Nano Magic (NMGX) 10-Q 5 Aug 14 2014 Q2 Quarterly report Financial data

Document_and_Entity_Informatio

Document and Entity Information	6 Months Ended
	Jun. 30, 2014	Jul. 31, 2014
Document And Entity Information	'	'
Entity Registrant Name	'Applied Nanotech Holdings, Inc.	'
Entity Central Index Key	'0000891417	'
Document Type	'10-Q	'
Document Period End Date	30-Jun-14	'
Amendment Flag	'false	'
Current Fiscal Year End Date	'--12-31	'
Entity Filer Category	'Smaller Reporting Company	'
Entity Common Stock, Shares Outstanding	'	158,319,151
Document Fiscal Period Focus	'Q2	'
Document Fiscal Year Focus	'2014	'

Consolidated_Balance_Sheets

Consolidated Balance Sheets (USD $)	Jun. 30, 2014	Dec. 31, 2013
Current assets:	'	'
Cash and cash equivalents	$118,374	$119,551
Accounts receivable, trade - net of allowance for doubtful accounts	225,241	462,964
Prepaid expenses and other current assets	52,522	85,499
Total current assets	396,137	668,014
Property and equipment, net	126,901	157,772
Other assets	17,618	27,114
Total assets	540,656	852,900
Current liabilities:	'	'
Accounts payable	787,335	642,486
Convertible notes payable	1,870,117	1,859,912
Obligations under capital lease	'	10,427
Accrued liabilities	1,301,187	1,580,194
Deposits and deferred revenue	217,351	143,323
Total current liabilities	4,175,990	4,236,342
Total liabilities	4,175,990	4,236,342
Commitments and contingencies	'	'
Stockholders' deficit:	'	'
Preferred stock, $1.00 par value, 2,000,000 shares authorized; No shares issued and outstanding	'	'
Common stock, $.001 par value, 160,000,000 shares authorized, 157,553,526 and 147,825,202 shares issued and outstanding at June 30, 2014 and December 31, 2013, respectively	157,553	147,825
Additional paid-in capital	119,231,286	117,595,024
Accumulated deficit	-123,024,173	-121,126,291
Total stockholders' deficit	-3,635,334	-3,383,442
Total liabilities and stockholders' deficit	$540,656	$852,900

Consolidated_Balance_Sheets_Pa

Consolidated Balance Sheets (Parenthetical) (USD $)	Jun. 30, 2014	Dec. 31, 2013
Statement of Financial Position [Abstract]	'	'
Preferred stock, par value	$1	$1
Preferred stock, shares authorized	2,000,000	2,000,000
Preferred stock, shares issued	'	'
Preferred stock, shares outstanding	'	'
Common stock, par value	$0.00	$0.00
Common stock, shares authorized	160,000,000	160,000,000
Common stock, shares issued	157,553,526	147,825,202
Common stock, shares outstanding	157,553,526	147,825,202

Consolidated_Statements_of_Ope

Consolidated Statements of Operations (Unaudited) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Revenues	'	'	'	'
Government contracts	$446,479	$436,191	$1,165,777	$915,017
Contract research	101,015	451,879	240,315	763,930
License fees and royalties	'	82,282	'	138,355
Product sales	11,702	94,920	35,336	167,621
Other	1,500	1,500	1,700	30,559
Total revenues	560,696	1,066,772	1,443,128	2,015,482
Research and development	507,378	911,476	1,133,733	1,779,148
Selling, general and administrative expenses	283,185	635,699	884,873	1,383,480
Operating costs and expenses	790,563	1,547,175	2,018,606	3,162,628
Gain on sale of property and equipment	549	'	3,104	'
Loss from operations	-229,318	-480,403	-572,374	-1,147,146
Other income (expense), net	'	'	'	'
Interest expense	-1,227,132	-163,564	-1,325,586	-871,766
Interest income	48	49	78	54
Loss from continuing operations before taxes	-1,456,402	-643,918	-1,897,882	-2,018,858
Provision for taxes	'	'	'	'
Net loss	($1,456,402)	($643,918)	($1,897,882)	($2,018,858)
Earnings (loss) per share	'	'	'	'
Basic and Diluted	($0.01)	($0.01)	($0.01)	($0.02)
Weighted average shares outstanding	'	'	'	'
Basic and Diluted	157,163,416	127,993,613	155,801,782	126,450,138

