Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Aug. 30, 2021 | |
Document And Entity Information | ||
Entity Registrant Name | XG SCIENCES INC | |
Entity Central Index Key | 0001435375 | |
Document Type | 10-K | |
Document Period End Date | Dec. 31, 2020 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity a Well-known Seasoned Issuer | No | |
Entity a Voluntary Filer | No | |
Entity's Reporting Status Current | No | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | true | |
Entity Ex Transition Period | true | |
Entity Shell Company | false | |
Entity Interactive Data Current | Yes | |
Entity File Number | 333-209131 | |
Entity Incorporation, State or Country Code | MI | |
Entity Public Float | $ 23,576,168 | |
Entity Common Stock, Shares Outstanding | 2,490,488 | |
Document Fiscal Period Focus | FY | |
Document Fiscal Year Focus | 2020 | |
ICFR Auditor Attestation Flag | false |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) | Dec. 31, 2020 | Dec. 31, 2019 |
CURRENT ASSETS | ||
Cash and cash equivalents | $ 1,774,366 | $ 1,129,702 |
Accounts receivable, less allowance for doubtful accounts of $152,000 at December 31, 2020 and $179,600 at December 31, 2019 | 119,234 | 72,227 |
Inventories | 514,652 | 891,587 |
Other current assets | 219,997 | 334,493 |
Total current assets | 2,628,249 | 2,428,009 |
LEASEHOLD IMPROVEMENTS AND EQUIPMENT, NET | 2,852,519 | 3,676,142 |
LEASE DEPOSIT | 59,650 | 77,544 |
INTANGIBLE ASSETS, NET | 755,544 | 753,862 |
RIGHT OF USE ASSET | 1,057,614 | 1,606,443 |
TOTAL ASSETS | 7,353,576 | 8,542,000 |
CURRENT LIABILITIES | ||
Accounts payable | 686,812 | 634,564 |
Other current liabilities | 280,950 | 238,554 |
Deferred revenue | 1,820 | |
Current portion of long-term debt | 7,800 | |
Current portion of lease liabilities | 641,663 | 520,197 |
Total current liabilities | 1,619,045 | 1,393,315 |
LONG-TERM LIABILITIES | ||
Long-term portion of lease liabilities | 640,093 | 1,183,872 |
Long term debt | 12,776,975 | 8,111,610 |
Total long-term liabilities | 13,417,068 | 9,295,482 |
TOTAL LIABILITIES | 15,036,113 | 10,688,797 |
STOCKHOLDERS' EQUITY | ||
Common stock, no par value, 25,000,000 shares authorized, 3,387,403 and 4,024,443 shares issued and outstanding at December 31, 2020 and December 31, 2019, respectively | 27,260,156 | 32,351,876 |
Additional paid-in capital | 10,280,853 | 8,774,975 |
Accumulated deficit | (72,682,876) | (65,581,128) |
Total stockholders' equity | (7,682,537) | (2,146,797) |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | 7,353,576 | 8,542,000 |
Series A Convertible Preferred Stock [Member] | ||
STOCKHOLDERS' EQUITY | ||
Preferred stock, value | 22,307,480 | 22,307,480 |
Series B Convertible Preferred Stock [Member] | ||
STOCKHOLDERS' EQUITY | ||
Preferred stock, value | $ 5,151,850 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) | Dec. 31, 2020 | Dec. 31, 2019 |
Allowance for doubtful accounts | $ 152,000 | $ 179,600 |
Common stock, no par value (in dollars per share) | $ 0 | $ 0 |
Common stock, authorized | 25,000,000 | 25,000,000 |
Common stock, issued | 3,387,403 | 4,024,443 |
Common stock, outstanding | 3,387,403 | 4,024,443 |
Series A Convertible Preferred Stock [Member] | ||
Preferred stock, authorized | 3,000,000 | 3,000,000 |
Preferred stock, issued | 1,890,354 | 1,890,354 |
Preferred stock, outstanding | 1,890,354 | 1,890,354 |
Preferred stock, liquidation value | $ 22,684,248 | $ 22,684,248 |
Series B Convertible Preferred Stock [Member] | ||
Preferred stock, authorized | 1,500,000 | 1,500,000 |
Preferred stock, issued | 647,040 | 0 |
Preferred stock, outstanding | 647,040 | 0 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
REVENUE | ||
Total Revenues | $ 782,692 | $ 1,369,556 |
COST OF GOODS SOLD | ||
Direct costs | 495,229 | 1,006,594 |
Unallocated manufacturing expenses | 2,168,695 | 2,756,879 |
Cost of Goods Sold | 2,663,924 | 3,763,473 |
GROSS LOSS | (1,881,232) | (2,393,917) |
OPERATING EXPENSES | ||
Research & Development Expense | 896,840 | 1,506,716 |
Sales, General & Administrative Expense | 4,218,361 | 5,467,698 |
Total Operating Expenses | 5,115,201 | 6,974,414 |
OPERATING LOSS | (6,996,433) | (9,368,331) |
OTHER INCOME (EXPENSE) | ||
Interest expense, net | (875,277) | (409,318) |
Nonoperating income - SBA PPP Loan Forgiveness | 796,089 | |
Nonoperating expense - Exchange Rights Expense | (26,127) | |
Total Other Expense | (105,315) | (409,318) |
Net Loss | $ (7,101,748) | $ (9,777,649) |
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING - Basic and diluted (in shares) | 3,853,681 | 3,951,178 |
NET LOSS PER SHARE - Basic and diluted (in dollars per share) | $ (1.84) | $ (2.47) |
CONSOLIDATED STATEMENTS OF CHAN
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT) - USD ($) | Preferred stockA | Preferred stock B | Common Stock [Member] | Additional Paid-In Capital | Accumulated Deficit | Total |
Balances at beginning at Dec. 31, 2018 | $ 22,307,480 | $ 30,268,476 | $ 8,101,923 | $ (55,687,160) | $ 4,990,719 | |
Balances at beginning (in shares) at Dec. 31, 2018 | 1,890,364 | 3,760,268 | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Stock issued for cash | $ 2,013,400 | 2,013,400 | ||||
Stock issued for cash (in shares) | 251,675 | |||||
Stock issuance fees and expenses | $ (20,000) | (20,000) | ||||
Transition adjustment for adoption of new lease standard | (116,319) | (116,319) | ||||
Stock-based compensation | $ 90,000 | 369,885 | 459,885 | |||
Restricted Stock Units issued to BOD | 12,500 | |||||
Warrants issued with Dow financing | 303,168 | 303,168 | ||||
Net loss | (9,777,649) | (9,777,649) | ||||
Balances at ending at Dec. 31, 2019 | $ 22,307,480 | $ 32,351,876 | 8,774,976 | (65,581,128) | (2,146,797) | |
Balances at ending (in shares) at Dec. 31, 2019 | 1,890,364 | 4,024,443 | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Stock issuance fees and expenses | (24,470) | (24,470) | ||||
Common stock exchange for Series B stock | 5,176,320 | $ (5,176,320) | 0 | |||
Common stock exchange for Series B stock (in shares) | 647,040 | (647,040) | ||||
Value of exchange rights | 989,811 | 989,811 | ||||
Stock-based compensation | $ 84,600 | 444,790 | 529,390 | |||
Restricted Stock Units issued to BOD | 10,000 | |||||
Warrants issued with Dow financing | 71,276 | 71,276 | ||||
Net loss | (7,101,748) | (7,101,748) | ||||
Balances at ending at Dec. 31, 2020 | $ 22,307,480 | $ 5,151,850 | $ 27,260,156 | $ 10,280,853 | $ (72,682,876) | $ (7,682,537) |
Balances at ending (in shares) at Dec. 31, 2020 | 1,890,364 | 647,040 | 3,387,403 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net loss | $ (7,101,748) | $ (9,777,649) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation | 865,026 | 927,974 |
Amortization of intangible assets | 74,733 | 68,040 |
Loss on disposal of equipment and intangibles | 6,122 | 2,605 |
Provision for bad debts | 181,679 | |
Stock-based compensation expense | 529,390 | 459,885 |
Non-cash interest expense | 902,445 | 130,410 |
Non-cash SBA PPP loan forgiveness | (796,089) | |
Changes in current assets and liabilities: | ||
Accounts receivable | (47,006) | 605,148 |
Inventory | 376,935 | (231,370) |
Other current and non-current assets | 258,905 | (296,123) |
Accounts payable and other liabilities | 148,864 | (660,197) |
NET CASH USED IN OPERATING ACTIVITIES | (4,782,423) | (8,589,598) |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Purchases of leasehold improvements and equipment | (47,526) | (383,070) |
Patents | (76,414) | (131,257) |
NET CASH USED IN INVESTING ACTIVITIES | (123,940) | (514,327) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Repayments of capital lease obligations | (15,527) | |
Repayments of long-term loan debt | (638,220) | |
Proceeds from issuance of common stock | 2,013,400 | |
Common stock issuance fees and expenses | (20,000) | |
Proceeds from long-term loan | 1,000,000 | 4,000,000 |
Proceeds of Unit Offering | 3,867,810 | |
Unit Offering issuance fees and expenses | (117,578) | |
Proceeds from SBA Loans / EIDL | 800,795 | |
NET CASH PROVIDED BY FINANCING ACTIVITIES | 5,551,027 | 5,339,653 |
NET CHANGE IN CASH AND CASH EQUIVALENTS | 644,664 | (3,764,272) |
CASH, AND CASH EQUIVALENTS, BEGINNING OF PERIOD | 1,129,702 | 4,893,974 |
CASH, AND CASH EQUIVALENTS, END OF PERIOD | 1,774,366 | 1,129,702 |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||
Cash paid for interest | 208,286 | |
Warrants issued with Dow financing | $ 71,276 | $ 303,168 |
NATURE OF BUSINESS AND BASIS OF
NATURE OF BUSINESS AND BASIS OF PRESENTATION | 12 Months Ended |
Dec. 31, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
NATURE OF BUSINESS AND BASIS OF PRESENTATION | NOTE 1 — NATURE OF BUSINESS AND BASIS OF PRESENTATION XG Sciences, Inc., a Michigan company located in Lansing, Michigan and its subsidiary, XG Sciences IP, LLC (collectively referred to as “we”, “us”, “our”, or the “Company”) manufactures graphene nanoplatelets made from graphite, using two proprietary manufacturing processes to split natural flakes of crystalline graphite into very small and thin particles, which we sell as xGnP ® Basis of Presentation The accompanying consolidated financial statements have been prepared in accordance with GAAP. The consolidated financial statements include the accounts of XG Sciences, Inc. and our wholly owned subsidiary, XGS IP, LLC. We operate as one operating segment. All intercompany accounts, transactions and profits have been eliminated in consolidation. Going Concern and Liquidity We have historically incurred losses from operations, and we may continue to generate negative cash flows as we implement our business plan. Our consolidated financial statements are prepared using GAAP as applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. As of August 30, 2021, we had cash on hand of $1,666,543. Due to lower-than-expected revenue in 2020 and the current COVID-19 global pandemic impacting both our operations and that of our customers, Management has taken several steps to ensure we are able to fund our operations from existing cash on hand, operating cash flows, additional borrowings and restructured debt obligations. In March of 2020, we restructured our organization by reducing headcount by 53%, by furloughing substantially all manufacturing employees, and by implementing temporary salary reductions ranging from 15-20%. Although we have re-employed key employees since the reductions and furloughs, annual payroll and related costs have been reduced by 38%. In April 2020, we furloughed additional employees in our R&D and Engineering departments. We also reduced our annual cash run rate for all other expenses by 17%. Salary reductions remained in place until February 1, 2021. In early April of 2020, we applied for relief under the Coronavirus Aid, Relief and Economic Security Act (“CARES”) by applying with the Small Business Administration (“SBA”) for an Economic Injury Disaster Loan (“EIDL”) and by applying to an SBA lender bank, PNC, for a Paycheck Protection Plan (“PPP”) loan. Based upon the various criteria outlined by the SBA, including meeting certain employee thresholds and demonstrating liquidity needs, the Company believed that it was eligible to receive the PPP loan. On April 18, 2020, we received an approved and fully executed PPP Term Note for $825,200 with a term of two years, a six-month repayment deferral period, and an annual rate of interest of 1%, with a potential for some or all of the loan to be forgiven, dependent upon use of the loan proceeds. On April 20, 2020, we received the $825,200 of proceeds under the PPP loan which was subsequently reduced by $34,405 to $790,795 due to additional SBA guidance regarding 1099 income paid. On October 6, 2020, the Paycheck Protection Flexibility Act of 2020 extended the deferral expiration period for loan repayments to either the date that the SBA remits the borrower’s loan forgiveness or to 24 weeks after the receipt of proceeds plus 10 months or July 3, 2021. In May of 2021, we applied for loan forgiveness for the PPP loan received in April of 2020 and, in July of 2021, we received SBA approval for forgiveness of 100 % of the PPP loan and accrued interest. As a result, the Company believes that it has met the PPP eligibility criteria for forgiveness and has concluded that the loan represents, in substance, a government grant that is expected to be forgiven. As such, in accordance with IAS 20 “Accounting for Government Grants and Disclosure of Government Assistance”, the Company has recognized the entire loan amount as Other Income as of December 31, 2020. If, despite the Company’s good-faith belief that given its circumstances the Company satisfied all eligible requirements for the PPP Loan, the Company is later determined to have not been in compliance with these requirements or it is otherwise determined that it was ineligible to receive the PPP Loan, the Company may be required to repay the PPP Loan in its entirety and/or be subject to additional penalties. Should the Company be audited or reviewed by federal or state regulatory authorities as a result of filing an application for forgiveness of the PPP Loan or otherwise, such audit or review could result in a change in the Company’s amount of forgiveness recorded in the condensed consolidated financial statements. In December 2016, we entered into the Dow Facility to provide up to $10 million of secured debt financing at an interest rate of 5% per year, drawable at our request under certain conditions. On February 12, 2020, we drew the remaining $1 million of the Dow Facility. On April 23, 2020, we entered into an amended and restated Draw Loan Note and Agreement and related transaction documents (collectively, the “Amended Dow Facility”) with the Dow Chemical Company to amend the terms of our current loan facility to allow us to structure a private placement of units (“Units”) comprised (in part) of subordinated, secured convertible notes (“Convertible Notes” and such offering, the “Unit Offering”), to support ongoing cash needs. In the Amended Dow Facility, the Company and Dow agreed to 1) extend the term of such loan facility by two years to December 1, 2023, 2) significantly reduce any required prepayment to Dow from the proceeds of new equity or equity-linked financings from the current 30-50% prepayment requirement on the pre-existing Dow Facility to a 10% prepayment requirement in the Amended Dow Facility, which does not begin until after we have raised an additional $7 million in equity or equity-linked capital from the date of the amendment, 3) capitalize all interest payable until such time as we have recorded GAAP revenue of at least $2 million for two consecutive calendar quarters 4) increase the rate of interest to 6.5% per annum from 5% in the pre-existing Dow Facility, and 5) allow for a subordinated security interest to be granted to new investors in the Unit Offering. Immediately after the execution of the transaction documents related to the Amended Dow Facility, we began the Unit Offering in a private placement to accredited investors. The Unit Offering is comprised of the Convertible Notes and a fully assignable or transferrable right to exchange two shares of previously issued Common Stock of the Company for two shares of Series B Preferred Stock of the Company for every $8.00 invested in the Unit Offering (the “Exchange Rights”). The Convertible Notes are secured by a junior security interest in all the assets of the Company, bear an interest rate of 7.5% per annum and mature on December 31, 2024. Each investor’s Exchange rights are exercisable for a period of thirty (30) days after acceptance by the Company of a fully executed subscription agreement. At the option of each holder, the Convertible Notes are convertible into either i) Series B Convertible Preferred Stock (“Series B Preferred Stock”) at a note conversion price of $8.00/share; or ii) any other form of preferred or common stock (“Subsequent Stock”) issued by the Company at a note conversion price per share equal to 80% of the purchase price per share at which such Subsequent Stock is sold (or if the value per share is fixed, 125% of the number of shares that might otherwise be issuable). If and when we raise at least $15 million of equity capital (excluding capital raised in this Unit Offering), the Convertible Notes will be automatically converted into whichever of the following equity securities would result in the greatest number of shares of Common Stock being issued to the holders on an “as-if-converted” basis at such time: (i) Series B Preferred Stock at a note conversion price of $8.00/share; or (ii) Subsequent Stock at a note conversion price per share equal to 80% of the purchase price per share at which such Subsequent Stock is sold (or if the value per share is fixed, 125% of the number of shares that might otherwise be issuable); provided, however, in the event the Company raises at least $15 million of equity capital within one hundred and twenty (120) days after the first issue date of Convertible Notes, such percentages will be changed to 90% of the purchase price per share at which such Subsequent Stock is sold (or, if the value per share is fixed, 110% of the number of shares that might otherwise be issuable). The first issue date of Convertible Notes was April 23, 2020. The Company did not raise at least $15 million of equity capital within one hundred and twenty (120) days after the first issue date of Convertible Notes. Each share of Series B Preferred Stock will have an original issue price of $8.00 per share (the “Series B Original Issue Price”) and a liquidation preference of $8.00 per share, with both the Series B Original