Document And Entity Information
Document And Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2018 | Apr. 16, 2019 | Jun. 30, 2018 | |
Document And Entity Information [Abstract] | |||
Document Type | 10-K | ||
Amendment Flag | false | ||
Document Period End Date | Dec. 31, 2018 | ||
Document Fiscal Year Focus | 2018 | ||
Document Fiscal Period Focus | FY | ||
Entity Registrant Name | AMERICAN BIO MEDICA CORP | ||
Entity Central Index Key | 0000896747 | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Filer Category | Non-accelerated Filer | ||
Entity Emerging Growth Company | false | ||
Entity Small Business | true | ||
Entity Shell Company | false | ||
Entity Public Float | $ 1,762,000 | ||
Trading Symbol | ABMC | ||
Entity Common Stock, Shares Outstanding | 32,479,368 |
BALANCE SHEETS
BALANCE SHEETS - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Current assets | ||
Cash and cash equivalents | $ 113,000 | $ 36,000 |
Accounts receivable, net of allowance for doubtful accounts of $36,000 at December 31, 2018 and $52,000 at December 31, 2017 | 452,000 | 348,000 |
Inventory, net of allowance of $268,000 at December 31, 2018 and $500,000 at December 31, 2017 | 1,019,000 | 1,473,000 |
Prepaid expenses and other current assets | 29,000 | 97,000 |
Total current assets | 1,613,000 | 1,954,000 |
Property, plant and equipment, net | 718,000 | 792,000 |
Patents, net | 123,000 | 109,000 |
Other assets | 21,000 | 21,000 |
Deferred finance costs - line of credit, net | 0 | 15,000 |
Total assets | 2,475,000 | 2,891,000 |
Current liabilities | ||
Accounts payable | 359,000 | 374,000 |
Accrued expenses and other current liabilities | 449,000 | 311,000 |
Wages payable | 278,000 | 259,000 |
Line of credit | 502,000 | 446,000 |
Current portion of long-term debt | 237,000 | 87,000 |
Total current liabilities | 1,825,000 | 1,477,000 |
Other liabilities/debt | 7,000 | 19,000 |
Long-term debt, net of current portion and deferred finance costs | 789,000 | 772,000 |
Total liabilities | 2,621,000 | 2,268,000 |
COMMITMENTS AND CONTINGENCIES | ||
Stockholders' equity: | ||
Preferred stock; par value $.01 per share; 5,000,000 shares authorized, none issued and outstanding | 0 | 0 |
Common stock; par value $.01 per share; 50,000,000 shares authorized; 32,279,368 issued and outstanding as of December 31, 2018 and 29,782,770 issued and outstanding as of December 31, 2017 | 323,000 | 298,000 |
Additional paid-in capital | 21,404,000 | 21,170,000 |
Accumulated deficit | (21,873,000) | (20,845,000) |
Total stockholders' (deficit)/equity | (146,000) | 623,000 |
Total liabilities and stockholders' (deficit)/equity | $ 2,475,000 | $ 2,891,000 |
BALANCE SHEETS (Parenthetical)
BALANCE SHEETS (Parenthetical) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Statement of Financial Position [Abstract] | ||
Allowance For Doubtful Accounts Receivable, Current | $ 36,000 | $ 52,000 |
Inventory Valuation Reserves | $ 268,000 | $ 500,000 |
Preferred stock, par value (in dollars per share) | $ 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 (in dollars per share) | $ .01 | $ 0.01 |
Common stock, shares authorized | 50,000,000 | 50,000,000 |
Common stock, shares issued | 32,279,368 | 29,782,770 |
Common stock, shares outstanding | 32,279,368 | 29,782,770 |
STATEMENT OF OPERATIONS
STATEMENT OF OPERATIONS - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Income Statement [Abstract] | ||
Net sales | $ 3,872,000 | $ 4,914,000 |
Cost of goods sold | 2,584,000 | 2,917,000 |
Gross profit | 1,288,000 | 1,997,000 |
Operating expenses: | ||
Research and development | 93,000 | 117,000 |
Selling and marketing | 545,000 | 680,000 |
General and administrative | 1,412,000 | 1,511,000 |
Operating Expenses, Total | 2,050,000 | 2,308,000 |
Operating loss | (762,000) | (311,000) |
Other income / (expense): | ||
Interest income | 1,000 | 0 |
Interest expense | (284,000) | (272,000) |
Other income, net | 19,000 | 38,000 |
Other income / (expense), Total | (264,000) | (234,000) |
Net loss before tax | (1,026,000) | (545,000) |
Income tax expense | (2,000) | 0 |
Net loss | $ (1,028,000) | $ (545,000) |
Basic and diluted loss per common share | $ (0.03) | $ (0.02) |
Weighted average number of shares outstanding - basic and diluted | 30,115,063 | 29,211,454 |
STATEMENTS OF CHANGES IN STOCKH
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - USD ($) | Common Stock [Member] | Additional Paid-in Capital [Member] | Retained Earnings [Member] | Total |
Balance at Dec. 31, 2016 | $ 288,000 | $ 21,037,000 | $ (20,300,000) | $ 1,025,000 |
Balance (in shares) at Dec. 31, 2016 | 28,842,788 | |||
Shares issued in connection with Landmark consulting agreement extensions | $ 10,000 | 90,000 | 100,000 | |
Shares issued in connection with Landmark consulting agreement extensions (in shares) | 939,982 | |||
Net Loss | (545,000) | (545,000) | ||
Balance at Dec. 31, 2017 | $ 298,000 | 21,170,000 | (20,845,000) | 623,000 |
Balance (in shares) at Dec. 31, 2017 | 29,782,770 | |||
Shares issued in connection with Landmark consulting agreement extensions | $ 3,000 | 22,000 | 25,000 | |
Shares issued in connection with Landmark consulting agreement extensions (in shares) | 277,778 | |||
Shares issued to Cherokee in connection with loan | $ 1,000 | 16,000 | 17,000 | |
Shares issued to Cherokee in connection with loan (in shares) | 150,000 | |||
Shares issued for board meeting attendance in lieu of cash | $ 1,000 | 6,000 | 7,000 | |
Shares issued for board meeting attendance in lieu of cash (in shares) | 68,820 | |||
Shares issued under December 2018 Private Placement | $ 20,000 | 180,000 | 200,000 | |
Shares issued under December 2018 Private Placement (in shares) | 2,000,000 | |||
Net Loss | (1,028,000) | (1,028,000) | ||
Balance at Dec. 31, 2018 | $ 323,000 | $ 21,404,000 | $ 21,873,000 | $ (146,000) |
Balance (in shares) at Dec. 31, 2018 | 32,279,368 |
STATEMENTS OF CASH FLOW
STATEMENTS OF CASH FLOW - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Cash flows from operating activities: | ||
Net loss | $ (1,028,000) | $ (545,000) |
Adjustments to reconcile net loss to net cash provided by operating activities: | ||
Depreciation and amortization | 81,000 | 80,000 |
Amortization of debt issuance costs | 126,000 | 126,000 |
Provision for bad debts | (16,000) | 3,000 |
Provision for slow moving and obsolete inventory | 134,000 | 51,000 |
Share-based payment expense | 10,000 | 43,000 |
Director fee paid with restricted stock | 6,000 | 0 |
Changes in: | ||
Accounts receivable | (88,000) | 205,000 |
Inventory | 320,000 | 58,000 |
Prepaid expenses and other current assets | 93,000 | 96,000 |
Accounts payable | (15,000) | 70,000 |
Accrued expenses and other current liabilities | 138,000 | 34,000 |
Wages payable | 19,000 | (40,000) |
Net cash (used in) / provided by operating activities | (220,000) | 181,000 |
Cash flows from investing activities: | ||
Purchase of property, plant and equipment | 0 | (44,000) |
Patent application costs | (22,000) | (20,000) |
Net cash used in investing activities | (22,000) | (64,000) |
Cash flows from financing activities: | ||
Proceeds (payments on) debt financing, net | 63,000 | (44,000) |
Proceeds from private placement | 200,000 | 0 |
Proceeds from lines of credit | 4,216,000 | 5,832,000 |
Payments on lines of credit | (4,160,000) | (6,025,000) |
Net cash used in financing activities | 319,000 | (237,000) |
Net decrease in cash and cash equivalents | 77,000 | (120,000) |
Cash and cash equivalents - beginning of period | 36,000 | 156,000 |
Cash and cash equivalents - end of period | 113,000 | 36,000 |
Supplemental disclosures of cash flow information: | ||
Consulting expense paid with restricted stock | 25,000 | 71,000 |
Common shares issued in connection with debt financings | 19,000 | 0 |
Related Party note payable paid with restricted stock | 6,000 | 0 |
Patent application costs | 22,000 | 20,000 |
Cash paid during the year for interest | 157,000 | 146,000 |
Cash paid for taxes | $ 2,000 | $ 0 |
THE COMPANY AND ITS SIGNIFICANT
THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Dec. 31, 2018 | |
Accounting Policies [Abstract] | |
THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES | The Company: American Bio Medica Corporation (the “Company”) is in the business of developing, manufacturing, and marketing point of collection testing products for drugs of abuse, as well as performing contract manufacturing services for third parties. Going Concern: The Company’s financial statements have been prepared assuming the Company will continue as a going concern, which assumes the realization of assets and the satisfaction of liabilities in the normal course of business. For the year ended December 31, 2018 (“Fiscal 2018”), the Company had a net loss of $1,028,000 and net cash used in operating activities of $220,000, compared to a net loss of $545,000, and net cash provided by operating activities of $181,000 in the year ended December 31, 2017 (“Fiscal 2017”). The Company’s cash position increased by $77,000 in Fiscal 2018 and decreased by $120,000 in Fiscal 2017. As of December 31, 2018, the Company had an accumulated deficit of $21,873,000. Over the course of the last several fiscal years, the Company has implemented a number of expense and personnel cuts, implemented a salary and commission deferral program, consolidated certain manufacturing operations of the Company, and refinanced debt. The salary deferral program consisted of a 20% salary deferral for the Company’s Chief Executive Officer/Principal Financial Officer Melissa Waterhouse and its non-executive VP Operations through September 30, 2018. In the fourth quarter Fiscal 