Document And Entity Information
Document And Entity Information - shares | 9 Months Ended | |
Sep. 30, 2018 | Nov. 13, 2018 | |
Document And Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Sep. 30, 2018 | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q3 | |
Entity Registrant Name | AMERICAN BIO MEDICA CORP | |
Entity Central Index Key | 896,747 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Non-accelerated Filer | |
Entity Emerging Growth Company | false | |
Entity Small Business | true | |
Trading Symbol | ABMC | |
Entity Common Stock, Shares Outstanding | 30,279,368 |
Condensed Balance Sheets
Condensed Balance Sheets - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Current assets | ||
Cash and cash equivalents | $ 59,000 | $ 36,000 |
Accounts receivable, net of allowance for doubtful accounts of $55,000 at September 30, 2018 and $52,000 at December 31, 2017 | 546,000 | 348,000 |
Inventory, net of allowance of $514,000 at September 30, 2018 and $500,000 at December 31, 2017 | 1,250,000 | 1,473,000 |
Prepaid expenses and other current assets | 71,000 | 97,000 |
Total current assets | 1,926,000 | 1,954,000 |
Property, plant and equipment, net | 736,000 | 792,000 |
Patents, net | 125,000 | 109,000 |
Other assets | 21,000 | 21,000 |
Deferred finance costs - line of credit, net | 0 | 15,000 |
Total assets | 2,808,000 | 2,891,000 |
Current liabilities | ||
Accounts payable | 459,000 | 374,000 |
Accrued expenses and other current liabilities | 425,000 | 311,000 |
Wages payable | 259,000 | 259,000 |
Line of credit | 595,000 | 446,000 |
Current portion of long-term debt | 237,000 | 87,000 |
Total current liabilities | 1,975,000 | 1,477,000 |
Other liabilities/debt | 10,000 | 19,000 |
Long-term debt, net of current portion and deferred finance costs | 761,000 | 772,000 |
Total liabilities | 2,746,000 | 2,268,000 |
COMMITMENTS AND CONTINGENCIES | ||
Stockholders' equity: | ||
Preferred stock; par value $.01 per share; 5,000,000 shares authorized, none issued and outstanding at September 30, 2018 and December 31, 2017 | 0 | 0 |
Common stock; par value $.01 per share; 50,000,000 shares authorized; 30,244,332 issued and outstanding at September 30, 2018 and 29,782,770 issued and outstanding at December 31, 2017 | 302,000 | 298,000 |
Additional paid-in capital | 21,220,000 | 21,170,000 |
Accumulated deficit | (21,460,000) | (20,845,000) |
Total stockholders' equity | 72,000 | 623,000 |
Total liabilities and stockholders' equity | $ 2,808,000 | $ 2,891,000 |
Condensed Balance Sheets (Paren
Condensed Balance Sheets (Parenthetical) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Statement of Financial Position [Abstract] | ||
Allowance For Doubtful Accounts Receivable, Current | $ 55,000 | $ 52,000 |
Inventory Valuation Reserves | $ 514,000 | $ 500,000 |
Preferred stock, par value | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized | 5,000,000 | 5,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 50,000,000 | 50,000,000 |
Common stock, shares issued | 30,244,332 | 29,782,770 |
Common stock, shares outstanding | 30,244,332 | 29,782,770 |
Condensed Statements of Operati
Condensed Statements of Operations - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Income Statement [Abstract] | ||||
Net sales | $ 878,000 | $ 1,354,000 | $ 2,988,000 | $ 3,975,000 |
Cost of goods sold | 514,000 | 788,000 | 1,815,000 | 2,279,000 |
Gross profit | 364,000 | 566,000 | 1,173,000 | 1,696,000 |
Operating expenses: | ||||
Research and development | 20,000 | 26,000 | 64,000 | 94,000 |
Selling and marketing | 125,000 | 159,000 | 435,000 | 531,000 |
General and administrative | 351,000 | 376,000 | 1,087,000 | 1,154,000 |
Operating Expenses, Total | 496,000 | 561,000 | 1,586,000 | 1,779,000 |
Operating (loss) / income | (132,000) | 5,000 | (413,000) | (83,000) |
Other income / (expense): | ||||
Interest expense | (71,000) | (70,000) | (217,000) | (204,000) |
Interest income | 2,000 | 0 | ||
Other income, net | 1,000 | 14,000 | 15,000 | 34,000 |
Other income / (expense), Total | (70,000) | (56,000) | (200,000) | (170,000) |
Net loss before tax | (202,000) | (51,000) | (613,000) | (253,000) |
Income tax (expense) / benefit | 0 | 2,000 | (2,000) | 1,000 |
Net loss | $ (202,000) | $ (49,000) | $ (615,000) | $ (252,000) |
Basic and diluted loss per common share | $ (0.01) | $ 0 | $ (0.02) | $ (0.01) |
Weighted average number of shares outstanding - basic & diluted | 30,241,313 | 29,297,333 | 30,001,598 | 29,129,168 |
Condensed Statements of Cash Fl
Condensed Statements of Cash Flows - USD ($) | 9 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
Cash flows from operating activities: | ||
Net loss | $ (615,000) | $ (252,000) |
Adjustments to reconcile net loss to net cash provided by operating activities: | ||
Depreciation and amortization | 61,000 | 64,000 |
Amortization of debt issuance costs | 98,000 | 94,000 |
Allowance for doubtful accounts | 3,000 | 2,000 |
Provision for slow moving and obsolete inventory | 14,000 | 2,000 |
Share-based payment expense | 11,000 | 33,000 |
Changes in: | ||
Accounts receivable | (202,000) | 32,000 |
Inventory | 209,000 | 116,000 |
Prepaid expenses and other current assets | 51,000 | 96,000 |
Accounts payable | 85,000 | 2,000 |
Accrued expenses and other current liabilities | 114,000 | 11,000 |
Wages payable | 0 | (42,000) |
Net cash (used in) / provided by operating activities | (171,000) | 158,000 |
Cash flows from investing activities: | ||
Patent application costs | (21,000) | (20,000) |
Purchase of property, plant and equipment | 0 | (44,000) |
Net cash used in investing activities | (21,000) | (64,000) |
Cash flows from financing activities: | ||
Proceeds from / (payments on) debt financing | 66,000 | (41,000) |
Proceeds from lines of credit | 3,194,000 | 4,729,000 |
Payments on lines of credit | (3,045,000) | (4,788,000) |
Net cash provided by / (used in) financing activities | 215,000 | (100,000) |