Issue Price and the liquidation preference per share subject to adjustment for stock splits, recapitalizations, and the like. The Series B Preferred Stock will be senior to the Company’s Common Stock and pari-passu with the Series A Preferred Stock in terms of right of repayment in a liquidation. The Series B Preferred Stock will have full ratchet antidilution protection that provides that each share of Series B Preferred Stock outstanding may be converted by an Investor at any time into that number of shares of Common Stock determined by dividing the then current Series B Original Issue Price by the applicable Conversion Price (as defined below) with the resulting fraction equal to the “Series B Conversion Rate”. The total number of shares of Common Stock issuable will be equal to the number of shares of Series B Preferred Stock being converted multiplied by the Series B Conversion Rate. The “Conversion Price” is, at any time, the price per share equal to the lesser of a) the Series B Original Issue Price per share and b) the lowest price per share at which the Company has sold equity or equity-linked securities (other than customary exclusions) at any future date while any shares of the Series B Preferred Stock remain outstanding. The Series B Original Issue Price and Conversion Price in effect at any time are also subject to proportional adjustment for share splits, share dividends, recapitalizations, and the like. For the year ended December 31, 2020, certain members of our Board of Directors and its affiliates purchased $3,213,664 of Convertible Notes. Subsequent to 2020, the Board members and their affiliates purchased $772,856 of Convertible Notes. In total, the Board members and their affiliates purchased $3,986,520 of Convertible Notes from the Company. For the year ended December 31, 2020, non-Board affiliated third parties purchased $638,000 of Convertible Notes and, subsequent to 2020, purchased $1,815,760 from the Company for a total purchase of $2,453,760. Total proceeds from the sale of Convertible Notes were $6,440,280. Taking into consideration our current cash on hand, we estimate that we will need to raise approximately $4,00,000 - $6,000,000 of additional capital in order to continue our operations for the next twelve months in a minimal to no revenue growth environment. We have historically incurred losses from operations, and we may continue to generate negative cash flows as we implement our business plan. Our consolidated financial statements are prepared using GAAP as applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. We believe our cash on hand when combined with operating cash flows and the expected net proceeds from additional borrowings or through the sales of equity securities will be sufficient to fund our operations through September of 2022. However, the ultimate outcome is uncertain, therefore, there is substantial doubt with regard to continuing as a going concern one year beyond the issuance date. In the event we are unable to fund our operations from existing cash on hand, operating cash flows, or additional borrowings, we may be forced to reduce our expenses, slow down our growth rate, or discontinue operations |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Dec. 31, 2020 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Use of Estimates GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, together with amounts disclosed in the related notes to the consolidated financial statements. Actual results and outcomes may differ from management’s estimates, judgments, and assumptions. Significant estimates, judgments and assumptions used in these consolidated financial statements include, but are not limited to, those related to revenues, accounts receivable and related allowances, contingencies, useful lives and recovery of long-term assets, income taxes, and the fair values of stock-based compensation, warrants, and derivative financial instrument liabilities. These estimates, judgments, and assumptions are reviewed periodically and the effects of material revisions in estimates are reflected in the financial statements prospectively from the date of the change in estimate. Revenue Recognition On January 1, 2018, the Company adopted ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) Revenues are recognized at a point in time, typically when control of the promised goods is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods. The Company does not recognize revenue in cases where collectability is not probable and defers the recognition until collection is probable or payment is received. Customer deposits, deferred revenue and other receipts are deferred and recognized when the revenue is realized and earned. Grant contract revenue is recognized over the life of the contracts as the services are performed. Amounts received in excess of revenues earned are recorded as deferred revenue. Cost of Products Sold We use a standard cost system to estimate the direct costs of products sold. Variances between the standard costs and the actual costs are then capitalized to the inventories and expensed to the cost of goods sold. Direct costs include estimates of raw material costs, packaging, freight charges net of those billed to customers, and an allocation for direct labor and manufacturing overhead. Because of the nature of our production processes, there is a substantial fixed manufacturing expense requirement that represents the ongoing cost of maintaining production facilities that are not directly related to products sold, so we use a “full capacity” allocation of overhead based on an estimate of what product costs would be if the manufacturing facilities were operating on a full-time basis and producing products at the designed capacity. The remaining costs of operating the Company’s manufacturing facilities are recorded as Unallocated Manufacturing Expenses. Manufacturing expense includes the costs of operating our manufacturing facilities including personnel costs, rent, utilities, indirect supplies, depreciation, and related indirect expenses. Manufacturing expenses are expensed as incurred. Research and Development Research and development expenses include the compensation costs of research personnel, laboratory rent and utilities, depreciation of laboratory equipment, travel and laboratory supplies and are expensed as incurred. Sales, General and Administrative Expense Sales, General and Administrative expenses include the compensation costs of personnel, rent, utilities, supplies, travel, depreciation of office equipment, and related expenses not included in other expense categories. Sales and marketing costs include compensation, travel, and business development expenses including free samples provided to customers. These costs are expensed as incurred. Product marketing allowances are recorded at the estimated out of pocket cost necessary to produce the product in the period the allowance is granted. General and administrative expenses also include non-cash compensation expenses related to the Company’s deferred compensation, management incentive bonus, and employee stock option programs. Income Taxes It is our policy to provide for uncertain tax positions and the related interest and penalties based upon management’s assessment of whether a tax benefit is more likely than not to be sustained upon examination by tax authorities. To the extent that the probable tax outcome of these uncertain tax position changes, such changes in estimate will impact the income tax provision in the period in which such determination is made. As of December 31, 2020, we believe we have appropriately accounted for any unrecognized tax benefits. We are not aware of any uncertain tax positions. To the extent we prevail in matters for which a liability for an unrecognized tax benefit is established or we are required to pay amounts more than the liability, our effective tax rate in a given financial statement period may be affected. We account for income taxes using an asset and liability approach. The difference between the financial statement and tax basis of assets and liabilities is determined annually. Deferred income tax assets and liabilities are computed for those differences that have future tax consequences using the currently enacted tax laws and rates that apply to the periods in which they are expected to affect taxable income. Income tax expense is the current tax payable or refundable for the period plus or minus the net change in the deferred tax assets and liabilities. The deferred tax effects of local income taxes are considered immaterial and have not been recorded. Valuation allowances are established, if necessary, to reduce deferred tax assets to the amount that is estimated to be realized. Because of the uncertainty related to future realization of deferred tax assets (see Note 14), we have established a valuation allowance equal to one hundred percent of the deferred tax assets. The Company will continue to assess its provision for income taxes as future guidance is issued but does not currently anticipate significant revisions will be necessary. Any such revisions will be treated in accordance with the measurement period guidance outlined in Staff Accounting Bulletin No. 118. Net Income (Loss) Per Common Share We compute net income or (loss) per share in accordance with Financial Accounting Standards Board (“FASB”) Accountings Standards Codification (“ASC”) Topic 260: Earnings Per Share. Under the provisions of ASC 260, basic net income (loss) per share is computed by dividing the net income (loss) available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted net loss per share is computed using the weighted average number of shares outstanding during the applicable period, plus the effect of potentially dilutive securities. Potentially dilutive securities consist of shares potentially issuable pursuant to stock options and warrants as well as shares that would result from full conversion of all outstanding convertible securities. These potentially dilutive securities were 3,466,392 and 3,150,487 as of December 31, 2020 and 2019 and are excluded from diluted net loss per share calculations because they are anti-dilutive. As a result, for the years ended December 31, 2020 and 2019, basic and diluted net loss per share was the same. Accounts Receivable and Allowance for Doubtful Accounts Accounts receivables are stated at the amount management expects to collect from outstanding balances. Management provides for probable uncollectible amounts through a provision for bad debt expense and an adjustment to a valuation allowance based on their assessment of the current status of individual accounts. Balances that are still outstanding after management has used reasonable collection efforts are written off through a charge to the allowance account and a credit to accounts receivable. Statements of Cash Flows For the purposes of the statements of cash flows, we consider all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Fair Value of Financial Instruments and Concentrations of Credit Risk Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of cash and accounts receivable. The Company places its cash with FDIC insured financial institutions. Although such balances may exceed the federally insured limits at certain times, in the opinion of management they are subject to minimal risk. The Company has established policies for extending credit to customers based upon factors including the customers’ credit worthiness, historical trends and other information. Nonetheless the collectability of accounts receivable is affected by regional economic conditions and other factors. Inventory Inventory consists of raw materials, consumables inventory and finished goods, all of which are stated at the lower of cost or net realizable value. Cost is determined on a first in, first out basis. We inventory media used in the production process of our facilities as a Consumables inventory. Leasehold Improvements and Equipment Leasehold improvements and equipment are recorded at cost, net of accumulated depreciation and amortization. Equipment generally include purchases of items with a cost greater than $3,000 and a useful life greater than one year. Depreciation and amortization are computed on the straight-line basis over the estimated useful lives of the assets. Leasehold improvements are amortized over the shorter of the related lease terms or their estimated useful lives. We periodically review the estimated useful lives of property, plant, and equipment. Changes to the estimated useful lives are recorded prospectively from the date of the change. Upon retirement or sale, the cost of the assets disposed of and the related accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the statement of operations. Repairs and maintenance costs are expensed as incurred. Intangible Assets We have entered into a license agreement with Michigan State University under which we have licensed certain intellectual property in the form of patents and patent applications and invention disclosures. We are responsible for managing the patent process and ongoing filings for this licensed intellectual property and for bearing the cost thereof. We capitalize all costs related to the acquisition and ongoing administration of this license agreement and we amortize these costs over 15 years or the remaining life of the license agreement, whichever is shorter. In addition to the costs of managing in-licensed intellectual property, we also file for patent protection for inventions and other intellectual property generated by our employees. All patents are evaluated for filing in international markets on a case-by-case basis and are filed in the United States and in selected international markets as considered appropriate. All external legal and filing costs related to patent applications, patent filings, ongoing registrations, overseas filings, and legal opinions related thereto are capitalized as intangible assets at cost and amortized over a period of 15 years from the date incurred, or the remaining useful life of the associated patent, whichever is shorter. The cost of royalties or minimum payments specified under the license agreement for in-licensed technology is expensed as incurred. Recoverability and Impairment of Long-Lived Assets Land, buildings and equipment and certain other assets, including definite-lived intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The judgments we make related to the expected useful lives of long-lived assets, definitions of lease terms and our ability to realize undiscounted cash flows in excess of the carrying amounts of these assets are affected by factors such as the ongoing maintenance and improvements of the assets, changes in economic conditions, changes in usage or operating performance, and other factors, such as our ability to sell our assets held for sale. As we assess the ongoing expected cash flows and carrying amounts of our long-lived assets, significant adverse changes in these factors could cause us to realize an impairment loss. Based on a review of operating results, we believe the carrying values of our long-lived assets are recoverable at December 31, 2020 and 2019. Fair Value Measurements FASB ASC 820: “Fair Value Measurements and Disclosures” defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value: Level 1 Quoted prices in active markets for identical assets or liabilities. Level 2 Inputs other than quoted prices included within Level 1 which are either directly or indirectly observable. Level 3 Inputs to the valuation methodology are unobservable and significant to the fair value measurement. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Stock-Based Compensation We recognize compensation expense in our statement of operations for all share-based option and stock awards, based on estimated grant-date fair values. We estimate the grant-date fair value of stock option awards using the Black-Scholes option valuation model. This model is affected by the estimated value of our common stock on the date of the grant as well as assumptions regarding a number of highly complex and subjective variables. These variables include the expected term of the option, the exercise price, expected risk-free rates of return, the expected volatility of our common stock, and expected dividend yield, each of which is more fully described below. The assumptions for the estimated value of our common stock, expected term and expected volatility are the assumptions that most significantly affect the grant date fair value. Expected Term Risk-free Interest Rate Expected Stock Price Volatility Dividend Yield The grant-date fair value of the award is recognized as expense over the requisite service period using the straight-line method. Derivative Financial Instruments We do not use derivative instruments to hedge exposures to cash flow, market or foreign currency risk. The terms of convertible preferred stock and convertible notes that we issue are reviewed to determine whether or not they contain embedded derivative instruments that are required by ASC 815: “Derivatives and Hedging” to be accounted for separately from the host contract and recorded at fair value. The Company’s freestanding warrants are classified as equity. Recent Accounting Pronouncements In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes,” which simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. ASU 2019-12 is effective for us for annual periods beginning January 1, 2021. We are currently reviewing the provisions of this new pronouncement, and the impact, if any, the adoption of this guidance has on our financial position and results of operations. In January 2020, the FASB issued ASU 2020-01, “Investments—Equity Securities (Topic 321)”, “Investments—Equity Method and Joint Ventures (Topic 323)”, and “Derivatives and Hedging (Topic 815): Clarifying the Interactions between Topic 321, Topic 323, and Topic 815”, which clarifies that an entity should consider observable transactions when either applying or discontinuing the equity method of accounting for the purposes of applying the measurement alternative in accordance with Topic 321. ASU 2020-01 clarifies that for certain forward contracts or purchased options to acquire investments, an entity should not consider whether, upon settlement of the forward contract or exercise of the purchased option, the underlying securities would be accounted for under the equity method or the fair value option. ASU 2020-01 is effective for us for annual periods beginning January 1, 2021. Early adoption is permitted. We are currently reviewing the provisions of this new pronouncement and the impact, if any, the adoption of this guidance has on our financial position and results of operations. In August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which addresses the complexity of its guidance for certain financial instruments with characteristics of liabilities and equity. ASU 2020-06 removes the accounting models that require beneficial conversion features or cash conversion features associated with convertible instruments to be recognized as a separate component of equity, adds certain disclosure requirements for convertible instruments, amends the guidance for the derivatives scope exception for contracts in an entity’s own equity and simplifies the diluted earnings per share calculation for certain situations. This guidance is effective for SEC filers, excluding entities eligible to be smaller reporting companies as defined by the SEC, for fiscal years beginning after December 15, 2021, and for interim periods within those fiscal years. The Company is currently evaluating the impact of this new guidance on its consolidated financial statements. |