2018, the salary deferral level was reduced to 10% given the length of time the deferral has been in place and the increasing balances on the deferred compensation. As of December 31, 2018, the Company owed these two individuals total deferred compensation of $167,000. The Company did not make any deferral payments in Fiscal 2018 and made payment of $27,000 in payments in Fiscal 2017. As cash flow from operations allows, the Company intends to make payments related to the salary deferral program, however the deferral program is continuing and the Company expects it will continue for up to another 12 months. The Company’s current cash balances, together with cash generated from future operations and amounts available under its credit facilities may not be sufficient to fund operations through April 2020. The Company’s current line of credit expires on June 22, 2020 and has a maximum availability of $1,500,000. However, the amount available under the line of credit is based upon the balance of the Company’s accounts receivable and inventory so the maximum amount is not available to borrow. As of December 31, 2018, based on the Company’s availability calculation, there were no additional amounts available under the line of credit because the Company draws any balance available on a daily basis. If sales levels continue to decline, the Company will have reduced availability on the line of credit due to decreased accounts receivable balances. The Company would also expect its inventory levels to decrease if sales levels decline further, which would result in further reduced availability on the line of credit. In addition to decreased inventory value, 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, starting July 1, 2018, the Inventory Sub-Cap Limit is being permanently reduced by $10,000 per month on the first day of each month until the Inventory Sub-Cap Limit is reduced to $0. Although this “staggered” reduction did not have a material immediate impact on our availability under the line of credit, it will eventually result in no availability under the line of credit related to inventory and the line of credit will be an accounts receivable based line only. If availability under the line of credit is not sufficient to satisfy the Company’s 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 which could have a material adverse effect on its business. 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. The Company’s ability to remain compliant with obligations under its current credit facilities will depend on the Company’s ability to replace lost sales and further increase sales. The Company’s ability to repay its current debt may also be affected by general economic, financial, competitive, regulatory, business and other factors beyond its control, including those discussed herein. If the Company is unable to meet its credit facility obligations, the Company would be required to raise money through new equity and/or debt financing(s) and, there is no assurance that the Company would be able to find new financing, or that any new financing would be at favorable terms. The Company was not in compliance with the TNW covenant as of December 31, 2018; however, the Company received a waiver from Crestmark Bank. The Company will be charged a fee of $5,000 for this waiver. A failure to comply with the TNW covenant under our Crestmark LOC (a failure that is not waived by Crestmark) could result in an event of default, which, if not cured, could result in the Company being required to pay much higher costs associated with the indebtedness. If we are forced to refinance our debt on less favorable terms, our results of operations and financial condition could be adversely affected by increased costs and rates. There is also no assurance that we could obtain alternative debt facilities. We may also be forced to pursue one or more alternative strategies, such as restructuring, selling assets, reducing or delaying capital expenditures or seeking additional equity capital. There can be no assurances that any of these strategies could be implemented on satisfactory terms, if at all. The Company’s term loan with Cherokee Financial, LLC matures on February 15, 2019. On this same date, another principal reduction payment will be due in the amount of $75,000 on our Loan and Security Agreement with Cherokee Financial, LLC; for a total of $225,000. See Note J – Subsequent Event. The Company’s history of limited cash flow and/or operating cash flow deficits, its current cash position and lack of access to capital raise doubt about its ability to continue as a going concern and its continued existence is dependent upon several factors, including its ability to raise revenue levels and control costs to generate positive cash flows, to sell additional shares of the Company’s common stock to fund operations and obtain additional credit facilities. Selling additional shares of the Company’s common stock and obtaining additional credit facilities may be more difficult as a result of limited access to equity markets and the tightening of credit markets. If events and circumstances occur such that 1) the Company does not meet its current operating plans to increase sales, 2) the Company is unable to raise sufficient additional equity or debt financing, or 3) the Company is unable to utilize equity as a form of payment in lieu of cash, or 4) the Company’s credit facilities are insufficient or not available, the Company may be required to further reduce expenses or take other steps which could have a material adverse effect on our future performance. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amount of or classification of liabilities that might be necessary as a result of this uncertainty. Significant Accounting Policies: [1] Cash equivalents: [2] Accounts Receivable: [3] Inventory: [4] Income taxes: On December 22, 2017, the Tax Reform Act was signed into law. Among the provisions, the Tax Reform ACT reduces the U.S. federal corporate income tax rate from a maximum of 35% to a flat 21% effective January 1, 2018, requires companies to pay a one-time transition tax on deemed repatriated earnings of certain foreign subsidiaries that were previously tax deferred, and creates new taxes on certain foreign sourced earnings. At December 31, 2018 we have completed our accounting for the tax effects of the enactment of the Tax Reform Act. We have finalized the tax effects on our existing deferred tax balances and the one-time transition tax under Staff Accounting Bulletin No. 118 ("SAB 118"). We have also included current year impacts of the Tax Reform Act in our tax provision. In Fiscal 2017, the Company recognized the provisional tax impact related to the revaluation of deferred tax assets and liabilities and included these amounts in its financial statements for Fiscal 2017. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to reverse. As a result of the reduction in the U.S. corporate income tax rate from 35% to 21% under the Tax Reform Act, the Company revalued its net U.S. deferred income tax assets and liabilities at December 31, 2017 from $5,400,000 to $3,600,000, a decrease of $1,800,000. In addition, the deferred income tax asset valuation allowance increased by 1,800,000 as a result of the reduction in the corporate income tax rate. [5] Depreciation and amortization: [6] Revenue recognition: In Fiscal 2018, the Company 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. [7] Shipping and handling: [8] Research and development: [9] Net loss per common share: Potential common shares outstanding as of December 31, 2018 and 2017: December 31, 2018 December 31, 2017 Warrants 2,000,000 2,060,000 Options 2,222,000 2,147,000 Total 4,222,000 4,207,000 For Fiscal 2018 and Fiscal 2017, the number of securities not included in the diluted loss per share was 4,222,000 and 4,207,000, respectively, as their effect was anti-dilutive due to a net loss in each year. [10] Use of estimates: · estimates of the fair value of stock options and warrants at date of grant; and · estimates of accounts receivable reserves; and · estimates of the inventory reserves; and · estimates of accruals and liabilities; and · deferred tax valuation. The fair value of stock options and warrants issued to employees, members of our Board of Directors, and consultants in connection with debt financings is estimated on the date of grant based on the Black-Scholes options-pricing model utilizing certain assumptions for a risk free interest rate; volatility; and expected remaining lives of the awards. The assumptions used in calculating the fair value of share-based payment awards represent management's best estimates, but these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and the Company uses different assumptions, the Company's equity-based compensation expense could be materially different in the future. In addition, the Company is required to estimate the expected forfeiture rate and only recognize expense for those shares expected to vest. In estimating the Company's forfeiture rate, the Company analyzed its historical forfeiture rate, the remaining lives of unvested options, and the amount of vested options as a percentage of total options outstanding. If the Company's actual forfeiture rate is materially different from its estimate, or if the Company reevaluates the forfeiture rate in the future, the equity-based compensation expense could be significantly different from what we have recorded in the current period. Actual results may differ from estimates and assumptions of future events. [11] Impairment of long-lived assets: [12] Financial Instruments: Estimated fair value of financial instruments is determined using available market information. In evaluating the fair value information, considerable judgment is required to interpret the market data used to develop the estimates. The use of different market assumptions and/or different valuation techniques may have a material effect on the estimated fair value amounts. Accordingly, the estimates of fair value presented herein may not be indicative of the amounts that could be realized in a current market exchange. ASC Topic 820, “Fair Value Measurements and Disclosures” (“ASC Topic 820”) establishes a hierarchy for ranking the quality and reliability of the information used to determine fair values. ASC Topic 820 requires that assets and liabilities carried at fair value be classified and disclosed in one of the following three categories: Level 1: Unadjusted quoted market prices in active markets for identical assets or liabilities. Level 2: Unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices are observable for the asset or liability. Level 3: Unobservable inputs for the asset or liability. The Company endeavors to utilize the best available information in measuring fair value. Financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. The following methods and assumptions were used by the Company in estimating its fair value disclosures for financial instruments: Cash and Cash Equivalents—The carrying amount reported in the balance sheet for cash and cash equivalents approximates its fair value due to the short-term maturity of these instruments. Line of Credit and Long-Term Debt—The carrying amounts of the Company’s borrowings under its line of credit agreement and other long-term debt approximates fair value, based upon current interest rates, some of which are variable interest rates. [13] Accounting for share-based payments and stock warrants: In Fiscal 2018, the Company accounted for derivative instruments in accordance with ASC Topic 815 “Derivatives and Hedging” (“ASC Topic 815”). The guidance within ASC Topic 815 requires the Company to recognize all derivatives as either assets or liabilities on the statement of financial position unless the contract, including common stock warrants, settles in the Company’s own stock and qualifies as an equity instrument. A contract designated as an equity instrument is included in equity at its fair value, with no further fair value adjustments required; and if designated as an asset or liability is carried at fair value with any changes in fair value recorded in the results of operations. The weighted average fair value of warrants issued and outstanding was $0.18 in both Fiscal 2018 and Fiscal 2017. (See Note H [3] – Stockholders’ Equity) [14] Concentration of credit risk: At December 31, 2018, one customer accounted for 56.5% of the Company’s net accounts receivable. A substantial portion of this balance was collected in the first quarter of the year ending December 31, 2019. Due to the long standing nature of the Company’s relationship with this customer and contractual obligations, the Company is confident it will recover these amounts. At December 31, 2017, one customer accounted for 38.4% of the Company’s net accounts receivable. A substantial portion of this balance was collected in the first quarter of the year ending December 31, 2018. The Company has established an allowance for doubtful accounts of $36,000 and $52,000 at December 31, 2018 and December 31, 2017, respectively, based on factors surrounding the credit risk of our customers and other information. One of the Company’s customers accounted for 44% of net sales in Fiscal 2018. Two of the Company’s customers accounted for 35.1% and 14.6% of net sales of the Company in Fiscal 2017. The loss of an account in the fourth quarter of Fiscal 2017 is the reason why there is only one major customer in Fiscal 2018. The account lost in Fiscal 2017 is a subject of litigation we initiated against a former Vice President, Sales & Marketing/Sales Consultant (See Note D – Litigation/Legal Matters). The Company maintains certain cash balances at financial institutions that are federally insured and at times the balances have exceeded federally insured limits. [15] Reporting comprehensive income: [16] Reclassifications: [17] New accounting pronouncements: In the year ended December 31, 2018, we 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. The following accounting standards have been issued prior to the end of Fiscal 2018 but, did not require adoption as in Fiscal 2018: ASU 2016-02, “Leases”, ASU 2018-11, “Leases (Topic 842); Targeted Improvements” ASU 2018-20, “Leases (Topic 842”) The Company will adopt ASU 2016-02, ASU 2018-11 and ASU 2018-20 in the first quarter of the year ending December 31, 2019 and does not expect such adoption to have a material impact on its financial position or results of operations. 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” Any other new accounting pronouncements recently issued, but not yet effective, have been reviewed and determined to be not applicable or were related to technical amendments or codification. As a result, the adoption of such new accounting pronouncements, when effective, is not expected to have a material effect on the Company’s financial position or results of operations. |
INVENTORY
INVENTORY | 12 Months Ended |
Dec. 31, 2018 | |
Inventory Disclosure [Abstract] | |
INVENTORY | Inventory is comprised of the following: December 31, 2018 December 31, 2017 Raw Materials $ 778,000 $ 1,023,000 Work In Process 184,000 403,000 Finished Goods 325,000 547,000 Allowance for slow moving and obsolete inventory (268,000 ) (500,000 ) $ 1,019,000 $ 1,473,000 |
PROPERTY, PLANT AND EQUIPMENT
PROPERTY, PLANT AND EQUIPMENT | 12 Months Ended |
Dec. 31, 2018 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY, PLANT AND EQUIPMENT | Property, plant and equipment, at cost, are as follows: December 31, 2018 December 31, 2017 Land $ 102,000 $ 102,000 Buildings and improvements 1,352,000 1,352,000 Manufacturing and warehouse equipment 2,108,000 2,108,000 Office equipment (incl. furniture and fixtures) 412,000 412,000 3,974,000 3,974,000 Less accumulated depreciation (3,256,000 ) (3,182,000 ) $ 718,000 $ 792,000 Depreciation expense was $74,000 and $76,000 in Fiscal 2018 and Fiscal 2017, respectively. |
ACCRUED EXPENSES AND OTHER CURR
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | 12 Months Ended |
Dec. 31, 2018 | |
Payables and Accruals [Abstract] | |
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | Accrued expenses and other current liabilities consisted of the following: December 31, 2018 December 31, 2017 Accounting fees $ 75,000 $ 75,000 Interest payable 13,000 11,000 Accounts receivable credit balances 34,000 11,000 Sales tax payable 115,000 89,000 Deferred compensation 167,000 113,000 Customer Deposits 25,000 0 Other current liabilities 20,000 12,000 $ 449,000 $ 311,000 |
DEBT AND LINE OF CREDIT
DEBT AND LINE OF CREDIT | 12 Months Ended |
Dec. 31, 2018 | |
Debt Disclosure [Abstract] | |
DEBT AND LINE OF CREDIT | The Company’s Line of Credit and Debt consisted of the following as of December 31, 2018 and December 31, 2017: December 31, 2018 December 31, 2017 Loan and Security Agreement with Cherokee Financial, LLC $ 975,000 $ 1,050,000 Crestmark Line of Credit: 502,000 446,000 Crestmark Equipment Term Loan: 19,000 0 Term Loan with Cherokee Financial LLC: 150,000 31,000 $ 1,646,000 1,527,000 Less debt discount & issuance costs (Cherokee Financial, LLC loans) (111,000 ) (203,000 ) Total debt, net 1,535,000 $ 1,324,000 Current portion 739,000 $ 533,000 Long-term portion, net of current portion 796,000 $ 791,000 At December 31, 2018, the following are the debt maturities for each of the next five years: 2019 $ 739,000 (1) 2020 796,000 2021 0 2022 0 2023 0 $ 1,535,000 (1) Although the Crestmark Line of Credit does not mature until June 22, 2020, the balance on the line of credit ($502,000) is included in the debt maturity for 2019 given the “demand” nature of the line of credit. LOAN AND SECURITY AGREEMENT WITH CHEROKEE FINANCIAL, LLC. (“CHEROKEE”) On March 26, 2015, the Company entered into a LSA with Cherokee (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, 2019; partially with proceeds received from a new, larger term loan with Cherokee (See Note J – Subsequent Event). 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. The expenses and fees (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 (in accordance with ASU No. 2015-03). The Company recognized $173,000 in interest expense related to the Cherokee LSA in Fiscal 2018 (of which $94,000 is debt issuance cost amortization recorded as interest expense) and $173,000 in interest expense related to the Cherokee LSA in Fiscal 2017 (of which $94,000 is debt issuance cost amortization recorded as interest expense). The Company had $13,000 in accrued interest expense at December 31, 2018 and, $11,000 in accrued interest expense at December 31, 2017. As of December 31, 2018, the balance on the Cherokee LSA was $975,000; however the discounted balance was $866,000. 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 has not complied with the TNW covenant since the year ended December 31, 2017 but, has received waivers from Crestmark. As consideration for the granting of the waiver for December 31, 2017, Crestmark increased the interest rate on the Crestmark LOC from Prime Rate plus 2% to Prime Rate plus 3%. The increase in interest rate was effective as of May 1, 2018. Thereafter, the Company was charged a fee of $5,000 for each waiver. The Company is not in compliance with the TNW covenant as of December 31, 2018, however the Company has received a waiver from Crestmark related to its non-compliance with the TNW covenant. The Company will be charged a fee of $5,000 for this waiver. 