Net (decrease in) / increase in cash and cash equivalents | 23,000 | (6,000) |
Cash and cash equivalents - beginning of period | 36,000 | 156,000 |
Cash and cash equivalents - end of period | 59,000 | 150,000 |
Supplemental disclosures of cash flow information | ||
Consulting expense prepaid with restricted stock | 25,000 | 50,000 |
Debt issuance cost paid with restricted stock | 18,000 | 0 |
Director Fee paid with restricted stock | 3,000 | 0 |
Patent application costs | 21,000 | 20,000 |
Cash paid during period for interest | 118,000 | 110,000 |
Cash paid / ( received) during period for taxes | $ 2,000 | $ (1,000) |
Basis of Reporting
Basis of Reporting | 9 Months Ended |
Sep. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Reporting | The accompanying unaudited interim condensed financial statements of American Bio Medica Corporation (the “Company”) have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Regulation S-X. Accordingly, these unaudited interim condensed financial statements do not include all information and footnotes required by U.S. GAAP for complete financial statement presentation. These unaudited interim condensed financial statements should be read in conjunction with audited financial statements and related notes contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017. In the opinion of management, the interim condensed financial statements include all normal, recurring adjustments which are considered necessary for a fair presentation of the financial position of the Company at September 30, 2018, and the results of operations and cash flows for the three and nine month periods ended September 30, 2018 and September 30, 2017. Operating results for the nine months ended September 30, 2018 are not necessarily indicative of results that may be expected for the year ending December 31, 2018. Amounts at December 31, 2017 are derived from audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017. During the nine months ended September 30, 2018, there were no significant changes to the Company’s critical accounting policies, which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017. The preparation of these interim condensed financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, the Company evaluates estimates, including those related to product returns, bad debts, inventories, income taxes, warranty obligations, contingencies and litigation. The Company bases estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. These unaudited interim condensed financial statements have been prepared assuming that the Company will continue as a going concern and, accordingly, do not include any adjustments that might result from the outcome of this uncertainty. The independent registered public accounting firm’s report on the financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, contained an explanatory paragraph regarding the Company’s ability to continue as a going concern. As of the date of this report, the Company’s current cash balances, together with cash generated from future operations and amounts available under the Company’s credit facilities may not be sufficient to fund operations through November 2019. The Company’s current line of credit matures on June 29, 2020. The maximum availability on the Company’s line of credit remains to be $1,500,000. However, the amount available under the Company’s line of credit is based upon the Company’s accounts receivable and inventory. As of September 30, 2018, based on the Company’s availability calculation, there were no additional amounts available under the Company’s line of credit because the Company draws any balance available on a daily basis. As discussed in more detail in “Cash Flow, Outlook/Risk”, if sales levels decline further, the Company will have reduced availability on its line of credit due to decreased accounts receivable balances. In addition, the Company would expect its inventory levels to decrease if sales levels decline further, and this would also result in reduced availability on the Company’s line of credit. In addition to this reduced availability, in June 2018, the Company’s line of credit was amended to reduce the maximum availability under the inventory component of its line of credit over the next 25 months. While this will not result in a dramatic impact to the Company’s availability all at once, it will ultimately remove availability related to the Company’s inventory under the line of credit. If availability under the Company’s line of credit is not sufficient to satisfy working capital and capital expenditure requirements, the Company will be required to obtain additional credit facilities or sell additional equity securities, or delay capital expenditures. There is no assurance that such financing will be available or that the Company will be able to complete financing on satisfactory terms, if at all. Recently Adopted Accounting Standards The Company adopted the following accounting standards set forth by the Financial Accounting Standards Board (“FASB”): ASU 2014-09, “Revenue from Contracts with Customers”, The Company's revenues result from the sale of goods and reflect the consideration to which the Company expects to be entitled. The Company records revenues based on a five-step model in accordance with ASU 2014-09. The Company has defined purchase orders as contracts in accordance with ASU 2014-09. For its customer contracts, the Company’s performance obligations are identified; which is delivering goods at a determined transaction price, allocation of the contract transaction price with performance obligations (when applicable), and recognition of revenue when (or as) the performance obligation is transferred to the customer. Goods are transferred when the customer obtains control of the goods (which is upon shipment to the customer). The Company's revenues are recorded at a point in time from