			928

CONSOLIDATED STATEMENTS OF CASH

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited Consolidated Condensed) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Operating activities:
Net loss	$ (513)	$ (924)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization	77	85
Loss on disposal of equipment and leasehold improvements	16
Share-based compensation	57	43
Changes in assets and liabilities related to operations:
Trade accounts receivable	(1,276)	(262)
Inventories	14	165
Prepaid expenses and other assets	(136)	(61)
Accounts payable	133	142
Accrued expenses	109	194
Other long-term assets and liabilities	(18)
Net cash used in operating activities	(1,537)	(618)
Investing activities:
Acquisition of equipment and leasehold improvements	(240)	(5)
Net cash used in investing activities	(240)	(5)
Financing activities:
Principal payment on finance leases	(52)	(42)
Proceeds from line of credit, bank	500	200
Payments to the line of credit, bank		(300)
Proceeds from line of credit, related party	2,936
Payments to line of credit, related party	(2,320)
Net cash provided by financing activities	1,064	(142)
Decrease in cash and cash equivalents	(713)	(765)
Cash and cash equivalents at beginning of period	1,345	1,955
Cash and cash equivalents at end of period	632	1,190
Supplemental cash flow information:
Interest paid	30	11
Supplemental non-cash investing and financing activities:
Accounts payable incurred for the purchase of equipment and leasehold improvements	$ 40	$ 30

Basis of Presentation

Basis of Presentation	3 Months Ended
	Mar. 31, 2019
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Basis of Presentation	(1) Basis of Presentation The accompanying unaudited consolidated condensed interim financial statements of Nanophase Technologies Corporation (“Nanophase”, “Company”, “we”, “our”, or “us”) reflect all adjustments (consisting of normal recurring adjustments) which, in the opinion of management, are necessary for a fair presentation of our financial position and operating results for the interim periods presented. All statements include the results from both Nanophase and our wholly-owned subsidiary, Solésence, LLC( “Solésence,” or our “Solésence ® These financial statements should be read in conjunction with our audited financial statements and notes thereto for the year ended December 31, 2018, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, as filed with the Securities and Exchange Commission.

Going Concern _ Liquidity

Going Concern / Liquidity	3 Months Ended
	Mar. 31, 2019
Going Concern Liquidity
Going Concern/ Liquidity	(2) Going Concern / Liquidity We believe that cash from operations, cash on hand, cash from our May 13, 2019 financing (see note 14), in addition to unused borrowing capacity, should be adequate to fund our operating plans through 2019, but this is dependent on several things over which we have limited control. Our largest customer made up 74% of our 2018 revenue, and expects a material reduction in orders from us in 2019, which has limited our flexibility and required us to make cash management a top priority. We also expect growth in our Solésence ® ® ® ® These circumstances raise significant doubt as to the Company’s ability to operate as a going concern under U.S. GAAP. The accompanying financial statements have been prepared on a going concern basis in accordance with U.S. GAAP. As such, no adjustments have been made to the unaudited condensed consolidated financial statements for the recoverability of assets and classification of liabilities that might be necessary should the Company be unable to continue operating as a going concern.

Summary of Significant Accounti

Summary of Significant Accounting Policies	3 Months Ended
	Mar. 31, 2019
Accounting Policies [Abstract]
Summary of Significant Accounting Policies	(3) Summary of Significant Accounting Policies Recently Adopted Financial Accounting Standards On January 1, 2019, the Company adopted Accounting Standards Update (“ASU”) No. 2016-02, Leases, ASU No. 2018-10, Codification Improvements to Topic 842 (Leases) and ASU No. 2018-11, Targeted Improvements to Topic 842 (Leases). The guidance is intended to increase transparency and comparability among companies for leasing transactions, including a requirement for companies that lease assets to recognize on their balance sheets the assets and liabilities for the rights and obligations created by those leases. The guidance also provides for disclosures that allow the users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. The Company adopted the guidance on January 1, 2019 using the modified retrospective method without restatement of comparative periods. As such, periods prior to the date of adoption are presented in accordance with ASC 840 - Leases. The Company utilized the available practical expedient that allowed for the Company to not reassess whether existing contracts contain a lease under the new definition of a lease, lease classification for existing leases and whether previously capitalized initial direct costs would qualify for capitalization under the new guidance. The adoption of this guidance had a material impact on the Consolidated Condensed Balance Sheet as of March 31, 2019 due to the recognition of equal right-of-use assets and lease liabilities for the Company’s portfolio of operating leases. The right-of-use asset balance was then adjusted by the reclassification of pre-existing accrued rent balances from other line items within the Consolidated Condensed Balance Sheet. The adoption had an immaterial impact to the Consolidated Condensed Statement of Cash Flows and to the Consolidated Condensed Statement of Operations for the three months ended March 31, 2019. The adoption had no impact to the Consolidated Condensed Statement of Changes in Stockholders’ Equity for the three months ended March 31, 2019. Additional information and disclosures required by the new standard are contained in Note 10, Leases.