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 December 31, 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 December 31, 2018, the interest only rate on the Crestmark LOC was 8.50%. As of December 31, 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 13.64%. The Company recognized $76,000 in interest expense related to the Crestmark LOC in Fiscal 2018 (of which $15,000 is debt issuance cost amortization recorded as interest expense). The Company recognized $98,000 in interest expense related to the Crestmark Line of Credit in Fiscal 2017 (of which $32,000 was debt issuance costs related to interest expense). Given the nature of the administration of the Crestmark LOC, at December 31, 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 December 31, 2018, the balance on the Crestmark LOC was $502,000, 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 8.5% as of the date of this report. The Company incurred $2,000 in interest expense in Fiscal 2018 related to the Equipment Loan and $1,000 in interest expense related to the Equipment Loan in Fiscal 2017. The balance on the equipment loan was $19,000 as of December 31, 2018, and $31,000 as of December 31, 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 that was due on February 15, 2018 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 was 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 $33,000 in interest expense related to the Cherokee Term Loan in Fiscal 2018 (of which $19,000 was debt issuance costs recorded as interest expense) and $0 in interest expense in Fiscal 2017 (as the term loan was not yet in place in Fiscal 2017). As of December 31, 2018, the balance on the Cherokee Term Loan was $150,000; however, the discounted balance was $148,000. 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). |
INCOME TAXES
INCOME TAXES | 12 Months Ended |
Dec. 31, 2018 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | The Company follows ASC 740 “Income Taxes” (“ASC 740”) which prescribes the asset and liability method whereby deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities, and are measured using the enacted laws and tax rates that will be in effect when the differences are expected to reverse. The measurement of deferred tax assets is reduced, if necessary, by a valuation allowance for any tax benefits that are not expected to be realized. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that such tax rate changes are enacted. Under ASC 740, tax benefits are recorded only for tax positions that are more likely than not to be sustained upon examination by tax authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely to be realized upon ultimate settlement. Unrecognized tax benefits are tax benefits claimed in the Company’s tax returns that do not meet these recognition and measurement standards. On December 22, 2017, the Tax Reform Act was signed into law. Among the provisions, the Tax Reform ACT reduces the U.S. federal corporate income tax rate from a maximum of 35% to a flat 21% effective January 1, 2018, requires companies to pay a one-time transition tax on deemed repatriated earnings of certain foreign subsidiaries that were previously tax deferred, and creates new taxes on certain foreign sourced earnings. At December 31, 2018 we have completed our accounting for the tax effects of the Tax Reform Act. We have finalized the tax effects on our existing deferred tax balances and the one-time transition tax under Staff Accounting Bulletin No. 118 ("SAB 118"). We have also included current year impacts of the Tax Reform Act in our tax provision. In Fiscal 2017, the Company recognized the provisional tax impact related to the revaluation of deferred tax assets and liabilities and included these amounts in its financial statements for Fiscal 2017. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to reverse. As a result of the reduction in the U.S. corporate income tax rate from 35% to 21% under the Tax Reform Act, the Company revalued its net U.S. deferred income tax assets and liabilities at December 31, 2017 from $5,400,000 to $3,600,000, a decrease of $1,800,000. In addition, the deferred income tax asset valuation allowance increased by 1,800,000 as a result of the reduction in the corporate income tax rate. The ultimate impact in Fiscal 2017 did not differ materially from the provisional amounts. A reconciliation of the U.S. Federal statutory income tax rate to the effective income tax rate is as follows: Year Ended December 31, 2018 Year Ended December 31, 2017 Tax expense at federal statutory rate (21 %) (34 %) State tax expense, net of federal tax effect 0 % 0 % Permanent timing differences 0 % 0 % Deferred income tax asset valuation allowance 21 % (298 %) Effective change in tax rate due to Tax Reform Act 0 % 332 % Effective income tax rate 0 % 0 % Significant components of the Company’s deferred income tax assets are as follows: December 31, 2018 December 31, 2017 Inventory capitalization $ 9,000 $ 13,000 Inventory allowance 70,000 130,000 Allowance for doubtful accounts 9,000 13,000 Accrued compensation 22,000 18,000 Stock based compensation 168,000 165,000 Deferred wages payable 43,000 29,000 Depreciation – Property, Plant & Equipment (6,000 ) (10,000 ) Sales tax reserve 0 0 Net operating loss carry-forward 3,569,000 3,261,000 Total gross deferred income tax assets 3,884,000 3,619,000 Less deferred income tax assets valuation allowance (3,884,000 ) (3,619,000 ) Net deferred income tax assets $ 0 $ 0 The valuation allowance for deferred income tax assets as of December 31, 2018 and December 31, 2017 was $3,884,000 and $3,619,000, respectively. The net change in the deferred income tax assets valuation allowance was $265,000 for Fiscal 2018. The net change in the deferred income tax assets valuation allowance was $1,583,000 for Fiscal 2017. The Company believes that it is more likely than not that the deferred tax assets will not be realized. As of December 31, 2018, the prior three years remain open for examination by the federal or state regulatory agencies for purposes of an audit for tax purposes. At December 31, 2018, the Company had Federal net operating loss carry-forwards for income tax purposes of approximately $3,569,000. The Company’s net operating loss carry-forwards begin to expire in 2019 and continue to expire through 2035. In assessing the realizability of deferred income tax assets, management considers whether or not it is more likely than not that some portion or all deferred income tax assets will be realized. The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the projected future taxable income and tax planning strategies in making this assessment. The Company’s ability to utilize the operating loss carry-forwards may be subject to an annual limitation in future periods pursuant to Section 382 of the Internal Revenue Code of 1986, as amended, if future changes in ownership occur. The Company recognizes potential interest and penalties related to income tax positions as a component of the provision for income taxes on operations. The Company does not anticipate that total unrecognized tax benefits will materially change in the next twelve months. |
OTHER INCOME _ EXPENSE
OTHER INCOME / EXPENSE | 12 Months Ended |
Dec. 31, 2018 | |
Other Income and Expenses [Abstract] | |
OTHER INCOME / EXPENSE | Other expense in Fiscal 2018 consisted of interest income, interest expense associated with our credit facilities (our line of credit and equipment loan with Crestmark Bank, and our loan and security agreement and term loan with Cherokee Financial, LLC) partially offset by other income related to gains on certain liabilities. Other expense in Fiscal 2017 consisted of interest expense associated with our credit facilities (our line of credit and equipment loan with Crestmark Bank, and our loan and security agreement with Cherokee Financial, LLC) partially offset by other income related to gains on certain liabilities. |
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY | 12 Months Ended |
Dec. 31, 2018 | |
Stockholders' Equity Note [Abstract] | |