Consolidated_Statements_of_Cas

Consolidated Statements of Cash Flows (Unaudited) (USD $)	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
Cash flows from operating activities	'	'
Net loss	($1,897,882)	($2,018,858)
Adjustments to reconcile net loss to net cash used in operating activities:	'	'
Depreciation and amortization expense	30,871	53,670
Amortization of discount on debt	1,252,756	756,110
Stock based compensation expense	197,376	54,454
Gain on disposal of property and equipment	-3,104	'
Changes in assets and liabilities:	'	'
Accounts receivable, trade	237,723	-102,106
Prepaid expenses and other assets	42,473	611,744
Accounts payable and accrued liabilities	-22,595	399,691
Deferred revenue	74,028	-52,131
Total adjustments	1,809,528	1,721,432
Net cash used in operating activities	-88,354	-297,426
Cash flows from investing activities:	'	'
Proceeds from equipment sales	3,104	'
Net cash used in investing activities	3,104	'
Cash flows from financing activities:	'	'
Repayment of capital leases and notes payable	-71,677	-100,263
Proceeds from long-term debt	155,750	394,250
Net cash provided by financing activities	84,073	293,987
Net (decrease) in cash and cash equivalents	-1,177	-3,439
Cash and cash equivalents, beginning of period	119,551	331,579
Cash and cash equivalents, end of period	$118,374	$328,140

Basis_of_Presentation

Basis of Presentation	6 Months Ended
	Jun. 30, 2014
Organization, Consolidation and Presentation of Financial Statements [Abstract]	'
Basis of Presentation	'
	1. Basis of Presentation
	The consolidated financial statements for the three and six month periods ended June 30, 2014 and 2013 have been prepared by us without audit pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, all adjustments necessary to present fairly our financial position, results of operations, and cash flows as of June 30, 2014 and 2013, and for the periods then ended, have been made. Those adjustments consist of normal and recurring adjustments. The consolidated balance sheet as of December 31, 2013, has been derived from the audited consolidated balance sheet as of that date.
	Certain information and note disclosures normally included in our annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. These consolidated financial statements should be read in conjunction with a reading of the financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2013, as filed with the U.S. Securities and Exchange Commission.
	The results of operations for the three and six month periods ended June 30, 2014, are not necessarily indicative of the results to be expected for the full year. Certain reclassifications have been made in the prior period’s consolidated financial statements to conform to the current period’s presentation.
	The Company has a history of net losses and negative cash flow from operations. We have had losses in each of the last three years, but we have a plan to achieve positive cash flow from operations for 2014, prior to interest expense and expenses associated with the business combination discussed in Note 6. The accompanying financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of the Company as a going concern, and do not include any adjustments that may be required if it were unable to continue as a going concern. Management and the Board believe that the actions taken to date in 2014 and currently being taken will allow the Company to achieve positive cash flow from operations for 2014, prior to interest expense and expenses associated with the business combination discussed in Note 6, and to achieve profitability in future years. These actions include both significant expense cuts and the business combination with NanoHolding, Inc. as discussed in Note 6.

Supplemental_Cash_Flow_Informa

Supplemental Cash Flow Information	6 Months Ended
	Jun. 30, 2014
Supplemental Cash Flow Elements [Abstract]	'
Supplemental Cash Flow Information	'
	2. Supplemental Cash Flow Information
	Cash paid for interest for the six months ended June 30, 2014 and 2013, was $1,512 and $10,579, respectively. During the six months ended June 30, 2014 and 2013, the Company had non-cash transactions related to share based payments described in greater detail in Note 5, non-cash transactions related to the conversion of accounts payable into common stock described in greater detail in Note 4, and non-cash transactions related to the conversion of notes payable and related accrued interest into common stock that are described in greater detail in Notes 3 and 4.