Description of Business

Description of Business	3 Months Ended
	Mar. 31, 2019
Description Of Business
Description of Business	(4) Description of Business Nanophase is a skin and sun care focused company that offers engineered materials, formulation development and commercial manufacturing with an integrated family of technologies. We look at our products in three major product categories; Personal Care Ingredients, including sunscreens as active ingredients; Solésence, including full formulations of skin care products, marketed and sold by our wholly-owned subsidiary, Solésence, LLC (“Solésence,” or our “Solésence ® We target markets in which we believe practical solutions may be found using our products. We work closely with current and potential customers in these target markets to identify their material and performance requirements and market our materials to various end-use applications manufacturers, and our Solésence ® ® Although our primary strategic focus has been the North American market, we currently sell material to customers overseas and have been working to expand our reach within foreign markets. The Company was incorporated in Illinois on November 25, 1989, and became a Delaware corporation during November 1997. Our common stock trades on the OTCQB marketplace under the symbol NANX. While product sales comprise the majority of our revenue, we also recognize revenue from other sources from time to time. These activities are not expected to drive the long-term growth of the business. For this reason, we classify such revenue as “other revenue” in our Consolidated Condensed Statements of Operations, as it does not represent revenue directly from the sale of our products.

Revenues

Revenues	3 Months Ended
	Mar. 31, 2019
Revenue from Contract with Customer [Abstract]
Revenues	(5) Revenues 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 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. Customers deposits, deferred revenue and other receipts are deferred and recognized when the revenue is realized and earned. Cash payments to customers are classified as reductions of revenue in the Company’s Consolidated Condensed Statement of Operations. The Company does not disclose the value of the unsatisfied performance obligations for contracts with an original expected length of one year or less and contracts for which the Company recognizes revenue which the Company has the right to invoice for goods completed.

Earnings Per Share

Earnings Per Share	3 Months Ended
	Mar. 31, 2019
Earnings Per Share [Abstract]
Earnings Per Share	(6) Earnings Per Share Earnings (loss) per share is computed using the Treasury Stock Method. Options to purchase approximately 766,000 shares of common stock that were outstanding as of March 31, 2019 were not included in the computation of earnings (loss) per share for the three-month period ended March 31, 2019, as the impact of such shares would be anti-dilutive. Options to purchase approximately 205,000 shares of common stock that were outstanding as of March 31, 2018 were not included in the computation of earnings (loss) per share for the three-month period ended March 31, 2018, as the impact of such shares would be anti-dilutive.

Financial Instruments

Financial Instruments	3 Months Ended
	Mar. 31, 2019
Fair Value Disclosures [Abstract]
Financial Instruments	(7) Financial Instruments We follow the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements and Disclosures Our financial instruments include cash and cash equivalents, accounts receivable, accounts payable and accrued expenses, along with the promissory note with no related borrowings described in Note 8, and any borrowings on the working capital line of credit from Libertyville Bank and Trust and any borrowings under the Master Agreement from Beachcorp, LLC described below in Note 8. The fair values of all financial instruments were not materially different from their carrying values. There were no financial assets or liabilities adjusted to fair value on March 31, 2019 or December 31, 2018.

