DELAWARE
|
94-3076866
|
(State or other jurisdiction of
incorporation or organization)
|
(IRS Employer
Identification No.)
|
PART I
|
||
ITEM 1.
|
BUSINESS
|
3
|
ITEM 1A.
|
RISK FACTORS
|
11
|
ITEM 2.
|
PROPERTIES
|
20
|
ITEM 3.
|
LEGAL PROCEEDINGS
|
20
|
ITEM 4.
|
MINE SAFETY DISCLOSURES
|
20
|
PART II
|
||
ITEM 5.
|
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
|
21
|
ITEM 6.
|
SELECTED FINANCIAL DATA
|
22
|
ITEM 7.
|
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
23
|
ITEM 7A.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
|
30
|
ITEM 8.
|
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|
31
|
INDEX TO FINANCIAL STATEMENTS
|
31
|
|
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
|
32
|
|
ITEM 9.
|
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
|
|
FINANCIAL DISCLOSURE
|
50
|
|
ITEM 9A.
|
CONTROLS AND PROCEDURES
|
50
|
ITEM 9B.
|
OTHER INFORMATION
|
51
|
PART III
|
||
ITEM 10.
|
DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
|
52
|
ITEM 11.
|
EXECUTIVE COMPENSATION
|
58
|
ITEM 12.
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
|
62
|
ITEM 13.
|
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
|
63
|
ITEM 14.
|
PRINCIPAL ACCOUNTANT FEES AND SERVICES
|
64
|
PART IV
|
||
ITEM 15.
|
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
|
65
|
SIGNATURES
|
66
|
ITEM 1.
|
BUSINESS
|
·
|
Patented hypothermic storage and cryopreservation freeze media products for cells, tissues, and organs
|
·
|
Generic blood stem cell freezing and cell thawing media products
|
·
|
Custom product formulation and custom packaging services
|
·
|
Cold chain logistics services incorporating precision thermal packaging products and cloud-hosted web applications
|
·
|
Contract aseptic manufacturing formulation, fill, and finish services of liquid media products
|
·
|
Minimize cell and tissue swelling
|
·
|
Reduce free radical levels upon formation
|
·
|
Maintain appropriate low temperature ionic balances
|
·
|
Provide regenerative, high energy substrates to stimulate recovery upon warming
|
·
|
Avoid the creation of an acidic state (acidosis)
|
·
|
Inhibit the onset of apoptosis and necrosis
|
ITEM 1A.
|
RISK FACTORS
|
●
|
availability or contamination of raw materials and components used in the manufacturing process, particularly those for which we have no other source or supplier;
|
●
|
the ongoing capacity of our facilities;
|
●
|
our ability to comply with regulatory requirements, including our ability to comply with cGMP;
|
●
|
inclement weather and natural disasters;
|
●
|
changes in forecasts of future demand for product components;
|
●
|
potential facility contamination by microorganisms or viruses;
|
●
|
updating of manufacturing specifications; and
|
●
|
product quality success rates and yields.
|
●
|
we were the first to make the inventions covered by each of our issued patents and pending patent applications;
|
●
|
we were the first to file patent applications for these inventions;
|
●
|
others will not independently develop similar or alternative technologies or duplicate any of our technologies;
|
●
|
any of our pending patent applications will result in issued patents;
|
●
|
any of our patents will be valid or enforceable;
|
●
|
any patents issued to us will provide us with any competitive advantages, or will not be challenged by third parties; and
|
●
|
we will develop additional proprietary technologies that are patentable, or the patents of others will not have an adverse effect on our business.
|
●
|
patent infringement and other intellectual property claims, which would be costly and time consuming to defend, whether or not the claims have merit, and which could delay a product and divert management’s attention from our business;
|
●
|
substantial damages for past infringement, which we may have to pay if a court determines that our product or technologies infringe a competitor’s patent or other proprietary rights;
|
●
|
a court prohibiting us from selling or licensing our technologies unless the third party licenses its patents or other proprietary rights to us on commercially reasonable terms, which it is not required to do; and
|
●
|
if a license is available from a third party, we may have to pay substantial royalties or lump-sum payments or grant cross licenses to our patents or other proprietary rights to obtain that license.
|
●
|
Future sales of our common stock or other fundraising events;
|
●
|
Sales of our common stock by existing shareholders;
|
●
|
Changes in our capital structure, including stock splits or reverse stock splits;
|
●
|
Announcements of technological innovations for new commercial products by our present or potential competitors;
|
●
|
Developments concerning proprietary rights;
|
●
|
Adverse results in our field or with clinical tests of our products in customer applications;
|
●
|
Adverse litigation;
|
●
|
Unfavorable legislation or regulatory decisions;
|
●
|
Public concerns regarding our products;
|
●
|
Variations in quarterly operating results;
|
●
|
General trends in the health care industry; and
|
●
|
Other factors outside of our control.
|
ITEM 1B.
|
UNRESOLVED STAFF COMMENTS
|
ITEM 2.
|
PROPERTIES
|
ITEM 3.
|
LEGAL PROCEEDINGS
|
·
|
On February 7, 2007, Kristi Snyder, a former employee of the Company filed a complaint in the New York State Supreme Court, County of Broome, against us alleging a breach of an employment agreement and seeking damages of up to $300,000 plus attorneys’ fees.
|
·
|
On April 6, 2007, we were served with a complaint filed by John G. Baust, our former Chief Executive Officer and President, and thereafter, until January 8, 2007, the Chairman, Sr. Vice President and Chief Scientific Officer, in the New York State Supreme Court, County of Tioga, against us seeking, among other things, damages under his employment agreement to be determined upon trial of the action plus attorneys’ fees, a declaratory judgment that he did not breach his fiduciary duties to the Company, and that his covenant not to compete is void as against public policy or unenforceable as a matter of law, and to enjoin us from commencing an action against him in Delaware courts seeking damages for breaches of his fiduciary obligations to us. The parties have engaged in extensive motion practice. By decision of December 18, 2009, Justice Tait rejected Plaintiff Baust’s efforts to obtain partial summary judgment.
|
·
|
On June 15, 2007, BioLife filed a lawsuit in the State of New York Supreme Court, County of Tioga, against Cell Preservation Services, Inc. (“CPSI”) and Coraegis Bioinnovations, Inc. (“Coraegis”), both of which are owned and controlled by John M. Baust, a former employee of the Company. John M. Baust is the son of John G. Baust; both John G. Baust’s and John M. Baust’s employment with BioLife was terminated on January 8, 2007. On approximately August 21, 2007, CPSI filed six counterclaims and Coraegis filed one counterclaim against BioLife. Four of the six counterclaims brought by CPSI were based on breach of contract, one was based on BioLife’s alleged negligence, and one was based on BioLife’s alleged malicious institution and maintenance of the lawsuit against CPSI and Coraegis. Coraegis joined in the last counterclaim against BioLife, which sought both compensatory and punitive damages.
|
·
|
On December 4, 2007, John M. Baust, the son of John G. Baust, filed a complaint in the New York State Supreme Court, County of Tioga, against the Company and Michael Rice, our Chief Executive Officer and former chairman of the board, alleging, among other things, a breach of an employment agreement and defamation of character and seeking damages against us in excess of $300,000 plus attorney’s fees.
|
ITEM 4.
|
MINE SAFETY DISCLOSURES
|
ITEM 5.
|
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
|
High
|
Low
|
|||||||
Year ended December 31, 2015
|
||||||||
4th Quarter
|
$ | 2.48 | $ | 2.04 | ||||
3rd Quarter
|
2.75 | 1.96 | ||||||
2nd Quarter
|
2.79 | 1.50 | ||||||
1st Quarter
|
2.34 | 1.61 | ||||||
Year ended December 31, 2014
|
||||||||
4th Quarter
|
$ | 2.30 | $ | 1.64 | ||||
3rd Quarter
|
2.85 | 2.06 | ||||||
2nd Quarter
|
3.90 | 1.89 | ||||||
1st Quarter
|
9.00 | 3.69 | ||||||
Plan category
|
Number of securities to be issued upon exercise of outstanding options and warrants
(in thousands)
|
Weighted Average exercise price of outstanding options and warrants
|
Number of securities remaining available for future issuance (in thousands)
|
|||||||||
Equity compensation plans approved by security holders
|
1,772
|
$
|
2.02
|
1,696
|
||||||||
Equity compensation plans not approved by security holders(1)
|
783
|
$
|
1.28
|
––
|
||||||||
Total
|
2,555
|
$
|
1.80
|
1,696
|
ITEM 6.
|
SELECTED FINANCIAL DATA
|
ITEM 7.
|
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
·
|
UK-based TC Biopharm Ltd, a developer of anti-cancer immunotherapies, announced that it has incorporated our CryoStor clinical and commercial grade freeze media in its manufacturing and clinical delivery processes of ImmuniCell, a novel T cell based immunotherapy targeting various cancers.
|
·
|
Cardio3 BioSciences, a leader in engineered cell therapy with clinical programs initially targeting indications in cardiovascular disease and oncology, has embedded the Company’s clinical grade CryoStor cryopreservation freeze media in its ongoing Congestive Heart Failure Cardiopoietic Regenerative Therapy (CHART-1) phase III clinical trial in Europe and Israel and the pending CHART-2 phase III clinical trial to be conducted in the United States.
|
·
|
Cord Blood Registry (CBR®), the world’s largest newborn stem cell company, announced the adoption of BioLife’s CryoStor clinical grade cryopreservation freeze media in its process for cryogenic storage of umbilical cord tissue stem cells.
|
·
|
Several new customers disclosed the use of the Company’s CryoStor and HypoThermosol biopreservation media products in pre-clinical validation projects and clinical trials at the recent International Society for Cellular Therapy (ISCT) conference as follows:
|
·
|
GSK – Overcoming automation and formulation challenges in the manufacture and distribution of next generation ex vivo gene therapy products.
|
·
|
HemaCare Bioresearch Products & Services – Cryopreserved Leukopaks (LP) Maintain Cell Viability & Functionality.
|
·
|
MaSTherCell (for their customer Imcyse) – Technology Transfer and Process Development for an Autologous Cell Therapy Against Multiple Sclerosis.
|
·
|
RoosterBio – poster: Cryopreserved hMSC maintain comparable in vitro functional activity compared to fresh hMSC.
|
·
|
Use of CryoStor cryopreservation freeze media with a dendritic cell based vaccine was published in the journal Oncotarget.
|
·
|
We announced that our CryoStor cell freeze media was utilized in a Mayo Clinic porcine animal study of umbilical cord blood-derived mononuclear cells (UBC-MNC) to evaluate the safety and feasibility of these cells for cardiac regeneration in pediatric congenital heart disease (CHD).
|
·
|
biologistex – We commercially launched the biologistex cold chain management service, which includes access to our biologistex web app and use of the evo Smart Shipper.