Notes_Payable_and_LongTerm_Deb

Notes Payable and Long-Term Debt	6 Months Ended
	Jun. 30, 2014
Debt Disclosure [Abstract]	'
Notes Payable and Long-Term Debt	'
	3. Notes Payable and Long-Term Debt
	As described in detail in our Form 10-K for the year ended December 31, 2013, we issued convertible notes from 2009 through 2013. Additional convertible notes with a face amount of $236,250 were issued in the six months ended June 30, 2014. One of these notes in the amount of $75,000 was issued to the Company’s former chief financial officer in a noncash transaction in connection with an overall release and settlement agreement related to the termination of the CFO’s employment. The note is due the earlier of December 31, 2014, or upon completion of the Company’s proposed business combination (as discussed further in Note 6) and is payable in cash or with 1.5 million shares of stock in the new entity, at the option of the Company. In addition, $50,000 of these notes were issued to Directors of the Company and $10,000 to individuals that are proposed Directors of the Company if the business combination is completed. These notes are due July 15, 2015, bear interest at a rate of 8%, and are convertible into common stock at a discount of 25% from the market price of the common stock at the time of conversion. If the proposed business combination occurs, the notes will be automatically convertible into common stock of the merged entity under the same terms.
	As of June 30, 2014, there are notes with a total face amount of $1,909,355 outstanding. These notes are due at dates throughout 2014 and through July 2015. These notes bear interest at rates ranging from less than 1% to 8%, and $21,297 of the notes outstanding included a 10% original issuance discount. The notes are convertible at fixed rates ranging from $0.05 to $0.10 per share and $121,297 of the face amount of the notes are convertible at floating rates based on discounts of 25% - 30% to the market price of our common stock at the date of conversion.
	At the time of issuance, the value of the beneficial conversion feature of these notes is calculated, recorded as a discount to the note, and amortized to expense over the term of the note. If the notes are converted before maturity, any unamortized expense at the time of conversion is expensed at the time of conversion. As of June 30, 2014, there is $39,238 of unamortized discount remaining to be amortized in future periods during 2014 and 2015. During the period ended June 30, 2014, the Company amended notes payable with a total face amount of $1,713,058 that were past due at the time to extend the due date to August 15, 2014 and provide for automatic conversion if the business combination is completed. To induce the note holders to agree to automatic conversion, the conversion price was lowered in most instances. The conversion price for $760,000 of these notes was lowered to $0.05 per share, to $0.10 per share for $915,058 of these notes, and the conversion price remained unchanged at $0.08 per share for the remaining $38,000 of notes.
	A total of $1,252,756 and $756,110 of discount was amortized to interest expense during the six month periods ending June 30, 2014 and 2013, respectively. Included in these amounts are charges related to lowering the conversion price of $1,136,584 and $408,132 in the six months ended June 30, 2014 and June 30, 2013, respectively.

Stockholders_Equity

Stockholders' Equity	6 Months Ended
	Jun. 30, 2014
Equity [Abstract]	'
Stockholders' Equity	'
	4. Stockholders’ Equity
	During the six months ended June 30, 2014, we issued 8,528,324 shares of common stock as the result of the conversion of notes payable and related accrued interest in the amount of $182,331. During the six months ended June 30, 2013, we issued 9,925,461 shares of common stock as the result of the conversion of notes payable and related accrued interest in the amount of $918,079. In the first quarter of 2013, we also issued 470,085 shares in connection with a cashless exercise of 1,692,307 warrants issued in January 2013 in connection with the issuance of convertible notes.
	During the six months ended June 30, 2014 and 2013, respectively, we issued 1,200,000 and 600,000 shares, respectively, of common stock in exchange for the payment of $30,000 and $60,000, respectively, of trade payables in exempt offerings under Regulation D of the Securities Act of 1933. We also issued 12,948 shares of common stock in connection with restricted stock payments to employees during the period ended June 30, 2013.

ShareBased_Payments

Share-Based Payments	6 Months Ended
	Jun. 30, 2014
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]	'
Share-Based Payments	'
	5. Share-Based Payments
	We use the fair value method to account for stock based compensation. We recorded $197,376 and $54,454 in compensation expense in the periods ended June 30, 2014 and 2013, respectively, related to options and restricted stock issued under our stock-based incentive compensation plans. This includes expense related to both options issued and committed, as well as unissued restricted stock during the period ended, June 30, 2013, but only unissued restricted stock in the current period. The fair value of these options was calculated using the Black-Scholes option pricing model. Information related to the assumptions used in this model is set forth in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013. The value of restricted stock grants is based upon the market price of the Company’s stock on the date of the grant.