Note and Lines of Credit

Note and Lines of Credit	3 Months Ended
	Mar. 31, 2019
Debt Disclosure [Abstract]
Notes and Lines of Credit	(8) Notes and Line of Credit During July 2014 we entered into a bank-issued letter of credit and related promissory note for up to $30 in borrowings to support our obligations under our facility lease agreement. No borrowings have been incurred under this promissory note. Should any borrowings occur in the future, the interest rate would be the prime rate plus 1%, with the bank having the right to “set off” or apply unpaid balances against our checking account if we fail to meet our obligations under any borrowings under the note. It is our intention to renew this note annually, for as long as we need to do so pursuant to the terms of our facility lease agreement. This note currently expires on July 1, 2019 and will then auto-renew through July 1, 2020. Because there were no amounts outstanding on the note at any time during 2019 or 2018, we have recorded no related liability on our balance sheet. On March 22, 2019, we executed a New Business Loan Agreement, dated as of March 4, 2019, with Libertyville Bank and Trust Company, a Wintrust Community Bank (“Libertyville”), our primary bank, which replaces the Line of Credit Agreement with Libertyville having a maturity date of March 4, 2019. Under the New Business Loan Agreement, Libertyville will provide a maximum of (i) $500 or (ii) two times the sum of (a) 75% our eligible accounts receivables and (b) our cash deposited with Libertyville, whichever is less, of revolving credit to us, collateralized by a senior priority lien on our accounts receivable, inventory, equipment, general intangibles and fixtures. Interest is payable monthly on any advances at a floating interest rate of the prime rate at the time plus 1%. We must have $500 in cash, inclusive of the borrowed amount, at Libertyville on the date of any advance. Advances may only occur at the beginning or end of a fiscal quarter and must be repaid in full within five business days of the advance. Amounts due under the Line of Credit Agreement must be paid in full on April 4, 2020. We borrowed $500 on March 29, 2019, and repaid it on April 3, 2019. There was no outstanding balance on this loan at December 31, 2018. On November 16, 2018, we entered into a Business Loan Agreement (the “Master Agreement”) with Beachcorp, LLC. Beachcorp, LLC is managed by Bradford T. Whitmore, who, together with his affiliates Grace Brothers, Ltd. and Grace Investments, Ltd., beneficially owned approximately 47% of the outstanding shares of our common stock as of March 31, 2019, and owned approximately 53% of our common stock as of May 13, 2019, pursuant to our recent financing (see Note 14). The Master Agreement relates to two loan facilities, each evidenced by separate promissory notes, each dated November 16, 2018: a term loan to the Company of up to $500 to be disbursed in a single advance (the “Term Loan”) with a fixed annual interest rate of 8.25%, payable quarterly, accruing from the date of such advance and with principal due on December 31, 2020; and an asset-based revolving loan facility for the Company of up to $2,000 (the “Revolver Facility”), with floating interest accruing at the prime rate plus 3% (8.25% minimum) per year, with a borrowing base consisting of qualified accounts receivable of the Company, and with all principal and accrued interest due March 31, 2020. The Term Loan and Revolver Facility are secured by all the unencumbered assets of the Company and subordinated to Libertyville’s secured interest under the New Business Loan Agreement. The Master Agreement substantially restricts the Company’s ability to incur additional indebtedness during the terms of both the Term Loan and the Revolver Facility. On March 31, 2019, the balance on the term loan was $500 and the balance on the Revolver Facility was $1,448. There was $26 in 2019 interest expense, of which $13 was accrued and $13 paid by the end of the quarter. As Beachcorp, LLC is an affiliate of one of our shareholders, this amounts to interest to be paid to a related party. On March 31, 2019 borrowings were within the credit agreement limit with an additional $391 available. The balance of borrowing base, loan amount, and any excess payments required over the available borrowing base will change as frequently as daily, given the operational nature of the elements of the Revolver Facility.

Inventories

Inventories	3 Months Ended
	Mar. 31, 2019
Inventory Disclosure [Abstract]
Inventories	(9) Inventories Inventories consist of the following: March 31, 2019 December 31, 2018 Raw materials $ 1,250 $ 1,086 Finished goods 1,057 1,243 2,307 2,329 Allowance for excess inventory quantities (79 ) (87 ) $ 2,228 $ 2,242