|
·
|
Cell Thawing Media - We commenced GMP manufacturing and sales of low molecular weight dextran solutions for use in thawing human cells. We gained about 50 new customers for this product in 2015.
|
·
|
BloodStor 27 NaCl Freeze Media – We launched the new product targeting end user cryopreservation applications including freezing of platelets for clinical administration. The first substantial order for BloodStor® 27 NaCl was shipped to The Netherlands Ministry of Defense in the late fourth quarter of 2015.
|
·
|
We were granted a new Australian patent number 2009228056
titled, “Materials and Methods for Hypothermic Collection of Whole Blood”.
|
·
|
We filed a patent application with claims related to novel features for next generations of the evo™ Smart Shipper and future releases of the biologistex™ cloud based cold chain management app.
|
·
|
We received the 2015 Silver Award for Achievement in Medical Technology from Seattle Business Magazine.
|
·
|
The evo™ Smart Shipper, designed and manufactured by SAVSU and marketed by BioLife, was the silver award recipient at the recent Medical Design Excellence Awards competition for the category Medical Product Packaging, Graphic Instructions, and Labeling Systems.
|
·
|
We were recognized by Seattle Business Magazine, which included BioLife in its annual list of the 100 best companies to work for in Washington state for 2015.
|
·
|
We grew our biopreservation media business 29% over 2014. This substantial increase was driven by a 45% increase in revenue from the regenerative medicine segment. At the end of 2014, we estimated that BioLife products were incorporated into the storage, shipping, freezing, and/or clinical administration processes and protocols of 175 regenerative medicine pre-clinical projects and clinical trials. This increased to over 200 by the end of 2015. We also drove more sales through our distributors, with an increase of 20% in revenue from distributors in 2015 compared to 2014.
|
·
|
Gross margin in 2015 was 59%, compared to 49% in 2014, driven by the significant increase in our biopreservation media revenue and the elimination of low margin contract-manufacturing revenue.
|
·
|
Our 2015 consolidated net loss was $5.0 million and net loss attributable to BioLife was $4.2 million. This is compared to a consolidated net loss of $3.3 million in 2014, of which $3.2 million was attributable to BioLife. The increase in the loss is primarily the result of increased headcount and spending related to the development and launch activities of our biologistex joint venture.
|
·
|
We used $6.1 million in cash and short term investments in 2015 and ended the year with $3.8 million in cash and short term investments. The increased cash burn is primarily the result of increased headcount and spending related to the development and launch activities of our biologistex joint venture.
|
Year Ended
|
||||||||||||
December 31,
|
||||||||||||
2015
|
2014
|
% Change
|
||||||||||
Revenue:
|
(‘000’s)
|
|||||||||||
Product revenue
|
||||||||||||
Core product sales
|
$
|
6,361
|
$
|
4,913
|
29%
|
|||||||
Contract manufacturing services
|
88
|
1,278
|
(93%)
|
|||||||||
Total revenue
|
6,449
|
6,191
|
4%
|
|||||||||
Cost of sales
|
2,635
|
3,155
|
(16%)
|
|||||||||
Gross profit
|
$
|
3,814
|
$
|
3,036
|
26%
|
|||||||
Gross margin %
|
59.1%
|
49.0%
|
Year Ended December 31,
|
||||||||||||
2015
|
2014
|
% Change
|
||||||||||
(‘000’s)
|
||||||||||||
Operating Expenses:
|
||||||||||||
Research and development
|
$
|
1,379
|
$
|
871
|
58%
|
|||||||
Sales and marketing
|
2,584
|
1,330
|
94%
|
|||||||||
General and administrative
|
4,868
|
3,970
|
23%
|
|||||||||
Operating Expenses
|
8,831
|
6,171
|
43%
|
|||||||||
% of revenue
|
137%
|
100%
|
ITEM 7A.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
|
ITEM 8.
|
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|
Page No.
|
||
Report of Independent Registered Public Accounting Firm
|
32
|
|
Consolidated Balance Sheets
|
33
|
|
Consolidated Statements of Operations
|
34
|
|
Consolidated Statements of Comprehensive Loss
|
35
|
|
Consolidated Statements of Shareholders’ Equity
|
36
|
|
Consolidated Statements of Cash Flows
|
37
|
|
Notes to Consolidated Financial Statements
|
38
|
December 31,
|
December 31,
|
|||||||
2015
|
2014
|
|||||||
Assets
|
||||||||
Current assets
|
||||||||
Cash and cash equivalents
|
$
|
2,173,258
|
$
|
2,538,758
|
||||
Short term investments
|
1,651,341
|
7,399,636
|
||||||
Accounts receivable, trade, net of allowance for doubtful accounts of $0 at December 31, 2015 and 2014
|
929,289
|
901,623
|
||||||
Inventories
|
1,834,635
|
965,224
|
||||||
Prepaid expenses and other current assets
|
384,414
|
360,521
|
||||||
Total current assets
|
6,972,937
|
12,165,762
|
||||||
Property and equipment
|
||||||||
Leasehold improvements
|
1,284,491
|
1,284,491
|
||||||
Furniture and computer equipment
|
557,666
|
476,788
|
||||||
Manufacturing and other equipment
|
1,025,521
|
972,386
|
||||||
Subtotal
|
2,867,678
|
2,733,665
|
||||||
Less: Accumulated depreciation
|
(1,421,279
|
)
|
(1,078,060
|
)
|
||||
Net property and equipment
|
1,446,399
|
1,655,605
|
||||||
Internal use software
|
1,698,735
|
––
|
||||||
Intangible asset
|
2,215,385
|
2,215,385
|
||||||
Long term deposits
|
36,166
|
36,166
|
||||||
Total assets
|
$
|
12,369,622
|
$
|
16,072,918
|
||||
Liabilities and Shareholders’ Equity
|
||||||||
Current liabilities
|
||||||||
Accounts payable
|
$
|
1,029,373
|
$
|
474,662
|
||||
Accrued expenses and other current liabilities
|
146,438
|
121,869
|
||||||
Accrued compensation
|
419,766
|
535,029
|
||||||
Deferred rent, current portion
|
130,216
|
130,216
|
||||||
Total current liabilities
|
1,725,793
|
1,261,776
|
||||||
Deferred rent, long term
|
784,458
|
874,825
|
||||||
Total liabilities
|
2,510,251
|
2,136,601
|
||||||
Commitments and Contingencies (Note 10)
|
||||||||
Shareholders' equity
|
||||||||
Common stock, $0.001 par value; 150,000,000 shares authorized, 12,448,391 and 12,084,859 shares issued and outstanding at December 31, 2015 and 2014
|
12,447
|
12,084
|
||||||
Additional paid-in capital
|
72,823,398
|
71,911,328
|
||||||
Accumulated other comprehensive loss
|
(451
|
)
|
(6,448
|
)
|
||||
Accumulated deficit
|
(64,326,923
|
)
|
(60,112,987
|
)
|
||||
Total BioLife Solutions, Inc. shareholders' equity
|
8,508,471
|
11,803,977
|
||||||
Total non-controlling interest equity
|
1,350,900
|
2,132,340
|
||||||
Total shareholders' equity
|
9,859,371
|
13,936,317
|
||||||
Total liabilities and shareholders' equity
|
$
|
12,369,622
|
$
|
16,072,918
|
Years Ended December 31,
|
||||||||
2015
|
2014
|
|||||||
Product sales
|
$
|
6,448,910
|
$
|
6,190,698
|
||||
Cost of product sales
|
2,634,700
|
3,155,288
|
||||||
Gross profit
|
3,814,210
|
3,035,410
|
||||||
Operating expenses
|
||||||||
Research and development
|
1,378,807
|
871,100
|
||||||
Sales and marketing
|
2,583,731
|
1,329,746
|
||||||
General and administrative
|
4,868,801
|
3,970,254
|
||||||
Total operating expenses
|
8,831,339
|
6,171,100
|
||||||
Operating loss
|
(5,017,129
|
)
|
(3,135,690
|
)
|
||||
Other income (expenses)
|
||||||||
Interest income
|
21,753
|
20,825
|
||||||
Interest expense
|
––
|
(177,308
|
)
|
|||||
Amortization of deferred financing costs
|
––
|
(13,022
|
)
|
|||||
Gain on disposal of property and equipment
|
––
|
4,400
|
||||||
Total other income (expenses)
|
21,753
|
(165,105
|
)
|
|||||
Net Loss
|
(4,995,376
|
)
|
(3,300,795
|
)
|
||||
Net Loss attributable to non-controlling interest
|
781,440
|
83,045
|
||||||
Net Loss attributable to BioLife Solutions, Inc.
|
$
|
(4,213,936
|
)
|
$
|
(3,217,750
|
)
|
||
Basic and diluted net loss per common share attributable to BioLife Solutions, Inc.
|
$
|
(0.35
|
)
|
$
|
(0.31
|
)
|
||
Basic and diluted weighted average common shares used to calculate net loss per common share
|
12,177,396
|
10,447,030
|
Years Ended December 31,
|
||||||||
2015
|
2015
|
|||||||
Net Loss
|
$
|
(4,995,376
|
)
|
$
|
(3,300,795
|
)
|
||
Other comprehensive income (loss)
|
||||||||
Unrealized gain (loss) on available-for-sale investments
|
5,997
|
(6,448
|
)
|
|||||
Total other comprehensive income (loss)
|
5,997
|
(6,448
|
)
|
|||||
Comprehensive Loss
|
$
|
(4,989,379
|
)
|
$
|
(3,307,243
|
)
|
||
Comprehensive loss attributable to non-controlling interest
|
781,440
|
83,045
|
||||||
Comprehensive Loss attributable to BioLife Solutions, Inc.