Contingencies

Contingencies	6 Months Ended
	Jun. 30, 2014
Commitments and Contingencies Disclosure [Abstract]	'
Contingencies	'
	6. Contingencies
	Proposed Business Combination
	On March 10, 2014, we entered into an agreement for a proposed business combination between the Company and NanoHolding, Inc., a privately held company with a leading market position for specialty optical coatings, cleaners, and nano-composite products. The specific mechanics of the proposed transaction are included in an 8-K dated March 11, 2014, but the business combination, if approved by stockholders, will result in a combined entity with the Company and NanoHolding, Inc., operating under the name PEN, Inc. A shareholder meeting is scheduled for August 22, 2014 to vote on the transaction. A definitive proxy dated July 3, 2014 is on file with the SEC and was mailed to shareholders beginning July 7, 2014.
	If the Company’s stockholders approve the proposed business combination and the business combination is completed, the Company will be obligated to issue 7,074,000 shares of restricted common stock to all outside Directors of the Company, except for Director David Li, as compensation for management functions assumed by those Directors in 2013 and 2014 that they believe went beyond their role as Directors, as well as the role that they played in facilitating the business combination. No liability for the issuance of these shares is recorded in the financial statements as of June 30, 2014, as the Company has no obligation to issue these shares unless the business combination is completed.
	In addition, all of the outside Directors have been deferring a portion of their normal monthly compensation. As of June 30, 2014, the financial statements reflect a liability of approximately $201,000 for these deferred fees. If the business combination is completed, the Directors have agreed to accept payment of these fees in the stock of PEN, Inc. based on a price of $0.05 per share. If the stock of PEN, Inc. is trading above $0.05 per share at the time of payment, that will result in additional expense beyond that currently reflected in the financial statements, based on the difference between the price at the time and $0.05 per share.
	If the stockholders approve the proposed business combination and the business combination is completed, the Company will be obligated to issue up to 6.8 million shares of restricted common stock to the Company’s Chief Operating Officer (“COO”) as part of an amended compensation package. These restricted stock grants will vest based on achievement of certain price targets for the stock of the new entity. No liability is recorded in the financial statements as of June 30, 2014 for this potential grant, since the Company has no obligation to issue this grant unless the business combination is completed. The Company does have a liability of $215,427 recorded for unpaid compensation due to the COO. The previously described restricted stock grant will supersede and replace any amounts due to the COO, including accrued compensation, or any severance due to the COO upon termination of employment.
	Litigation
	The Company is a defendant in minor lawsuits described in greater detail in its 2013 Annual Report on Form 10-K. The Company expects any potential eventual payment to have no material effect on the financial statements.
	Authorized shares
	As discussed in the Annual Report on Form 10-K for the fiscal year ended December 31, 2013, the Company has potential commitments to issue shares in excess of its current authorized share limit. It has included a proposal to increase its authorized shares to 502 million at the shareholder meeting scheduled for August 22, 2014, however; if its share price increases significantly prior to an increase in the authorized limit, the Company may be liable to convertible note holders or optionees for damages equal to their lost profits if it is unable to deliver shares in accordance with its existing agreements. As discussed in note 3 above, in April and May 2014, the Company amended the majority of its notes payable to lower the conversion price. These lowered conversion prices increase the amount of shares the Company is committed to release, as the conversion price was lowered to below the existing market price of the common stock at the time of amendment on a significant portion of the notes.

Subsequent_Events

Subsequent Events	6 Months Ended
	Jun. 30, 2014
Subsequent Events [Abstract]	'
Subsequent Events	'
	7.       Subsequent Events
	During the Period from July 1, 2014 through July 31, 2014, the Company issued 765,625 shares of common stock in connection with the conversion of notes payable with a face amount of $21,297. During the same period, the Company also received commitments for $10,000 in additional convertible notes payable under the terms described in Note 3.

Supplemental_Cash_Flow_Informa1

Supplemental Cash Flow Information (Details Narrative) (USD $)	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
Supplemental Cash Flow Elements [Abstract]	'	'
Cash paid for interest	$1,512	$10,579