Leases

Leases	3 Months Ended
	Mar. 31, 2019
Leases [Abstract]
Leases	(10) Leases The Company’s operating lease portfolio is comprised of operating leases for office, warehouse space and equipment. Certain of the Company’s leases include one or more options to renew or terminate the lease at the Company’s discretion. The Company regularly evaluates the renewal and termination options and when they are reasonably certain of exercise, includes the renewal or termination option in our lease term. The adoption of Topic 842 resulted in the Company recognizing operating lease liabilities totaling $2,556 with a corresponding right of-use (‘ROU”) asset of $2,212 based on the present value of the minimum rental payments of such leases. The variance between the ROU asset balance and the lease liability is deferred rent liability that existed prior to the adoption of the ASC 842 and was offset against the ROU asset balance during the adoption. As of March 31, 2019, the ROU asset had a balance of $2,122 which is included in the “Operating lease right-of-use assets” line item of these condensed consolidated financial statements and current and non-current lease liabilities related to the ROU asset of $331 and $2,117 respectively, and are included in the “Current portion of operating lease obligations” and “Long-term portion of operating lease obligations” line items of these condensed consolidated financial statements. The discount rates used for leases accounted for under ASC842 are based on an interest rate yield curve developed for the leases in the Company’s portfolio. The office leases contain variable lease payments which consist primarily of rent escalations based on an established index or rate and taxes, insurance, and common area or other maintenance costs, which are paid based on actual costs incurred by the lessor. The Company has elected to utilize the available practical expedient to not separate lease and non-lease components. Quantitative information regarding the Company’s leases is as follows: Three Months Ended Components of lease cost Finance lease cost components: Amortization of finance lease assets $ 17 Interest on fiance lease liabilities 16 Total finance lease costs 33 Operating lease cost components: Operating lease cost 123 Variable lease cost 27 Short-term lease cost 22 Total operating lease costs 172 Total lease cost $ 205 Supplemental cash flow information related to leases is as follows for the period ended March 31, 2019: Cash paid for amounts included in the measurement of lease liabiltiies: Operating cash outflow from operating leases $ 168 Weighted-average remaining lease term-finance leases (in years) 2.7 Weighted-average remaining lease term-operating leases (in years) 3.7 Weighted-average discount rate-finance leases 9.1 % Weighted-average discount rate-operating leases 14.4 % The future maturities of the Company’s finance and operating leases as of March 31, 2019 is as follows: Finance Operating Leases Leases Total 2019 $ 206 $ 506 $ 712 2020 255 616 871 2021 196 618 814 2022 109 632 741 2023 5 642 647 2024 and thereafter — 580 580 Total payments $ 771 $ 3,594 $ 4,365 Less amounts representing interest (99 ) (1,146 ) (1,245 ) Total minimum payments required: $ 672 $ 2,448 $ 3,120

Share-Based Compensation

Share-Based Compensation	3 Months Ended
	Mar. 31, 2019
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Share-Based Compensation	(11) Share-Based Compensation We follow FASB ASC Topic 718, Compensation – Stock Compensation As of March 31, 2019, there was approximately $334 of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under our stock option plans. That cost is expected to be recognized over a remaining weighted-average period of 1.9 years. Stock Options and Stock Grants No stock options were exercised during the three months ended March 31, 2019, or March 31, 2018. During the three months ended March 31, 2019, 8,000 stock options were granted, compared to 36,000 stock options granted during the same period in 2018. During the three months ended March 31, 2019, 4,000 stock options expired, and 11,000 stock options were forfeited compared to no stock options being forfeited and 101,000 stock options expiring during the same period in 2018. We had 3,408,000 stock options outstanding at a weighted average exercise price of $0.67 on March 31, 2019, compared to 3,415,000 stock options outstanding at a weighted average exercise price of $0.67 on December 31, 2018. The following table illustrates the various assumptions used to calculate the Black-Scholes option pricing model for stock options granted during the three-month periods presented: March 31, 2019 March 31, 2018 Weighted-average risk-free interest rates: 2.5 % 2.7 % Dividend yield: — — Weighted-average expected life of the option: 7 years 7 years Weighted-average expected stock price volatility: 94 % 94 % Weighted-average fair value of the options granted: $ 0.75 $ 0.36 As of March 31, 2019, we did not have any unvested restricted stock or performance shares outstanding.