INVENTORY
INVENTORY | 12 Months Ended |
Dec. 31, 2020 | |
Inventory | |
INVENTORY | NOTE 3 — INVENTORY The following amounts were included in inventory at the end of the period: Year Ended December 31, 2020 2019 Raw Materials 56,135 68,784 Consumables 70,103 70,103 Finished Goods 388,414 752,700 Total 514,652 891,587 |
LEASEHOLD IMPROVEMENTS AND EQUI
LEASEHOLD IMPROVEMENTS AND EQUIPMENT | 12 Months Ended |
Dec. 31, 2020 | |
Property, Plant and Equipment [Abstract] | |
LEASEHOLD IMPROVEMENTS AND EQUIPMENT | NOTE 4 — LEASEHOLD IMPROVEMENTS AND EQUIPMENT Leasehold improvements and equipment as of December 31 consist of the following: Depreciable Life (Years) 2020 2019 Leasehold improvements and equipment 5-10 804,460 804,460 Lab equipment 3-7 1,075,500 1,134,129 Production and other equipment 3-7 8,885,354 8,857,169 Software 3 14,177 14,177 Total Cost 10,779,491 10,809,935 Less accumulated depreciation and amortization (7,926,972 ) (7,133,793 ) Net leasehold improvements and equipment 2,852,519 3,676,142 Depreciation expense on leasehold improvements and equipment, including leased assets, for the years ended December 31, 2020 and 2019, was $865,026 and $927,974, respectively. These amounts are included as part of our statement of operations in Cost of Goods Sold, Research and Development, and Sales, General and Administrative Expenses. For the year ended December 31, 2020, $743,350 was recorded in Cost of Goods Sold, $97,218 in Research and Development, and $24,458 in Sales, General and Administrative Expenses. For the year ended December 31, 2019, $805,114 was recorded in Cost of Goods Sold, $96,065 in Research and Development, and $26,795 in Sales, General and Administrative Expenses. |
INTANGIBLE ASSETS
INTANGIBLE ASSETS | 12 Months Ended |
Dec. 31, 2020 | |
Intangible Assets | |
INTANGIBLE ASSETS | NOTE 5 — INTANGIBLE ASSETS Intangible assets and related accumulated amortization as of December 31, 2020 and 2019 are as follows: Year Ended December 31 2020 2019 Licenses 159,868 159,868 Patents 964,480 888,066 Trademarks, other intangibles 24,728 24,728 Total Carrying Amount 1,149,076 1,072,662 Less: Accumulated Amortization – Licenses (121,419 ) (110,312 ) Less: Accumulated Amortization – Patents (264,299 ) (202,328 ) Less: Accumulated Amortization – Trademarks, other intangibles (7,814 ) (6,159 ) Total Accumulated Amortization (393,532 ) (318,799 ) Net Carrying Amount – Licenses 38,450 49,556 Net Carrying Amount – Patents 700,181 685,737 Net Carrying Amount – Trademarks, other intangibles 16,913 18,569 Total Net Carrying Amount 755,544 753,862 Amortization expense of $74,733 and $68,040 was recorded for the years ended December 31, 2020 and 2019, respectively. Amortization expense for the next five years is estimated to be approximately $74,000 annually. |
OTHER CURRENT LIABILITIES
OTHER CURRENT LIABILITIES | 12 Months Ended |
Dec. 31, 2020 | |
Other Current Liabilities | |
OTHER CURRENT LIABILITIES | NOTE 6 — OTHER CURRENT LIABILITIES As of December 31, 2020, and 2019, our other current liabilities on our balance sheet consisted of the following: 2020 2019 Accrued Compensation 57,770 47,453 Accrued Expenses 220,280 188,360 401 (k) Employer Contribution Expense 2,900 2,741 Total Other Current Liabilities 280,950 238,554 |
WARRANTS AND FINANCING AGREEMEN
WARRANTS AND FINANCING AGREEMENTS | 12 Months Ended |
Dec. 31, 2020 | |
Warrants And Financing Agreements | |
WARRANTS AND FINANCING AGREEMENTS | NOTE 7 —WARRANTS AND FINANCING AGREEMENTS Dow Facility In December 2016, we entered into the Dow Facility which provided us with up to $10 million of secured debt financing at an interest rate of 5% per year, drawable at our request under certain conditions. Under the original terms, the loan matured on December 1, 2021. In addition, after we raised a cumulative amount of equity capital exceeding $15 million, we were required to prepay an amount equal to 30% of the amount raised over $15 million, but less than $25 million. We began these prepayments on equity raised as of September 10, 2018. Interest was payable beginning January 1, 2017 although we elected, per the loan documents, to capitalize the interest as part of the outstanding debt through January 1, 2019. Beginning April 1, 2019, current interest was payable in cash on the first day of following the quarter. Dow received warrant coverage of one share of common stock for each $40 in loans received by us, equating to 20% warrant coverage, with an exercise price of $8.00 per share for the warrants issued at closing of the initial $2 million draw. After the initial closing, the strike price of future warrants issued is subject to adjustment if we sell shares of common stock at a lower price. As of December 31, 2020, we have issued 250,000 warrants to Dow, which are exercisable on or before the expiration date of December 1, 2023. On April 23, 2020, we entered into an amended and restated Draw Loan Note and Agreement and related transaction documents (collectively, the “Amended Dow Facility”) whereby the Company and Dow agreed to 1) extend the term of such loan facility by two years to December 1, 2023, 2) reduce required prepayment to Dow from the proceeds of new equity or equity-linked financings from the current 30-50% prepayment requirement on the pre-existing Dow Facility to a 10% prepayment requirement in the Amended Dow Facility, which does not begin until after we have raised an additional $7 million in equity or equity-linked capital from the date of the amendment, 3) capitalize all interest payable until such time as we have recorded GAAP revenue of at least $2 million for two consecutive calendar quarters, 4) increase the rate of interest to 6.5% per annum from 5% in the pre-existing Dow Facility, and 5) allow for a subordinated security interest to be granted to new investors in the Unit Offering. The warrants meet the criteria for classification within stockholders’ equity. Proceeds were allocated between the debt and the warrants at their relative fair value on the date of issue. The total debt discount on the Dow Facility was approximately $747,000. This debt discount is being amortized to interest expense using the effective interest method over the term of the loans using an average effective interest rate of 7.9%. During the year ended December 31, 2020, we recognized $740,369 of amortization expense consisting of $595,176 of interest expense accrued and $145,193 of amortization from debt discount accretion related to the Dow Facility warrants. As of December 31, 2020, the Dow Facility has a carrying value of $9,780,703. The Dow Facility entitles Dow to appoint an observer to our Board. Dow will maintain this observation right until the amount of principal and interest outstanding under the Dow Facility is less than $5 million. |
PRIVATE PLACEMENT
PRIVATE PLACEMENT | 12 Months Ended |
Dec. 31, 2020 | |
Warrants and Rights Note Disclosure [Abstract] | |
PRIVATE PLACEMENT | NOTE 8 — PRIVATE PLACEMENT In connection with the private placement of Series B Preferred Stock issued in 2015, warrants to purchase 222,262 shares of common stock and preemptive rights warrants to purchase 2,635 shares of common stock, remain outstanding at December 31, 2020. Such warrants have an exercise price of $16.00 per share and expire between April 21 and June 30, 2022 . |
DERIVATIVE LIABILITY
DERIVATIVE LIABILITY | 12 Months Ended |
Dec. 31, 2020 | |
Operating Leases Tables | |
DERIVATIVE LIABILITY | NOTE 9 - DERIVATIVE LIABILITY On April 23, 2020, the Company entered into an Amended and Restated Draw Notice and Agreement with the Dow Chemical Company (“Amended Dow Facility”) to allow us to structure an offering of secured, subordinated convertible notes to support ongoing cash needs (the “Unit Offering”). In the Amended Dow Facility, the Company and Dow agreed to 1) extend the term of the loan facility by two years to December 1, 2023, 2) significantly reduce any required prepayment to Dow from the proceeds of new equity or equity-linked financings from the current 30-50% prepayment requirement on the pre-existing Dow Facility to a 10% prepayment requirement in the Amended Dow Facility, which does not begin until after we have raised an additional $7 million in equity or equity-linked capital from the date of the amendment, 3) capitalize all interest payable until such time as we have recorded GAAP revenue of at least $2 million for two consecutive calendar quarters 4) increase the rate of interest to 6.5% per annum and 5) allow for a subordinated security interest to be granted to new investors in the Unit Offering. We evaluated the accounting for the amendment and concluded it met the conditions to be a troubled debt restructure. The future cash flows on the restructured debt were approximately $2.7 million greater than the carrying value of the debt which was accounted for prospectively through the effective interest rate. Immediately after executing the Amended Dow Facility, we commenced a Unit Offering in a private placement to accredited investors. The Unit Offering consists of (i) an offering of up to $10 million in Convertible Notes (“Notes”) in $8 units, and (ii) an assignable or transferrable right to exchange two shares of previously issued common stock for two shares of Series B Convertible Preferred Stock for every $8.00 invested in the Unit Offering (“Exchange Rights”). As of December 31, 2020, we have raised $3,851,664 in the Unit Offering through the sale of 481,458 Units and 647,040 shares of Common Stock have been exchanged for 647,040 shares of Preferred Series B stock. The Convertible Notes pay interest at 7.5% per year, compounded quarterly, which is payable on the maturity date unless the Company has recorded GAAP revenue of at least $4.0 million for two consecutive quarters at which time the holder may elect to receive all accrued interest in cash on a quarterly basis. The maturity date of the Notes is December 31, 2024. The Notes are convertible at the holder’s option into either i.) Series B Preferred Stock at a conversion price of $8.00/share; or ii) any other form of preferred or common stock (“Subsequent Stock”) issued by the Company at a conversion price per share equal to 80% of the purchase price per share at which such Subsequent Equity is sold, or if the value per share is fixed, 125% of the number of shares that might otherwise be issuable, provided that if a Qualified Capital Event occurs within 120 days after the initial funding, then the conversion price will be 90% of the purchase price per share at which the Subsequent Equity is sold, or if the value per share is fixed, 110% of the number of shares that would otherwise be issuable. No Qualified Capital Event has occurred within 120 days after the initial funding on April 23, 2020. If we raise at least $15 million of equity capital, excluding equity raised in this offering, we may choose to convert the outstanding amount due and payable under the Note into whichever form of conversion shares would result in the greatest number of shares of Common Stock being issued to the holder in an “as-if-converted” into Common Stock basis at the conversion price then in effect. In the event the Notes are outstanding on the date our shares of Common Stock are listed on a Qualified National Exchange, then the Notes will automatically be converted first into Series B Preferred Stock at a price of $8.00 per share and then into shares of Common Stock at the Series B Conversion Rate in effect at the time. If there is a change in control, all principal and accrued interest will be paid in cash or can be converted according to the terms of the Note, at the holder’s option. The Notes are secured by a junior security interest in all the assets of the Company. The Notes may not be prepaid prior to the maturity date, but they may be transferred at any time to i) any entity controlled by the holder, ii) any investors in the holder or iii) any other accredited investor only in compliance with the Securities Act of 1933 and other state laws. After the original issue date but prior to the date we raise $15 million of cumulative equity capital, excluding capital raised in this Offering, if we consummate a financing transaction with a third-party using any other form of convertible debt security, then the holder has the right to exchange their outstanding obligations for a new security with the same terms as the new convertible debt security offered to the third party. This provision is viewed as a redemption option. Embedded features in the Notes were analyzed under ASC 815 to determine if they required bifurcation as derivative instruments. To be a derivative, one of the criteria is that the embedded component must be net settleable. The Company’s common stock is not publicly traded, there is no mechanism outside the notes that would permit the holder to achieve net settlement and the underlying shares are not readily convertible to cash. Accordingly, the embedded derivatives, including the embedded conversion feature, do not meet the definition of a derivative, and therefore, do not require bifurcation from the host instrument. Certain default put provisions, the change in control repayment provision and the redemption option were not considered to be clearly and closely related to the host instrument but we concluded that the value of these provisions was de minim us at inception. We reconsider the value of these provisions each reporting period to determine if the value becomes material to the financial statements. For every $8.00 invested in the Unit Offering, we provided investors in the Unit Offering, the one-time right to exchange two shares of previously issued Common Stock for two shares of Series B Preferred Stock of the Company within 30 days of the closing (the “Exchange Right”). The Exchange Right is fully transferable and assignable to any other party during the 30-day period if they are an accredited investor and executed a joinder to become bound by the terms of the Agreement. The Exchange Right is a freestanding financial instrument, and its fair value is estimated based on the incremental fair value between the exchanged Common Stock and the issued Preferred Stock. In this instance, the Exchange Right was included as part of the Unit Financing in conjunction with the issuance of the Notes, therefore, the proceeds from the financing were allocated between the Notes and the Exchange Right based on their relative fair values. The difference between the fair value of the Exchange Right and the relative fair value assigned to the Exchange Right is recognized immediately as nonoperating expense. As of December 31,2020, Nonoperating expense of $26,127 had been recorded related to the Exchange Rights. A convertible financial instrument includes a beneficial conversion feature (“BCF”) if the effective conversion price is less than the company’s market price of their stock on the commitment date. The BCF for the year ended December 31, 2020 was $263,537. For the year ended December 31, 2020, we sold Convertible Notes with total proceeds of $3,851,664. Subsequent to 2020, we sold additional Convertible Notes with total proceeds of $2,588,616. The sale of Convertible Notes through the quarter ended March 31, 2021, raised total proceeds of $6,440,280. The proceeds received in the April 23, 2020 Unit Offering for the year ended December 31, 2020 were allocated as follows: From inception through December 31, 2020 Convertible Notes 3,151,516 Additional Paid In Capital – Exchange Rights 700,148 Proceeds 3,851,664 Convertible Notes 3,151,516 Additional Paid In Capital – BCF (263,537 ) Convertible Notes - Accrued Interest 130,655 Convertible Notes - Cost of Debt Offering (76,962 ) Convertible Notes Balance 2,941,672 The value of exchange rights, the BCF and the debt issuance costs are being amortized using the effective interest method over the term of the Note. The Company recognized interest expense of $130,655 associated with the Note for the year ended December 31, 2020. As of December 31, 2020, the carrying value of the Convertible Notes was $2,941,672. |