STOCKHOLDERS' EQUITY | [1] Stock option plans: [2] Stock options: As of December 31, 2016, there were 2,222,000 options issued and outstanding under the 2001 Plan. There were no options issued under the 2013 Plan, making the total issued and outstanding options 2,222,000 as of December 31, 2018. Of the total options issued and outstanding, 2,142,000 were fully vested as of December 31, 2018. As of December 31, 2018, there were 1,495,000 options available for issuance under the 2001 Plan and 4,000,000 options available under the 2013 Plan. Stock option activity for Fiscal 2018 and Fiscal 2017 is summarized as follows: (the figures contained within the tables below have been rounded to the nearest thousand) Year Ended December 31, 2018 Year Ended December 31, 2017 Shares Weighted Average Exercise Price Aggregate Intrinsic Value as of December 31, 2018 Shares Weighted Average Exercise Price Aggregate Intrinsic Value as of December 31, 2017 Options outstanding at beginning of year 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 year 2,222,000 $ 0.13 $ 3,000 2,147,000 $ 0.13 $ 10,000 Options exercisable at end of year 2,142,000 $ 0.13 1,647,000 $ 0.13 The following table presents information relating to stock options outstanding as of December 31, 2018: Options Outstanding Options Exercisable Weighted Weighted Weighted Average Average Average Range of Exercise Exercise Remaining Exercise Price Shares Price Life in Years Shares Price $0.07 - $0.10 285,000 $ 0.09 4.01 205,000 $ 0.09 $0.11 - $0.14 1,485,000 $ 0.12 6.35 1,485,000 $ 0.12 $0.15 - $0.26 452,000 $ 0.18 4.03 452,000 $ 0.18 TOTAL 2,222,000 $ 0.13 5.58 2,142,000 $ 0.13 The following table summarizes weighted-average assumptions using the Black-Scholes option-pricing model used on the date of the grants issued during Fiscal 2018 and Fiscal 2017: Year Ended December 31 2018 2017 Volatility 79% 81% Expected term (years) 10 years 10 years Risk-free interest rate 2.90% 2.16% Dividend yield 0% 0% The Company recognized $10,000 in share based payment expense related to stock options in Fiscal 2018 and $43,000 in share based payment expense related to stock options in Fiscal 2017. As of December 31, 2018, there was approximately $3,000 of total unrecognized share based payment expense related to stock options. This cost is expected to be recognized over 5 months. [3] Warrants: Warrant activity for Fiscal 2018 and Fiscal 2017 is summarized as follows. Any common shares issued as a result of the exercise of warrants would be new common shares issued from our authorized issued shares. Year Ended December 31, 2018 Year Ended December 31, 2017 Shares Weighted Average Exercise Price Aggregate Intrinsic Value as of December 31, 2018 Shares Weighted Average Exercise Price Aggregate Intrinsic Value as of December 31, 2017 Warrants outstanding at beginning of year 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 year 2,000,000 $ 0.18 None 2,060,000 $ 0.18 NA Warrants exercisable at end of year 2,000,000 $ 0.18 2,060,000 $ 0.18 The Company recognized $0 in debt issuance and deferred finance costs related to the issuance of these warrants outstanding in Fiscal 2018 and Fiscal 2017. As of December 31, 2018, there was $0 of total unrecognized debt issuance costs associated with the issuance of the above warrants outstanding. |
COMMITMENTS, CONTINGENCIES AND
COMMITMENTS, CONTINGENCIES AND OTHER MATTERS | 12 Months Ended |
Dec. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS, CONTINGENCIES AND OTHER MATTERS | [1] Operating leases: 2019 $ 35,000 2020 3,000 2021 3,000 2022 2,000 2023 0 Thereafter 0 $ 43,000 Rent Expense was $43,000 in Fiscal 2018 and $46,000 in Fiscal 2017. [2] Employment agreements: [3] Legal: ABMC v. Todd Bailey The Company has ongoing litigation in the Northern District of New York against Premier Biotech Inc., and its principal, Todd Bailey (“Bailey”) (together the “Defendants”) that was filed in February 2017. 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 damages related to any profits and revenues that results from action taken by the Defendants related to Company customers. In early 2017, the Company became aware of actions taken by the Defendants, including but not limited to, action taken specifically related to a Company contract with a state agency (held by the Company in excess of 10 years). 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 Vocational Industries, Inc. (a then vendor of the Company) and Premier Biotech, Inc. in July 2017. This contract historically accounted for 10-15% of the Company’s annual revenue. 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 continued to hold a contract with the agency through September 30, 2017. After the award of the contract, 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 and undercut the Company’s pricing. 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 2017). The court found that there was jurisdiction over the Defendants. 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 addressed (among other things) the Company’s intent to further supplement its complaint based on additional (subsequent) damage alleged by the Company on the part of the Defendants. 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 supplementing claims of the 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. Defendants’ 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. In January 2019, an initial conference was held to discuss the case management plan and exchange mandatory disclosures. On January 31, 2019, the court referred the case for participation in the Mandatory Mediation Program. The deadline for completion of mediation was set for May 31, 2019. In January 2019, Bailey’s complaint previously filed in Minnesota was transferred as a counter-claim in the Company’s complaint against Bailey. Bailey is seeking deferred commissions of $164,000 he alleges are owed to him by the Company. These amounts were originally deferred under a deferred compensation program initiated in 2013; a program in which Bailey was one of the participants. The Company has responded to the Bailey counterclaim and believes these amounts are not due to Bailey given the actions indicated in the Company’s litigation. Given the stage of the litigation, management is not yet able to opine on the outcome of its complaint or the counterclaim. [4] Financial Advisory Agreement: As a result of the retainer fees being paid in restricted shares and the resulting percentage of common share ownership, Landmark filed a Schedule 13G in October 2016 related to its ownership of the Company’s common stock. Apart from his status as a shareholder and with respect to the Agreement, there is no material relationship between the Company and Landmark. |
SUBSEQUENT EVENT
SUBSEQUENT EVENT | 12 Months Ended |
Dec. 31, 2018 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENT | On February 25, 2019 (the “Closing Date”), the Company entered into an agreement dated (and effective) February 13, 2019 (the “Agreement”) with Cherokee under which Cherokee is providing the Company with a loan in the amount of $200,000. The Agreement extends the Company’s current Term Loan with Cherokee in the amount of $150,000 and provides the Company with an additional $50,000 in gross proceeds; $48,000 in net proceeds after Cherokee’s legal fees in connection with the financing. The Company utilized the net proceeds to pay a portion of the $75,000 principal reduction payment under the Company’s Loan and Security Agreement with Cherokee (with the remaining $27,000 being paid with cash on hand). The annual interest rate under the new term loan is 18% paid quarterly in arrears with the first interest payment being due on May 15, 2019. The loan is required to be paid in full on February 15, 2020 unless paid off earlier (with no penalty) at the Company’s sole discretion. In connection with the Loan Agreement, the Company issued 200,000 restricted shares of common stock to Cherokee in the first quarter of the year ending December 31, 2019. In the event of default, this includes, but is not limited to, the Company’s inability to make any payments due under the Agreement, Cherokee has the right to increase the interest rate on the financing to 20%, automatically add a delinquent payment penalty of $20,000 to the outstanding principal and the Company would be required to issue an additional 200,000 shares of restricted common stock. |
SEGMENT AND GEOGRAPHIC INFORMAT
SEGMENT AND GEOGRAPHIC INFORMATION | 12 Months Ended |
Dec. 31, 2018 | |
Segment Reporting [Abstract] | |
SEGMENT AND GEOGRAPHIC INFORMATION | The Company operates in one reportable segment. Information concerning net sales by principal geographic location is as follows: Year Ended December 31, 2018 Year Ended December 31, 2017 United States $ 3,411,000 $ 4,344,000 North America (not domestic) 56,000 102,000 Europe 133,000 127,000 Asia/Pacific Rim 25,000 30,000 South America 246,000 309,000 Africa 1,000 2,000 $ 3,872,000 $ 4,914,000 |
THE COMPANY AND ITS SIGNIFICA_2
THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Dec. 31, 2018 | |
Accounting Policies [Abstract] | |
Cash equivalents | The Company considers all highly liquid financial instruments purchased with a maturity of three months or less to be cash equivalents. |
Accounts Receivable | Accounts receivable consists of mainly trade receivables due from customers for the sale of our products. Payment terms vary on a customer-by-customer basis, and currently range from cash on delivery to net 60 days. Receivables are considered past due when they have exceeded their payment terms. Accounts receivable have been reduced by an estimated allowance for doubtful accounts. The Company estimates its allowance for doubtful accounts based on facts, circumstances and judgments regarding each receivable. Customer payment history and patterns, length of relationship with the customer, historical losses, economic and political conditions, trends and individual circumstances are among the items considered when evaluating the collectability of the receivables. Accounts are reviewed regularly for collectability and those deemed uncollectible are written off. At December 31, 2018 and December 31, 2017, the Company had an allowance for doubtful accounts of $36,000 and $52,000, respectively. |
Inventory | Inventory is stated at the lower of cost or net realizable value. Work in process and finished goods are comprised of labor, overhead and raw material costs. Labor and overhead costs are determined on a rolling average cost basis and raw materials are determined on an average cost basis. At December 31, 2018 and December 31, 2017, the Company established an allowance for slow moving and obsolete inventory of $268,000 and $500,000, respectively. |