|
$
|
(4,207,939
|
)
|
$
|
(3,224,198
|
)
|
BioLife Solutions, Inc. Shareholders' Equity (Deficiency)
|
||||||||||||||||||||||||||||||||
Common Stock
Shares
|
Common Stock
Amount
|
Additional Paid-in Capital
|
Accumulated Other Comprehensive Loss
|
Accumulated Deficit
|
Total BioLife Solutions, Inc. Shareholders' Equity (Deficiency)
|
Non-Controlling Interest Equity
|
Total Shareholders' Equity (Deficiency)
|
|||||||||||||||||||||||||
Balance, December 31, 2013
|
5,031,336 | $ | 5,030 | $ | 43,618,686 | $ | - | $ | (56,895,237 | ) | $ | (13,271,521 | ) | $ | - | $ | (13,271,521 | ) | ||||||||||||||
Stock-based compensation
|
229,679 | 229,679 | 229,679 | |||||||||||||||||||||||||||||
Stock issued for services
|
74,720 | 75 | 209,925 | 210,000 | 210,000 | |||||||||||||||||||||||||||
Stock option exercises
|
68,520 | 69 | 83,525 | 83,594 | 83,594 | |||||||||||||||||||||||||||
Stock issued in connection with public registered stock offering March 25, 2014, net of transaction costs
|
3,588,878 | 3,589 | 13,592,641 | 13,596,230 | 13,596,230 | |||||||||||||||||||||||||||
Stock issued in connection with conversion of outstanding notes and interest on March 25, 2014, net of unamortized deferred financing costs of $101,852
|
3,321,405 | 3,321 | 14,176,872 | 14,180,193 | 14,180,193 | |||||||||||||||||||||||||||
Other comprehensive loss
|
(6,448 | ) | (6,448 | ) | (6,448 | ) | ||||||||||||||||||||||||||
Capital contribution of non-
controlling interest in biologistex
CCM, LLC joint venture
|
- | 2,215,385 | 2,215,385 | |||||||||||||||||||||||||||||
Net loss
|
(3,217,750 | ) | (3,217,750 | ) | (83,045 | ) | (3,300,795 | ) | ||||||||||||||||||||||||
Balance, December 31, 2014
|
12,084,859 | 12,084 | 71,911,328 | (6,448 | ) | (60,112,987 | ) | 11,803,977 | 2,132,340 | 13,936,317 | ||||||||||||||||||||||
Stock-based compensation
|
511,457 | 511,457 | 511,457 | |||||||||||||||||||||||||||||
Stock options/warrant exercises
|
363,532 | 363 | 400,613 | 400,976 | 400,976 | |||||||||||||||||||||||||||
Other comprehensive income
|
5,997 | 5,997 | 5,997 | |||||||||||||||||||||||||||||
Net loss
|
(4,213,936 | ) | (4,213,936 | ) | (781,440 | ) | (4,995,376 | ) | ||||||||||||||||||||||||
Balance, December 31, 2015
|
12,448,391 | $ | 12,447 | $ | 72,823,398 | $ | (451 | ) | $ | (64,326,923 | ) | $ | 8,508,471 | $ | 1,350,900 | $ | 9,859,371 |
Years Ended December 31,
|
||||||||
2015
|
2014
|
|||||||
Cash flows from operating activities
|
||||||||
Net loss
|
$
|
(4,995,376
|
)
|
$
|
(3,300,795
|
)
|
||
Adjustments to reconcile net loss to net cash used in operating activities
|
||||||||
Depreciation
|
343,218
|
258,119
|
||||||
Gain on disposal of property and equipment
|
––
|
(4,400)
|
||||||
Stock-based compensation expense
|
511,457
|
229,679
|
||||||
Stock issued for services
|
––
|
210,000
|
||||||
Amortization of deferred financing costs
|
––
|
13,022
|
||||||
Lease incentives, net of amortization of deferred rent related to lease incentives
|
(126,999)
|
(37,704)
|
||||||
Accretion and amortization on available for sale investments
|
90,125
|
98,006
|
||||||
Change in operating assets and liabilities
|
||||||||
(Increase) Decrease in
|
||||||||
Accounts receivable, trade
|
(27,666
|
)
|
107,693
|
|||||
Inventories
|
(869,411
|
)
|
(544,300
|
)
|
||||
Prepaid expenses and other current assets
|
15,192
|
(23,123
|
)
|
|||||
Increase (Decrease) in
|
||||||||
Accounts payable
|
194,386
|
(392,408
|
)
|
|||||
Accrued compensation and other current liabilities
|
(145,419
|
)
|
7,078
|
|||||
Accrued interest, related parties
|
––
|
177,308
|
||||||
Deferred rent
|
36,632
|
39,509
|
||||||
Net cash used in operating activities
|
(4,973,861
|
)
|
(3,162,316
|
)
|
||||
Cash flows from investing activities
|
||||||||
Purchase of available-for-sale investments
|
(1,409,695
|
)
|
(7,952,119
|
)
|
||||
Sales/maturities of available-for-sale investments
|
7,067,000
|
402,376
|
||||||
Cash received from sale of property and equipment
|
––
|
4,400
|
||||||
Costs associated with internal use software development
|
(1,283,685
|
)
|
––
|
|||||
Purchase of property and equipment
|
(134,012
|
)
|
(589,680
|
)
|
||||
Net cash provided by (used in) investing activities
|
4,239,608
|
(8,135,023
|
)
|
|||||
Cash flows from financing activities
|
||||||||
Proceeds from exercise of common stock options and warrants
|
368,753
|
83,594
|
||||||
Proceeds from sale of common stock, net of expenses
|
––
|
13,596,230
|
||||||
Net cash provided by financing activities
|
368,753
|
13,679,824
|
||||||
Net increase (decrease) in cash and cash equivalents
|
(365,500
|
)
|
2,382,485
|
|||||
Cash and cash equivalents - beginning of year
|
2,538,758
|
156,273
|
||||||
Cash and cash equivalents - end of year
|
$
|
2,173,258
|
$
|
2,538,758
|
||||
Non-cash investing and financing activities
|
||||||||
Acquisition of intangible asset from non-controlling interest (See Note 1)
|
$
|
––
|
$
|
2,215,385
|
||||
Conversion of notes payable and related party accrued interest to equity, net of
unamortized deferred finance costs (See Note 1)
|
$
|
––
|
$
|
14,180,193
|
||||
Costs incurred for capitalized internal use software not paid as of year-end (amounts are included in liabilities)
|
$
|
415,050
|
$
|
––
|
||||
Proceeds from issuance of common stock on exercise of common stock
options not received as of year-end
|
$
|
32,223
|
$
|
––
|
1.
|
Organization and Significant Accounting Policies
|
2015
|
2014
|
||||
Basic and diluted weighted average common stock shares outstanding
|
12,177,396
|
10,447,030
|
|||
Potentially dilutive securities excluded from loss per share computations:
|
|||||
Common stock options
|
2,555,263
|
1,390,770
|
|||
Common stock purchase warrants
|
7,195,997
|
7,428,141
|
Assumptions
|
2015
|
2014
|
||||||
Risk-free rate
|
1.77
|
%
|
2.01
|
%
|
||||
Annual rate of dividends
|
––
|
––
|
||||||
Historical volatility
|
105.20
|
%
|
105.20
|
%
|
||||
Expected life
|
7.0 years
|
7.0 years
|
2.
|
Accumulated Other Comprehensive Loss
|
2015
|
2014
|
|||||||
Beginning balance
|
$
|
(6,448)
|
$
|
––
|
||||
Unrealized Gain (loss) on investments, current period
|
5,997
|
(6,448)
|
||||||
Ending balance
|
$
|
(451)
|
$
|
(6,448)
|
3.
|
Fair Value Measurement
|
As of December 31, 2015
|
Level 1
|
Level 2
|
Total
|
|||||||||
Bank deposits
|
$
|
440,809
|
$
|
—
|
$
|
440,809
|
||||||
Money market funds
|
1,732,449
|
—
|
1,732,449
|
|||||||||
Cash and cash equivalents
|
2,173,258
|
—
|
2,173,258
|
|||||||||
Corporate debt securities
|
1,401,453
|
—
|
1,401,453
|
|||||||||
Commercial paper
|
249,888
|
—
|
249,888
|
|||||||||
Short term investments
|
1,651,341
|
—
|
1,651,341
|
|||||||||
Total
|
$
|
3,824,599
|
$
|
—
|
$
|
3,824,599
|
||||||
As of December 31, 2014
|
Level 1
|
Level 2
|
Total
|
|||||||||
Bank deposits
|
$
|
972,891
|
$
|
—
|
$
|
972,891
|
||||||
Money market funds
|
1,565,867
|
—
|
1,565,867
|
|||||||||
Cash and cash equivalents
|
2,538,758
|
—
|
2,538,758
|
|||||||||
Corporate debt securities
|
6,799,702
|
—
|
6,799,702
|
|||||||||
Commercial paper
|
599,934
|
—
|
599,934
|
|||||||||
Short term investments
|
7,399,636
|
—
|
7,399,636
|
|||||||||
Total
|
$
|
9,938,394
|
$
|
—
|
$
|
9,938,394
|
4.
|
Short Term Investments
|
Amortized Cost
|
Gross Unrealized Gains
|
Gross Unrealized Losses
|
Fair Value
|
|||||||||||||
Corporate debt securities
|
$
|
1,401,904
|
$
|
—
|
$
|
(451
|
)
|
$
|
1,401,453
|
|||||||
Commercial paper
|
249,888
|
—
|
—
|
249,888
|
||||||||||||
Total marketable securities
|
$
|
1,651,792
|
$
|
—
|
$
|
(451
|
)
|
$
|
1,651,341
|
Amortized Cost
|
Fair Value
|
|||||||
Due in 1 year or less
|
$
|
1,651,792
|
$
|
1,651,341
|
||||
Total marketable securities
|
$
|
1,651,792
|
$
|
1,651,341
|
Amortized Cost
|
Gross Unrealized Gains
|
Gross Unrealized Losses
|
Fair Value
|
|||||||||||||
Corporate debt securities
|
$
|
6,806,150
|
$
|
—
|
$
|
(6,448
|
)
|
$
|
6,799,702
|
|||||||
Commercial paper
|
599,934
|
—
|
$
|
—
|
599,934
|
|||||||||||
Total marketable securities
|
$
|
7,406,084
|
$
|
—
|
$
|
(6,448
|
)
|
$
|
7,399,636
|
5.
|
Inventories
|
2015
|
2014
|
|||||||
Raw materials
|
$
|
299,952
|
$
|
362,656
|
||||
Work in progress
|
666,124
|
79,012
|
||||||
Finished goods
|
868,559
|
523,556
|
||||||
Total
|
$
|
1,834,635
|
$
|
965,224
|
6.
|
Deferred Rent
|
2015
|
2014
|
|||||||
Landlord-funded leasehold improvements
|
$
|
1,124,790
|
$
|
1,124,790
|
||||
Less accumulated amortization
|
(375,530
|
)
|
(248,531
|
)
|
||||
Total (current portion $130,216 at December 31, 2015 and 2014)
|
749,260
|
876,259
|
||||||
Straight line rent adjustment
|
165,414
|
128,782
|
||||||
Total deferred rent
|
$
|
914,674
|
$
|
1,005,041
|
7.