STOCK WARRANTS ACCOUNTED FOR AS
STOCK WARRANTS ACCOUNTED FOR AS EQUITY INSTRUMENTS | 12 Months Ended |
Dec. 31, 2020 | |
Equity [Abstract] | |
STOCK WARRANTS ACCOUNTED FOR AS EQUITY INSTRUMENTS | NOTE 10 – STOCK WARRANTS ACCOUNTED FOR AS EQUITY INSTRUMENTS The following table summarizes the warrants (including the warrants previously accounted for as derivatives) outstanding at December 31, 2020, which are accounted for as equity instruments, all of which are exercisable: Date Issued Expiration Date Indexed Stock Exercise Price Number of Warrants 10/8/2012 10/8/2027 Common $ 12.00 5,000 01/15/2014-12/31/2014 1/15/2024 Series A Convertible Preferred $ 6.40 972,720 04/30/2015-05/26/2015 4/30/2022 Common $ 16.00 218,334 6/30/2015 6/30/2022 Common $ 16.00 6,563 3/31/2016 3/31/2021 Common $ 10.00 10,600 4/30/2016 4/30/2021 Common $ 10.00 895 12/14/2016 12/1/2023 Common $ 8.00 50,000 7/18/2017 12/1/2023 Common $ 8.00 25,000 9/22/2017 12/1/2023 Common $ 8.00 25,000 12/4/2017 12/1/2023 Common $ 8.00 25,000 7/8/2019 12/1/2023 Common $ 8.00 50,000 11/11/2019 12/1/2023 Common $ 8.00 50,000 2/12/2020 12/1/2023 Common $ 8.00 25,000 Total 1,464,112 The warrants indexed to Series A Convertible Preferred Stock are currently exercisable and are exchangeable into 1.875 shares of common stock for each share of Series A Preferred. |
STOCKHOLDERS' EQUITY (DEFICIT)
STOCKHOLDERS' EQUITY (DEFICIT) | 12 Months Ended |
Dec. 31, 2020 | |
Stockholders Equity Deficit | |
STOCKHOLDERS' EQUITY (DEFICIT) | NOTE 11 — STOCKHOLDERS’ EQUITY (DEFICIT) Series A Convertible Preferred Stock As of December 31, 2020, the Company is authorized to issue up to 3,000,000 shares of Series A Convertible Preferred Stock, or Series A Preferred. Each share of the Series A Preferred, which has a liquidation preference of $12.00 per share, is convertible at any time, at the option of the holder, into one share of Common Stock at the lower of: (a) $12.00 per share, or (b) 80% of the price at which the Company sells any equity or equity-linked securities in the future. The Series A Preferred also contains typical anti-dilution provisions that provide for adjustment of the conversion price to reflect stock splits, stock dividends, or similar events. The Series A Preferred is subject to mandatory conversion into Common Stock upon the listing of the Company’s Common Stock on a Qualified National Exchange. However, the Series A Preferred is not subject to the mandatory conversion until all outstanding Convertible Securities are also converted into common stock. Each holder of outstanding shares of Series A Preferred Stock shall be entitled to cast the number of votes equal to the number of whole shares of Common Stock info which the shares of Series A Preferred Stock held by such holder are convertible as of the record date for determining stockholders entitled to vote on such matter. The Series A Preferred ranks senior to all other equity or equity equivalent securities of the Company other than those securities which are explicitly senior or pari passu in rights and liquidation preference to the Series A Preferred. There were 1,890,354 shares of Series A Convertible Preferred Stock outstanding as of both December 31, 2020 and 2019. Series B Convertible Preferred Stock As of December 31, 2020, and December 31, 2019, the Company was authorized to issue up to 1,500,000 shares of Series B Preferred Stock, of which 647,040 and zero were issued and outstanding as of December 31, 2020 and December 31, 2019Exchange rights received with the purchase of each unit of the Convertible Notes Unit offering dated April 23, 2020, allow for an exchange of two shares of Common Stock for two shares of Series B Preferred Stock. Exchange rights exercised resulted in the issuance of 647,040 Series B Preferred stock for the year ended December 31, 2020 and 854,354 of Series B Preferred stock issued for the quarter ended March 31, 2021. A total of 1,501,394 shares of Common Stock has been exchanged for Series B Preferred stock as a result of the exercised of exchange rights received with the purchase of each unit of the Convertible Notes Unit offering. Each share of the Series B Preferred, is convertible at any time, at the option of the holder, into one share of common stock. The Series B Preferred also contains typical anti-dilution provisions that provide for adjustment of the conversion price to reflect stock splits, stock dividends, or similar events. Each share of Series B Preferred is subject to mandatory conversion into common stock at the then-effective Series B conversion rate upon the public listing by the Company of its common stock on a Qualified National Exchange. However, the Series B Preferred is not subject to the mandatory conversion until all outstanding Convertible Securities are also converted into common stock. The Series B Preferred ranks senior to all other equity or equity equivalent securities of the Company other than those securities which are explicitly senior or pari passu in rights and liquidation preference to the Series B Preferred and pari passu with the Company’s Series A Preferred. On April 27, 2020, the Company filed the Second Amended and Restated Certificate of Designations of the Series B Preferred Stock in connection with the Unit Offering and the Amended Dow Facility, lowering the liquidation preference from $16.00 per share to $8.00 per share, and lowering the conversion price from $16.00 per share to $8.00 per share, among other things. The Company also adjusted certain provisions to harmonize the rights of the Series B Preferred Stock with the rights in the Series A Certificate of Designations. On December 28, 2020, the Board of Directors and a majority of the holders of Series A and Series B Preferred Stock consented to Amendments to the Second Amended and Restated Certificate of Designation of the Series A Convertible Preferred Stock and the Series B Convertible Preferred Stock by adapting the Third Amended and Restated Certificate of Designations of Series A and of Series B Convertible Preferred Stock. The Third Amended and Restated Certificate of Designations continue to allow for liquidation preference prior and in preference to any distribution of any of the assets of the Corporation to the holders of junior securities and, as amended, after the payment of all preferential amounts required to be paid to the holders of the Series A Preferred Stock, Series B Preferred Stock and other senior securities, the remaining assets of the corporation available for distribution to its stockholders shall be distributed among the holders of junior securities, including the Common Stock. On March 31, 2021, after consent by the Board of Directors and a majority of the holders of Series B Preferred Stock, the Company filed the Fourth Amended and Restated Certificate of Designation of the Series B Convertible Preferred Stock increasing the number of authorized shares from 1,500,000 to 3,750,000. The Series A Preferred and Series B Preferred are not redeemable for cash and the Company concluded that they are more akin to equity-type instruments than debt-type instruments. Accordingly, the embedded conversion option in each agreement is clearly and closely related to an equity-type host and the conversion option does not require classification and measurement as a derivative financial instrument. Therefore, the securities meet the conditions for stockholders’ equity classification. Common Stock The Company is authorized to issue 25,000,000 shares of common stock, no par value per share. During the years ended December 31, 2020 and 2019, the Company issued 10,000 and 264,175 shares of common stock and exchanged 647,040 and zero shares of common stock for Series B Preferred stock, respectively. There were 3,387,403 and 4,024,443 shares of common stock issued and outstanding at December 31, 2020 and 2019, respectively. Each outstanding share of common stock is entitled to one vote on each matter submitted to a vote, unless provided in our Articles of Incorporation, as amended. Each common stockholder is entitled to receive dividends, if declared. Holders of the common stock have no other preemptive or preferential rights to purchase additional shares of any class of the Company’s capital stock in subsequent stock offerings. |
EQUITY INCENTIVE PLAN
EQUITY INCENTIVE PLAN | 12 Months Ended |
Dec. 31, 2020 | |
Share-based Payment Arrangement [Abstract] | |
EQUITY INCENTIVE PLAN | NOTE 12 — EQUITY INCENTIVE PLAN We previously established the 2007 Stock Option Plan (the “2007 Plan”), which was scheduled to expire on October 30, 2017 and under which we granted key employees and directors options to purchase shares of our common stock at not less than fair market value as of the grant date. On May 4, 2017, the Board approved the 2017 Equity Incentive Plan (the “2017 Plan”) to replace the 2007 Plan, which became effective upon the approval of the stockholders holding a majority of the voting power in the Company on July 18, 2017. The 2017 Plan replaced the 2007 Plan and authorizes us to issue awards (stock options and restricted stock) with respect of a maximum of 1,200,000 shares of our common stock, which equals the number of shares authorized under the 2007 Plan. As of December 31, 2020, and 2019, the Company had outstanding stock options to purchase up to 504,110 and 839,625 shares of common stock, respectively. On September 30, 2020, and September 30, 2019, the Company granted each Board member 2,500 stock options and 2,500 shares of restricted stock for their Board services. The options were granted at a price of $8.00 per share and vest ratably over a four-year period beginning on the one-year anniversary. The options had an aggregate grant date fair value of $24,300 and $38,295 on September 30, 2020, and, September 30, 2019, respectively. The restricted stock issued to the Board members from September 30, 2017, through September 30, 2020 has an aggregate fair value of $320,000 and vests ratably in arrears over four quarters on the last day of each fiscal quarter following the grant date. As of December 31, 2020, and 2019, 35,000 and 23,125 of the 42,500 shares of restricted stock issued had vested, resulting in compensation expense of $84,600 and $90,000 for the years ended December 31, 2020 and December 31, 2019, respectively. During the year ended December 31,2020, we granted 138,734 stock options to employees who had received a reduction in pay due to cost controls. These options have an exercise price of $8.00, vesting 1/3 upon the grant date and 1/3 on the anniversary of the grant for the next two years and a term of seven years. During the year ended December 31, 2019, we granted 70,000 stock options to employees, vesting equally over four years beginning on the first anniversary of the date of grant with an exercise price of $8.00 and a seven-year term. The aggregate fair value of the awards on the date of grant was $329,850 and $177,111, respectively, as of December 31, 2020, and December 31, 2019. Except for the stock options granted on April 1, 2020, all other stock options vest equally over four years beginning on the first anniversary of the date of grant. The following table shows the stock option activity during the years ended December 31, 2020 and 2019: 2020 2019 Number of Options Number of Options Options outstanding at beginning of year 839,625 797,875 Changes during the year: Cancelled (28,250 ) New options granted- at market price 148,734 70,000 Expired (484,249 ) Options outstanding at end of year 504,110 839,625 Options exercisable at end of year 271,502 498,393 Weighted average remaining contractual term (in months) 52.7 57.8 The weighted average exercise price of all stock options is $8.00 per share. Stock-based compensation expense for employees and directors, for the years ended December 31, 2020 and 2019 was $529,390 and $459,885, respectively. Unrecognized compensation cost as of December 31, 2020 and 2019 was $510,515 and $854,405 respectively. Unrecognized compensation expense includes options which have not yet vested and is expected to be recognized over the next four years. As of December 31, 2020, none of the currently exercisable stock options had intrinsic value. The intrinsic value of each option share is the difference between the fair value of our common stock and the exercise price of such option share to the extent it is “in-the-money”. Aggregate intrinsic value represents the value that would have been received by the holders of in-the-money options had they exercised their options on the last trading day of the year and sold the underlying shares at the closing stock price on such day. The intrinsic value calculation is based on the assumed market value of our common stock on December 31, 2020 of $8.00 per share, which is the price per share at which we have been selling shares of common stock to third parties in our Offering. There were no in-the-money options outstanding and exercisable as of December 31, 2020, since the exercise prices of the stock options outstanding and expected to vest were all equal to the fair value of our common stock. The following table presents changes in the number of non-exercisable options during 2020 2020 Total- non-exercisable options outstanding- December 31, 2019 341,232 Options granted 148,734 Options vested (105,234 ) Options cancelled/forfeited (152,124 ) Outstanding non-exercisable options outstanding as of December 31, 2020 232,608 Weighted average grant date fair value $ 8.00 Weighted average remaining vested period (in months) 11 The fair value of options granted during the year ended December 31, 2020, totaled $354,150. The total fair value of options granted during the year ended December 31, 2019 was $215,406. The fair value of the options granted during the years ended December 31, 2020 and 2019 was estimated on the grant date using the Black-Scholes option-pricing model with the following assumptions: 2020 2019 Fair value of underlying stock $ 8.00 $ 8.00 Expected option life 4.51 – 4.75 years 4.75 years Expected stock price volatility 35.36% 41.07% – 42.95% Risk free interest rate 0.22% – 0.29% 1.51% – 2.23% Expected dividend yield 0.00% 0.00% Information with respect to restricted stock awards outstanding was as follows: 2020 2019 Outstanding non-vested restricted stock at beginning of year: 6,250 5,000 Granted 10,000 12,500 Vested (10,575 ) (11,250 ) Cancelled/forfeited (2,025 ) — Outstanding non-vested restricted stock 3,800 6,250 Weighted average grant date fair value $ 8.00 $ 8.00 Weighted average remaining vested period (in months) 4.5 4.5 |
LEASES
LEASES | 12 Months Ended |
Dec. 31, 2020 | |
Capital Leases of Lessee [Abstract] | |
LEASES | NOTE 13 – LEASES Right of Use Asset and Leased Liability: Estimated Lease Life – Lease term through December 2022 Right-of-use lease assets- operating as of January 1, 2020 $ 1,606,443 Less: Accumulated amortization (548,829 ) Right-of-use lease assets- operating as of December 31, 2020 $ 1,057,614 Lease liability-operating as of January 1, 2020 $ 1,704,069 Less: Accumulated Amortization (422,313 ) Lease liability operating-as of December 31, 2020 $ 1,281,756 Operating lease expense for the twelve months ended December 31, 2020 $ 639,903 Actual remaining lease payments, December 31, 2020 $ 1,407,885 Present value of remaining payments, December 31, 2020 $ 1,281,756 Supplemental cash flow information related to leases: Operating Leases Twelve months ended December 31, 2020 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 512,645 Weighted average remaining lease term- operating leases (in months) 21.2 Weighted average discount rate- operating leases (annual) 9.98 % Maturities of leases liabilities were as follows: Year ending December 31, 2021 736,027 Year ending December 31, 2022 671,858 Total Lease payments $ 1,407,885 Less imputed interest (126,129 ) Total $ 1,281,756 |
INCOME TAXES
INCOME TAXES | 12 Months Ended |
Dec. 31, 2020 | |
Income Taxes | |
INCOME TAXES | NOTE 14 — INCOME TAXES The income tax provision differs from the amount of income tax determined by applying the U.S. federal and state income tax rates due to a valuation allowance which has been established against the entire deferred tax asset as of December 31, 2020 and 2019. Below is the income tax determined by applying the U.S. federal and state income tax rates as well as the corresponding Valuation Allowance. Deferred tax assets: 2020 2019 Net operating loss carry forwards $ 15,190,000 $ 13,315,000 Miscellaneous temporary differences 42,000 50,000 Research and development credits 870,000 760,000 Deferred tax liabilities: Leasehold improvements and equipment (64,000 ) (20,000 ) Miscellaneous temporary differences Net deferred tax asset $ 16,038,000 $ 14,105,000 Valuation Allowance $ (16,038,000 ) $ (14,105,000 ) Federal net operating loss carry forwards of $68,000,000 and $60,400,000 exist as of December 31, 2020 and 2019, respectively. State net operating loss carry forwards of $13,100,000 and $9,000,000 exist as of December 31, 2020 and 2019, respectively. The primary difference between the net operating loss carry forwards and the accumulated deficit arises from certain stock option, warrants and other debt and equity transactions that are considered permanent differences. These losses were incurred in the years 2006 through 2020 and will expire between 2026 and 2040 and their utilization may be limited if we experience significant ownership changes. The Company has not conducted a full IRC Section 382 analysis to determine if a reduction in net operating loss carry forwards is required due to ownership changes. The analysis has not been undertaken due to the financial burden it would cause and changes, if any, resulting in a reduction to the deferred tax asset and related valuation would have no impact on the net deferred tax asset or expense recognized. The research and development credits will expire between 2028 and 2039. A rate of 28% has been used to calculate the deferred tax assets and liabilities based on the expected effective tax rates, net of applicable credits, upon reversal of the differences above. There were no uncertain tax positions in either 2020 or 2019. |