the sale of tangible products. Revenues are recognized when products are shipped. The Company has elected the Modified Retrospective Method (the "Cumulate Effect Method") to comply with ASU 2014-09. The Cumulative Effect Method does not affect the amounts for the prior periods, but requires that the current period be reported in accordance with ASU 2014-09. ASU 2014-09 was adopted on January 1, 2018 which was the first day of the Company's 2018 fiscal year. There was no material impact on the Company’s financial position or results of operations. Product returns, discounts and allowances are variable consideration and are recorded as a reduction of revenue in the same period that the related sale is recorded. The Company has reviewed the overall sales transactions for variable consideration and has determined that these costs are not significant. The Company has not experienced any impairment losses, has no future performance obligations and does not capitalize costs to obtain or fulfill contracts. Accounting Standards Issued; Not Yet Adopted ASU 2016-02, “Leases” ASU 2018-11, “Leases (Topic 842); Targeted Improvements” ASU 2017-11, “Earnings Per Share, Distinguishing Liabilities from Equity, Derivatives and Hedging” ASU 2018-07, “Compensation - Stock Compensation/Improvements to Nonemployee Share-Based Payment Accounting” ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement” Reclassifications Certain items have been reclassified from the prior year to conform to the current year presentation. |
Inventory
Inventory | 9 Months Ended |
Sep. 30, 2018 | |
Inventory Disclosure [Abstract] | |
Inventory | Inventory is comprised of the following: September 30, 2018 December 31, 2017 Raw Materials $ 1,011,000 $ 1,023,000 Work In Process 409,000 403,000 Finished Goods 344,000 547,000 Allowance for slow moving and obsolete inventory (514,000 ) (500,000 ) $ 1,250,000 $ 1,473,000 |
Net Loss Per Common Share
Net Loss Per Common Share | 9 Months Ended |
Sep. 30, 2018 | |
Earnings Per Share [Abstract] | |
Net Loss Per Common Share | Basic net loss per common share is calculated by dividing the net loss by the weighted average number of outstanding common shares during the period. Diluted net loss per common share includes the weighted average dilutive effect of stock options and warrants. Potential common shares outstanding as of September 30, 2017 and 2016: September 30, 2018 September 30, 2017 Warrants 2,000,000 2,060,000 Options 2,222,000 2,147,000 4,222,000 4,207,000 The number of securities not included in the diluted net loss per share for the three and nine months ended September 30, 2018 was 4,222,000, as their effect would have been anti-dilutive due to the net loss in each period. The number of securities not included in the diluted net loss per share for the three and nine months ended September 30, 2017 was 4,207,000, as their effect would have been anti-dilutive due to the net loss in each period. |
Litigation_Legal Matters
Litigation/Legal Matters | 9 Months Ended |
Sep. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Litigation/Legal Matters | ABMC v. Premier Biotech, Inc., Todd Bailey, et al. In February 2017, the Company filed a complaint in the Supreme Court of the State of New York in Columbia County against Premier Biotech Inc., Premier Biotech Labs, LLC and its principals, including its President Todd Bailey (“Bailey”), and Peckham Vocational Industries, Inc. (together the “Defendants”). Bailey formerly served as the Company’s Vice President of Sales and Marketing and as a sales consultant until December 23, 2016. The complaint seeks preliminary and permanent injunctions and a temporary restraining order against Bailey (for his benefit or the benefit of another party or entity) related to the solicitation of Company customers as well as damages related to any profits and revenues that would result from actions taken by the Defendants related to Company customers. In March 2017, the complaint was moved to the federal court in the Northern District of New York. In April 2017, the Defendants filed a motion to dismiss on the basis of jurisdiction, to which the Company responded on April 21, 2017. In July 2017, the Company was notified that it was not awarded a contract with a state agency for which it has held a contract in excess of 10 years. The contract in question is included in the February 2017 complaint. The Company believes that the Defendants actions related to this customer and a RFP that was issued by the state agency resulted in the loss of the contract award to the Company and the award of the contract to Peckham and Premier Biotech. This contract historically accounted for 10-15% of the Company’s annual revenue. The Company continued to hold a contract with the agency through September 30, 2017. The Company did protest the award of the contract to Peckham and Premier Biotech, and the state agency advised the Company on July 26, 2017 that they denied the Company’s protest of the award. The Company amended its complaint against the Defendants to show actual damages caused by the Defendants and to show proprietary and confidential information (belonging to the Company) used by the Defendants in their response to the RFP. This confidential information belonging to the Company enabled the Defendants to comply with specifications of the RFP. The Defendants filed a response to the court opposing the Company’s supplemental motion and the Company filed reply papers to the Defendants response on November 2, 2017. In January 2018, the court ruled on the motion to dismiss (that was filed by the Defendants in April 2017). The court found that there was jurisdiction over Bailey only. In the Company’s opinion, this ruling does not diminish its standing in the case against Bailey, who again in the Company’s opinion, has always been the primary defendant. The court did not rule on the other motions before them. In February 