|
Income Taxes
|
2015
|
2014
|
|||||||
Federal tax (benefit) at statutory rate
|
$
|
(1,698,428)
|
$
|
(1,122,270)
|
||||
Change in valuation allowance
|
1,430,291
|
1,122,900
|
||||||
Add back tax benefit on loss attributable to non-controlling interest in subsidiary
|
265,690
|
––
|
||||||
Other
|
2,447
|
(630)
|
||||||
Benefit for income taxes, net
|
$
|
––
|
$
|
––
|
2015
|
2014
|
|||||||
Deferred tax assets (liabilities)
|
||||||||
Net operating loss carryforwards
|
$
|
11,080,303
|
$
|
10,046,713
|
||||
Accrued compensation
|
120,344
|
170,161
|
||||||
Depreciation
|
21,835
|
14,282
|
||||||
Section 263a inventory adjustment
|
79,110
|
20,233
|
||||||
Stock-based compensation
|
565,349
|
434,740
|
||||||
Suspended loss of subsidiary
|
246,241
|
––
|
||||||
Other
|
25,323
|
22,085
|
||||||
Total
|
12,138,505
|
10,708,214
|
||||||
Less: Valuation allowance
|
(12,138,505
|
)
|
(10,708,214
|
)
|
||||
Net deferred tax asset
|
$
|
––
|
$
|
––
|
Year of Expiration
|
Net Operating Losses
|
|||
2018
|
$
|
1,425,000
|
||
2019
|
1,234,000
|
|||
2020
|
2,849,000
|
|||
2021
|
4,168,000
|
|||
2023
|
1,217,000
|
|||
2024
|
646,000
|
|||
2025
|
589,000
|
|||
2026
|
873,000
|
|||
2027
|
2,607,000
|
|||
2028
|
2,512,000
|
|||
2029
|
2,196,000
|
|||
2030
|
1,232,000
|
|||
2031
|
1,028,000
|
|||
2032
|
437,000
|
|||
2033
|
37,000
|
|||
2034
|
6,427,000
|
|||
2035
|
3,112,000
|
|||
Total
|
$
|
32,589,000
|
8.
|
Warrants
|
Year Ended
|
Year Ended
|
|||||||||||||||
December 31, 2015
|
December 31, 2014
|
|||||||||||||||
Wtd. Avg.
|
Wtd. Avg.
|
|||||||||||||||
Exercise
|
Exercise
|
|||||||||||||||
Shares
|
Price
|
Shares
|
Price
|
|||||||||||||
Outstanding at beginning of year
|
7,428,141
|
$
|
4.49
|
517,858
|
$
|
1.02
|
||||||||||
Granted
|
––
|
––
|
6,910,283
|
4.75
|
||||||||||||
Exercised
|
(232,144
|
)
|
1.03
|
––
|
––
|
|||||||||||
Forfeited/Expired
|
––
|
––
|
––
|
––
|
||||||||||||
Outstanding and exercisable at end of year
|
7,195,997
|
$
|
4.60
|
7,428,141
|
$
|
4.49
|
9.
|
Stock-Based Compensation
|
Year Ended
|
Year Ended
|
|||||||||||||||
December 31, 2015
|
December 31, 2014
|
|||||||||||||||
Wtd. Avg.
|
Wtd. Avg.
|
|||||||||||||||
Exercise
|
Exercise
|
|||||||||||||||
Shares
|
Price
|
Shares
|
Price
|
|||||||||||||
Outstanding at beginning of year
|
1,390,770
|
$
|
1.50
|
1,417,309
|
$
|
1.36
|
||||||||||
Granted
|
1,300,881
|
2.06
|
95,000
|
3.36
|
||||||||||||
Exercised
|
(131,388
|
)
|
1.23
|
(68,520
|
)
|
1.22
|
||||||||||
Forfeited
|
(3,438
|
)
|
3.77
|
(49,895
|
)
|
1.51
|
||||||||||
Expired - vested
|
(1,562
|
)
|
3.77
|
(3,124
|
)
|
2.23
|
||||||||||
Outstanding at end of year
|
2,555,263
|
$
|
1.80
|
1,390,770
|
$
|
1.50
|
||||||||||
Stock options exercisable at year end
|
1,185,582
|
$
|
1.42
|
1,225,358
|
$
|
1.33
|
Range of
|
Number Outstanding at
|
Weighted Average Remaining
|
Weighted Average
|
|||||||||||
Exercise Prices
|
December 31, 2015
|
Contractual Life
|
Exercise Price
|
|||||||||||
$ |
0.49-$1.00
|
167,853
|
1.95
|
$
|
0.92
|
|||||||||
$ |
1.01-$1.30
|
670,651
|
3.63
|
$
|
1.14
|
|||||||||
$ |
1.31-$2.00
|
290,167
|
4.57
|
$
|
1.43
|
|||||||||
$ |
2.01-$10.75
|
1,426,592
|
9.25
|
$
|
2.28
|
|||||||||
2,555,263
|
6.76
|
$
|
1.80
|
10.
|
Commitments and Contingencies
|
Year Ending
|
||||
December 31
|
||||
2016
|
$
|
676,000
|
||
2017
|
690,000
|
|||
2018
|
704,000
|
|||
2019
|
718,000
|
|||
2020
|
733,000
|
|||
Thereafter
|
433,000
|
|||
Total
|
$
|
3,954,000
|
ITEM 9.
|
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
|
ITEM 9A.
|
CONTROLS AND PROCEDURES
|
ITEM 9B.
|
OTHER INFORMATION
|
ITEM 10.
|
DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
|
Name
|
Age
|
Position and Offices With the Company
|
||
Todd Berard
|
47
|
Vice President, Marketing
|
||
Aby J. Mathew, Ph.D.
|
44
|
Chief Technology Officer and Senior Vice President
|
||
Michael Rice
|
53
|
Chief Executive Officer, President, and Director
|
||
Matt Snyder
|
64
|
Vice President, Global Sales
|
||
Daphne Taylor
|
49
|
Secretary, Chief Financial Officer and Vice President, Finance and Administration
|
||
Raymond Cohen
|
56
|
Chairman of the Board
|
||
Thomas Girschweiler
|
58
|
Director
|
||
Andrew Hinson
|
52
|
Director
|
||
Joseph Schick
|
54
|
Director
|
||
Rick Stewart
|
63
|
Director
|
Name
|
Board
|
Audit
|
Compensation
|
Nominating and Governance
|
||||
Mr. Rice
|
X
|
|||||||
Mr. Cohen
|
Chair
|
X
|
X
|
X
|
||||
Mr. Hinson
|
X
|
X
|
Chair
|
|||||
Mr. Schick (financial expert)
|
X
|
Chair
|
||||||
Mr. Stewart
|
X
|
X
|
Chair
|
|||||
Mr. Girschweiler
|
X
|
Annual Retainer
|
||||
Audit Committee Chairman
|
$
|
10,000
|
||
Compensation Committee Chairman
|
$
|
7,500
|
||
Nominating and Governance Committee Chairman
|
$
|
5,000
|
Name
|
Annual Retainer ($)
|
Board and Committee Chair and Committee Membership Fees ($)
|
Total Cash Fees Earned
($)
|
Restricted Stock Unit Awards
($)
|
Option
Awards
($)
|
Total
($)
|
||||||||||||||||||
Raymond Cohen
|
40,000
|
110,000
|
150,000
|
––
|
26,139
|
176,139
|
||||||||||||||||||
Thomas Girschweiler
|
30,000
|
––
|
30,000
|
––
|
26,139
|
56,139
|
||||||||||||||||||
Andrew Hinson
|
40,000
|
5,000
|
45,000
|
––
|
26,139
|
71,139
|
||||||||||||||||||
Joseph Schick
|
40,000
|
10,000
|
50,000
|
––
|
26,139
|
76,139
|
||||||||||||||||||
Rick Stewart
|
40,000
|
7,500
|
47,500
|
––
|
26,139
|
73,639
|
ITEM 11.
|
EXECUTIVE COMPENSATION
|
Name and Principal Positions
(a)
|
Year
(b)
|
Salary
($)
(c)
|
Bonus
($)
(d)
|
Stock
Awards
($)
(e)
|
Option
Awards
($)
(f)(1)
|
All Other
Compensation
($)
(i)(7)
|
Total
($)
(j)
|
|||||||||||||||||||
Michael Rice
|
2015
|
400,000 | (2 | ) | –– | 653,478 | (3) | –– | 1,053,478 | |||||||||||||||||
President, Chief Executive Officer and Director (8/06 – present) | 2014 | 345,000 | 150,000 | –– | –– | 1,739 | 496,739 | |||||||||||||||||||
Aby J. Mathew
|
2015
|
345,000 | –– | –– | 400,516 | (4) | –– | 745,516 | ||||||||||||||||||
Chief Technology Officer (9/00 – present) | 2014 | 260,000 | 128,000 | –– | 31,374 | (5) | 2,483 | 421,857 | ||||||||||||||||||
Daphne Taylor
|
2015
|
285,000 | –– | –– | 304,102 | (6) | –– | 589,102 | ||||||||||||||||||
Chief Financial Officer (8/11 – present) | 2014 | 223,560 | 33,534 | –– | –– | 2,221 | 259,315 |
(1)
|
See Note 1 for the years ended December 31, 2015 and 2014 for a description on the valuation methodology of stock option awards.
|
(2) |
As of February 25, 2016, the amount of bonus for fiscal 2015 has not yet been determined. The actual amount of bonus is expected to be determined by April 1, 2016.
|
(3)
|
Amount is a result of options to purchase 375,000 shares at $2.06 per share granted to officer on May 4, 2015, which options vest to the extent of 1/4 of the underlying shares on May 4, 2016 and, thereafter, vest in monthly increments of 7,813 shares.
|
(4)
|
Amount is a result of options to purchase 229,837 shares at $2.06 per share granted to officer on May 4, 2015, which options vest to the extent of 1/4 of the underlying shares on May 4, 2016 and, thereafter, vest in monthly increments of 4,788 shares.
|
(5)
|
Amount is a result of options to purchase 10,000 shares at $3.70 per share granted to officer on April 21, 2014, which options vested to the extent of 1/4 of the underlying shares on April 21, 2015 and, thereafter, vest in monthly increments of 208 shares.
|
(6)
|
Amount is a result of options to purchase 174,510 shares at $2.06 per share granted to officer on May 4, 2015, which options vest to the extent of 1/4 of the underlying shares on May 4, 2016 and, thereafter, vest in monthly increments of 3,636 shares.
|
(7)
|
Amounts represent company paid wellness benefits.