CUSTOMER, SUPPLIER, COUNTRY AND
CUSTOMER, SUPPLIER, COUNTRY AND PRODUCT CONCENTRATIONS | 12 Months Ended |
Dec. 31, 2020 | |
Customer Supplier Country And Product Concentrations | |
CUSTOMER, SUPPLIER, COUNTRY AND PRODUCT CONCENTRATIONS | NOTE 15 — Customer, Supplier, country and Product Concentrations Product Concentration For 2020, we had a concentration of product revenue from one product that was greater than 10% of total product revenues. Revenue from one of the Company’s graphene nanoplatelets materials, Grade C 500 m²/g, was 60%. For 2019, we had a concentration of product revenue from one product that was greater than 10% of total product revenues. Revenue from one of the Company’s graphene nanoplatelets materials, Grade C 500 m²/g, was 62%. We attempt to minimize the risk associated with product concentrations by continuing to develop new markets and products to add to our portfolio. Customer Concentration We had one customer whose purchases accounted for 52% and 41% of total product revenues in the twelve months ended December 31, 2020 and December 31, 2019, respectively. At December 31, 2020 and December 31, 2019, there were two customers who had an accounts receivable balance greater than 20% and 10% of our outstanding receivable balance, respectively. Country Concentration We sell our products on a worldwide basis. International revenues in 2020 and 2019, as a percentage of total product revenue, were 47% and 49%, respectively. All of these sales are denominated in U.S. dollars. For 2020, revenue from three countries, Korea, Switzerland and the UK, other than in the United States accounted for 40% of total product revenue. For 2019, revenue from three countries, Korea, Switzerland and the UK, other than in the United States accounted for 47% of total product revenue. Suppliers We buy raw materials used in manufacturing from several sources. These materials are available from a large number of sources. A change in suppliers has no material effect on the Company’s operations. We did not have any purchases from one supplier that were more than 10% of total purchases in either 2020 or 2019. |
RELATED PARTY TRANSACTIONS AND
RELATED PARTY TRANSACTIONS AND COMMITMENTS | 12 Months Ended |
Dec. 31, 2020 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS AND COMMITMENTS | NOTE 16 — RELATED PARTY TRANSACTIONS AND COMMITMENTS For the twelve months ended December 31, 2020, the Company Directors, Management and affiliates purchased 401,708 Units (See Note 1) with total proceeds of $3,213,664. Interest accrued on the Convertible Notes which were a part of this Unit offering during the twelve months ended December 31, 2020, was $64,612. With the Unit purchases, the purchaser was entitled to the rights to exchange 803,416 shares of Common stock for Series B Preferred stock. The Company Directors, Management and affiliates exchanged 589,290 shares of Common stock for Series B Preferred stock for the twelve months ended December 31, 2020. Related Parties (1) Units Purchased in 2020 Proceeds Interest Expense Accrued Rights to Exchange Common Stock for Series B Preferred Stock (2) Shares of Common Stock exchanged for Shares of Series B Preferred Stock Arnold A. Allemang & Affiliates 192,063 $ 1,536,504 $ 31,580 384,126 250,000 Robert M. Blinstrub 7,770 $ 62,160 $ 181 15,540 15,540 Steven J. Jones & Affiliates 187,500 $ 1,500,000 $ 29,703 375,000 295,000 David G. Pendell & Affiliates 14,375 $ 115,000 $ 2,698 28,750 28,750 Total 401,708 $ 3,213,664 $ 64,162 803,416 589,290 (1) Related parties include relatives as well as purchasers for whom the Director or Management has management or control responsibilities. For Mr. Jones, AAOF and ASOF are affiliates, although Mr. Jones disclaims beneficial ownership of the shares of AAOF and ASOF. For Mr. Pendell, ASC-XGS, LLC and XGS II, LLC are affiliates, although Mr. Pendell disclaims beneficial ownership of the shares of ASC-XGS, LLC and XGS II, LLC. (2) Unit purchasers received the right to assign the rights to exchange Common Stock for Series B Preferred Stock to other holders of Common Stock During 2019, affiliates of Mr. Pendell, our director, purchased 3,125 shares of common stock with an investment of $25,000. During 2019, Ms. Jacqueline Lemke, the Chief Financial Officer, purchased 5,000 shares of common stock with an investment value of $40,000. Among other things, the Shareholder Agreement provides for certain voting and nomination rights to be calculated on the basis of “Full Conversion” stock ownership (under which calculation, all convertible notes, preferred shares, or other convertible equity securities are deemed converted into common stock) as follows: ● So long as AAOF or its affiliates own 10% of more of the aggregate outstanding Shareholder Stock (as defined in the Shareholder Agreement): ● the size of the Board of Directors shall be set at seven individuals. ● one person nominated by AAOF shall be elected to the Board of Directors. ● two members of the Board of Directors, other than those nominated by AAOF, POSCO or Hanwha Chemical, shall qualify as independent Directors. ● So long as POSCO owns 10% of more of the aggregate outstanding Shareholder Stock, one person nominated by POSCO shall be elected to the Board of Directors. POSCO does not currently own at least 10% of the aggregate outstanding Shareholder Stock and therefore, there is no POSCO representative on the Board of Directors. ● So long as Hanwha Chemical owns 10% of more of the aggregate outstanding Shareholder Stock, one person nominated by Hanwha Chemical shall be elected to the Board of Directors. Hanwha does not currently own at least 10% of the aggregate outstanding Shareholder Stock and therefore, there is no Hanwha representative on the Board of Directors. As of December 31, 2016, the ownership percentage of AAOF, as calculated for purposes of director voting, required the shareholders bound by the Shareholder Agreement to vote for a director nominated by AAOF. Mr. Jones is the AAOF representative to the Board pursuant to the terms of the Shareholder Agreement. The Shareholder Agreement grants preemptive rights to shareholders and holders of convertible notes who are parties to the Shareholder Agreement. Pursuant to the terms therein, such shareholders and noteholders have the right to purchase their pro rata share of all shareholder stock that the Company may, from time to time, propose to sell, issue, or exchange after the date of the Shareholder Agreement, other than certain excluded stock which includes stock granted to employees or as merger consideration. Each shareholder’s pro rata shares shall be equal to the ratio of (i) the aggregate number of shares of the Company’s common stock on a fully diluted basis, owned by the shareholder at the time of the delivery of a preemptive rights notice to (ii) the aggregate number of shares of Company’s common stock on a fully diluted basis owned by all of the Company’s shareholders at the time of the delivery of a preemptive rights notice. The Shareholder Agreement may be amended or terminated by agreement (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of (i) a majority of the Board, and (ii) persons holding, in the aggregate, shares of Shareholder Stock representing at least sixty percent (60%) of the voting power of all shares of Shareholder Stock then held by Shareholders and their permitted assignees. The February 26, 2016 amendment provides that holders of Excluded Stock are not subject to the terms of the Shareholders Agreement. Excluded Stock means shares of common stock that are subject to a registration statement that has been filed with the SEC and has been declared effective, and, for the avoidance of any doubt, includes the 3,000,000 shares being offered under the Registration Statement. This amendment took effect upon the effectiveness of our Registration Statement. The Amendment to the Shareholder Agreement further clarifies that preemptive rights shall not apply to Excluded Stock (including, without limitation, the 3,000,000 shares being offered under the Registration Statement) and amends the termination date of the Shareholders Agreement. The Shareholder Agreement will continue in effect, unless the Shareholder Agreement is earlier terminated in accordance with its terms until the date on which the Company’s common stock is listed on the NASDAQ Stock Market of the New York Stock Exchange. As a result, the Shareholder Agreement will continue to remain in effect and certain of our larger shareholders will be entitled to continue to exercise their rights under such Shareholder Agreement, but purchasers of shares of common stock under the registration statement filed in connection with our current offering are not required to adopt the Shareholder Agreement. On April 23, 2020, the Dow Chemical Company amended and restated certain terms of our current loan facility to allow the Company to structure an offering of subordinated, secured convertible notes (“Convertible Notes”) and such offering, the “Unit Offering”, instrument to support ongoing cash needs. In the Amended Dow Facility, Dow has agreed to 1) extend the term of our current loan for two years December 1, 2023, 2) significantly reduce any pre-payment requirements from the proceeds of new equity or equity-linked investments from the current 30-50% repayment requirement on the pre-existing Dow Facility to a 10% repayment requirement in the Amended Dow after we have raised an additional $7 million in capital from the date of the amendment, 3) capitalize all interest payable until such time as we have recorded GAAP revenue of at least $2 million for two consecutive calendar quarters 4) increase the rate of interest to 6.5% per year and 5) allow for a subordinated security interest for a Convertible Note offering. Immediately after the execution of the transaction documents related to the Amended Dow Facility, we began the Unit Offering in a private placement to accredited investors. The Unit Offering is comprised of the Convertible Notes and a fully assignable or transferrable right to exchange two shares of previously issued Common Stock of the Company for two shares of Series B Preferred Stock of the Company for every $8.00 invested in the Unit Offering (the “Exchange Rights”). The Convertible Notes are secured by a junior security interest in all the assets of the Company, bear an interest rate of 7.5% per annum and mature on December 31, 2024. Each investor’s Exchange rights are exercisable for a period of thirty (30) days after the Company has received a completed subscription agreement. At the option of each holder, the Convertible Notes are convertible into either i) Series B Convertible Preferred Stock (“Series B Preferred Stock”) at a note conversion price of $8.00/share; or ii) any other form of preferred or common stock (“Subsequent Stock”) issued by the Company at a note conversion price per share equal to 80% of the purchase price per share at which such Subsequent Stock is sold (or if the value per share is fixed, 120% of the number of shares that might otherwise be issuable). If and when we raise at least $15 million of equity capital (excluding capital raised in this Unit Offering), the Convertible Notes will be mandatorily converted into whichever of the following equity securities would result in the greatest number of shares of Common Stock being issued to the holders on an “as-if-converted” basis at such time: (i) Series B Preferred Stock at a note conversion price of $8.00/share; or (ii) Subsequent Stock at a note conversion price per share equal to 80% of the purchase price per share at which such Subsequent Stock is sold (or if the value per share is fixed, 120% of the number of shares that might otherwise be issuable); provided, however, in the event the Company raises at least $15 million of equity capital within one hundred and twenty (120) days after the first issue date of Convertible Notes, such percentages will be changed to 90% of the purchase price per share at which such Subsequent Stock is sold (or, if the value per share is fixed, 110% of the number of shares that might otherwise be issuable). Each share of Series B Preferred Stock will have an original issue price of $8.00 per share (the “Series B Original Issue Price”) and a liquidation preference of $8.00 per share, with both the Series B Original Issue Price and the liquidation preference per share subject to adjustment for stock splits, recapitalizations, and the like. The Series B Preferred Stock will be senior to the Company’s Common Stock and pari-passu with the Series A Preferred Stock in terms of right of repayment in a liquidation. The Series B Preferred Stock will have full ratchet antidilution protection that provides that each share of Series B Preferred Stock outstanding may be converted by an Investor at any time into that number of shares of Common Stock determined by dividing the then current Series B Original Issue Price by the applicable Conversion Price (as defined below) with the resulting fraction equal to the “Series B Conversion Rate”. The total number of shares of Common Stock issuable will be equal to the number of shares of Series B Preferred Stock being converted multiplied by the Series B Conversion Rate. The “Conversion Price” will be the price per share equal to the lesser of a) the Series B Original Issue Price per share and b) the lowest price per share at which the Company has sold equity or equity-linked securities (other than customary exclusions) at any future date while any shares of the Series B Preferred Stock remain outstanding. The Series B Original Issue Price and Conversion Price in effect at any time are also subject to proportional adjustment for share splits, share dividends, recapitalizations and the like. |
RETIREMENT PLAN
RETIREMENT PLAN | 12 Months Ended |
Dec. 31, 2020 | |
Retirement Plan | |
RETIREMENT PLAN | NOTE 17 — RETIREMENT PLAN We maintain a defined-contribution 401(k) retirement plan covering substantially all employees (as defined by our plan document). Employees may make voluntary contributions to the plan, subject to limitations based on IRS regulations and compensation. The plan allows for an employer match contribution. The employer match expense was $77,766 and $110,743 for the years ended December 31, 2020 and 2019, respectively. |
LETTER OF CREDIT
LETTER OF CREDIT | 12 Months Ended |
Dec. 31, 2020 | |
Letter Of Credit | |
LETTER OF CREDIT | NOTE 18 — LETTER OF CREDIT In April of 2019, we were relieved of the requirement by one of our lease agreements to maintain a letter of credit of approximately $190,000 in exchange for placing one month rent on deposit with the lessee. Through April of 2019, to support this letter of credit, we were required to maintain an equivalent cash deposit. As of December 31, 2020, and 2019, there was no outstanding letters of credit nor supporting cash deposits. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 12 Months Ended |
Dec. 31, 2020 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | NOTE 19 — SUBSEQUENT EVENTS Financing We continued sales of the Unit Offering throughout the first quarter of 2021. See Derivatives Liability write-up in Note 2. In February of 2021, we applied for continued relief under the Coronavirus Aid, Relief and Economic Security Act (CARES) by applying to an SBA lender bank, PNC, for a second Paycheck Protection Plan (“PPP”) loan. On February 16, 2021, we received an approved and fully executed PPP Term Note for $536,700 with a term of five years, a repayment deferral period which is 10 months plus 24 weeks from the date that the funds were disbursed or the date any forgiven amount of the Facility is remitted by the SBA to the Bank, and an annual rate of interest of 1%, with a potential for some or all of the loan to be forgiven, dependent upon use of the loan proceeds. Funds were disbursed to us on February 17, 2021. In May of 2021, we applied for loan forgiveness for the first PPP loan, with proceeds of $790,795, as received in April of 2020. In July of 2021, the SBA granted 100 % forgiveness of this PPP loan and its accrued interest. Related Party Transactions As of March 31, 2021, the Board of Directors and their affiliates, including Management of the Company, had purchased $3,986,520 of Convertible Notes. Other On September 27, 2021, Steven Jones resigned as a member of our Board of Directors. There was no disagreement with XG Sciences management nor any matter relating to XG’s operations, policies or practices. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Dec. 31, 2020 | |