2018, the Company filed a motion for reconsideration and for leave to serve a supplemental/amended complaint. The new filing asks for reconsideration in the jurisdiction ruling regarding Premier Biotech Inc. and addresses the Company’s intent to further supplement its complaint based on additional (subsequent) damage alleged by ABMC on the part of Bailey and Premier Biotech, Inc. In September 2018, the court ruled on the motions filed in February 2018. The court granted in part and denied in part our motions for reconsideration. More specifically, our motions related to jurisdiction over Premier Biotech, Inc., supplementing claims of Bailey’s breach of contract and damages related to the same, and Bailey’s misappropriation of the Company’s trade secrets were granted. The Company’s motions related to unjust enrichment and tortious interference were not granted. Bailey’s motion to dismiss was once again denied. The Company filed its supplemental motions as required on October 12, 2018. On November 1, 2018, the Defendants filed their response to our supplemental motions. As of the date of this report, the Company is awaiting to court’s decision on both parties’ motions. Given the stage of the litigation, management is not yet able to opine on the outcome of the case. Todd Bailey v. ABMC On October 20, 2017, the Company received notice that Bailey, its former Vice President of Sales & Marketing and sales consultant (and the same “Bailey” discussed above) filed a complaint against the Company in the State of Minnesota seeking deferred commissions of $164,000 that Bailey alleges is owed to him by the Company. On November 2, 2017, the Company filed a Notice of Removal in this action to move the matter from state to federal court. On November 9, 2017, the Company filed a motion to dismiss or, in the alternative to transfer venue and consolidate, the Bailey complaint with our litigation filed previously against Bailey and others. In January 2018, the judge in the Minnesota case requested additional briefing on the impact of ruling in the New York case that determined there was personal jurisdiction over Bailey. The Company filed the requested briefing as requested by the court. The action in Minnesota has been stayed while the New York motions were decided. When the Bailey response was filed in the New York case on November 2, 2018, Bailey also filed a stipulation to transfer the Minnesota case to the New York court (the Bailey litigation was not added as a counter-claim to the Company’s case against Bailey). The Company agreed to the stipulation. Given the stage of the litigation, management is not yet able to opine on the outcome of the case. |
Line of Credit and Debt
Line of Credit and Debt | 9 Months Ended |
Sep. 30, 2018 | |
Debt Disclosure [Abstract] | |
Line of Credit and Debt | September 30, 2018 December 31, 2017 Loan and Security Agreement with Cherokee Financial, LLC: $ 975,000 $ 1,050,000 Crestmark Line of Credit: 595,000 446,000 Crestmark Equipment Loan: 22,000 31,000 Term Loan with Cherokee Financial LLC: 150,000 0 1,742,000 1,527,000 Less debt discount & issuance costs (Cherokee Financial LLC loans) (139,000 ) (203,000 ) Total debt, net 1,603,000 1,324,000 Current portion 832,000 533,000 Long-term portion, net of current portion $ 771,000 $ 791,000 LOAN AND SECURITY AGREEMENT WITH CHEROKEE FINANCIAL, LLC (“CHEROKEE”) On March 26, 2015, the Company entered into a LSA with Cherokee Financial, LLC (the “Cherokee LSA”). The debt with Cherokee is collateralized by a first security interest in real estate and machinery and equipment. Under the Cherokee LSA, the Company was provided the sum of $1,200,000 in the form of a 5-year Note at a fixed annual interest rate of 8%. The Company is making interest only payments quarterly on the Cherokee LSA, with the first interest payment paid on May 15, 2015. The Company is also required to make an annual principal reduction payment of $75,000 on each anniversary of the date of the closing; with the first principal reduction payment being made on February 15, 2016 and the most recent principal reduction payment being made on February 15, 2018 with the proceeds received from a new term loan with Cherokee Financial, LLC (See “Term Loan with Cherokee” within this Note). A final balloon payment is due on March 26, 2020. In addition to the 8% interest, the Company pays Cherokee a 1% annual fee for oversight and administration of the loan. This oversight fee is paid in cash and is paid contemporaneously with the quarterly interest payments. The Company can pay off the Cherokee loan at any time with no penalty; except that a 1% administration fee would be required to be paid to Cherokee to close out all participations. The Company received net proceeds of $80,000 after $1,015,000 of debt payments, and $105,000 in other expenses and fees. With the adoption of ASU No. 2015-03 in the First Quarter of Fiscal 2016, these transaction costs (with the exception of the interest expense) are being deducted from the balance on the Cherokee LSA and are being amortized over the term of the debt. The Company recognized $130,000 in interest expense related to the Cherokee LSA in the nine months ended September 30, 2018 (of which $70,000 is debt issuance cost amortization recorded as interest expense) and, $128,000 in interest expense related to the Cherokee LSA in the nine months ended September 30, 2017 (of which $70,000 was debt issuance cost amortization recorded as interest expense). The Company had $13,000 in accrued interest expense at September 30, 2018 and, $11,000 in accrued interest expense at December 31, 2017. The Company recognized $43,000 in interest expense related to the Cherokee LSA in the three months ended September 30, 2018 (of which $23,000 was debt issuance cost amortization recorded as interest expense) and, $45,000 in interest expense related to the Cherokee LSA in the three months ended