|
OPTION AWARDS
|
|||||||||||||||||
Name (a)
|
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
(b)
|
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
(c)
|
Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#)
(d)
|
Option
Exercise
Price ($)
(e)
|
Option
Expiration
Date
(f)
|
||||||||||||
Michael Rice
|
107,142
|
––
|
––
|
0.98
|
8/7/2016(1)
|
||||||||||||
Michael Rice
|
71,428
|
––
|
––
|
1.12
|
2/7/2017(2)
|
||||||||||||
Michael Rice
|
54,642
|
––
|
––
|
1.26
|
2/2/2019(3)
|
||||||||||||
Michael Rice
|
85,062
|
––
|
––
|
1.40
|
2/5/2020(4)
|
||||||||||||
Michael Rice
|
28,571
|
––
|
––
|
1.12
|
2/25/2021(5)
|
||||||||||||
Michael Rice
|
160,567
|
––
|
––
|
1.12
|
2/25/2021(6)
|
||||||||||||
Michael Rice
|
––
|
375,000
|
––
|
2.06
|
5/4/2025(7)
|
||||||||||||
Aby J. Mathew
|
7,142
|
––
|
––
|
0.98
|
10/12/2016(8)
|
||||||||||||
Aby J. Mathew
|
35,714
|
––
|
––
|
1.12
|
2/7/2017(9)
|
||||||||||||
Aby J. Mathew
|
24,285
|
––
|
––
|
1.40
|
8/7/2017(10)
|
||||||||||||
Aby J. Mathew
|
7,142
|
––
|
––
|
0.70
|
2/11/2018(11)
|
||||||||||||
Aby J. Mathew
|
7,142
|
––
|
––
|
0.56
|
11/5/2018(12)
|
||||||||||||
Aby J. Mathew
|
37,966
|
––
|
––
|
1.40
|
2/5/2020(13)
|
||||||||||||
Aby J. Mathew
|
55,451
|
––
|
––
|
1.12
|
2/11/2021(14)
|
||||||||||||
Aby J. Mathew
|
17,113
|
744
|
––
|
1.40
|
2/15/2022(15)
|
||||||||||||
Aby J. Mathew
|
4,166
|
5,834
|
––
|
3.70
|
4/21/2024(16)
|
||||||||||||
Aby J. Mathew
|
––
|
229,837
|
––
|
2.06
|
5/4/2025(17)
|
||||||||||||
Daphne Taylor
|
17,857
|
––
|
––
|
1.40
|
3/1/2021(18)
|
||||||||||||
Daphne Taylor
|
35,714
|
––
|
––
|
0.88
|
8/17/2021(19)
|
||||||||||||
Daphne Taylor
|
17,113
|
744
|
––
|
1.40
|
2/15/2022(20)
|
||||||||||||
Daphne Taylor
|
––
|
174,510
|
––
|
2.06
|
5/4/2025(21)
|
(1)
|
This award vested 1/3 of the total underlying shares on each of August 7, 2007, 2008 and 2009.
|
(2)
|
This award vested 1/3 of the total underlying shares on each of February 7, 2008, 2009 and 2010.
|
(3)
|
This award vested 1/4 of the total underlying shares on February 2, 2010 and, thereafter, in 36 equal monthly increments.
|
(4)
|
This award vested 1/3 of the total underlying shares on each of February 5, 2012, 2013 and 2014.
|
(5)
|
This award vested on the date of grant.
|
(6)
|
This award vested at the end of the fourth quarter of 2012, when the Company achieved cash flow break even.
|
(7)
|
This award vests 1/4 of the total shares on May 4, 2016 and, thereafter, vests in 36 equal monthly increments.
|
(8)
|
This award vested 1/4 of the total underlying shares on each of October 12, 2007, 2008, 2009 and 2010.
|
(9)
|
This award vested 1/4 of the total underlying shares on each of February 7, 2008, 2009, 2010 and 2011.
|
(10)
|
This award vested 1/4 of the total underlying shares on each of August 7, 2008, 2009, 2010 and 2011.
|
(11)
|
This award vested 1/4 of the total underlying shares on each of February 11, 2009, 2010, 2011 and 2012.
|
(12)
|
This award vested 1/4 of the total underlying shares on each of November 5, 2009, 2010, 2011 and 2012.
|
(13)
|
This award vested 1/4 of the total underlying shares on each of February 5, 2011, 2012, 2013 and 2014.
|
(14)
|
This award vests 1/4 of the total underlying shares on each of February 11, 2012, 2013, 2014 and 2015.
|
(15)
|
This award vests 4,464 shares on February 15, 2013 and, thereafter, in 36 equal monthly increments.
|
(16)
|
This award vests 2,500 shares on April 21, 2015 and, thereafter, vests in 36 equal monthly increments.
|
(17)
|
This award vests 1/4 of the total shares on May 4, 2016 and, thereafter, vests in 36 equal monthly increments.
|
(18)
|
This award vests 1/4 of the total underlying shares on each of March 1, 2012, 2013, 2014 and 2015.
|
(19)
|
This award vests 1/4 of the total underlying shares on each of August 18, 2012, and, thereafter, vests in 36 equal monthly increments.
|
(20)
|
This award vests 1/4 of the total underlying shares on each of February 15, 2013, and, thereafter, vests in 36 equal monthly increments.
|
(21)
|
This award vests 1/4 of the total shares on May 4, 2016 and, thereafter, vests in 36 equal monthly increments.
|
ITEM 12.
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
|
Name and Address of Beneficial Owner
|
Common Stock
|
Percentage of Class
|
||||||
Directors and Executive Officers
|
||||||||
Thomas Girschweiler (Director)(1)
|
4,392,427
|
30.9
|
%
|
|||||
Michael Rice (Officer and Director)(2)
|
528,180
|
4.1
|
%
|
|||||
Aby J. Mathew (Officer) (3)
|
242,088
|
1.9
|
%
|
|||||
Raymond Cohen (Director) (4)
|
104,893
|
0.8
|
%
|
|||||
Daphne Taylor (Officer)(5)
|
71,428
|
0.6
|
%
|
|||||
Andrew Hinson (Director)(6)
|
60,713
|
0.5
|
%
|
|||||
Rick Stewart (Director) (7)
|
13,690
|
0.1
|
%
|
|||||
Joseph Schick (Director) (8)
|
8,928
|
0.1
|
%
|
|||||
Total shares owned by Executive Officers and Directors (10 persons) (9)
|
5,433,894
|
35.9
|
%
|
|||||
5% Stockholders
|
||||||||
Walter Villiger(10)
|
5,524,714
|
38.5
|
%
|
|||||
WAVI Holding AG (11)
|
5,381,857
|
37.8
|
%
|
|||||
Taurus4757 GmbH (12)
|
4,188,857
|
29.9
|
%
|
(1)
|
Includes 142,857 shares of common stock issuable upon exercise of warrants held by Mr. Girschweiler, options to purchase 60,713 shares of common stock issuable upon stock options exercisable within 60 days from February 25, 2016, 2,644,663 shares of common stock held indirectly through Mr. Girschweiler’s wholly-owned entity named Taurus4757 GmbH and 1,544,194 shares of common stock issuable upon exercise of warrants held by Taurus4757 GmbH.
|
(2)
|
Includes options to purchase 507,413 shares of common stock issuable under stock options exercisable within 60 days from February 25, 2016.
|
(3)
|
Includes options to purchase 197,699 shares of common stock issuable under stock options exercisable within 60 days from February 25, 2016.
|
(4)
|
Includes options to purchase 96,427 shares of common stock issuable under stock options exercisable within 60 days from February 25, 2016.
|
(5)
|
Includes options to purchase 71,428 shares of common stock issuable under stock options exercisable within 60 days from February 25, 2016.
|
(6)
|
Includes options to purchase 60,713 shares of common stock issuable under stock options exercisable within 60 days from February 25, 2016.
|
(7)
|
Includes options to purchase 8,928 shares of common stock issuable under stock options exercisable within 60 days from February 25, 2016.
|
(8)
|
Includes options to purchase 8,928 shares of common stock issuable under stock options exercisable within 60 days from February 25, 2016.
|
(9)
|
Includes the securities listed in footnotes 1-8, in addition to options to purchase 9,166 shares of common stock issuable under stock options exercisable within 60 days from February 25, 2016.
|
(10)
|
Includes 3,604,646 shares of common stock held indirectly through Mr. Villiger’s wholly-owned entity named WAVI Holding AG, 142,857 shares of common stock issuable upon exercise of warrants held by Mr. Villiger and 1,777,211 shares of common stock issuable upon exercise of warrants held by WAVI Holding AG.
|
(11)
|
Includes 1,777,211 shares of common stock issuable upon exercise of warrants.
|
(12)
|
Includes 1,544,194 shares of common stock issuable upon exercise of warrants.
|
ITEM 13.
|
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
|
ITEM 14.
|
PRINCIPAL ACCOUNTANT FEES AND SERVICES
|
2015
|
2014
|
|||||||
Audit fees
|
$
|
75,000
|
$
|
71,500
|
||||
Audit related fees(1)
|
1,200
|
20,287
|
||||||
Total audit and audit related fees
|
$
|
76,200
|
$
|
91,787
|
(1)
|
Audit-related fees consist of assurance and related services that are reasonably related to the performance of the audit or review of our financial statements. In the years ended December 31, 2015 and 2014, we incurred audit-related fees in connection with our registration statements and related comfort letter procedures.
|
ITEM 15.
|
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
|
Date:
|
February 25, 2016
|
BIOLIFE SOLUTIONS, INC.