Accounting Policies [Abstract] | |
Use of Estimates | Use of Estimates GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, together with amounts disclosed in the related notes to the consolidated financial statements. Actual results and outcomes may differ from management’s estimates, judgments, and assumptions. Significant estimates, judgments and assumptions used in these consolidated financial statements include, but are not limited to, those related to revenues, accounts receivable and related allowances, contingencies, useful lives and recovery of long-term assets, income taxes, and the fair values of stock-based compensation, warrants, and derivative financial instrument liabilities. These estimates, judgments, and assumptions are reviewed periodically and the effects of material revisions in estimates are reflected in the financial statements prospectively from the date of the change in estimate. |
Revenue Recognition | Revenue Recognition On January 1, 2018, the Company adopted ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) Revenues are recognized at a point in time, typically when control of the promised goods is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods. The Company does not recognize revenue in cases where collectability is not probable and defers the recognition until collection is probable or payment is received. Customer deposits, deferred revenue and other receipts are deferred and recognized when the revenue is realized and earned. Grant contract revenue is recognized over the life of the contracts as the services are performed. Amounts received in excess of revenues earned are recorded as deferred revenue. |
Cost of Products Sold | Cost of Products Sold We use a standard cost system to estimate the direct costs of products sold. Variances between the standard costs and the actual costs are then capitalized to the inventories and expensed to the cost of goods sold. Direct costs include estimates of raw material costs, packaging, freight charges net of those billed to customers, and an allocation for direct labor and manufacturing overhead. Because of the nature of our production processes, there is a substantial fixed manufacturing expense requirement that represents the ongoing cost of maintaining production facilities that are not directly related to products sold, so we use a “full capacity” allocation of overhead based on an estimate of what product costs would be if the manufacturing facilities were operating on a full-time basis and producing products at the designed capacity. The remaining costs of operating the Company’s manufacturing facilities are recorded as Unallocated Manufacturing Expenses. Manufacturing expense includes the costs of operating our manufacturing facilities including personnel costs, rent, utilities, indirect supplies, depreciation, and related indirect expenses. Manufacturing expenses are expensed as incurred. |
Research and Development | Research and Development Research and development expenses include the compensation costs of research personnel, laboratory rent and utilities, depreciation of laboratory equipment, travel and laboratory supplies and are expensed as incurred. |
Sales, General and Administrative Expense | Sales, General and Administrative Expense Sales, General and Administrative expenses include the compensation costs of personnel, rent, utilities, supplies, travel, depreciation of office equipment, and related expenses not included in other expense categories. Sales and marketing costs include compensation, travel, and business development expenses including free samples provided to customers. These costs are expensed as incurred. Product marketing allowances are recorded at the estimated out of pocket cost necessary to produce the product in the period the allowance is granted. General and administrative expenses also include non-cash compensation expenses related to the Company’s deferred compensation, management incentive bonus, and employee stock option programs. |
Income Taxes | Income Taxes It is our policy to provide for uncertain tax positions and the related interest and penalties based upon management’s assessment of whether a tax benefit is more likely than not to be sustained upon examination by tax authorities. To the extent that the probable tax outcome of these uncertain tax position changes, such changes in estimate will impact the income tax provision in the period in which such determination is made. As of December 31, 2020, we believe we have appropriately accounted for any unrecognized tax benefits. We are not aware of any uncertain tax positions. To the extent we prevail in matters for which a liability for an unrecognized tax benefit is established or we are required to pay amounts more than the liability, our effective tax rate in a given financial statement period may be affected. We account for income taxes using an asset and liability approach. The difference between the financial statement and tax basis of assets and liabilities is determined annually. Deferred income tax assets and liabilities are computed for those differences that have future tax consequences using the currently enacted tax laws and rates that apply to the periods in which they are expected to affect taxable income. Income tax expense is the current tax payable or refundable for the period plus or minus the net change in the deferred tax assets and liabilities. The deferred tax effects of local income taxes are considered immaterial and have not been recorded. Valuation allowances are established, if necessary, to reduce deferred tax assets to the amount that is estimated to be realized. Because of the uncertainty related to future realization of deferred tax assets (see Note 14), we have established a valuation allowance equal to one hundred percent of the deferred tax assets. The Company will continue to assess its provision for income taxes as future guidance is issued but does not currently anticipate significant revisions will be necessary. Any such revisions will be treated in accordance with the measurement period guidance outlined in Staff Accounting Bulletin No. 118. |
Net Income (Loss) Per Common Share | Net Income (Loss) Per Common Share We compute net income or (loss) per share in accordance with Financial Accounting Standards Board (“FASB”) Accountings Standards Codification (“ASC”) Topic 260: Earnings Per Share. Under the provisions of ASC 260, basic net income (loss) per share is computed by dividing the net income (loss) available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted net loss per share is computed using the weighted average number of shares outstanding during the applicable period, plus the effect of potentially dilutive securities. Potentially dilutive securities consist of shares potentially issuable pursuant to stock options and warrants as well as shares that would result from full conversion of all outstanding convertible securities. These potentially dilutive securities were 3,466,392 and 3,150,487 as of December 31, 2020 and 2019 and are excluded from diluted net loss per share calculations because they are anti-dilutive. As a result, for the years ended December 31, 2020 and 2019, basic and diluted net loss per share was the same. |
Accounts Receivable and Allowance for Doubtful Accounts | Accounts Receivable and Allowance for Doubtful Accounts Accounts receivables are stated at the amount management expects to collect from outstanding balances. Management provides for probable uncollectible amounts through a provision for bad debt expense and an adjustment to a valuation allowance based on their assessment of the current status of individual accounts. Balances that are still outstanding after management has used reasonable collection efforts are written off through a charge to the allowance account and a credit to accounts receivable. |
Statements of Cash Flows | Statements of Cash Flows For the purposes of the statements of cash flows, we consider all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. |
Fair Value of Financial Instruments and Concentrations of Credit Risk | Fair Value of Financial Instruments and Concentrations of Credit Risk Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of cash and accounts receivable. The Company places its cash with FDIC insured financial institutions. Although such balances may exceed the federally insured limits at certain times, in the opinion of management they are subject to minimal risk. The Company has established policies for extending credit to customers based upon factors including the customers’ credit worthiness, historical trends and other information. Nonetheless the collectability of accounts receivable is affected by regional economic conditions and other factors. |
Inventory | Inventory Inventory consists of raw materials, consumables inventory and finished goods, all of which are stated at the lower of cost or net realizable value. Cost is determined on a first in, first out basis. We inventory media used in the production process of our facilities as a Consumables inventory. |
Leasehold Improvements and Equipment | Leasehold Improvements and Equipment Leasehold improvements and equipment are recorded at cost, net of accumulated depreciation and amortization. Equipment generally include purchases of items with a cost greater than $3,000 and a useful life greater than one year. Depreciation and amortization are computed on the straight-line basis over the estimated useful lives of the assets. Leasehold improvements are amortized over the shorter of the related lease terms or their estimated useful lives. We periodically review the estimated useful lives of property, plant, and equipment. Changes to the estimated useful lives are recorded prospectively from the date of the change. Upon retirement or sale, the cost of the assets disposed of and the related accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the statement of operations. Repairs and maintenance costs are expensed as incurred. |
Intangible Assets | Intangible Assets We have entered into a license agreement with Michigan State University under which we have licensed certain intellectual property in the form of patents and patent applications and invention disclosures. We are responsible for managing the patent process and ongoing filings for this licensed intellectual property and for bearing the cost thereof. We capitalize all costs related to the acquisition and ongoing administration of this license agreement and we amortize these costs over 15 years or the remaining life of the license agreement, whichever is shorter. In addition to the costs of managing in-licensed intellectual property, we also file for patent protection for inventions and other intellectual property generated by our employees. All patents are evaluated for filing in international markets on a case-by-case basis and are filed in the United States and in selected international markets as considered appropriate. All external legal and filing costs related to patent applications, patent filings, ongoing registrations, overseas filings, and legal opinions related thereto are capitalized as intangible assets at cost and amortized over a period of 15 years from the date incurred, or the remaining useful life of the associated patent, whichever is shorter. The cost of royalties or minimum payments specified under the license agreement for in-licensed technology is expensed as incurred. |
Recoverability and Impairment of Long-Lived Assets | Recoverability and Impairment of Long-Lived Assets Land, buildings and equipment and certain other assets, including definite-lived intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The judgments we make related to the expected useful lives of long-lived assets, definitions of lease terms and our ability to realize undiscounted cash flows in excess of the carrying amounts of these assets are affected by factors such as the ongoing maintenance and improvements of the assets, changes in economic conditions, changes in usage or operating performance, and other factors, such as our ability to sell our assets held for sale. As we assess the ongoing expected cash flows and carrying amounts of our long-lived assets, significant adverse changes in these factors could cause us to realize an impairment loss. Based on a review of operating results, we believe the carrying values of our long-lived assets are recoverable at December 31, 2020 and 2019. |
Fair Value Measurements | Fair Value Measurements FASB ASC 820: “Fair Value Measurements and Disclosures” defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value: Level 1 Quoted prices in active markets for identical assets or liabilities. Level 2 Inputs other than quoted prices included within Level 1 which are either directly or indirectly observable. Level 3 Inputs to the valuation methodology are unobservable and significant to the fair value measurement. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. |
Stock-Based Compensation | Stock-Based Compensation We recognize compensation expense in our statement of operations for all share-based option and stock awards, based on estimated grant-date fair values. We estimate the grant-date fair value of stock option awards using the Black-Scholes option valuation model. This model is affected by the estimated value of our common stock on the date of the grant as well as assumptions regarding a number of highly complex and subjective variables. These variables include the expected term of the option, the exercise price, expected risk-free rates of return, the expected volatility of our common stock, and expected dividend yield, each of which is more fully described below. The assumptions for the estimated value of our common stock, expected term and expected volatility are the assumptions that most significantly affect the grant date fair value. Expected Term Risk-free Interest Rate Expected Stock Price Volatility Dividend Yield The grant-date fair value of the award is recognized as expense over the requisite service period using the straight-line method. |
Derivative Financial Instruments | Derivative Financial Instruments We do not use derivative instruments to hedge exposures to cash flow, market or foreign currency risk. The terms of convertible preferred stock and convertible notes that we issue are reviewed to determine whether or not they contain embedded derivative instruments that are required by ASC 815: “Derivatives and Hedging” to be accounted for separately from the host contract and recorded at fair value. The Company’s freestanding warrants are classified as equity. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes,” which simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. ASU 2019-12 is effective for us for annual periods beginning January 1, 2021. We are currently reviewing the provisions of this new pronouncement, and the impact, if any, the adoption of this guidance has on our financial position and results of operations. In January 2020, the FASB issued ASU 2020-01, “Investments—Equity Securities (Topic 321)”, “Investments—Equity Method and Joint Ventures (Topic 323)”, and “Derivatives and Hedging (Topic 815): Clarifying the Interactions between Topic 321, Topic 323, and Topic 815”, which clarifies that an entity should consider observable transactions when either applying or discontinuing the equity method of accounting for the purposes of applying the measurement alternative in accordance with Topic 321. ASU 2020-01 clarifies that for certain forward contracts or purchased options to acquire investments, an entity should not consider whether, upon settlement of the forward contract or exercise of the purchased option, the underlying securities would be accounted for under the equity method or the fair value option. ASU 2020-01 is effective for us for annual periods beginning January 1, 2021. Early adoption is permitted. We are currently reviewing the provisions of this new pronouncement and the impact, if any, the adoption of this guidance has on our financial position and results of operations. In August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which addresses the complexity of its guidance for certain financial instruments with characteristics of liabilities and equity. ASU 2020-06 removes the accounting models that require beneficial conversion features or cash conversion features associated with convertible instruments to be recognized as a separate component of equity, adds certain disclosure requirements for convertible instruments, amends the guidance for the derivatives scope exception for contracts in an entity’s own equity and simplifies the diluted earnings per share calculation for certain situations. This guidance is effective for SEC filers, excluding entities eligible to be smaller reporting companies as defined by the SEC, for fiscal years beginning after December 15, 2021, and for interim periods within those fiscal years. The Company is currently evaluating the impact of this new guidance on its consolidated financial statements. |
INVENTORY (Tables)
INVENTORY (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Inventory Tables | |
Schedule of inventory | The following amounts were included in inventory at the end of the period: Year Ended December 31, 2020 2019 Raw Materials 56,135 68,784 Consumables 70,103 70,103 Finished Goods 388,414 752,700 Total 514,652 891,587 |
LEASEHOLD IMPROVEMENTS AND EQ_2
LEASEHOLD IMPROVEMENTS AND EQUIPMENT (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Property Plant And Equipment Tables | |