September 30, 2017 (of which $23,000 was debt issuance cost amortization recorded as interest expense). As of September 30, 2018, the balance on the Cherokee LSA was $975,000; however the discounted balance was $842,000. As of December 31, 2017, the balance on the Cherokee LSA was $1,050,000; however the discounted balance was $847,000. LINE OF CREDIT WITH CRESTMARK BANK (“CRESTMARK”) On June 29, 2015 (the “Closing Date”), the Company entered into a Loan and Security Agreement (“LSA”) with Crestmark related to a revolving line of credit (the “Crestmark LOC”). The Crestmark LOC is used for working capital and general corporate purposes and expires on June 22, 2020. The Crestmark LOC provides the Company with a revolving line of credit up to $1,500,000 (“Maximum Amount”) with a minimum loan balance requirement of $500,000. The Crestmark LOC is secured by a first security interest in the Company’s inventory, and receivables and security interest in all other assets of the Company (in accordance with permitted prior encumbrances). The Maximum Amount is subject to an Advance Formula comprised of: 1) 90% of Eligible Accounts Receivables (excluding, receivables remaining unpaid for more than 90 days from the date of invoice and sales made to entities outside of the United States), and 2) up to 40% of eligible inventory plus up to 10% of Eligible Generic Packaging Components not to exceed the lesser of $350,000, or 100% of Eligible Accounts Receivable. However, as a result of an amendment executed on June 25, 2018, the amount available under the inventory component of the line of credit was changed to 40% of eligible inventory plus up to 10% of Eligible Generic Packaging Components not to exceed the lesser of $250,000 (“Inventory Sub-Cap Limit”) or 100% of Eligible Accounts Receivable. In addition, the Inventory Sub-Cap Limit is being permanently reduced by $10,000 per month as of July 1, 2018 and thereafter on the first day of the month until the Inventory Sub-Cap Limit is reduced to $0. So long as any obligations are due to Crestmark, the Company must comply with a minimum Tangible Net Worth (“TNW”) Covenant. As a result of an amendment executed on June 25, 2018, the TNW covenant was reduced from $650,000 to $150,000 as of June 30, 2018. Additionally, if a quarterly net income is reported, the TNW covenant will increase by 50% of the reported net income. If a quarterly net loss is reported, the TNW covenant will remain the same as the prior quarter’s covenant amount. TNW is still defined as: Total Assets less Total Liabilities less the sum of (i) the aggregate amount of non-trade accounts receivables, including accounts receivables from affiliated or related persons, (ii) prepaid expenses, (iii) deposits, (iv) net lease hold improvements, (v) goodwill and (vi) any other asset that would be treated as an intangible asset under GAAP; plus Subordinated Debt. Subordinated Debt means any and all indebtedness presently or in the future incurred by the Company to any creditor of the Company entering into a written subordination agreement with Crestmark. The Company did not comply with the previous TNW covenant (of $650,000) for March 31, 2018; however, on June 25, 2018 the Company received a waiver from Crestmark with no further changes to the terms of the Crestmark LOC. Crestmark did charge a fee of $5,000 to issue the waiver. The Company was not in compliance with the new TNW covenant as of June 30, 2018. The Company received a waiver from Crestmark for the June 30, 2018 non-compliance with no further changes to the terms of the Crestmark LOC; however, Crestmark charged a fee of $5,000 to issue the waiver. The Company is also not in compliance with the TNW covenant at September 30, 2018. As of the date of this report, the Company is in the process of obtaining another waiver from Crestmark for the quarter ended September 30, 2018. Due to internal requirements within Crestmark, the waiver could not be obtained prior to the date of this report. The Company expects to be charged a fee of $5,000 for this waiver given we have been charged this fee for previous waivers. If the Company terminates the LSA prior to June 22, 2020, an early exit fee of 2% of the Maximum Amount (plus any additional amounts owed to Crestmark at the time of termination) would be due. In the event of a default of the LSA, which includes but is not limited to, failure of the Company to make any payment when due and non-compliance with the TNW covenant (that is not waived by Crestmark), Crestmark is permitted to charge an Extra Rate. The Extra Rate is the Company’s then current interest rate plus 12.75% per annum. As of the date of this report, Crestmark has not elected to charge the Extra Rate even though the Company is not in compliance with the TNW covenant as of September 30, 2018. Interest on the Crestmark LOC is at a variable rate based on the Prime Rate plus 3% with a floor of 5.25%. As of September 30, 2018, the interest only rate on the Crestmark LOC was 8.25%. As of September 30, 2018, with all fees considered (the interest rate + an Annual Loan Fee of $7,500 + a monthly maintenance fee of 0.30% of the actual average monthly balance from the prior month), the interest rate on the Crestmark LOC was 13.36%. The Company recognized $61,000 in interest expense related to the Crestmark LOC in the nine months ended September 30, 2018 (of which $15,000 is debt issuance cost amortization recorded as interest expense) and, $76,000 in interest expense related to the Crestmark LOC in the nine months ended September 30, 2017 (of which $24,000 was debt issuance cost amortization recorded as interest expense). The Company recognized $18,000 in interest expense related to the Crestmark LOC in the three months ended September 30, 2018 (of which $0 is debt issuance cost amortization recorded as interest expense) and, $25,000 in interest expense related to the Crestmark LOC in