|
||
/s/Michael Rice
|
||||
Michael Rice
|
||||
Chief Executive Officer and President (principal executive officer) and Director
|
Date:
|
February 25, 2016
|
/s/Michael Rice
|
||
Michael Rice
|
||||
Chief Executive Officer and President (principal executive officer) and Director
|
||||
Date:
|
February 25, 2016
|
/s/Daphne Taylor
|
||
Daphne Taylor
|
||||
Chief Financial Officer (principal financial officer and principal accounting officer)
|
||||
Date:
|
February 25, 2016
|
/s/Raymond Cohen
|
||
Raymond Cohen
|
||||
Chairman of the Board of Directors
|
||||
Date:
|
February 25, 2016
|
/s/Thomas Girschweiler
|
||
Thomas Girschweiler
|
||||
Director
|
||||
Dte:
|
February 25, 2016
|
/s/Andrew Hinson
|
||
Andrew Hinson
|
||||
Director
|
||||
Date:
|
February 25, 2016
|
/s/ Joseph Schick
|
||
Joseph Schick
|
||||
Director
|
||||
Date:
|
February 25, 2016
|
/s/Frederick Stewart
|
||
Frederick Stewart
|
||||
Director
|
||||
Exhibit Number | Document | ||
3.1
|
Amended and Restated Certificate of Incorporation of BioLife Solutions, Inc. (included as Exhibit 4.1 to the Registration Statement on Form S-8 filed on June 24, 2013)
|
||
3.2
|
Certificate of Amendment to the Amended and Restated Certificate of Incorporation of BioLife Solutions, Inc. (included as Exhibit 3.1 to the Current Report on Form 8-K filed on January 30, 2014)
|
||
3.3
|
Amended and Restated Bylaws of BioLife Solutions, Inc., effective April 25, 2013 (included as Exhibit A to the Registrant’s Definitive Information Statement on Schedule 14C filed March 27, 2013)
|
||
4.1
|
Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Annual Report on Form 10-K filed on February 12, 2014)
|
||
10.1**
|
1998 Stock Option Plan, as amended through September 28, 2005 (included as Exhibit 4.3 to the Registration Statement on Form S-8 filed on June 24, 2013)
|
||
10.2**
|
Amended and Restated 2013 Performance Incentive Plan (included as Appendix A to the Registrant’s Definitive Proxy Statement filed on March 24, 2015)
|
||
10.3**
|
BioLife Solutions, Inc. Form of Non-Plan Stock Option Agreement (included as Exhibit 4.4 to the Registration Statement on Form S-8 filed on June 24, 2013)
|
||
10.4
|
Lease Agreement dated August 1, 2007 for facility space 3303 Monte Villa Parkway, Bothell, WA 98021 (included as Exhibit 10.27 and Exhibit 10.29 to the Annual Report on Form 10-KSB for the fiscal year ended December 31, 2007 filed April 1, 2008)
|
||
10.5
|
First Amendment to the Lease, dated November 4, 2008, between the Company and Monte Villa Farms, LLC (included as Exhibit 10.16 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2008 filed March 31, 2009)
|
||
10.6
|
Second Amendment to the Lease, dated March 2, 2012, between the Company and Monte Villa Farms, LLC (included as Exhibit 10.30 to the Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2012 filed May 14, 2012)
|
||
10.7
|
Third Amendment to the Lease, dated June 15, 2012, between the Company and Monte Villa Farms, LLC (included as Exhibit 10.37 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2012 filed March 29, 2013)
|
||
10.8
|
Fourth Amendment to the Lease, dated November 26, 2012, between the Company and Monte Villa Farms, LLC (included as Exhibit 10.41 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2012 filed March 29, 2013)
|
||
10.9
|
Fifth Amendment to Lease, dated August 19, 2014, by and between the Company and Monte Villa Farms LLC (included as Exhibit 10.1 Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2014 filed on November 6, 2014)
|
||
10.10
|
Manufacturing Service Agreement dated October 26, 2007 between the Company and Bioserv, Inc., a division of NextPharma Technologies, Inc. (included as Exhibit 10.26 to the Annual Report on Form 10-KSB for the fiscal year ended December 31, 2007 filed April 1, 2008)
|
||
10.11
|
Storage Services Agreement dated October 26, 2007 between the Company and Bioserv, Inc., a division of NextPharma Technologies, Inc. (included as Exhibit 10.25 to the Annual Report on Form 10-KSB for the fiscal year ended December 31, 2007 filed April 1, 2008)
|
||
10.12
|
Order Fulfillment Services Agreement dated October 26, 2007 between the Company and Bioserv, Inc., a division of NextPharma Technologies, Inc. (included as Exhibit 10.23 to the Annual Report on Form 10-KSB for the fiscal year ended December 31, 2007 filed April 1, 2008)
|
10.13
|
Warrant to purchase Common Stock issued to Thomas Girschweiler (included as Exhibit 10.23 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2010 filed March 28, 2011)
|
||
10.14
|
Warrant to purchase Common Stock issued to Walter Villiger (included as Exhibit 10.24 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2010 filed March 28, 2011)
|
||
10.15
|
Warrant to purchase Common Stock issued to Thomas Girschweiler (included as Exhibit 10.27 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2011 filed March 29, 2012)
|
||
10.16
|
Warrant to purchase Common Stock issued to Walter Villiger (included as Exhibit 10.28 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2011 filed March 29, 2012)
|
||
10.17
|
Warrant to purchase Common Stock issued to Thomas Girschweiler (included as Exhibit 10.35 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2012 filed March 29, 2013)
|
||
10.18
|
Warrant to purchase Common Stock issued to Walter Villiger (included as Exhibit 10.36 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2012 filed March 29, 2013)
|
||
10.19
|
Note Conversion Agreement, dated December 16, 2013, by and among the Company and Walter Villiger (included as Exhibit 10.1 to the Current Report on Form 8-K filed on December 16, 2013)
|
||
10.20
|
Note Conversion Agreement, dated December 16, 2013, by and among the Company and Thomas Girschweiler (included as Exhibit 10.2 to the Current Report on Form 8-K filed on December 16, 2013)
|
||
10.21*
|
Manufacturing Services Agreement with Organ Recovery Systems, Inc., effective as of December 22, 2011 (included as Exhibit 10.44 to Amendment No. 1 to the Registration Statement on Form S-1 filed on January 23, 2014)
|
||
10.22
|
Form of Warrant issued to Taurus4757 GmbH and WAVI Holding AG pursaunt to conversion of outstanding notes (incorporated by reference to Exhibit 10.1 to the Company’s report on Form 8-K filed March 25, 2014)
|
||
10.23
|
Form of Warrant issued to purchasers in the March 25, 2014 public offering (incorporated by reference to Exhibit 4.1 to the Company’s report on Form 8-K filed March 20, 2014)
|
||
10.24
|
Assignment and Amendment of Note Conversion Agreement, dated February 11, 2014, by and among the Company, Walter Villiger and WAVI Holding AG (included as Exhibit 10.1 to the Current Report on Form 8-K filed on February 12, 2014)
|
||
10.25
|
Assignment and Amendment of Note Conversion Agreement, dated February 11, 2014, by and among the Company, Thomas Girschweiler and Taurus4757 GmbH (included as Exhibit 10.2 to the Current Report on Form 8-K filed on February 12, 2014)
|
||
10.26
|
biologistex CCM, LLC Limited Liability Company Agreement dated September 29, 2014 (included as Exhibit 10.2 to the Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2014 filed on November 6, 2014)
|
||
10.27*
|
Supply and Distribution Agreement between SAVSU Technologies, LLC and biologistex CCM dated September 29, 2014 (included as Exhibit 10.3 to the Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2014 filed on November 6, 2014)
|
||
10.28*
|
Services Agreement between BioLife Solutions, Inc. and biologistex CCM dated September 29, 2014
(included as Exhibit 10.4 to the Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2014 filed on November 6, 2014)
|
||
10.29**
|
Employment Agreement dated February 19, 2015 between the Company and Michael Rice (included as Exhibit 10.29 to the Annual Report on Form 10-K for the year ended December 31, 2014 filed on March 12, 2015)
|
||
10.30**
|
Employment Agreement dated February 19, 2015 between the Company and Aby Mathew (included as Exhibit 10.30 to the Annual Report on Form 10-K for the year ended December 31, 2014 filed on March 12, 2015)
|
10.31**
|
Employment Agreement dated February 19, 2015 between the Company and Daphne Taylor (included as Exhibit 10.31 to the Annual Report on Form 10-K for the year ended December 31, 2014 filed on March 12, 2015)
|
||
10.32**
|
Employment Agreement dated February 19, 2015 between the Company and Joseph Annicchiarico (included as Exhibit 10.32 to the Annual Report on Form 10-K for the year ended December 31, 2014 filed on March 12, 2015)
|
||
10.33**
|
Employment Agreement dated February 19, 2015 between the Company and Matthew Snyder (included as Exhibit 10.33 to the Annual Report on Form 10-K for the year ended December 31, 2014 filed on March 12, 2015)
|
||
10.34**
|
Employment Agreement dated February 19, 2015 between the Company and Todd Berard (included as Exhibit 10.34 to the Annual Report on Form 10-K for the year ended December 31, 2014 filed on March 12, 2015)
|
||
10.35
|
Board of Directors Services Agreement entered into May 4, 2015 by and between the Company and Raymond Cohen (included as Exhibit 10.1 to the Current Report on Form 8-K filed on May 5, 2015)
|
||
10.36
|
Board of Directors Services Agreement entered into May 4, 2015 by and between the Company and Thomas Girschweiler (included as Exhibit 10.2 to the Current Report on Form 8-K filed on May 5, 2015)
|
||
10.37
|
Board of Directors Services Agreement entered into May 4, 2015 by and between the Company and Other Non-Employee Directors (included as Exhibit 10.3 to the Current Report on Form 8-K filed on May 5, 2015)
|
||
Subsidiaries of the Company
|
|||
Consent of Peterson Sullivan LLP
|
|||
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|||
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|||
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|||
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|||
101.INS
|
XBRL Instance Document
|
||
101.SCH
|
XBRL Taxonomy Extension Schema
|
||
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase
|
||
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase
|
||
101.LAB
|
XBRL Taxonomy Extension Label Linkbase
|
||
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase
|
|
*
|
Confidential treatment has been granted with respect to certain portions of this exhibit pursuant to an order granted by the SEC.
|
|
**
|
Management contract or compensatory plan or arrangement.
|
Name
|
Jurisdiction of Formation
|
Beneficial Ownership
|
biologistex CCM, LLC
|
Delaware
|
52%
|
/s/ Michael Rice
|
|
Michael Rice
|
/s/ Daphne Taylor
|
|
Daphne Taylor
|
1.
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
/s/ Michael Rice
|
|
Michael Rice
|
|
Chief Executive Officer
|
1.
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
/s/ Daphne Taylor
|
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Daphne Taylor
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Chief Financial Officer
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Document and Entity Information - USD ($) |
12 Months Ended | ||
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Dec. 31, 2015 |
Jan. 31, 2016 |
Jun. 30, 2015 |
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Document And Entity Information | |||
Entity Registrant Name | BIOLIFE SOLUTIONS INC | ||
Entity Central Index Key | 0000834365 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2015 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Is Entity a Well-known Seasoned Issuer? | No | ||
Is Entity a Voluntary Filer? | No | ||
Is Entity's Reporting Status Current? | Yes | ||
Entity Filer Category | Smaller Reporting Company | ||
Entity Public Float | $ 11,641,545 | ||
Entity Common Stock, Shares Outstanding | 12,448,391 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2015 |
Balance Sheets (Parenthetical) - USD ($) |
Dec. 31, 2015 |
Dec. 31, 2014 |
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Assets | ||
Accounts receivable allowances | $ 0 | $ 0 |
Stockholders Equity | ||
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, authorized | 150,000,000 | 150,000,000 |
Common stock, issued | 12,448,391 | 12,084,859 |
Common stock, outstanding | 12,448,391 | 12,084,859 |
Statements of Comprehensive Income (Loss) (USD $) - USD ($) |
12 Months Ended | |
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Dec. 31, 2015 |
Dec. 31, 2014 |
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Statements Of Comprehensive Income Loss Usd | ||
Net loss | $ (4,995,376) | $ (3,300,795) |
Other comprehensive income (loss) | ||
Unrealized gain (loss) on available-for-sale investments | 5,997 | (6,448) |
Total other comprehensive income (loss) | 5,997 | (6,448) |
Comprehensive loss | (4,989,379) | (3,307,243) |
Comprehensive loss attributable to non-controlling interest | 781,440 | 83,045 |
Comprehensive Loss attributable to BioLife Solutions, Inc. | $ (4,207,939) | $ (3,224,198) |
Statements of Shareholders' Equity (Deficiency) (Parenthetical) |
Dec. 31, 2015
USD ($)
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Statement of Stockholders' Equity [Abstract] | |
Unamortized deferred financing costs | $ 101,852 |
1. Organization and Significant Accounting Policies |
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Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Organization and Significant Accounting Policies | Business
BioLife Solutions, Inc. ("BioLife, us, we, our, or the Company) is a developer, manufacturer and marketer of proprietary clinical grade cell and tissue hypothermic storage and cryopreservation freeze media and a related cloud hosted biologistics cold chain management app for smart shippers. Our proprietary HypoThermosol® and CryoStor® platform of solutions are highly valued in the biobanking, drug discovery, and regenerative medicine markets. Our biopreservation media products are serum-free and protein-free, fully defined, and are formulated to reduce preservation-induced cell damage and death. Our enabling technology provides commercial companies and clinical researchers significant improvement in shelf life and post-preservation viability and function of cells, tissues, and organs. Additionally, for our direct, distributor, and contract customers, we perform custom formulation, fill, and finish services.