Schedule of leasehold improvements and equipment | Leasehold improvements and equipment as of December 31 consist of the following: Depreciable Life (Years) 2020 2019 Leasehold improvements and equipment 5-10 804,460 804,460 Lab equipment 3-7 1,075,500 1,134,129 Production and other equipment 3-7 8,885,354 8,857,169 Software 3 14,177 14,177 Total Cost 10,779,491 10,809,935 Less accumulated depreciation and amortization (7,926,972 ) (7,133,793 ) Net leasehold improvements and equipment 2,852,519 3,676,142 |
INTANGIBLE ASSETS (Tables)
INTANGIBLE ASSETS (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Intangible Assets Tables | |
Schedule of Intangible assets and related accumulated amortization | Intangible assets and related accumulated amortization as of December 31, 2020 and 2019 are as follows: Year Ended December 31 2020 2019 Licenses 159,868 159,868 Patents 964,480 888,066 Trademarks, other intangibles 24,728 24,728 Total Carrying Amount 1,149,076 1,072,662 Less: Accumulated Amortization – Licenses (121,419 ) (110,312 ) Less: Accumulated Amortization – Patents (264,299 ) (202,328 ) Less: Accumulated Amortization – Trademarks, other intangibles (7,814 ) (6,159 ) Total Accumulated Amortization (393,532 ) (318,799 ) Net Carrying Amount – Licenses 38,450 49,556 Net Carrying Amount – Patents 700,181 685,737 Net Carrying Amount – Trademarks, other intangibles 16,913 18,569 Total Net Carrying Amount 755,544 753,862 |
OTHER CURRENT LIABILITIES (Tabl
OTHER CURRENT LIABILITIES (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Other Current Liabilities Tables | |
Schedule of accounts payable and other current liabilities | As of December 31, 2020, and 2019, our other current liabilities on our balance sheet consisted of the following: 2020 2019 Accrued Compensation 57,770 47,453 Accrued Expenses 220,280 188,360 401 (k) Employer Contribution Expense 2,900 2,741 Total Other Current Liabilities 280,950 238,554 |
DERIVATIVE LIABILITY (Tables)
DERIVATIVE LIABILITY (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Operating Leases Tables | |
Schedule of units offering | The proceeds received in the April 23, 2020 Unit Offering for the year ended December 31, 2020 were allocated as follows: From inception through December 31, 2020 Convertible Notes 3,151,516 Additional Paid In Capital – Exchange Rights 700,148 Proceeds 3,851,664 Convertible Notes 3,151,516 Additional Paid In Capital – BCF (263,537 ) Convertible Notes - Accrued Interest 130,655 Convertible Notes - Cost of Debt Offering (76,962 ) Convertible Notes Balance 2,941,672 |
STOCK WARRANTS ACCOUNTED FOR _2
STOCK WARRANTS ACCOUNTED FOR AS EQUITY INSTRUMENTS (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Schedule of change in fair value of derivative liability - warrants | The following table summarizes the warrants (including the warrants previously accounted for as derivatives) outstanding at December 31, 2020, which are accounted for as equity instruments, all of which are exercisable: Date Issued Expiration Date Indexed Stock Exercise Price Number of Warrants 10/8/2012 10/8/2027 Common $ 12.00 5,000 01/15/2014-12/31/2014 1/15/2024 Series A Convertible Preferred $ 6.40 972,720 04/30/2015-05/26/2015 4/30/2022 Common $ 16.00 218,334 6/30/2015 6/30/2022 Common $ 16.00 6,563 3/31/2016 3/31/2021 Common $ 10.00 10,600 4/30/2016 4/30/2021 Common $ 10.00 895 12/14/2016 12/1/2023 Common $ 8.00 50,000 7/18/2017 12/1/2023 Common $ 8.00 25,000 9/22/2017 12/1/2023 Common $ 8.00 25,000 12/4/2017 12/1/2023 Common $ 8.00 25,000 7/8/2019 12/1/2023 Common $ 8.00 50,000 11/11/2019 12/1/2023 Common $ 8.00 50,000 2/12/2020 12/1/2023 Common $ 8.00 25,000 Total 1,464,112 |
STOCKHOLDERS' EQUITY (DEFICIT)
STOCKHOLDERS' EQUITY (DEFICIT) (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Stockholders Equity Deficit | |
Schedule of preferred stock shares issued | Exchange rights exercised resulted in the issuance of Series B Preferred stock as listed below. Series B For the three Preferred months ended Stock Issued June 30, 2020 137,043 September 30, 2020 200,457 December 31, 2020 309,540 Total 2020 647,040 March 31, 2021 854,354 Total from inception, April 23, 2020 through March 31, 2021 1,501,394 |
EQUITY INCENTIVE PLAN (Tables)
EQUITY INCENTIVE PLAN (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Equity Incentive Plan Tables | |
Schedule of stock option activity | The following table shows the stock option activity during the years ended December 31, 2020 and 2019: 2020 2019 Number of Options Number of Options Options outstanding at beginning of year 839,625 797,875 Changes during the year: Cancelled (28,250 ) New options granted- at market price 148,734 70,000 Expired (484,249 ) Options outstanding at end of year 504,110 839,625 Options exercisable at end of year 271,502 498,393 Weighted average remaining contractual term (in months) 52.7 57.8 |
Schedule of non-exercisable options | The following table presents changes in the number of non-exercisable options during 2020 2020 Total- non-exercisable options outstanding- December 31, 2019 341,232 Options granted 148,734 Options vested (105,234 ) Options cancelled/forfeited (152,124 ) Outstanding non-exercisable options outstanding as of December 31, 2020 232,608 Weighted average grant date fair value $ 8.00 Weighted average remaining vested period (in months) 11 |
Schedule of Black-Scholes option-pricing model | The fair value of the options granted during the years ended December 31, 2020 and 2019 was estimated on the grant date using the Black-Scholes option-pricing model with the following assumptions: 2020 2019 Fair value of underlying stock $ 8.00 $ 8.00 Expected option life 4.51 – 4.75 years 4.75 years Expected stock price volatility 35.36 41.07% – 42.95% Risk free interest rate 0.22% – 0.29% 1.51% – 2.23% Expected dividend yield 0.00 0.00 |
Schedule of options outstanding | Information with respect to restricted stock awards outstanding was as follows: 2020 2019 Outstanding non-vested restricted stock at beginning of year: 6,250 5,000 Granted 10,000 12,500 Vested (10,575 ) (11,250 ) Cancelled/forfeited (2,025 ) — Outstanding non-vested restricted stock 3,800 6,250 Weighted average grant date fair value $ 8.00 $ 8.00 Weighted average remaining vested period (in months) 4.5 4.5 |
LEASES (Tables)
LEASES (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Capital Leases of Lessee [Abstract] | |
Right of Use Asset and Leased Liability | Estimated Lease Life – Lease term through December 2022 Right-of-use lease assets- operating as of January 1, 2020 $ 1,606,443 Less: Accumulated amortization (548,829 ) Right-of-use lease assets- operating as of December 31, 2020 $ 1,057,614 Lease liability-operating as of January 1, 2020 $ 1,704,069 Less: Accumulated Amortization (422,313 ) Lease liability operating-as of December 31, 2020 $ 1,281,756 Operating lease expense for the twelve months ended December 31, 2020 $ 639,903 Actual remaining lease payments, December 31, 2020 $ 1,407,885 Present value of remaining payments, December 31, 2020 $ 1,281,756 |
Schedule of Future Minimum Rental Payments | Supplemental cash flow information related to leases: Operating Leases Twelve months ended December 31, 2020 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 512,645 Weighted average remaining lease term- operating leases ( in months) 21.2 Weighted average discount rate- operating leases (annual) 9.98 % Maturities of leases liabilities were as follows: Year ending December 31, 2021 736,027 Year ending December 31, 2022 671,858 Total Lease payments $ 1,407,885 Less imputed interest (126,129 ) Total $ 1,281,756 |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Income Taxes Tables | |
Schedule of deferred tax assets liabilities | Below is the income tax determined by applying the U.S. federal and state income tax rates as well as the corresponding Valuation Allowance. Deferred tax assets: 2020 2019 Net operating loss carry forwards $ 15,190,000 $ 13,315,000 Miscellaneous temporary differences 42,000 50,000 Research and development credits 870,000 760,000 Deferred tax liabilities: Leasehold improvements and equipment (64,000 ) (20,000 ) Miscellaneous temporary differences Net deferred tax asset $ 16,038,000 $ 14,105,000 Valuation Allowance $ (16,038,000 ) $ (14,105,000 ) |
RELATED PARTY TRANSACTIONS AN_2
RELATED PARTY TRANSACTIONS AND COMMITMENTS (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Related Party Transactions And Commitments Tables | |
Schedule of purchased the number of shares | The Company Directors, Management and affiliates exchanged 589,290 shares of Common stock for Series B Preferred stock for the twelve months ended December 31, 2020. Related Parties (1) Units Purchased in 2020 Proceeds Interest Expense Accrued Rights to Exchange Common Stock for Series B Preferred Stock (2) Shares of Common Stock exchanged for Shares of Series B Preferred Stock Arnold A. Allemang & Affiliates 192,063 $ 1,536,504 $ 31,580 384,126 250,000 Robert M. Blinstrub 7,770 $ 62,160 $ 181 15,540 15,540 Steven J. Jones & Affiliates 187,500 $ 1,500,000 $ 29,703 375,000 295,000 David G. Pendell & Affiliates 14,375 $ 115,000 $ 2,698 28,750 28,750 Total 401,708 $ 3,213,664 $ 64,162 803,416 589,290 (1) Related parties include relatives as well as purchasers for whom the Director or Management has management or control responsibilities. For Mr. Jones, AAOF and ASOF are affiliates, although Mr. Jones disclaims beneficial ownership of the shares of AAOF and ASOF. For Mr. Pendell, ASC-XGS, LLC and XGS II, LLC are affiliates, although Mr. Pendell disclaims beneficial ownership of the shares of ASC-XGS, LLC and XGS II, LLC. (2) Unit purchasers received the right to assign the rights to exchange Common Stock for Series B Preferred Stock to other holders of Common Stock |
NATURE OF BUSINESS AND BASIS _2
NATURE OF BUSINESS AND BASIS OF PRESENTATION (Details Narrative) - USD ($) | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2021 | Dec. 31, 2020 | Aug. 30, 2021 | Dec. 31, 2016 | |
PPP loan description | On April 20, 2020, we received the $825,200 of proceeds under the PPP loan which was subsequently reduced by $34,405 to $790,795 due to additional SBA guidance regarding 1099 income paid. On October 6, 2020, the Paycheck Protection Flexibility Act of 2020 extended the deferral expiration period for loan repayments to either the date that the SBA remits the borrower’s loan forgiveness or to 24 weeks after the receipt of proceeds plus 10 months or July 3, 2021. | |||
Proceeds from Convertible Notes | $ 6,440,280 | |||
Board of Directors [Member] | ||||
Proceeds from Convertible Notes | 3,213,664 | |||
Board [Member] | ||||
Proceeds from Convertible Notes | 3,986,520 | |||
Non Board [Member] | ||||
Proceeds from Convertible Notes | 3,851,664 | |||
Draw Loan Note And Agreement [Member] | Senior Secured Debt Financing [Member] | The Dow Chemical Company [Member] | ||||
Face amount | $ 9,780,703 | $ 10,000,000 | ||
Interest rate | 5.00% | |||
Subsequent Event [Member] | ||||
Cash on hand | $ 1,666,543 | |||
Proceeds from Convertible Notes | $ 6,440,280 | |||
Subsequent Event [Member] | Board [Member] | ||||
Proceeds from Convertible Notes | 772,856 | |||
Subsequent Event [Member] | Non Board [Member] | ||||
Proceeds from Convertible Notes | $ 2,588,616 |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Mar. 31, 2019 | |
Potentially dilutive securities (in shares) | 3,466,392 | 3,150,487 | |
Property and equipment | $ 3,000 | ||
Useful life of property and equipment | 1 year | ||
Dividend yield (in percent) | 0.00% | 0.00% | |
ROU assets | $ 1,871,366 | ||
Lease liabilities | $ 1,281,756 | $ 1,704,069 | $ 1,981,795 |
Decrease in retained earnings | $ 116,319 | ||
Leasehold improvements and equipment [Member] | |||
Description of useful life | Shorter of the related lease terms or their estimated useful lives | ||
Patents [Member] | |||
Amortization period of intangible assets | 15 years |
INVENTORY (Details)
INVENTORY (Details) - USD ($) | Dec. 31, 2020 | Dec. 31, 2019 |
Inventory Details | ||
Raw materials | $ 56,135 | $ 68,784 |
Consumables | 70,103 | 70,103 |
Finished goods | 388,414 | 752,700 |
Total | $ 514,652 | $ 891,587 |
LEASEHOLD IMPROVEMENTS AND EQ_3
LEASEHOLD IMPROVEMENTS AND EQUIPMENT (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Total Cost | $ 10,779,491 | $ 10,809,935 |
Less accumulated depreciation and amortization | (7,926,972) | (7,133,793) |
Net leasehold improvements and equipment | 2,852,519 | $ 3,676,142 |
Depreciable life | 1 year | |
Leasehold improvements and equipment [Member] | ||
Total Cost | $ 804,460 | $ 804,460 |
Leasehold improvements and equipment [Member] | Minimum [Member] | ||
Depreciable life | 5 years | |
Leasehold improvements and equipment [Member] | Maximum [Member] | ||
Depreciable life | 10 years | |
Lab Equipment [Member] | ||
Total Cost | $ 1,075,500 | 1,134,129 |
Lab Equipment [Member] | Minimum [Member] | ||
Depreciable life | 3 years | |
Lab Equipment [Member] | Maximum [Member] | ||
Depreciable life | 7 years | |
Production and Other Equipment [Member] | ||
Total Cost | $ 8,885,354 | 8,857,169 |
Production and Other Equipment [Member] | Minimum [Member] | ||
Depreciable life | 3 years | |
Production and Other Equipment [Member] | Maximum [Member] | ||
Depreciable life | 7 years | |
Software [Member] | ||
Total Cost | $ 14,177 | $ 14,177 |
Depreciable life | 3 years |
LEASEHOLD IMPROVEMENTS AND EQ_4
LEASEHOLD IMPROVEMENTS AND EQUIPMENT (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Depreciation and amortization expense | $ 865,026 | $ 927,974 |
Cost of goods sold | 2,663,924 | 3,763,473 |
Research and development | 896,840 | 1,506,716 |
Cost of Goods Sold [Member] | ||
Cost of goods sold | 743,350 | 805,114 |
Research and Development [Member] | ||
Research and development | 97,218 | 96,065 |
General and Administrative [Member] | ||
General and administrative expenses | $ 24,458 | $ 26,795 |
INTANGIBLE ASSETS (Details)
INTANGIBLE ASSETS (Details) - USD ($) | Dec. 31, 2020 | Dec. 31, 2019 |
Carrying Amount | $ 1,149,076 | $ 1,072,662 |
Less Accumulated Amortization | (393,532) | (318,799) |
Net Carrying Amount | 755,544 | 753,862 |
Licensing [Member] | ||
Carrying Amount | 159,868 | 159,868 |
Less Accumulated Amortization | (121,419) | (110,312) |
Net Carrying Amount | 38,450 | 49,556 |
Patents [Member] | ||
Carrying Amount | 964,480 | 888,066 |
Less Accumulated Amortization | (264,299) | (202,328) |
Net Carrying Amount | 700,181 | 685,737 |
Trademarks and Other Intangible Assets [Member] | ||
Carrying Amount | 24,728 | 24,728 |
Less Accumulated Amortization | (7,814) | (6,159) |
Net Carrying Amount | $ 16,913 | $ 18,569 |
INTANGIBLE ASSETS (Details Narr
INTANGIBLE ASSETS (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Intangible Assets Details Narrative | ||
Amortization expense | $ 74,733 | $ 68,040 |
Amortization expense year one | 74,000 | |
Amortization expense year two | 74,000 | |
Amortization expense year three | 74,000 | |
Amortization expense year four | 74,000 | |
Amortization expense year five | $ 74,000 |
OTHER CURRENT LIABILITIES (Deta
OTHER CURRENT LIABILITIES (Details) - USD ($) | Dec. 31, 2020 | Dec. 31, 2019 |
Other Current Liabilities Details | ||
Accrued compensation | $ 57,770 | $ 47,453 |
Accrued expenses | 220,280 | 188,360 |
401(k) employer contribution expense | 2,900 | 2,741 |
Total Other Current Liabilities | $ 280,950 | $ 238,554 |
WARRANTS AND FINANCING AGREEM_2
WARRANTS AND FINANCING AGREEMENTS (Details Narrative) - Senior Secured Debt Financing [Member] - The Dow Chemical Company [Member] - Draw Loan Note And Agreement [Member] - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2016 | |
Face amount | $ 9,780,703 | $ 10,000,000 |
Amortization expense of debt | $ 740,369 | |
Number of shares purchased (in shares) | 250,000 | |
Exercise price (in dollars per share) | $ 8 | |
Description of conversion terms | Interest was payable beginning January 1, 2017 although we elected, per the loan documents, to capitalize the interest as part of the outstanding debt through January 1, 2019. Beginning April 1, 2019, current interest was payable in cash on the first day of following the quarter. Dow received warrant coverage of one share of common stock for each $40 in loans received by us, equating to 20% warrant coverage, with an exercise price of $8.00 per share for the warrants issued at closing of the initial $2 million draw | |
Unamortized discount | $ 747,000 | |
Interest rate (in percent) | 5.00% | |
Maturity date | Dec. 1, 2023 | Dec. 1, 2021 |
Effective intrest rate | 7.90% | |
Non-cash interest expense | $ 595,176 | |
Amortization from debt discount | $ 145,193 | |
Equity capital description | Equity capital exceeding $15 million, we were required to prepay an amount equal to 30% of the amount raised over $15 million, but less than $25 million | |
Warrnat issued | 250,000 |
PRIVATE PLACEMENT AND PREEMPTIV
PRIVATE PLACEMENT AND PREEMPTIVE RIGHTS (Details Narrative) - Warrant [Member] | 12 Months Ended |
Dec. 31, 2020$ / sharesshares | |
Exercise price (in dollars per share) | $ / shares | $ 12 |
Private Placement [Member] | |
Number of shares issued | shares | 222,262 |
Exercise price (in dollars per share) | $ / shares | $ 16 |
Number of warrants cancelled | shares | 2,635 |
DERIVATIVE LIABILITY (Details)
DERIVATIVE LIABILITY (Details) - USD ($) | 8 Months Ended | 12 Months Ended |
Dec. 31, 2020 | Dec. 31, 2020 | |
Operating Leases Tables | ||
Convertible Notes | $ 3,151,516 | |
Additional Paid In Capital – Exchange Rights | 700,148 | |
Proceeds | 3,851,664 | |
Convertible Notes | $ 3,151,516 | |
Additional Paid In Capital – BCF | (263,537) | |
Convertible Notes - Accrued Interest | 130,655 | |