Significant Customers and Conti

Significant Customers and Contingencies	3 Months Ended
	Mar. 31, 2019
Risks and Uncertainties [Abstract]
Significant Customers and Contingencies	(12) Significant Customers and Contingencies Revenue from three customers constituted approximately 54%, 19% and 9%, respectively, of our total revenue for the three months ended March 31, 2019. Amounts included in accounts receivable on March 31, 2019 relating to these three customers were approximately $631, $673 and $325, respectively. Revenue from these three customers constituted approximately 78%, 0% and 0%, respectively, of our total revenue for the three months ended March 31, 2018. Amounts included in accounts receivable on March 31, 2018 relating to these three customers were approximately $1,089, $0 and $0, respectively. The loss of one of these significant customers, a significant decrease in revenue from one or more of these customers, or the failure to attract new customers could have a material adverse effect on our business, results of operations and financial condition. We currently have exclusive supply agreements with BASF Corporation (“BASF”), our largest customer, that have contingencies outlined which could potentially result in the license of technology and/or the sale of production equipment from the Company to the customer intended to provide capacity sufficient to meet the customer’s production needs. This outcome may occur if we fail to meet certain performance requirements, certain other obligations and/or certain financial condition covenants. The financial condition covenants in one of our supply agreements with BASF “trigger” a technology transfer right (license and equipment sale at BASF’s option) in the event (a) that earnings for the twelve-month period ending with our most recently published quarterly financial statements are less than zero and our cash, cash equivalents and certain investments are less than $500,000, or (b) of an acceleration of any debt maturity having a principal amount of more than $10 million. There are certain minimum finished goods inventory requirements with the 2019 amendment to the supply agreement. This agreement also requires Nanophase to maintain certain finished goods inventory levels as “safety stock,” beginning in the first quarter of 2019, and increasing through the third quarter of 2019 to a negotiated level based on agreed demand metrics, in order to maintain the $500,000 non-cash component discussed above. After September 30, 2019, should our safety stock fall below the prescribed amount of material, the quarter-end cash requirement would revert to $1,000,000 in cash, cash equivalents, and certain investments. The safety stock requirement may be adjusted upon mutual agreement. Our supply agreements with BASF also “trigger” a technology transfer right in the event of our insolvency, as further defined within the agreements. In the event of an equipment sale, upon incurring a triggering event, the equipment would be sold to the customer at either 115% of the equipment’s net book value or the greater of 30% of the original book value of such equipment, and any associated upgrades to it, or 115% of the equipment’s net book value, depending on the equipment and related products. We believe that we should have sufficient cash and credit availability (See the description of our New Line of Credit Agreement with Libertyville and the Master Agreement with Beachcorp, LLC (described in Note 8) to operate our business during 2019, but this is dependent on several things over which we have limited control. If a triggering event were to occur and BASF elected to proceed with the license and related equipment sale mentioned above, we would receive royalty payments from this customer for products sold using our technology; however, we would lose both significant revenue and the ability to generate significant revenue to replace that which was lost in the near term. Replacement of necessary equipment that could be purchased and removed by the customer pursuant to this triggering event could take in excess of twelve months. Any additional capital outlays required to rebuild capacity would probably be greater than the proceeds from the purchase of the assets as dictated by our agreement with the customer. Similar consequences would occur if we were determined to have materially breached certain other provisions of the supply agreement with BASF. Any such event would also likely result in the loss of many of our key staff and line employees due to economic realities. We believe that our employees are a critical component of our success and it could be difficult to replace them quickly. Given the occurrence of any such event, we might not be able to hire and retain skilled employees given the stigma relating to such an event and its impact on us. Finally, any shortfall in capital needed to operate the business as management intends, including with respect to avoiding this triggering event as described above, may result in a curtailment of certain activities or anticipated investments. We expect to expend resources on research, development and product testing, and in expanding current capacity or capability for new business. In addition, we may incur significant costs in preparing, filing, prosecuting, maintaining and enforcing our patents and other proprietary rights. We may need additional financing if we were to lose an existing customer or suffer a significant decrease in revenue from one or more of our customers or because of currently unknown capital requirements, new regulatory requirements or the need to meet the cash requirements discussed above to avoid a triggering event under our BASF agreement. Given our expected growth in our Solésence® business, we may also have temporary working capital demands that we cannot fund with existing capital, while remaining in compliance with the covenants included in our BASF agreement described above. If necessary, we may seek funding through public or private financing and through contracts with governmental entities or other companies. Additional financing may not be available on acceptable terms or at all, and any such additional financing could be dilutive to our shareholders. If we are unable to obtain adequate funds, we may be required to delay, scale-back or eliminate some of our manufacturing and marketing operations or we may need to obtain funds through arrangements on less favorable terms. Such circumstances could raise doubt as to our ability to continue as a going concern. If we obtain funding on unfavorable terms, we may be required to relinquish rights to some of our intellectual property.