Recent Developments
Reverse Stock Split
On January 17, 2014, our Board of Directors approved an amendment to our certificate of incorporation to effect a reverse stock split by a ratio of 1 for 14, with no reduction in the number of shares of common stock that were previously authorized in our certificate of incorporation. The reverse stock split was effective on January 29, 2014. Unless otherwise noted, all share and per share data in these consolidated financial statements give effect to the 1-for-14 reverse stock split of our common stock.
Public Offering of Units
On March 25, 2014, we closed a registered public offering of 3,588,878 units for gross proceeds of $15,432,175. Each $4.30 unit consisted of one share of the Companys common stock and one warrant, each warrant exercisable for seven years to purchase one share of the Companys common stock at an exercise price of $4.75. Net of placement agent fees of $1,211,734 and offering costs of $624,211, we received net proceeds of $13,596,230. Of the gross proceeds, $9.1 million was allocated to common stock and $6.3 million was allocated to warrants, based on relative fair values.
Conversion of Notes and Interest to Equity
Pursuant to note conversion agreements with WAVI Holding AG and Taurus4757 GmbH (the Note Holders), concurrently with the closing of the Companys public offering of units, the Company converted approximately $14.3 million of indebtedness, including accrued interest, to the Note Holders into equity, issuing to the Note Holders an aggregate of 3,321,405 units having terms substantially similar to the public offering units. In connection with the note conversion, the Companys $14.3 million indebtedness to the Note Holders under the terms of the Companys previously disclosed facility agreements was extinguished, all remaining unamortized deferred finance costs of $101,852 were recorded to additional paid in capital, and the Note Holders agreed to release all security interests. Of the total conversion amount, $8.4 million was allocated to common stock and $5.8 million was allocated to warrants, based on relative fair values.
Listing of Common Stock on NASDAQ Capital Market
On March 26, 2014, our common stock was listed on the NASDAQ Capital Market under the symbol BLFS.
biologistex Joint Venture
On September 29, 2014, we entered into an LLC Agreement with SAVSU to create biologistex, a 20-year joint venture for the purpose of acquiring, developing, maintaining, owning, operating, marketing and selling an integrated platform of a cloud-based information service and precision thermal shipping products based on SAVSUs next generation evo Smart Shippers.
The joint venture vehicle, biologistex CCM, LLC, is structured as a Delaware limited liability company. We will make a capital contribution of $2.4 million in such amounts and at such times as will be necessary for the purpose of funding biologistexs purchase of products from SAVSU under a separate Supply and Distribution Agreement. SAVSU contributed exclusive distribution rights to the Smart Shippers under the separate Supply and Distribution Agreement. As at December 31, 2015, our remaining capital contribution commitment is $2.2 million.
We were also required to pay SAVSU $1 million in consideration of SAVSUs participation in biologistex. As at December 31, 2015, we have satisfied this obligation in full.
The Company and SAVSU are the only members of biologistex, holding 52% and 48%, respectively, of the outstanding units. Distributions of net cash flow, if any, are to be made in proportion to the members ownership of units.
On September 29, 2014, biologistex and SAVSU also entered into the Supply and Distribution Agreement whereby biologistex became the exclusive, worldwide distributor of Smart Shippers. Pursuant to the Supply and Distribution Agreement, biologistex agrees to purchase a minimum number of Smart Shippers for an aggregate purchase price of approximately $2.6 million. Under the terms of the agreement, SAVSU must fulfill all obligations required of it to permit biologistex to make the products available for marketing, sales and acceptance of customer orders. The Supply and Distribution Agreement has an initial term of 20 years unless terminated early by its terms.
On September 29, 2014, the Company and biologistex also entered into a Services Agreement whereby we will provide services to biologistex related to operations, sales, marketing, administration and development of a cloud-based software system for tracking and managing the products. The Services Agreement has an initial term of 20 years unless terminated early by its terms.
Pursuant to the Services Agreement, we agreed to manage biologistex to achieve certain minimum sales targets. biologistex will pay us monthly for expenses incurred and certain overhead expenses.
To date, we have funded biologistexs obligations to us and certain of biologistexs other obligations as an interest-free, inter-company loan to biologistex. We anticipate that we may be required to continue funding such obligations on an ongoing basis until biologistex has achieved revenues sufficient to pay such expenses. As at December 31, 2015, the principal balance of this loan, which is eliminated upon consolidation, is $3.5 million.
We launched the biologistex cold-chain management service including unlimited use of the evo Smart Shipper and the integrated track and trace cloud-based web application, mybiologistex.com, during the third quarter of 2015, with deployment of shippers to customers and access to the biologistex web app for validation.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its majority-owned subsidiary. All intercompany balances and transactions have been eliminated in consolidation.
Use of estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Net loss per share
Basic net loss per common share is calculated by dividing the net loss by the weighted average number of common shares outstanding during the period. Diluted earnings per share is calculated using the weighted average number of common shares outstanding plus dilutive common stock equivalents outstanding during the period. Common stock equivalents are excluded for the years ending December 31, 2015 and 2014 since the effect is anti-dilutive due to the Companys net losses. Common stock equivalents include stock options and warrants.
Basic weighted average common shares outstanding, and the potentially dilutive securities excluded from loss per share computations because they are antidilutive, are as follows for the years ended December 31, 2015 and 2014:
Cash and cash equivalents
Cash equivalents consist primarily of interest-bearing money market accounts. We consider all highly liquid debt instruments purchased with an initial maturity of three months or less to be cash equivalents. We maintain cash balances that may exceed federally insured limits. We do not believe that this results in any significant credit risk.
No cash was paid for either interest expense or income taxes for the years ended December 31, 2015 and 2014.
Investments
The Company's investments consist primarily of commercial paper, corporate debt, and other debt securities. Investments are classified as available-for-sale and are reported at fair value based on quoted market prices with unrealized gains and losses, net of applicable taxes, recorded in accumulated other comprehensive income (loss), a component of shareholders' equity. The realized gains and losses for available-for-sale securities are included in other income and expense in the Consolidated Statements of Operations. Realized gains and losses are calculated based on the specific identification method.
The Company monitors its investment portfolio for impairment on a periodic basis. When the amortized cost basis of an investment exceeds its fair value and the decline in value is determined to be an other-than-temporary decline, and when the Company does not intend to sell the debt security and it is not more likely than not that the Company will be required to sell the debt securities prior to recovery of its amortized cost basis, the Company records an impairment charge in the amount of the credit loss and the balance, if any, to other comprehensive income (loss).
Inventories
Inventories represent biopreservation solutions, raw materials used to make biopreservation solutions and finished evo Smart Shippers, and are stated at the lower of cost or market. Cost is determined using the first-in, first-out (FIFO) method.
Accounts receivable
Accounts receivable are stated at principal amount, do not bear interest, and are generally unsecured. We provide an allowance for doubtful accounts based on an evaluation of customer account balances past due ninety days from the date of invoicing. Accounts considered uncollectible are charged against the established allowance.
Property and equipment
Property and equipment are stated at cost and are depreciated using the straight-line method over estimated useful lives of three to ten years.
Intangible asset
Our intangible asset represents exclusive distribution rights to the Smart Containers associated with our biologistex CCM, LLC joint venture discussed previously. The intangible asset was recorded at its fair value of $2,215,385 at the date contributed. We will review the intangible asset for impairment whenever an impairment indicator exists. We will assess recoverability by determining whether the carrying value of such asset will be recovered through the undiscounted expected future cash flows. If the future undiscounted cash flows are less than the carrying amount of these assets, we will recognize an impairment loss based on any excess of the carrying amount over the fair value of the assets. We did not recognize any intangible asset impairment charges in 2015 or 2014. We will amortize this asset over its estimated useful life of 20 years, the life of the distribution agreement with SAVSU with expected amortization of $0.1 million per year. Amortization is expected to begin in the first quarter of 2016 with the initial commercial shipments of the Smart Containers. Amortization is based on the pattern in which the economic benefits of the intangible asset will be consumed or on a straight-line basis when the consumption pattern is not apparent.
Internal Use Software
We capitalize costs associated with the development of the biologistex web and mobile applications, which we consider internal-use software. Capitalization of costs began in the first quarter of 2015, when we reached the application development stage. Such capitalized costs include external direct costs utilized in developing or obtaining the applications and payroll and payroll-related expenses for employees, who are directly associated with the development of the applications. Capitalization will cease once we have completed all substantial testing, at which time the applications are complete and ready for their intended use.
In 2015, we capitalized $1.7 million in costs related to the development of the biologistex web and mobile applications. Of this amount, $0.3 million was unpaid as of December 31, 2015. Maintenance and enhancement costs, including those costs in the post-implementation stages, will be expensed as incurred, unless such costs relate to substantial upgrades and enhancements to the software that result in added functionality, in which case the costs are capitalized. Capitalized costs will be amortized on a straight-line basis over estimated useful life of three years once the software has been commercially deployed.
Deferred rent
For our operating leases, we recognize rent expense on a straight-line basis over the terms of the leases and, accordingly, we record the difference between cash rent payments and the recognition of rent expense as a deferred rent liability. Landlord-funded leasehold improvements, to the extent the improvements are not landlord property upon lease termination, are also recorded as deferred rent liabilities and are amortized as a reduction of rent expense over the non-cancelable term of the related operating lease.
Revenue recognition
We recognize product revenue, including shipping and handling charges billed to customers, upon shipment of product when title and risk of loss pass to customers. Shipping and handling costs are classified as part of cost of product sales. We may also receive fees from our contract manufacturing customers for validation of the manufacturing process. This typically occurs prior to production for those customers and revenue is recognized upon successful completion of all obligations related to the validation process.