the three months ended September 30, 2017 (of which $8,000 was debt issuance cost amortization recorded as interest expense). Given the nature of the administration of the Crestmark LOC, at September 30, 2018, the Company had $0 in accrued interest expense related to the Crestmark LOC, and there is $0 in additional availability under the Crestmark LOC. As of September 30, 2018, the balance on the Crestmark LOC was $595,000, and as of December 31, 2017, the balance on the Crestmark LOC was $446,000. EQUIPMENT LOAN WITH CRESTMARK On May 1, 2017, the Company entered into term loan with Crestmark in the amount of $38,000 related to the purchase of manufacturing equipment. The equipment loan is collateralized by a first security interest in a specific piece of manufacturing equipment. The Company executed an amendment to its LSA and Promissory Note with Crestmark. The amendments addressed the inclusion of the term loan into the LSA and an extension of the Crestmark LOC. No terms of the Crestmark LOC were changed in the amendment. The interest rate on the term loan is the WSJ Prime Rate plus 3%; or 8.25% as of the date of this report. The balance on the equipment loan was $22,000 as of September 30, 2018, and $31,000 as of December 31, 2017. Given the Company has not yet received the waiver for the TNW compliance at March 31, 2018, the Company is in default under the Equipment Loan with Crestmark as of the date of this report. This results in the Equipment Loan being due and payable if called by Crestmark. The Company incurred $2,000 in interest expense in the nine months ended September 30, 2018 related to the Equipment Loan and $1,000 in interest expense in the nine months ended September 30, 2017. The Company incurred less than $1,000 in interest expense in the three months ended September 30, 2018 related to the Equipment Loan and less than $1,000 in interest expense in the three months ended September 30, 2017. TERM LOAN WITH CHEROKEE On March 2, 2018, the Company entered into a one-year Loan Agreement made as of February 15, 2018 (the “Closing Date”) with Cherokee under which Cherokee provided the Company with $150,000 (the “Cherokee Term Loan”). The proceeds from the Cherokee Term Loan were used by the Company to pay a $75,000 principal reduction payment to Cherokee and $1,000 in legal fees incurred by Cherokee. Net proceeds (to be used for working capital and general business purposes) were $74,000. The annual interest rate for the Cherokee Term Loan is 12% to be paid quarterly in arrears with the first interest payment being made on May 15, 2018. The Cherokee Term Loan is required to be paid in full on February 15, 2019 unless paid off earlier (with no penalty) at the Company’s sole discretion. In connection with the Cherokee Term Loan, the Company issued 150,000 restricted shares of common stock to Cherokee on March 8, 2018. In the event of default, this includes, but is not limited to, the Company’s inability to make any payments due under the Cherokee Term Loan, Cherokee has the right to increase the interest rate on the Cherokee Term Loan to 18% and the Company would be required to issue and additional 150,000 restricted shares of common stock to Cherokee . The Company recognized $24,000 in interest expense related to the Cherokee Term Loan in the nine months ended September 30, 2018 (of which $13,000 was debt issuance costs recorded as interest expense) and $0 in interest expense in the nine months ended September 30, 2017 (as the facility was not yet in place). The Company recognized $9,000 in interest expense related to the Cherokee Term Loan in the three months ended September 30, 2018 (of which $5,000 was debt issuance costs recorded as interest expense) and $0 in interest expense in the three months ended September 30, 2017 (as the facility was not yet in place). As of September 30, 2018, the balance on the Cherokee Term Loan is $150,000 however the discounted balance is $144,000. As of December 31, 2017, the balance on the Cherokee Term loan was $0 (as the facility was not in place at December 31, 2017). |
Stock Options and Warrants
Stock Options and Warrants | 9 Months Ended |
Sep. 30, 2018 | |
Stockholders' Equity Note [Abstract] | |
Stock Options and Warrants | The Company currently has two non-statutory stock option plans, the Fiscal 2001 Non-statutory Stock Option Plan (the “2001 Plan”) and the 2013 Equity Compensation Plan (the “2013 Plan”). Both plans have been adopted by our Board of Directors and approved by our shareholders. Both the 2001 Plan and the 2013 Plan have options available for future issuance. Any common shares issued as a result of the exercise of stock options would be new common shares issued from our authorized issued shares. During the three months ended September 30, 2018 and September 30, 2017, the Company issued 0 options to purchase shares of stock. Stock option activity for the nine months ended September 30, 2018 and September 30, 2017 is summarized as follows (the figures contained within the tables below have been rounded to the nearest thousand): Nine months ended September 30, 2018 Nine months ended September 30, 2017 Shares Weighted Average Exercise Price Aggregate Intrinsic Value as of September 30, 2018 Shares Weighted Average Exercise Price Aggregate Intrinsic Value as of September 30, 2017 Options outstanding at beginning of period 2,147,000 $ 0.13 2,107,000 $ 0.13 Granted 80,000 $ 0.10 40,000 $ 0.13 Exercised 0 NA 0 NA Cancelled/expired (5,000 ) $ 0.26 0 NA Options outstanding at end of period 2,222,000 $ 0.13 $ 3,000 2,147,000 $ 0.13 $ 15,000 Options exercisable at end of period 2,142,000 $ 0.13 1,647,000 $ 0.13 The Company recognized $8,000 in share based payment expense in the nine months ended September 30, 2018 and $33,000 in share based payment expense in the nine months ended September 30, 2017. The Company recognized $2,000 in share based payment expense in the three