Convertible Notes - Cost of Debt Offering | (76,962) | |
Convertible Notes Balance | $ 2,941,672 | $ 2,941,672 |
DERIVATIVE LIABILITY (Details N
DERIVATIVE LIABILITY (Details Narrative) - USD ($) | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Nonoperating expense | $ 26,127 | ||
Proceed from units offering | $ 3,851,664 | ||
Number units sale | 481,458 | ||
Number of share exchanged | 647,040 | ||
Preferred stock, shares exchanged | 647,040 | ||
Beneficial conversion feature | $ 263,537 | ||
Interest expense | 130,655 | ||
Convertible Notes | 2,941,672 | $ 3,151,516 | |
Proceeds from Convertible Notes | 6,440,280 | ||
Subsequent Event [Member] | |||
Proceeds from Convertible Notes | $ 6,440,280 | ||
Non Board [Member] | |||
Proceeds from Convertible Notes | $ 3,851,664 | ||
Non Board [Member] | Subsequent Event [Member] | |||
Proceeds from Convertible Notes | $ 2,588,616 |
STOCK WARRANTS ACCOUNTED FOR _3
STOCK WARRANTS ACCOUNTED FOR AS EQUITY INSTRUMENTS (Details) | 12 Months Ended |
Dec. 31, 2020$ / sharesshares | |
Number of Warrants | 1,464,112 |
Warrant 2 [Member] | |
Expiration Date | Jan. 15, 2024 |
Indexed stock | Series A Convertible Preferred |
Exercise Price | $ / shares | $ 6.4 |
Number of Warrants | 972,720 |
Warrant 3 [Member] | |
Expiration Date | Apr. 30, 2022 |
Indexed stock | Common |
Exercise Price | $ / shares | $ 16 |
Number of Warrants | 218,334 |
Warrant [Member] | |
Date Issued | Oct. 8, 2012 |
Expiration Date | Oct. 8, 2027 |
Indexed stock | Common |
Exercise Price | $ / shares | $ 12 |
Number of Warrants | 5,000 |
Warrant 4 [Member] | |
Date Issued | Jun. 30, 2015 |
Expiration Date | Jun. 30, 2022 |
Indexed stock | Common |
Exercise Price | $ / shares | $ 16 |
Number of Warrants | 6,563 |
Warrant 5 [Member] | |
Date Issued | Mar. 31, 2016 |
Expiration Date | Dec. 31, 2020 |
Indexed stock | Common |
Exercise Price | $ / shares | $ 10 |
Number of Warrants | 10,600 |
Warrant 6 [Member] | |
Date Issued | Apr. 30, 2016 |
Expiration Date | Mar. 31, 2021 |
Indexed stock | Common |
Exercise Price | $ / shares | $ 10 |
Number of Warrants | 895 |
Warrant 7 [Member] | |
Date Issued | Dec. 14, 2016 |
Expiration Date | Apr. 30, 2021 |
Indexed stock | Common |
Exercise Price | $ / shares | $ 8 |
Number of Warrants | 50,000 |
Warrant 8 [Member] | |
Date Issued | Jul. 18, 2017 |
Expiration Date | Dec. 1, 2023 |
Indexed stock | Common |
Exercise Price | $ / shares | $ 8 |
Number of Warrants | 25,000 |
Warrant 9 [Member] | |
Date Issued | Sep. 22, 2017 |
Expiration Date | Dec. 1, 2023 |
Indexed stock | Common |
Exercise Price | $ / shares | $ 8 |
Number of Warrants | 25,000 |
Warrant 10 [Member] | |
Date Issued | Dec. 4, 2017 |
Expiration Date | Dec. 1, 2023 |
Indexed stock | Common |
Exercise Price | $ / shares | $ 8 |
Number of Warrants | 25,000 |
Warrant 11 [Member] | |
Date Issued | Jul. 8, 2019 |
Expiration Date | Dec. 1, 2023 |
Indexed stock | Common |
Exercise Price | $ / shares | $ 8 |
Number of Warrants | 50,000 |
Warrant 12 [Member] | |
Date Issued | Nov. 11, 2019 |
Expiration Date | Dec. 1, 2023 |
Indexed stock | Common |
Exercise Price | $ / shares | $ 8 |
Number of Warrants | 50,000 |
Warrant 13 [Member] | |
Date Issued | Feb. 12, 2020 |
Expiration Date | Dec. 1, 2023 |
Indexed stock | Common |
Exercise Price | $ / shares | $ 8 |
Number of Warrants | 25,000 |
Minimum [Member] | Warrant 2 [Member] | |
Date Issued | Jan. 15, 2014 |
Minimum [Member] | Warrant 3 [Member] | |
Date Issued | Apr. 30, 2015 |
Maximum [Member] | Warrant 2 [Member] | |
Date Issued | Dec. 31, 2014 |
Maximum [Member] | Warrant 3 [Member] | |
Date Issued | May 26, 2015 |
STOCKHOLDERS' EQUITY (DEFICIT_2
STOCKHOLDERS' EQUITY (DEFICIT) (Details) - shares | 3 Months Ended | 11 Months Ended | 12 Months Ended | |||
Mar. 31, 2021 | Dec. 31, 2020 | Sep. 30, 2020 | Jun. 30, 2020 | Mar. 31, 2021 | Dec. 31, 2020 | |
Series B Preferred Stock Issued [Member] | ||||||
Share issued | 854,354 | 309,540 | 200,457 | 137,043 | 1,501,394 | 647,040 |
STOCKHOLDERS' EQUITY (DEFICIT_3
STOCKHOLDERS' EQUITY (DEFICIT) (Details Narrative) - USD ($) | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | Apr. 27, 2020 | |
Common stock, authorized | 25,000,000 | 25,000,000 | ||
Common stock, issued | 3,387,403 | 4,024,443 | ||
Common stock, outstanding | 3,387,403 | 4,024,443 | ||
Common Stock [Member] | ||||
Proceeds from sale of stock | $ 10,000 | $ 264,175 | ||
Stock issued | 251,675 | |||
Series A Convertible Preferred Stock [Member] | ||||
Preferred stock, authorized | 3,000,000 | 3,000,000 | ||
Preferred stock, outstanding | 1,890,354 | 1,890,354 | ||
Liquidation (in dollars per share) | $ 12 | |||
Description of conversion of stock | One share of Common Stock at the lower of: (a) $12.00 per share, or (b) 80% of the price at which the Company sells any equity or equity-linked securities in the future. | |||
Conversion price (in dollars per share) | $ 12 | |||
Series B Preferred Stock [Member] | ||||
Preferred stock, authorized | 1,500,000 | 1,500,000 | ||
Preferred stock, outstanding | 647,040 | 0 | ||
Preferred stock, issued | 647,040 | 0 | ||
Liquidation (in dollars per share) | $ 8 | |||
Conversion price (in dollars per share) | $ 8 | |||
Stock issued | 647,040 | |||
Series B Preferred Stock [Member] | Subsequent Event [Member] | ||||
Preferred stock, authorized | 3,750,000 | |||
Stock issued | 854,354 |
EQUITY INCENTIVE PLAN (Details)
EQUITY INCENTIVE PLAN (Details) - shares | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward] | ||
Options outstanding at beginning of year | 839,625 | 797,875 |
Changes during the year: | ||
Cancelled | 0 | (28,250) |
New Options Granted - at market price | 148,734 | 70,000 |
Expired | (484,249) | |
Options outstanding at end of Period | 504,110 | 839,625 |
Options exercisable at end of Period | 271,502 | 498,393 |
Weighted average remaining contractual term (in months) | 52 months 22 days | 57 months 25 days |
EQUITY INCENTIVE PLAN (Details
EQUITY INCENTIVE PLAN (Details 1) | 12 Months Ended |
Dec. 31, 2020$ / sharesshares | |
Share-based Compensation Arrangement by Share-based Payment Award, Non-Exercisable Options, Outstanding [Roll Forward] | |
Total non-exercisable options outstanding at beginning | 341,232 |
Options granted | 148,734 |
Options vested | (105,234) |
Options cancelled/forfeited | (152,124) |
Total non-exercisable options outstanding at end | 232,608 |
Weighted average grant date fair value | $ / shares | $ 8 |
Weighted average remaining vested period (in months) | 11 months |
EQUITY INCENTIVE PLAN (Detail_2
EQUITY INCENTIVE PLAN (Details 2) - $ / shares | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Fair value of underlying stock | $ 8 | $ 8 |
Expected option life | 4 years 9 months | |
Expected stock price volatility | 35.36% | |
Expected dividend yield | 0.00% | 0.00% |
Minimum [Member] | ||
Expected option life | 4 years 6 months 3 days | |
Expected stock price volatility | 41.07% | |
Risk free interest rate | 0.22% | 1.51% |
Maximum [Member] | ||
Expected option life | 4 years 9 months | |
Expected stock price volatility | 42.95% | |
Risk free interest rate | 0.29% | 2.23% |
EQUITY INCENTIVE PLAN (Detail_3
EQUITY INCENTIVE PLAN (Details 3) - $ / shares | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Nonvested, Number of Shares [Roll Forward] | ||
Granted | 148,734 | 70,000 |
Weighted average grant date fair value | $ 8 | |
Weighted average remaining vested period (in months) | 52 months 22 days | 57 months 25 days |
Restricted Common Stock [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Nonvested, Number of Shares [Roll Forward] | ||
Outstanding non-vested restricted stock at beginning of year | 6,250 | 5,000 |
Granted | 10,000 | 12,500 |
Vested | (10,575) | (11,250) |
Cancelled/forfeited | (2,025) | |
Outstanding non-vested restricted stock at end | 3,800 | 6,250 |
Weighted average grant date fair value | $ 8 | $ 8 |
Weighted average remaining vested period (in months) | 4 years 6 months | 4 years 6 months |
EQUITY INCENTIVE PLAN (Detail_4
EQUITY INCENTIVE PLAN (Details Narrative) - USD ($) | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Number of options granted (in shares) | 148,734 | 70,000 | |||
Stock based compensation | $ 529,390 | $ 459,885 | |||
Unrecognized compensation cost | $ 510,515 | $ 854,405 | |||
Intrinsic value (in dollars per share) | $ 8 | ||||
Exercise price (in dollars per share) | $ 8 | $ 8 | |||
Stock options outstanding | 504,110 | 839,625 | 797,875 | ||
Fair value of options granted | $ 354,150 | $ 215,406 | |||
Stock Option [Member] | |||||
Number of options granted (in shares) | 138,734 | 70,000 | |||
Exercise price (in dollars per share) | $ 8 | $ 8 | |||
Aggregate grant date fair value | $ 329,850 | $ 177,111 | |||
Unrecognized compensation expense period | 7 years | 7 years | |||
Restricted Common Stock [Member] | |||||
Number of options granted (in shares) | 10,000 | 12,500 | |||
Number of shares vested (in shares) | 10,575 | 11,250 | |||
2007 Stock Option Plan [Member] | Stock Option [Member] | Directors [Member] | |||||
Number of options granted (in shares) | 2,500 | ||||
Exercise price (in dollars per share) | $ 8 | ||||
Aggregate grant date fair value | $ 24,300 | ||||
2007 Stock Option Plan [Member] | Restricted Common Stock [Member] | Directors [Member] | |||||
Number of options granted (in shares) | 2,500 | ||||
Stock based compensation | $ 84,600 | $ 90,000 | |||
Exercise price (in dollars per share) | $ 8 | ||||
Number of shares vested (in shares) | 35,000 | 23,125 | |||
Aggregate grant date fair value | $ 38,295 | $ 320,000 | |||
2007 Stock Option Plan [Member] | Maximum [Member] | |||||
Number of shares awarded (in shares) | 1,200,000 |
LEASES (Details)
LEASES (Details) | 12 Months Ended |
Dec. 31, 2020USD ($) | |
Capital Leases of Lessee [Abstract] | |
Right-of-use lease assets- operating at beginning | $ 1,606,443 |
Less: Accumulated amortization | (548,829) |
Right-of-use lease assets- operating at end | 1,057,614 |
Lease liability-operating at beginning | 1,704,069 |
Less: Accumulated Amortization | (422,313) |
Lease liability operating at end | 1,281,756 |
Operating lease expense | 639,903 |
Actual remaining lease payments | 1,407,885 |
Present value of remaining payments | $ 1,281,756 |
LEASES (Details 1)
LEASES (Details 1) | 12 Months Ended |
Dec. 31, 2020USD ($) | |
Cash paid for amounts included in the measurement of lease liabilities: | |
Operating cash flows from operating leases | $ 512,645 |
Weighted average remaining lease term- operating leases ( in months) | 21 years 2 months 12 days |
Weighted average discount rate- operating leases (annual) | 9.98% |
Maturities of leases liabilities | |
Year ending December 31, 2021 | $ 736,027 |
Year ending December 31, 2022 | 671,858 |
Total Lease payments | 1,407,885 |
Less imputed interest | (126,129) |
Total | $ 1,281,756 |
INCOME TAXES (Details)
INCOME TAXES (Details) - USD ($) | Dec. 31, 2020 | Dec. 31, 2019 |
Deferred tax assets: | ||
Net operating loss carry forwards | $ 15,190,000 | $ 13,315,000 |
Miscellaneous temporary differences | 42,000 | 50,000 |
Research and development credits | 870,000 | 760,000 |
Deferred tax liabilities: | ||
Leasehold improvements and equipment | (64,000) | (20,000) |
Miscellaneous temporary differences | ||
Net deferred tax asset | 16,038,000 | 14,105,000 |
Valuation allowance | $ (16,038,000) | $ (14,105,000) |
INCOME TAXES (Details Narrative
INCOME TAXES (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Fedral operating loss carryforward | $ 68,000,000 | $ 60,400,000 |
State net operating loss carry forwards | $ 13,100,000 | 9,000,000 |
Previously federal statutory rate | 35.00% | |
Description of expire date | These losses were incurred in the years 2006 through 2020 and will expire between 2026 and 2040 and their utilization may be limited if we experience significant ownership changes. The Company has not conducted a full IRC Section 382 analysis to determine if a reduction in net operating loss carry forwards is required due to ownership changes | |
Uncertain tax positions | $ 0 | $ 0 |
Research and Development [Member] | ||
Description of expire date | The research and development credits will expire between 2028 and 2039. A rate of 28% has been used to calculate the deferred tax assets and liabilities based on the expected effective tax rates, net of applicable credits, upon reversal of the differences above. |
CUSTOMER, SUPPLIER, COUNTRY A_2
CUSTOMER, SUPPLIER, COUNTRY AND PRODUCT CONCENTRATIONS (Details Narrative) - Total Product Revenues [Member] | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Product Concentration Risk [Member] | One Product [Member] | ||
Concentration of risk | 60.00% | 62.00% |
Customer Concentration Risk [Member] | One Customer [Member] | ||
Concentration of risk | 52.00% | 41.00% |
Country Concentration Risk [Member] | ||
Concentration of risk | 40.00% | 47.00% |
Country Concentration Risk [Member] | Foreign [Member] | ||
Concentration of risk | 47.00% | 49.00% |
RELATED PARTY TRANSACTIONS AN_3
RELATED PARTY TRANSACTIONS AND COMMITMENTS (Details) | 12 Months Ended |
Dec. 31, 2020USD ($)shares | |
Units Purchase | 401,708 |
Value of units purchased | $ | $ 3,213,664 |
Interest Expense Accrued | $ | $ 64,162 |
Number of units exchanged | 803,416 |
Shares of Common Stock exchanged for Shares of Series B Preferred Stock | 589,290 |
Mr. Arnold Allemang [Member] | |
Units Purchase | 192,063 |
Value of units purchased | $ | $ 1,536,504 |
Interest Expense Accrued | $ | $ 31,580 |
Number of units exchanged | 384,126 |
Shares of Common Stock exchanged for Shares of Series B Preferred Stock | 250,000 |
Mr. Steven Jones [Member] | |
Units Purchase | 7,770 |
Value of units purchased | $ | $ 62,160 |
Interest Expense Accrued | $ | $ 181 |
Number of units exchanged | 15,540 |
Shares of Common Stock exchanged for Shares of Series B Preferred Stock | 15,540 |
Mr. Dave Pendell [Member] | |
Units Purchase | 187,500 |
Value of units purchased | $ | $ 1,500,000 |
Interest Expense Accrued | $ | $ 29,703 |
Number of units exchanged | 375,000 |
Shares of Common Stock exchanged for Shares of Series B Preferred Stock | 295,000 |
Robert M. Blinstrub [Member] | |
Units Purchase | 14,375 |
Value of units purchased | $ | $ 115,000 |
Interest Expense Accrued | $ | $ 2,698 |
Number of units exchanged | 28,750 |
Shares of Common Stock exchanged for Shares of Series B Preferred Stock | 28,750 |
RELATED PARTY TRANSACTIONS AN_4
RELATED PARTY TRANSACTIONS AND COMMITMENTS (Details Narrative) - USD ($) | Feb. 26, 2016 | Dec. 31, 2020 | Dec. 31, 2019 |
Value of units purchased | $ 3,213,664 | ||
Units purchase | 401,708 | ||
Interest accrued | $ 64,162 | ||
Number of units exchanged | 803,416 | ||
Pendall [Member] | |||
Number of common stock purchased for investment, shares | 3,125 | ||
Number of common stock purchased for investment, value | $ 25,000 | ||
Jacqueline Lemke [Member] | |||
Number of common stock purchased for investment, shares | 5,000 | ||
Number of common stock purchased for investment, value | $ 40,000 | ||
Board of Directors [Member] | |||
Value of units purchased | $ 3,213,664 | ||
Units purchase | 401,708 | ||
Convertible Notes [Member] | |||
Interest accrued | $ 64,612 | ||
Purchases [Member] | |||
Number of units exchanged | 806,416 | ||
Directors [Member] | |||
Number of units exchanged | 589,290 | ||
Shareholders Agreement [Member] | |||
Number of excluded stock offered | 3,000,000 | ||
Description of excluded stock | The Amendment to the Shareholder Agreement further clarifies that preemptive rights shall not apply to Excluded Stock (including, without limitation, the 3,000,000 shares being offered under the Registration Statement) and amends the termination date of the Shareholders Agreement. The Shareholder Agreement will continue in effect, unless the Shareholder Agreement is earlier terminated in accordance with its terms until the date on which the Company’s common stock is listed on the NASDAQ Stock Market of the New York Stock Exchange. |
RETIREMENT PLAN (Details Narrat
RETIREMENT PLAN (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Retirement Plan Details Narrative | ||
Employer contribution expense | $ 110,743 | $ 110,743 |
LETTER OF CREDIT (Details Narra
LETTER OF CREDIT (Details Narrative) | Apr. 30, 2019USD ($) |
Letter of Credit [Member] | |
Letter of credit | $ 190,000 |
SUBSEQUENT EVENTS (Details Narr
SUBSEQUENT EVENTS (Details Narrative) - USD ($) | 1 Months Ended | 12 Months Ended | |||
Mar. 31, 2021 | Feb. 28, 2021 | Feb. 16, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Proceeds from loan | $ 1,000,000 | $ 4,000,000 | |||
Value of units purchased | 3,213,664 | ||||
Board of Directors [Member] | |||||
Value of units purchased | $ 3,213,664 | ||||
Subsequent Event [Member] | |||||
CARES Description | In February of 2021, we applied for continued relief under the Coronavirus Aid, Relief and Economic Security Act (CARES) by applying to an SBA lender bank, PNC, for a second Paycheck Protection Plan (“PPP”) loan. On February 16, 2021, we received an approved and fully executed PPP Term Note for $536,700 with a term of five years, a repayment deferral period which is 10 months plus 24 weeks from the date that the funds were disbursed or the date any forgiven amount of the Facility is remitted by the SBA to the Bank, and an annual rate of interest of 1%, with a potential for some or all of the loan to be forgiven, dependent upon use of the loan proceeds. Funds were disbursed to us on February 17, 2021 | ||||
Proceeds from loan | $ 790,795 | ||||
Interest rate | 1.00% | ||||
Subsequent Event [Member] | Board of Directors [Member] | |||||
Value of units purchased | $ 3,986,520 |