Notes_Payable_and_LongTerm_Deb1

Notes Payable and Long-Term Debt (Details Narrative) (USD $)	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
Debt instruments maturity date	31-Dec-14	'
Number of stock issued during period for business combination	1,500,000	'
Unamortized discount	$39,238	'
Unamortized discount to be amortized in future period	'during 2014 and 2015	'
Convertion price amount	1,136,584	408,132
Discount amortized to interest expense	1,252,756	756,110
Debt Conversion Three [Member]	'	'
Convertion price amount	38,000	'
Directors [Member]	'	'
Debt instruments interest rate	8.00%	'
Percentage of discount in debt conversion	25.00%	'
Individuals [Member]	'	'
Notes issued	10,000	'
Debt instruments maturity date	15-Jul-15	'
Debt instruments interest rate	8.00%	'
Percentage of discount in debt conversion	25.00%	'
Former Chief Financial Officer [Member]	'	'
Notes issued	75,000	'
Directors [Member]	'	'
Notes issued	50,000	'
Debt instruments maturity date	15-Jul-15	'
Convertible Notes Payable [Member]	'	'
Debt instruments face amount	236,250	'
Notes Payable One [Member]	'	'
Debt instrument face amount	1,909,355	'
Debt instrument maturity date description	'	'
	Due at dates throughout 2014 and through July 2015.
Debt instruments interest rate minimum	1.00%	'
Debt instruments interest rate maximum	8.00%	'
Notes Payable Two [Member]	'	'
Percentage of discount in debt conversion	10.00%	'
Debt instrument face amount	21,297	'
Notes Payable Two [Member] | Minimum [Member]	'	'
Notes convertible price per share	$0.05	'
Notes Payable Two [Member] | Maximum [Member]	'	'
Notes convertible price per share	$0.10	'
Notes Payable Three [Member]	'	'
Debt instrument face amount	121,297	'
Notes Payable Three [Member] | Minimum [Member]	'	'
Percentage of discount in debt conversion	25.00%	'
Notes Payable Three [Member] | Maximum [Member]	'	'
Percentage of discount in debt conversion	30.00%	'
Notes Payable Four [Member]	'	'
Debt instruments maturity date	15-Aug-15	'
Debt instrument face amount	1,713,058	'
Debt Conversion One [Member]	'	'
Notes convertible price per share	$0.05	'
Convertion price amount	760,000	'
Debt Conversion Two [Member]	'	'
Notes convertible price per share	$0.10	'
Convertion price amount	$915,058	'
Debt Conversion Three [Member]	'	'
Notes convertible price per share	$0.08	'

Stockholders_Equity_Details_Na

Stockholders' Equity (Details Narrative) (USD $)	1 Months Ended	3 Months Ended	6 Months Ended
	Jan. 31, 2013	Mar. 31, 2013	Jun. 30, 2014	Jun. 30, 2013
Stock issued in conversion of notes payable and related interest, shares	'	470,085	8,528,324	9,925,461
Stock issued in conversion of notes payable and related interest, value	'	'	$182,331	$918,079
Stock issued in connection with number of cashless exercise warrants issued, shares	1,692,307	'	'	'
Stock issued during period for trade payable, shares	'	'	1,200,000	600,000
Stock issued during period for trade payable, value	'	'	$30,000	$60,000
Employees [Member]	'	'	'	'
Number of restricted stock issued for payments to employees	'	'	'	12,948

ShareBased_Payments_Details_Na

Share-Based Payments (Details Narrative) (USD $)	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]	'	'
Share-based compensation	$197,376	$54,454

Contingencies_Details_Narrativ

Contingencies (Details Narrative) (USD $)	6 Months Ended
	Jun. 30, 2014	Dec. 31, 2013
Issuance of restricted common stock	1,500,000	'
Deferred fees	$201,000	'
Business combination to accepted payment fee description	'	'
	If the business combination is completed, the Directors have agreed to accept payment of these fees in the stock of PEN, Inc. based on a price of $0.05 per share. If the stock of PEN, Inc. is trading above $0.05 per share at the time of payment, that will result in additional expense beyond that currently reflected in the financial statements, based on the difference between the price at the time and $0.05 per share.
Excess stock shares authorized	'	502,000,000
Chief Operating Officer [Member]	'	'
Issuance of restricted common stock	6,800,000	'
Unpaid compensation due	$215,427	'
Outside Directors [Member]	'	'
Issuance of restricted common stock	7,074,000	'

Subsequent_Events_Details_Narr

Subsequent Events (Details Narrative) (USD $)	3 Months Ended	6 Months Ended		1 Months Ended
	Mar. 31, 2013	Jun. 30, 2014	Jun. 30, 2013	Jul. 31, 2014
				Subsequent Event [Member]
Stock issued in conversion of notes payable, shares	470,085	8,528,324	9,925,461	765,625
Stock issued in conversion of notes payable	'	$182,331	$918,079	$21,297
Additional convertible notes payable	'	$1,136,584	$408,132	$10,000