months ended September 30, 2018 and $10,000 in share based payment expense in the three months ended September 30, 2017. At September 30, 2018 there was approximately $4,000 of total unrecognized share based payment expense related to stock options. This cost is expected to be recognized over 8 months. The following table summarizes weighted-average assumptions using the Black-Scholes option-pricing model used on the date of the grants issued during the nine months ended September 30, 2018 and September 30, 2017: Nine months ended 2018 2017 Volatility 79 % 81 % Expected term (years) 10 years 10 years Risk-free interest rate 2.90 % 2.16 % Dividend yield 0 % 0 % Warrants Warrant activity for the nine months ended September 30, 2018 and September 30, 2017 is summarized as follows: Nine months ended September 30, 2018 Nine months ended September 30, 2017 Shares Weighted Average Exercise Price Aggregate Intrinsic Value as of September 30, 2018 Shares Weighted Average Exercise Price Aggregate Intrinsic Value as of September 30, 2017 Warrants outstanding at beginning of period 2,060,000 $ 0.18 2,060,000 $ 0.18 Granted 0 NA 0 NA Exercised 0 NA 0 NA Cancelled/expired (60,000 ) $ 0.18 0 NA Warrants outstanding at end of period 2,000,000 $ 0.18 $ 0 2,060,000 $ 0.18 $ 0 Warrants exercisable at end of period 2,000,000 $ 0.18 2,060,000 $ 0.18 In the nine months ended September 30, 2018 and September 30, 2017, the Company recognized $0 in debt issuance and deferred finance costs related to the issuance of the above warrants outstanding. In the three months ended September 30, 2018 and September 30, 2017, the Company recognized $0 in debt issuance and deferred finance costs related to the issuance of the above warrants. As of September 30, 2018, there was $0 of total unrecognized expense. |
Basis of Reporting (Policies)
Basis of Reporting (Policies) | 9 Months Ended |
Sep. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Recently Adopted Accounting Standards | The Company adopted the following accounting standards set forth by the Financial Accounting Standards Board (“FASB”): ASU 2014-09, “Revenue from Contracts with Customers”, The Company's revenues result from the sale of goods and reflect the consideration to which the Company expects to be entitled. The Company records revenues based on a five-step model in accordance with ASU 2014-09. The Company has defined purchase orders as contracts in accordance with ASU 2014-09. For its customer contracts, the Company’s performance obligations are identified; which is delivering goods at a determined transaction price, allocation of the contract transaction price with performance obligations (when applicable), and recognition of revenue when (or as) the performance obligation is transferred to the customer. Goods are transferred when the customer obtains control of the goods (which is upon shipment to the customer). The Company's revenues are recorded at a point in time from the sale of tangible products. Revenues are recognized when products are shipped. The Company has elected the Modified Retrospective Method (the "Cumulate Effect Method") to comply with ASU 2014-09. The Cumulative Effect Method does not affect the amounts for the prior periods, but requires that the current period be reported in accordance with ASU 2014-09. ASU 2014-09 was adopted on January 1, 2018 which was the first day of the Company's 2018 fiscal year. There was no material impact on the Company’s financial position or results of operations. Product returns, discounts and allowances are variable consideration and are recorded as a reduction of revenue in the same period that the related sale is recorded. The Company has reviewed the overall sales transactions for variable consideration and has determined that these costs are not significant. The Company has not experienced any impairment losses, has no future performance obligations and does not capitalize costs to obtain or fulfill contracts. |
Accounting Standards Issued; Not Yet Adopted | ASU 2016-02, “Leases” ASU 2018-11, “Leases (Topic 842); Targeted Improvements” ASU 2017-11, “Earnings Per Share, Distinguishing Liabilities from Equity, Derivatives and Hedging” ASU 2018-07, “Compensation - Stock Compensation/Improvements to Nonemployee Share-Based Payment Accounting” ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement” |
Reclassifications | Certain items have been reclassified from the prior year to conform to the current year presentation. |
Inventory (Tables)
Inventory (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Inventory Disclosure [Abstract] | |
Schedule of Inventory, Current | September 30, 2018 December 31, 2017 Raw Materials $ 1,011,000 $ 1,023,000 Work In Process 409,000 403,000 Finished Goods 344,000 547,000 Allowance for slow moving and obsolete inventory (514,000 ) (500,000 ) $ 1,250,000 $ 1,473,000 |
Net Loss Per Common Share (Tabl
Net Loss Per Common Share (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Earnings Per Share [Abstract] | |
Schedule of Earnings Per Share, Basic and Diluted | September 30, 2018 September 30, 2017 Warrants 2,000,000 2,060,000 Options 2,222,000 2,147,000 4,222,000 4,207,000 |
Line of Credit and Debt (Tables
Line of Credit and Debt (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Debt Disclosure [Abstract] | |
Schedule of Long-term Debt | September 30, 2018 December 31, 2017 Loan and Security Agreement with Cherokee Financial, LLC: $ 975,000 $ 1,050,000 Crestmark Line of Credit: 595,000 446,000 Crestmark Equipment Loan: 22,000 31,000 Term Loan with Cherokee Financial LLC: 150,000 0 1,742,000 1,527,000 Less debt discount & issuance costs (Cherokee Financial LLC loans) (139,000 ) (203,000 ) Total debt, net 1,603,000 1,324,000 Current portion 832,000 533,000 Long-term portion, net of current portion $ 771,000 $ 791,000 |
Stock Options and Warrants (Tab