Business Segmentation and Geogr

Business Segmentation and Geographical Distribution	3 Months Ended
	Mar. 31, 2019
Segment Reporting [Abstract]
Business Segmentation and Geographical Distribution	(13) Business Segmentation and Geographical Distribution Revenue from international sources approximated $457 and $18 for the three months ended March 31, 2019 and 2018, respectively. All this revenue was product revenue. Our Operations comprise a single business segment and all of our long-lived assets are located within the United States. We categorize our revenue stream into three main product categories, Personal Care Ingredients, Advanced Materials and Solésence ® Product Category 2019 2018 Personal Care Ingredients $ 2,009 $ 2,305 Advanced Materials 850 532 Solésence ® 896 61 Total Sales $ 3,755 $ 2,898

Subsequent Events

Subsequent Events	3 Months Ended
	Mar. 31, 2019
Subsequent Events [Abstract]
Subsequent Events	(14) Subsequent Events

Summary of Significant Accoun_2

Summary of Significant Accounting Policies (Policies)	3 Months Ended
	Mar. 31, 2019
Accounting Policies [Abstract]
Recently Adopted Financial Accounting Standards	Recently Adopted Financial Accounting Standards On January 1, 2019, the Company adopted Accounting Standards Update (“ASU”) No. 2016-02, Leases, ASU No. 2018-10, Codification Improvements to Topic 842 (Leases) and ASU No. 2018-11, Targeted Improvements to Topic 842 (Leases). The guidance is intended to increase transparency and comparability among companies for leasing transactions, including a requirement for companies that lease assets to recognize on their balance sheets the assets and liabilities for the rights and obligations created by those leases. The guidance also provides for disclosures that allow the users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. The Company adopted the guidance on January 1, 2019 using the modified retrospective method without restatement of comparative periods. As such, periods prior to the date of adoption are presented in accordance with ASC 840 - Leases. The Company utilized the available practical expedient that allowed for the Company to not reassess whether existing contracts contain a lease under the new definition of a lease, lease classification for existing leases and whether previously capitalized initial direct costs would qualify for capitalization under the new guidance. The adoption of this guidance had a material impact on the Consolidated Condensed Balance Sheet as of March 31, 2019 due to the recognition of equal right-of-use assets and lease liabilities for the Company’s portfolio of operating leases. The right-of-use asset balance was then adjusted by the reclassification of pre-existing accrued rent balances from other line items within the Consolidated Condensed Balance Sheet. The adoption had an immaterial impact to the Consolidated Condensed Statement of Cash Flows and to the Consolidated Condensed Statement of Operations for the three months ended March 31, 2019. The adoption had no impact to the Consolidated Condensed Statement of Changes in Stockholders’ Equity for the three months ended March 31, 2019. Additional information and disclosures required by the new standard are contained in Note 10, Leases.

Inventories (Tables)

Inventories (Tables)	3 Months Ended
	Mar. 31, 2019
Inventory Disclosure [Abstract]
Schedule of inventories	Inventories consist of the following: March 31, 2019 December 31, 2018 Raw materials $ 1,250 $ 1,086 Finished goods 1,057 1,243 2,307 2,329 Allowance for excess inventory quantities (79 ) (87 ) $ 2,228 $ 2,242

Lease Commitments (Tables)

Lease Commitments (Tables)	3 Months Ended
	Mar. 31, 2019
Leases [Abstract]
Summary of information regarding leases	Quantitative information regarding the Company’s leases is as follows: Three Months Ended Components of lease cost Finance lease cost components: Amortization of finance lease assets $ 17 Interest on fiance lease liabilities 16 Total finance lease costs 33 Operating lease cost components: Operating lease cost 123 Variable lease cost 27 Short-term lease cost 22 Total operating lease costs 172 Total lease cost $ 205
Summary of supplemental cash flow information related to leases	Supplemental cash flow information related to leases is as follows for the period ended March 31, 2019: Cash paid for amounts included in the measurement of lease liabiltiies: Operating cash outflow from operating leases $ 168 Weighted-average remaining lease term-finance leases (in years) 2.7 Weighted-average remaining lease term-operating leases (in years) 3.7 Weighted-average discount rate-finance leases 9.1 % Weighted-average discount rate-operating leases 14.4 %
Schedule of future maturities of finance and operating leases	The future maturities of the Company’s finance and operating leases as of March 31, 2019 is as follows: Finance Operating Leases Leases Total 2019 $ 206 $ 506 $ 712 2020 255 616 871 2021 196 618 814 2022 109 632 741 2023 5 642 647 2024 and thereafter — 580 580 Total payments $ 771 $ 3,594 $ 4,365 Less amounts representing interest (99 ) (1,146 ) (1,245 ) Total minimum payments required: $ 672 $ 2,448 $ 3,120

Share-Based Compensation (Table

Share-Based Compensation (Tables)	3 Months Ended
	Mar. 31, 2019
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Schedule of assumptions used to calculate black-scholes option pricing model for options granted	The following table illustrates the various assumptions used to calculate the Black-Scholes option pricing model for stock options granted during the three-month periods presented: March 31, 2019 March 31, 2018 Weighted-average risk-free interest rates: 2.5 % 2.7 % Dividend yield: — — Weighted-average expected life of the option: 7 years 7 years Weighted-average expected stock price volatility: 94 % 94 % Weighted-average fair value of the options granted: $ 0.75 $ 0.36