Income taxes | The Company follows ASC 740 “Income Taxes” (“ASC 740”) which prescribes the asset and liability method whereby deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities, and are measured using the enacted laws and tax rates that will be in effect when the differences are expected to reverse. The measurement of deferred tax assets is reduced, if necessary, by a valuation allowance for any tax benefits that are not expected to be realized. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that such tax rate changes are enacted. Under ASC 740, tax benefits are recorded only for tax positions that are more likely than not to be sustained upon examination by tax authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely to be realized upon ultimate settlement. Unrecognized tax benefits are tax benefits claimed in the Company’s tax returns that do not meet these recognition and measurement standards. On December 22, 2017, the Tax Reform Act was signed into law. Among the provisions, the Tax Reform ACT reduces the U.S. federal corporate income tax rate from a maximum of 35% to a flat 21% effective January 1, 2018, requires companies to pay a one-time transition tax on deemed repatriated earnings of certain foreign subsidiaries that were previously tax deferred, and creates new taxes on certain foreign sourced earnings. At December 31, 2018 we have completed our accounting for the tax effects of the enactment of the Tax Reform Act. We have finalized the tax effects on our existing deferred tax balances and the one-time transition tax under Staff Accounting Bulletin No. 118 ("SAB 118"). We have also included current year impacts of the Tax Reform Act in our tax provision. In Fiscal 2017, the Company recognized the provisional tax impact related to the revaluation of deferred tax assets and liabilities and included these amounts in its financial statements for Fiscal 2017. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to reverse. As a result of the reduction in the U.S. corporate income tax rate from 35% to 21% under the Tax Reform Act, the Company revalued its net U.S. deferred income tax assets and liabilities at December 31, 2017 from $5,400,000 to $3,600,000, a decrease of $1,800,000. In addition, the deferred income tax asset valuation allowance increased by 1,800,000 as a result of the reduction in the corporate income tax rate. |
Depreciation and amortization | Property, plant and equipment are depreciated on the straight-line method over their estimated useful lives; generally 3-5 years for equipment and 30 years for buildings. Leasehold improvements and capitalized lease assets are amortized by the straight-line method over the shorter of their estimated useful lives or the term of the lease. Intangible assets include the cost of patent applications, which are deferred and charged to operations over 19 years. The accumulated amortization of patents is $182,000 at December 31, 2018 and $175,000 at December 31, 2017. Annual amortization expense of such intangible assets is expected to be $7,000 per year for the next 5 years. |
Revenue recognition | The Company adopted ASU 2014-09, “Revenue from Contracts with Customers” in the first quarter of Fiscal 2018.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. In Fiscal 2018, the Company 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. |
Shipping and handling | Shipping and handling fees charged to customers are included in net sales, and shipping and handling costs incurred by the Company, to the extent of those costs charged to customers, are included in cost of sales. |
Research and development | Research and development (“R&D”) costs are charged to operations when incurred. These costs include salaries, benefits, travel, costs associated with regulatory applications, supplies, depreciation of R&D equipment and other miscellaneous expenses. |
Net loss per common share | Basic loss per common share is calculated by dividing net loss by the weighted average number of outstanding common shares during the period. Potential common shares outstanding as of December 31, 2018 and 2017: December 31, 2018 December 31, 2017 Warrants 2,000,000 2,060,000 Options 2,222,000 2,147,000 Total 4,222,000 4,207,000 For Fiscal 2018 and Fiscal 2017, the number of securities not included in the diluted loss per share was 4,222,000 and 4,207,000, respectively, as their effect was anti-dilutive due to a net loss in each year. |
Use of estimates | ● estimates of the fair value of stock options and warrants at date of grant; and ● estimates of accounts receivable reserves; and ● estimates of the inventory reserves; and ● estimates of accruals and liabilities; and ● deferred tax valuation. The fair value of stock options and warrants issued to employees, members of our Board of Directors, and consultants in connection with debt financings is estimated on the date of grant based on the Black-Scholes options-pricing model utilizing certain assumptions for a risk free interest rate; volatility; and expected remaining lives of the awards. The assumptions used in calculating the fair value of share-based payment awards represent management's best estimates, but these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and the Company uses different assumptions, the Company's equity-based compensation expense could be materially different in the future. In addition, the Company is required to estimate the expected forfeiture rate and only recognize expense for those shares expected to vest. In estimating the Company's forfeiture rate, the Company analyzed its historical forfeiture rate, the remaining lives of unvested options, and the amount of vested options as a percentage of total options outstanding. If the Company's actual forfeiture rate is materially different from its estimate, or if the Company reevaluates the forfeiture rate in the future, the equity-based compensation expense could be significantly different from what we have recorded in the current period. Actual results may differ from estimates and assumptions of future events. |
Impairment of long-lived assets | The Company records impairment losses on long-lived assets used in operations when events and circumstances indicate that the assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amounts of those assets. |
Financial Instruments | The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, and other liabilities approximate their fair value based on the short term nature of those items. Estimated fair value of financial instruments is determined using available market information. In evaluating the fair value information, considerable judgment is required to interpret the market data used to develop the estimates. The use of different market assumptions and/or different valuation techniques may have a material effect on the estimated fair value amounts. Accordingly, the estimates of fair value presented herein may not be indicative of the amounts that could be realized in a current market exchange. ASC Topic 820, “Fair Value Measurements and Disclosures” (“ASC Topic 820”) establishes a hierarchy for ranking the quality and reliability of the information used to determine fair values. ASC Topic 820 requires that assets and liabilities carried at fair value be classified and disclosed in one of the following three categories: Level 1: Unadjusted quoted market prices in active markets for identical assets or liabilities. Level 2: Unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices are observable for the asset or liability. Level 3: Unobservable inputs for the asset or liability. The Company endeavors to utilize the best available information in measuring fair value. Financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. The following methods and assumptions were used by the Company in estimating its fair value disclosures for financial instruments: Cash and Cash Equivalents—The carrying amount reported in the balance sheet for cash and cash equivalents approximates its fair value due to the short-term maturity of these instruments. Line of Credit and Long-Term Debt—The carrying amounts of the Company’s borrowings under its line of credit agreement and other long-term debt approximates fair value, based upon current interest rates, some of which are variable interest rates. |
Accounting for share-based payments and stock warrants | In accordance with the provisions of ASC Topic 718, “Accounting for Stock Based Compensation”, the Company recognizes share-based payment expense for stock options and warrants. The weighted average fair value of options issued and outstanding in Fiscal 2018 and Fiscal 2017 was $0.13 in each year. (See Note H [2] – Stockholders’ Equity) In Fiscal 2018, the Company accounted for derivative instruments in accordance with ASC Topic 815 “Derivatives and Hedging” (“ASC Topic 815”). The guidance within ASC Topic 815 requires the Company to recognize all derivatives as either assets or liabilities on the statement of financial position unless the contract, including common stock warrants, settles in the Company’s own stock and qualifies as an equity instrument. A contract designated as an equity instrument is included in equity at its fair value, with no further fair value adjustments required; and if designated as an asset or liability is carried at fair value with any changes in fair value recorded in the results of operations. The weighted average fair value of warrants issued and outstanding was $0.18 in both Fiscal 2018 and Fiscal 2017. (See Note H [3] – Stockholders’ Equity) |