Stock Options and Warrants (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Schedule of Share-based Compensation, Stock Options, Activity | Nine months ended September 30, 2018 Nine months ended September 30, 2017 Shares Weighted Average Exercise Price Aggregate Intrinsic Value as of September 30, 2018 Shares Weighted Average Exercise Price Aggregate Intrinsic Value as of September 30, 2017 Warrants outstanding at beginning of period 2,060,000 $ 0.18 2,060,000 $ 0.18 Granted 0 NA 0 NA Exercised 0 NA 0 NA Cancelled/expired (60,000 ) $ 0.18 0 NA Warrants outstanding at end of period 2,000,000 $ 0.18 $ 0 2,060,000 $ 0.18 $ 0 Warrants exercisable at end of period 2,000,000 $ 0.18 2,060,000 $ 0.18 |
Employee Stock Option [Member] | |
Schedule of Share-based Compensation, Stock Options, Activity | Nine months ended September 30, 2018 Nine months ended September 30, 2017 Shares Weighted Average Exercise Price Aggregate Intrinsic Value as of September 30, 2018 Shares Weighted Average Exercise Price Aggregate Intrinsic Value as of September 30, 2017 Options outstanding at beginning of period 2,147,000 $ 0.13 2,107,000 $ 0.13 Granted 80,000 $ 0.10 40,000 $ 0.13 Exercised 0 NA 0 NA Cancelled/expired (5,000 ) $ 0.26 0 NA Options outstanding at end of period 2,222,000 $ 0.13 $ 3,000 2,147,000 $ 0.13 $ 15,000 Options exercisable at end of period 2,142,000 $ 0.13 1,647,000 $ 0.13 |
Schedule of assumptions used | Nine months ended 2018 2017 Volatility 79 % 81 % Expected term (years) 10 years 10 years Risk-free interest rate 2.90 % 2.16 % Dividend yield 0 % 0 % |
Inventory (Details)
Inventory (Details) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Inventory Disclosure [Abstract] | ||
Raw Materials | $ 1,011,000 | $ 1,023,000 |
Work In Process | 409,000 | 403,000 |
Finished Goods | 344,000 | 547,000 |
Allowance for slow moving and obsolete inventory | (514,000) | (500,000) |
Inventory, Net, Total | $ 1,250,000 | $ 1,473,000 |
Net Loss Per Common Share (Deta
Net Loss Per Common Share (Details) - shares | 9 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
Weighted Average Number Diluted Shares Outstanding Adjustment | 4,222,000 | 4,207,000 |
Warrant [Member] | ||
Weighted Average Number Diluted Shares Outstanding Adjustment | 2,000,000 | 2,060,000 |
Employee Stock Option [Member] | ||
Weighted Average Number Diluted Shares Outstanding Adjustment | 2,222,000 | 2,147,000 |
Net Loss Per Common Share (De_2
Net Loss Per Common Share (Details Narrative) - shares | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Earnings Per Share [Abstract] | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 4,222,000 | 4,207,000 | 4,222,000 | 4,207,000 |
Line of Credit and Debt (Detail
Line of Credit and Debt (Details) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Debt Instrument [Line Items] | ||
Long-term Debt, Gross | $ 1,742,000 | $ 1,527,000 |
Less debt discount & issuance costs (Cherokee Financial, LLC Loan) | (139,000) | (203,000) |
Total debt, net | 1,603,000 | 1,324,000 |
Current portion | 832,000 | 533,000 |
Long-term portion, net of current portion | 771,000 | 791,000 |
Cherokee Financial LLC [Member] | ||
Debt Instrument [Line Items] | ||
Long-term Debt, Gross | 975,000 | 1,050,000 |
Crestmark Line of Credit [Member] | ||
Debt Instrument [Line Items] | ||
Long-term Debt, Gross | 595,000 | 446,000 |
Crestmark Equipment Term Loan [Member] | ||
Debt Instrument [Line Items] | ||
Long-term Debt, Gross | 22,000 | 31,000 |
Cherokee Financial LLC [Member] | ||
Debt Instrument [Line Items] | ||
Long-term Debt, Gross | $ 150,000 | $ 0 |
Stock Options and Warrants (Det
Stock Options and Warrants (Details) - Employee Stock Option [Member] - USD ($) | 9 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
Shares, Beginning Balance | 2,147,000 | 2,107,000 |
Shares, Granted | 80,000 | 40,000 |
Shares, Exercised | 0 | 0 |
Shares, Cancelled/expired | (5,000) | 0 |
Shares, Ending Balance | 2,222,000 | 2,147,000 |
Exercisable at end of period | 2,142,000 | 1,647,000 |
Weighted Average Exercise Price, at beginning of period | $ .13 | $ .13 |
Weighted Average Exercise Price, Granted | .10 | .13 |
Weighted Average Exercise Price, Exercised | .00 | .00 |
Weighted Average Exercise Price, Cancelled/expired | .26 | .00 |
Weighted Average Exercise Price, at end of period | .13 | .13 |
Weighted Average Exercise Price, Exercisable, at end of period | $ .13 | $ .13 |
Aggregate Intrinsic Value, Outstanding at end of period | $ 3,000 | $ 15,000 |
Stock Options and Warrants (D_2
Stock Options and Warrants (Details 1) | 9 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
Equity [Abstract] | ||
Volatility | 79.00% | 81.00% |
Expected term (years) | 10 years | 10 years |
Risk-free interest rate | 2.90% | 2.16% |
Dividend yield | 0.00% | 0.00% |
Stock Options and Warrants (D_3
Stock Options and Warrants (Details 2) - Warrant [Member] - USD ($) | 9 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Shares, Beginning Balance | 2,060,000 | 2,060,000 |
Shares, Granted | 0 | 0 |
Shares, Exercised | 0 | 0 |
Shares, Cancelled/expired | (60,000) | 0 |
Shares, Ending Balance | 2,000,000 | 2,060,000 |
Exercisable at end of period | 2,000,000 | 2,060,000 |
Weighted Average Exercise Price, at beginning of period | $ .18 | $ .18 |
Weighted Average Exercise Price, Granted | .00 | .00 |
Weighted Average Exercise Price, Exercised | .00 | .00 |
Weighted Average Exercise Price, Cancelled/expired | .18 | .00 |
Weighted Average Exercise Price, at end of period | .18 | .18 |
Weighted Average Exercise Price, Exercisable, at end of period | $ .18 | $ .18 |
Aggregate Intrinsic Value outstanding at period | $ 0 | $ 0 |
Stock Options and Warrants (D_4
Stock Options and Warrants (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Stockholders' Equity Note [Abstract] | ||||
Share based payment expense | $ 2,000 | $ 10,000 | $ 8,000 | $ 33,000 |
Unrecognized share based payment expense related to stock options | $ 4,000 | $ 4,000 |