Business Segmentation and Geo_2

Business Segmentation and Geographical Distribution (Tables)	3 Months Ended
	Mar. 31, 2019
Segments, Geographical Areas [Abstract]
Schedule of revenue by category	The revenues for the three months ended March 31, 2019 and 2018, respectively, by category, are as follows: Product Category 2019 2018 Personal Care Ingredients $ 2,009 $ 2,305 Advanced Materials 850 532 Solésence ® 896 61 Total Sales $ 3,755 $ 2,898

Going Concern_ Liquidity (Detai

Going Concern/ Liquidity (Details Narrative)	3 Months Ended
	Mar. 31, 2018
Customer Concentration Risk [Member] | Revenue Benchmark [Member]
Concentration risk, percentage	74.00%

Earnings Per Share (Details Nar

Earnings Per Share (Details Narrative) - shares	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Earnings Per Share [Abstract]
Antidilutive securities	766,000	205,000

Notes and Lines of Credit (Deta

Notes and Lines of Credit (Detail Narratives) $ in Thousands	Mar. 22, 2019USD ($)Number	Nov. 16, 2018USD ($)	Mar. 31, 2019USD ($)	Dec. 31, 2018USD ($)
Line of Credit			$ 500
Business Loan Agreement [Member] | Beachcorp, LLC [Member]
Term loan		$ 500		500
Fixed annual interest rate		8.25%
Maturity date		Dec. 31, 2020
Ownership percentage		47.00%
Term loan collateral		The Term Loan and Revolver Facility are secured by all the unencumbered assets of the Company and subordinated to Libertyville’s secured interest under the New Business Loan Agreement.
Borrowing base per the credit agreement		$ 192
Business Loan Agreement [Member] | Beachcorp, LLC [Member] | Asset-Based Revolving Loan Facility [Member]
Basis spread variable interest rate		3.00%
Variable interest rate basis		Prime rate
Line of credit facility, maximum borrowing capacity		$ 2
Facility, expiration date		Mar. 31, 2020
Term loan				832
Line of Credit [Member] | New Business Loan Agreement [Member]
Basis spread variable interest rate	1.00%
Variable interest rate basis	Prime rate
Line of credit facility, maximum borrowing capacity	$ 500
Borrowing capacity as percentage of accounts receivable	75.00%
Borrowing capacity as multiple of accounts receivable | Number	2
Minimum amount of cash on hand before advance is given	$ 500
Facility, expiration date	Apr. 4, 2020
Line of Credit	$ 500			$ 0
Line of Credit [Member] | Business Loan Agreement [Member] | Libertyville [Member]
Line of Credit			$ 300

Inventories (Details)

Inventories (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Inventory Disclosure [Abstract]
Raw materials	$ 1,250	$ 1,086
Finished goods	1,057	1,243
Inventory gross, Total	2,307	2,329
Allowance for excess quantities	(79)	(87)
[us-gaap:InventoryNet]	$ 2,228	$ 2,242

Lease (Details)

Lease (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2019USD ($)
Finance lease cost components:
Amortization of finance lease assets	$ 17
Interest on fiance lease liabilities	16
Total finance lease costs	33
Operating lease cost components:
Operating lease cost	123
Variable lease cost	27
Short-term lease cost	22
Total operating lease costs	172
Total lease cost	$ 205

Lease (Details 1)

Lease (Details 1) $ in Thousands	3 Months Ended
	Mar. 31, 2019USD ($)
Cash paid for amounts included in the measurement of lease liabiltiies:
Operating cash outflow from operating leases	$ 168
Weighted-average remaining lease term-finance leases (in years)	2 years 8 months 12 days
Weighted-average remaining lease term-operating leases (in years)	3 years 8 months 12 days
Weighted-average discount rate-finance leases	9.10%
Weighted-average discount rate-operating leases	14.40%

Lease (Details 2)