Concentration of credit risk | At December 31, 2018, one customer accounted for 56.5% of the Company’s net accounts receivable. A substantial portion of this balance was collected in the first quarter of the year ending December 31, 2019. Due to the long standing nature of the Company’s relationship with this customer and contractual obligations, the Company is confident it will recover these amounts. At December 31, 2017, one customer accounted for 38.4% of the Company’s net accounts receivable. A substantial portion of this balance was collected in the first quarter of the year ending December 31, 2018. The Company has established an allowance for doubtful accounts of $36,000 and $52,000 at December 31, 2018 and December 31, 2017, respectively, based on factors surrounding the credit risk of our customers and other information. One of the Company’s customers accounted for 44% of net sales in Fiscal 2018. Two of the Company’s customers accounted for 35.1% and 14.6% of net sales of the Company in Fiscal 2017. The loss of an account in the fourth quarter of Fiscal 2017 is the reason why there is only one major customer in Fiscal 2018. The account lost in Fiscal 2017 is a subject of litigation we initiated against a former Vice President, Sales & Marketing/Sales Consultant (See Note D – Litigation/Legal Matters). The Company maintains certain cash balances at financial institutions that are federally insured and at times the balances have exceeded federally insured limits. |
Reporting comprehensive income | The Company reports comprehensive income in accordance with the provisions of ASC Topic 220, “Reporting Comprehensive Income” (“ASC Topic 220”). The provisions of ASC Topic 220 require the Company to report the change in the Company's equity during the period from transactions and events other than those resulting from investments by, and distributions to, the shareholders. For Fiscal 2018 and Fiscal 2017, comprehensive income was the same as net income. |
Reclassifications | Certain items have been reclassified from the prior years to conform to the current year presentation. |
New accounting pronouncements | In the year ended December 31, 2018, we 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. The following accounting standards have been issued prior to the end of Fiscal 2018 but, did not require adoption as in Fiscal 2018: ASU 2016-02, “Leases”, ASU 2018-11, “Leases (Topic 842); Targeted Improvements” ASU 2018-20, “Leases (Topic 842”) The Company will adopt ASU 2016-02, ASU 2018-11 and ASU 2018-20 in the first quarter of the year ending December 31, 2019 and does not expect such adoption to have a material impact on its financial position or results of operations. 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” Any other new accounting pronouncements recently issued, but not yet effective, have been reviewed and determined to be not applicable or were related to technical amendments or codification. As a result, the adoption of such new accounting pronouncements, when effective, is not expected to have a material effect on the Company’s financial position or results of operations. |
THE COMPANY AND ITS SIGNIFICA_3
THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Accounting Policies [Abstract] | |
Shares Outstanding | December 31, 2018 December 31, 2017 Warrants 2,000,000 2,060,000 Options 2,222,000 2,147,000 Total 4,222,000 4,207,000 |
INVENTORY (Tables)
INVENTORY (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Inventory Disclosure [Abstract] | |
Schedule of Inventory | December 31, 2018 December 31, 2017 Raw Materials $ 778,000 $ 1,023,000 Work In Process 184,000 403,000 Finished Goods 325,000 547,000 Allowance for slow moving and obsolete inventory (268,000 ) (500,000 ) $ 1,019,000 $ 1,473,000 |
PROPERTY, PLANT AND EQUIPMENT (
PROPERTY, PLANT AND EQUIPMENT (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Property, Plant and Equipment [Abstract] | |
Property, Plant and Equipment | December 31, 2018 December 31, 2017 Land $ 102,000 $ 102,000 Buildings and improvements 1,352,000 1,352,000 Manufacturing and warehouse equipment 2,108,000 2,108,000 Office equipment (incl. furniture and fixtures) 412,000 412,000 3,974,000 3,974,000 Less accumulated depreciation (3,256,000 ) (3,182,000 ) $ 718,000 $ 792,000 |
ACCRUED EXPENSES AND OTHER CU_2
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Payables and Accruals [Abstract] | |
Schedule Of Accrued Expenses And Other Current Liabilities | December 31, 2018 December 31, 2017 Accounting fees $ 75,000 $ 75,000 Interest payable 13,000 11,000 Accounts receivable credit balances 34,000 11,000 Sales tax payable 115,000 89,000 Deferred compensation 167,000 113,000 Customer Deposits 25,000 0 Other current liabilities 20,000 12,000 $ 449,000 $ 311,000 |
DEBT AND LINE OF CREDIT (Tables
DEBT AND LINE OF CREDIT (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Debt Disclosure [Abstract] | |
Schedule of Long-term Debt Instruments | December 31, 2018 December 31, 2017 Loan and Security Agreement with Cherokee Financial, LLC $ 975,000 $ 1,050,000 Crestmark Line of Credit: 502,000 446,000 Crestmark Equipment Term Loan: 19,000 0 Term Loan with Cherokee Financial LLC: 150,000 31,000 $ 1,646,000 1,527,000 Less debt discount & issuance costs (Cherokee Financial, LLC loans) (111,000 ) (203,000 ) Total debt, net 1,535,000 $ 1,324,000 Current portion 739,000 $ 533,000 Long-term portion, net of current portion 796,000 $ 791,000 |
Schedule of Maturities of Long-term Debt | 2019 $ 739,000 (1) 2020 796,000 2021 0 2022 0 2023 0 $ 1,535,000 |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Income Tax Disclosure [Abstract] | |
Schedule of Effective Income Tax Rate Reconciliation | Year Ended December 31, 2018 Year Ended December 31, 2017 Tax expense at federal statutory rate (21 %) (34 %) State tax expense, net of federal tax effect 0 % 0 % Permanent timing differences 0 % 0 % Deferred income tax asset valuation allowance 21 % (298 %) Effective change in tax rate due to Tax Reform Act 0 % 332 % Effective income tax rate 0 % 0 % |
Schedule of Deferred Tax Assets and Liabilities | December 31, 2018 December 31, 2017 Inventory capitalization $ 9,000 $ 13,000 Inventory allowance 70,000 130,000 Allowance for doubtful accounts 9,000 13,000 Accrued compensation 22,000 18,000 Stock based compensation 168,000 165,000 Deferred wages payable 43,000 29,000 Depreciation – Property, Plant & Equipment (6,000 ) (10,000 ) Sales tax reserve 0 0 Net operating loss carry-forward 3,569,000 3,261,000 Total gross deferred income tax assets 3,884,000 3,619,000 Less deferred income tax assets valuation allowance (3,884,000 ) (3,619,000 ) Net deferred income tax assets $ 0 $ 0 |
STOCKHOLDERS' EQUITY (Tables)
STOCKHOLDERS' EQUITY (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Warrant [Member] | |
Schedule of Share-based Compensation, Stock Options, Activity | Year Ended December 31, 2018 Year Ended December 31, 2017 Shares Weighted Average Exercise Price Aggregate Intrinsic Value as of December 31, 2018 Shares Weighted Average Exercise Price Aggregate Intrinsic Value as of December 31, 2017 Warrants outstanding at beginning of year 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 year 2,000,000 $ 0.18 None 2,060,000 $ 0.18 NA Warrants exercisable at end of year 2,000,000 $ 0.18 2,060,000 $ 0.18 |
Employee Stock Option [Member] | |
Schedule of Share-based Compensation, Stock Options, Activity | Year Ended December 31, 2018 Year Ended December 31, 2017 Shares Weighted Average Exercise Price Aggregate Intrinsic Value as of December 31, 2018 Shares Weighted Average Exercise Price Aggregate Intrinsic Value as of December 31, 2017 Options outstanding at beginning of year 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 year 2,222,000 $ 0.13 $ 3,000 2,147,000 $ 0.13 $ 10,000 Options exercisable at end of year 2,142,000 $ 0.13 1,647,000 $ 0.13 |
Schedule of Share-based Compensation, Shares Authorized under Stock Option Plans, by Exercise Price Range | Options Outstanding Options Exercisable Weighted Weighted Weighted Average Average Average Range of Exercise Exercise Remaining Exercise Price Shares Price Life in Years Shares Price $0.07 - $0.10 285,000 $ 0.09 4.01 205,000 $ 0.09 $0.11 - $0.14 1,485,000 $ 0.12 6.35 1,485,000 $ 0.12 $0.15 - $0.26 452,000 $ 0.18 4.03 452,000 $ 0.18 TOTAL 2,222,000 $ 0.13 5.58 2,142,000 $ 0.13 |
Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions | Year Ended December 31 2018 2017 Volatility 79% 81% Expected term (years) 10 years 10 years Risk-free interest rate 2.90% 2.16% Dividend yield 0% 0% |
COMMITMENTS, CONTINGENCIES AN_2
COMMITMENTS, CONTINGENCIES AND OTHER MATTERS (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of Future Minimum Rental Payments for Operating Leases | 2019 $ 35,000 2020 3,000 2021 3,000 2022 2,000 2023 0 Thereafter 0 $ 43,000 |
SEGMENT AND GEOGRAPHIC INFORM_2
SEGMENT AND GEOGRAPHIC INFORMATION (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Segment Reporting [Abstract] | |
Schedule of Segment Reporting Information, by Segment | Year Ended December 31, 2018 Year Ended December 31, 2017 United States $ 3,411,000 $ 4,344,000 North America (not domestic) 56,000 102,000 Europe 133,000 127,000 Asia/Pacific Rim 25,000 30,000 South America 246,000 309,000 Africa 1,000 2,000 $ 3,872,000 $ 4,914,000 |
THE COMPANY AND ITS SIGNIFICA_4
THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES (Details) - shares | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Earnings Per Share Basic And Diluted [Line Items] | ||
Weighted Average Number Diluted Shares Outstanding Adjustment | 4,222,000 | 4,207,000 |
Employee Stock Option [Member] | ||
Earnings Per Share Basic And Diluted [Line Items] | ||
Weighted Average Number Diluted Shares Outstanding Adjustment | 2,222,000 | 2,147,000 |
Note Warrant [Member] | ||
Earnings Per Share Basic And Diluted [Line Items] | ||