Lease (Details 2) $ in Thousands	Mar. 31, 2019USD ($)
Operating Leases:
2019	$ 506
2020	616
2021	618
2022	632
2023	642
2024 and thereafter	580
Total payments	3,594
Less amounts representing interest	(1,146)
Total minimum payments required	2,448
Finance Leases:
2019	206
2020	255
2021	196
2022	109
2023	5
Total payments	771
Less amounts representing interest	(99)
Total minimum payments required	672
Total:
2019	712
2020	871
2021	814
2022	741
2023	647
2024 and thereafter	580
Total payments	4,365
Less amounts representing interest	(1,245)
Total minimum payments required	$ 3,120

Lease (Details Narrative)

Lease (Details Narrative) - USD ($) $ in Thousands	Mar. 31, 2019	Jan. 02, 2019	Dec. 31, 2018
Operating Leased Assets [Line Items]
Operating lease right-of-use assets	$ 2,122
Current portion of operating lease obligations	331
Long-term portion of operating lease obligations	2,117
Operating lease liability	$ 2,448
Topic 842 [Member]
Operating Leased Assets [Line Items]
Operating lease right-of-use assets		$ 2,212
Operating lease liability		$ 2,556

Share-Based Compensation (Detai

Share-Based Compensation (Details) - Stock Options [Member] - $ / shares	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Weighted-average risk-free interest rates	2.50%	2.70%
Dividend yield	0.00%	0.00%
Weighted-average expected life of the option	7 years	7 years
Weighted-average expected stock price volatility	94.00%	94.00%
Weighted-average fair value of the options granted	$ .75	$ .36

Share-Based Compensation (Det_2

Share-Based Compensation (Detail Narratives) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018	Dec. 31, 2018
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total unrecognized compensation cost related to nonvested share-based compensation arrangements granted			$ 334
Weighted-average period over which unrecognized compensation is expected to be recognized	1 year 10 months 25 days
Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation expense	$ 57	$ 43
Stock options granted	8,000	36,000
Stock options expired	4,000	0
Stock options forfeited	11,000	101,000
Stock options outstanding, end of period	3,408,000	3,415,000
Vesting period of stock options	3 years
Weighted average exercise price	$ .67	$ .67

Significant Customers and Con_2

Significant Customers and Contingencies (Detail Narratives) $ in Thousands	3 Months Ended
	Mar. 31, 2019USD ($)Number	Mar. 31, 2018USD ($)	Sep. 30, 2019USD ($)	Dec. 31, 2018USD ($)
Number of major customers | Number	3
Accounts receivable	$ 2,105
Finished goods inventory	1,057			$ 1,243
Customer Concentration Risk [Member] | Revenue Benchmark [Member]
Revenue from customers		74.00%
Customers One [Member]
Accounts receivable	$ 631	$ 1,089
Customers One [Member] | Customer Concentration Risk [Member] | Revenue Benchmark [Member]
Revenue from customers	54.00%	78.00%
Customers Two [Member]
Accounts receivable	$ 673	$ 0
Customers Two [Member] | Customer Concentration Risk [Member] | Revenue Benchmark [Member]
Revenue from customers	19.00%	0.00%
Customers Three [Member]
Accounts receivable	$ 325	$ 0
Customers Three [Member] | Customer Concentration Risk [Member] | Revenue Benchmark [Member]
Revenue from customers	9.00%	0.00%
BASF [Member]
Equipment sale - original book value of equipment and upgrades				30.00%
Equipment sale - net book value equipment				115.00%
BASF [Member] | Greater than [Member]
Cash, cash equivalents and investments trigger under supply agreeement			$ 1,000
Accelerated debt maturity - principal amount debt				$ 10,000
Finished goods inventory	$ 500
BASF [Member] | Less than [Member]
Earnings trigger under supply agreeement	$ 0
Cash, cash equivalents and investments trigger under supply agreeement				$ 500

Business Segmentation and Geo_3

Business Segmentation and Geographical Distribution (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Sales	$ 3,755	$ 2,898
Personal Care Ingredients [Member]
Sales	2,009	2,305
Advanced Materials [Member]
Sales	850	532
Solesence [Member]
Sales	$ 896	$ 61

Business Segmentation and Geo_4

Business Segmentation and Geographical Distribution (Detail Narratives) $ in Thousands	3 Months Ended
	Mar. 31, 2019USD ($)segment	Mar. 31, 2018USD ($)
Number of business segments | segment	1
International Sources [Member]
Revenue from international sources | $	$ 457	$ 18

Subsequent Events (Detail Narra

Subsequent Events (Detail Narrative) - Subsequent Event [Member] $ in Thousands	May 13, 2019USD ($)shares
Number of shares sold | shares	4,200,000
Proceeds from sale of shares | $	$ 1,700