Weighted Average Number Diluted Shares Outstanding Adjustment | 2,000,000 | 2,060,000 |
THE COMPANY AND ITS SIGNIFICA_5
THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Net loss | $ (1,028,000) | $ (545,000) |
Net cash provided by operating activities | (220,000) | 181,000 |
Increase/decrease in cash | 77,000 | (120,000) |
Accumulated deficit | (21,873,000) | (20,845,000) |
Allowance for doubtful accounts | 36,000 | 52,000 |
Allowance for slow moving and obsolete inventory | 268,000 | 500,000 |
Accumulated amortization of patents | $ 182,000 | $ 175,000 |
Securities not included in diluted loss per share | 4,222,000 | 4,207,000 |
Accounts Receivable | ||
Concentration of credit risk | 56.50% | 38.40% |
Sales Revenue [Member] | Customer One [Member] | ||
Concentration of credit risk | 44.00% | 35.10% |
Sales Revenue [Member] | Customer Two [Member] | ||
Concentration of credit risk | 14.60% |
INVENTORY (Details)
INVENTORY (Details) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Inventory Disclosure [Abstract] | ||
Raw Materials | $ 778,000 | $ 1,023,000 |
Work In Process | 184,000 | 403,000 |
Finished Goods | 325,000 | 547,000 |
Allowance for slow moving and obsolete inventory | (268,000) | (500,000) |
Inventory, Net, Total | $ 1,019,000 | $ 1,473,000 |
PROPERTY, PLANT AND EQUIPMENT_2
PROPERTY, PLANT AND EQUIPMENT (Details) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Property, Plant and Equipment [Abstract] | ||
Land | $ 102,000 | $ 102,000 |
Buildings and improvements | 1,352,000 | 1,352,000 |
Manufacturing and warehouse equipment | 2,108,000 | 2,108,000 |
Office equipment (incl. furniture and fixtures) | 412,000 | 412,000 |
Property, Plant and Equipment, Gross | 3,974,000 | 3,974,000 |
Less accumulated depreciation | (3,256,000) | (3,182,000) |
Property, Plant and Equipment, Net | $ 718,000 | $ 792,000 |
PROPERTY, PLANT AND EQUIPMENT_3
PROPERTY, PLANT AND EQUIPMENT (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Property, Plant and Equipment [Abstract] | ||
Depreciation | $ 74,000 | $ 76,000 |
ACCRUED EXPENSES AND OTHER CU_3
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Details) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Payables and Accruals [Abstract] | ||
Accounting fees | $ 75,000 | $ 75,000 |
Interest payable | 13,000 | 11,000 |
Accounts receivable credit balances | 34,000 | 11,000 |
Sales tax payable | 115,000 | 89,000 |
Deferred compensation | 167,000 | 113,000 |
Customer Deposits | 25,000 | 0 |
Other current liabilities | 20,000 | 12,000 |
Accrued Expenses and Other Current Liabilities | $ 449,000 | $ 311,000 |
DEBT AND LINE OF CREDIT (Detail
DEBT AND LINE OF CREDIT (Details) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Debt Instrument [Line Items] | ||
Long-term Debt, Gross | $ 1,646,000 | $ 1,527,000 |
Less debt discount & issuance costs (Cherokee Financial, LLC loan) | (111,000) | (203,000) |
Total debt, net | 1,535,000 | 1,324,000 |
Current portion | 739,000 | 533,000 |
Long-term portion, net of current portion | 796,000 | 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 | 502,000 | 446,000 |
Term Loan with Cherokee Financial LLC [Member] | ||
Debt Instrument [Line Items] | ||
Long-term Debt, Gross | 19,000 | 0 |
Crestmark Equipment Term Loan [Member] | ||
Debt Instrument [Line Items] | ||
Long-term Debt, Gross | $ 150,000 | $ 31,000 |
DEBT AND LINE OF CREDIT (Deta_2
DEBT AND LINE OF CREDIT (Details 1) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Debt Disclosure [Abstract] | ||
2019 | $ 739,000 | |
2020 | 796,000 | |
2021 | 0 | |
2022 | 0 | |
2023 | 0 | |
Long-term Debt | $ 1,535,000 | $ 1,324,000 |
INCOME TAXES (Details)
INCOME TAXES (Details) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Income Tax Disclosure [Abstract] | ||
Tax expense at federal statutory rate | (21.00%) | (34.00%) |
State tax expense, net of federal tax effect | 0.00% | 0.00% |
Permanent timing differences | 0.00% | 0.00% |
Deferred income tax asset valuation allowance | 21.00% | (298.00%) |
Effective change in tax rate due to Tax Reform Act | 0.00% | 332.00% |
Effective income tax rate | 0.00% | 0.00% |
INCOME TAXES (Details 1)
INCOME TAXES (Details 1) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Income Tax Disclosure [Abstract] | ||
Inventory capitalization | $ 9,000 | $ 13,000 |
Inventory allowance | 70,000 | 130,000 |
Allowance for doubtful accounts | 9,000 | 13,000 |
Accrued compensation | 22,000 | 18,000 |
Stock based compensation | 168,000 | 165,000 |
Deferred wages payable | 43,000 | 29,000 |
Depreciation - Property, Plant & Equipment | (6,000) | (10,000) |
Sales tax reserve | 0 | 0 |
Net operating loss carry-forward | 3,569,000 | 3,261,000 |
Total gross deferred income tax assets | 3,884,000 | 3,619,000 |
Less deferred income tax assets valuation allowance | (3,884,000) | (3,619,000) |
Net deferred income tax assets | $ 0 | $ 0 |
INCOME TAXES (Details Narrative
INCOME TAXES (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Income Tax Disclosure [Abstract] | ||
Deferred Tax Assets, Valuation Allowance | $ 3,884,000 | $ 3,619,000 |
Valuation Allowance, Deferred Tax Asset, Change in Amount | 265,000 | $ 1,583,000 |
Operating Loss Carryforwards | $ 3,569,000 |
STOCKHOLDERS' EQUITY (Details)
STOCKHOLDERS' EQUITY (Details) - Employee Stock Option [Member] - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 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 | $ 0.13 | $ 0.13 |
Weighted Average Exercise Price, Granted | 0.10 | 0.13 |
Weighted Average Exercise Price, Cancelled/expired | 0 | .00 |
Weighted Average Exercise Price, at end of period | 0.26 | 0.13 |
Weighted Average Exercise Price, Exercisable, at end of period | $ 0.13 | $ 0.13 |
Aggregate Intrinsic Value, Outstanding at end of period | $ 3,000 | $ 10,000 |
STOCKHOLDERS' EQUITY (Details 1
STOCKHOLDERS' EQUITY (Details 1) - $ / shares | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Options Outstanding, Shares | 2,222,000 | 2,147,000 |
Options Outstanding, Weighted Average Exercise Price | $ 0.13 | $ 0.13 |
Options Outstanding, Weighted Average Remaining Life in Years | 5 years 6 months 29 days | |
Range of Exercise Price 0.07 - 0.10 [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Options Outstanding, Shares | 285,000 | 955,000 |
Options Outstanding, Weighted Average Exercise Price | $ 0.09 | $ 0.1 |
Options Outstanding, Weighted Average Remaining Life in Years | 4 years 4 days | |
Range of Exercise Price 0.11 - 0.14 [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Options Outstanding, Shares | 1,485,000 | 815,000 |
Options Outstanding, Weighted Average Exercise Price | $ 0.12 | $ 0.13 |
Options Outstanding, Weighted Average Remaining Life in Years | 6 years 4 months 6 days | |
Range of Exercise Price 0.15 - 0.26 [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Options Outstanding, Shares | 452,000 | 377,000 |
Options Outstanding, Weighted Average Exercise Price | $ 0.18 | $ 0.19 |
Options Outstanding, Weighted Average Remaining Life in Years | 4 years 11 days |
STOCKHOLDERS' EQUITY (Details 2
STOCKHOLDERS' EQUITY (Details 2) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Stockholders' Equity Note [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% |
STOCKHOLDERS' EQUITY (Details 3
STOCKHOLDERS' EQUITY (Details 3) - Warrant [Member] - $ / shares | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 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 | $ 0.18 | $ 0.18 |
Weighted Average Exercise Price, Granted | 0 | 0 |
Weighted Average Exercise Price, Exercised | 0 | 0 |
Weighted Average Exercise Price, Cancelled/expired | 0.18 | 0 |
Weighted Average Exercise Price, at end of period | 0.18 | 0.18 |
Weighted Average Exercise Price, Exercisable, at end of period | $ 0.18 | $ 0.18 |
STOCKHOLDERS' EQUITY (Details N
STOCKHOLDERS' EQUITY (Details Narrative) - USD ($) | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Share based payment expense related to stock options | $ 10,000 | $ 43,000 | |
Warrant [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross | 0 | 0 | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number | 2,000,000 | 2,060,000 | 2,060,000 |
Employee Stock Option [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross | 80,000 | 40,000 | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number | 2,222,000 | 2,147,000 | 2,107,000 |
COMMITMENTS, CONTINGENCIES AN_3
COMMITMENTS, CONTINGENCIES AND OTHER MATTERS (Details) | Dec. 31, 2018USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
2019 | $ 35,000 |
2020 | 3,000 |
2021 | 3,000 |
2022 | 2,000 |
2023 | 0 |
Thereafter | 0 |
Operating Leases, Future Minimum Payments Due | $ 43,000 |
COMMITMENTS, CONTINGENCIES AN_4
COMMITMENTS, CONTINGENCIES AND OTHER MATTERS (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | ||
Operating Leases, Rent Expense | $ 43,000 | $ 46,000 |
SEGMENT AND GEOGRAPHIC INFORM_3
SEGMENT AND GEOGRAPHIC INFORMATION (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Segment Reporting Information [Line Items] | ||
Net sales | $ 3,872,000 | $ 4,914,000 |
United States [Member] | ||
Segment Reporting Information [Line Items] | ||
Net sales | 3,411,000 | 4,344,000 |
North America [Member] | ||
Segment Reporting Information [Line Items] | ||
Net sales | 56,000 | 102,000 |
Europe [Member] | ||
Segment Reporting Information [Line Items] | ||
Net sales | 133,000 | 127,000 |
Asia Pacific [Member] | ||
Segment Reporting Information [Line Items] | ||
Net sales | 25,000 | 30,000 |
South America [Member] | ||
Segment Reporting Information [Line Items] | ||
Net sales | 246,000 | 309,000 |
Africa [Member] | ||
Segment Reporting Information [Line Items] | ||
Net sales | $ 1,000 | $ 2,000 |