Income taxes
We account for income taxes using an asset and liability method which generally requires recognition of deferred tax assets and liabilities for the expected future tax effects of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are recognized for the future tax effects of differences between tax bases of assets and liabilities, and financial reporting amounts, based upon enacted tax laws and statutory rates applicable to the periods in which the differences are expected to affect taxable income. We evaluate the likelihood of realization of deferred tax assets and provide an allowance where, in managements opinion, it is more likely than not that the asset will not be realized.
We have not recorded any liabilities for uncertain tax positions or any related interest and penalties. Our tax returns are open to audit for years ending December 31, 2012 to 2015.
Advertising
Advertising costs are expensed as incurred and totaled $69,091 and $19,584 for the years ended December 31, 2015 and 2014, respectively.
Operating segments
As described above, our activities are directed in the life sciences field of biopreservation products and services. As of December 31, 2015 and 2014 this is the Companys only operating unit and segment.
Concentrations of credit risk and business risk
In 2015 and 2014, we derived approximately 10% and 11%, respectively, of our revenue from our relationship with one distributor of our products. In 2014, we also derived 18% of our revenue from our relationship with one contract-manufacturing customer. Revenue from customers located in foreign countries represented 21% and 16% of total revenue during the years ended December 31, 2015 and 2014, respectively. At December 31, 2015, three customers accounted for 53% of gross accounts receivable. At December 31, 2014, two customers accounted for 28% of gross accounts receivable.
Research and development
Research and development costs are expensed as incurred.
Stock Based Compensation
We use the Black-Scholes option pricing model as our method of valuation for stock option awards. Restricted stock unit grants are valued at the fair value of our common stock on the date of grant. Share-based compensation expense is based on the value of the portion of the stock-based award that will vest during the period, adjusted for expected forfeitures. Our determination of the fair value of stock option awards on the date of grant using an option pricing model is affected by our stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, the expected life of the award, expected stock price volatility over the term of the award and historical and projected exercise behaviors. The estimation of share-based awards that will ultimately vest requires judgment, and to the extent actual or updated results differ from our current estimates, such amounts will be recorded in the period estimates are revised. Although the fair value of stock option awards is determined in accordance with authoritative guidance, the Black-Scholes option pricing model requires the input of highly subjective assumptions and other reasonable assumptions could provide differing results. Share-based compensation expense is recognized ratably over the applicable requisite service period based on the fair value of such share-based awards on the grant date.
The fair value of options at the date of grant is determined under the Black-Scholes option pricing model. During the years ended December 31, 2015 and 2014, the following weighted-average assumptions were used:
The risk-free interest rate was based on the U.S. Treasury yield curve in effect at the time of grant. We do not anticipate declaring dividends in the foreseeable future. Volatility was based on historical data. We utilize the simplified method in determining option lives. The simplified method is used due to the fact that we have had significant structural changes in our business such that our historical exercise data may not provide a reasonable basis to estimate option lives.
We recognize compensation expense for only the portion of options that are expected to vest. Therefore, management applies an estimated forfeiture rate that is derived from historical employee termination data. The estimated forfeiture rate applied for the years ended December 31, 2015 and 2014 was 7.00%. If the actual number of forfeitures differs from those estimated by management, additional adjustments to compensation expense may be required in future periods. Our stock price volatility, option lives and expected forfeiture rates involve managements best estimates at the time of such determination, all of which impact the fair value of the option calculated under the Black-Scholes methodology and, ultimately, the expense that will be recognized over the life of the option.
Recent accounting pronouncements
In January 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities: Topic 825 (ASU 2016-01). The updated guidance enhances the reporting model for financial instruments, which includes amendments to address aspects of recognition, measurement, presentation and disclosure. Adoption of ASU 2016-01 is required for fiscal reporting periods beginning after December 15, 2017, including interim reporting periods within those fiscal years. The Company is currently evaluating the potential impact of the pending adoption of ASU 2016-01 on its consolidated financial statements.
In November 2015, FASB issued Accounting Standards Update No. 2015-17, Balance Sheet Classification of Deferred Taxes: Topic 740 (ASU 2015-17). Current GAAP requires the deferred taxes for each jurisdiction to be presented as a net current asset or liability and net noncurrent asset or liability. This requires a jurisdiction-by-jurisdiction analysis based on the classification of the assets and liabilities to which the underlying temporary differences relate, or, in the case of loss or credit carryforwards, based on the period in which the attribute is expected to be realized. Any valuation allowance is then required to be allocated on a pro rata basis, by jurisdiction, between current and noncurrent deferred tax assets. The new guidance requires that all deferred tax assets and liabilities, along with any related valuation allowance, be classified as noncurrent on the balance sheet. As a result, each jurisdiction will now only have one net noncurrent deferred tax asset or liability. The guidance does not change the existing requirement that only permits offsetting within a jurisdiction. Adoption of ASU 2015-17 is required for fiscal reporting periods beginning after December 15, 2016, including interim reporting periods within those fiscal years, and either prospective or retrospective application is permitted. Early adoption of ASU 2015-17 is permitted. At the time of adoption, all of the Company's deferred tax assets and liabilities, along with any related valuation allowance, will be classified as noncurrent on its Consolidated Balance Sheet. The Company does not plan to early adopt ASU 2015-17.
In July 2015, the FASB issued ASU No. 2015-11, Simplifying the Measurement of Inventory: Topic 330 (ASU 2015-11). Topic 330 currently requires an entity to measure inventory at the lower of cost or market. Market could be replacement cost, net realizable value, or net realizable value less an approximately normal profit margin. ASU 2015-11 requires that inventory measured using either the first-in, first-out (FIFO) or average cost method be measured at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Adoption of ASU 2015-11 is required for fiscal reporting periods beginning after December 15, 2016, including interim reporting periods within those fiscal years. The Company does not expect adoption of ASU 2015-11 to have a material impact on its consolidated financial statements.
On May 28, 2014, FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, Topic 606, requiring an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The updated standard will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective and permits the use of either the retrospective or cumulative effect transition method. Early adoption is not permitted. The updated standard becomes effective for us in the first quarter of fiscal 2018. We have not yet selected a transition method and we are currently evaluating the effect that the updated standard will have on our consolidated financial statements and related disclosures.
With the exception of the new revenue standard discussed above, there have been no new accounting pronouncements not yet effective that have significance, or potential significance, to our Consolidated Financial Statements. |
2. Accumulated Other Comprehensive Loss |
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Accumulated Other Comprehensive Loss | The following table shows the changes in Accumulated Other Comprehensive Loss by component for the years ended December 31, 2015 and 2014:
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3. Fair Value Measurement |
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Fair Value Measurement | In accordance with FASB ASC Topic 820, "Fair Value Measurements and Disclosures," (ASC Topic 820), the Company measures its cash and cash equivalents and short term investments at fair value on a recurring basis. ASC Topic 820 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, ASC Topic 820 establishes a three-tier value fair hierarchy, which prioritizes the inputs used in measuring fair value as follows:
Level 1 Observable inputs that reflect quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 Observable inputs other than quoted prices included in Level 1 for similar assets or liabilities, quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities.
Level 3 Unobservable data points for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability.
As of December 31, 2015 and 2014, the Company does not have liabilities that are measured at fair value.
The following tables set forth the Company's financial assets measured at fair value on a recurring basis as of December 31, 2015 and December 31, 2014, based on the three-tier fair value hierarchy:
The fair values of bank deposits, money market funds, corporate debt securities and commercial paper classified as Level 1 were derived from quoted market prices as active markets for these instruments exist. The Company has no level 2 or level 3 financial assets. The Company did not have any transfers between Level 1 and Level 2 of the fair value hierarchy during the twelve months ended December 31, 2015 and December 31, 2014.
Investments in debt securities at December 31, 2015, are investment grade and carried a long-term rating of BBB+ or higher. |
4. Short Term Investments |
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Schedule of Investments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Short Term Investments | The amortized cost and fair value of short term investments as of December 31, 2015 were as follows:
As of December 31, 2015, there are no short term investments, classified and accounted for as available-for-sale securities that have been in a continuous unrealized loss position in excess of twelve months.
As of December 31, 2015, the amortized cost and fair value of short term investments by contractual maturity were as follows:
The amortized cost and fair value of short term investments as of December 31, 2014 were as follows:
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5. Inventories |
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Inventories | Inventories consist of the following at December 31, 2015 and 2014:
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6. Deferred Rent |
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Deferred Rent | Deferred rent consists of the following at December 31, 2015 and 2014:
During 2014, the Company recorded $125,000 in deferred rent relating to leasehold improvements funded by the Companys landlord as incentives under the facility lease, offset by payments to the landlord of $47,237. During 2015, the Company did not receive landlord funded lease incentives. During the years ended December 31, 2015 and 2014, the Company recorded $126,999 and $115,468, respectively, in deferred rent amortization of these landlord funded leasehold improvements.
In addition, during the years ended December 31, 2015 and 2014, the Company recorded deferred rent of $36,632 and $39,509, which represented the difference between cash rent payments and the recognition of rent expense on a straight-line basis over the terms of the lease. |
7. Income Taxes |
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Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes | Income tax benefit reconciled to tax calculated at statutory rates is as follows:
At December 31, 2015 and 2014, the components of the Companys deferred taxes are as follows:
The Company has the following net operating loss tax carryforwards available at December 31, 2015:
In the event of a significant change in the ownership of the Company, the utilization of such loss and tax credit carryforwards could be substantially limited. |
8. Warrants |
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Warrants | The following table summarizes warrant activity for the years ended December 31, 2015 and 2014:
As discussed in Note 1, during the year ended December 31, 2014, we issued 3,588,878 warrants with an expiration date of March 25, 2021 in connection with the Companys public offering of units on March 25, 2014. Each whole warrant is exercisable for a period of seven years to acquire one share of common stock with an exercise price of $4.75 per share. In addition, we issued 3,321,405 warrants with an expiration date of March 25, 2021 in connection with the conversion of approximately $14.3 million of indebtedness to the Companys existing Note Holders into equity on March 25, 2014. Each whole warrant is exercisable for a period of seven years to acquire one share of common stock with an exercise price of $4.75 per share.
The outstanding warrants have expiration dates between August 2016 and March 2021. |
9. Stock-based Compensation |
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Stock-based Compensation | Stock Compensation Plans
Our stock-based compensation programs are long-term retention programs that are intended to attract, retain and provide incentives for talented employees, officers and directors, and to align stockholder and employee interests. We have the following stock-based compensation plans and programs:
During 1998, we adopted the 1998 Stock Option Plan (the 1998 Plan). An aggregate of 285,714 shares of common stock were reserved for issuance upon the exercise of options granted under the 1998 Plan. In September 2005, the shareholders approved an increase in the number of shares available for issuance to 714,285 shares. The 1998 Plan expired on August 31, 2008. The options are exercisable for up to ten years from the grant date. As of December 31, 2015, there were outstanding options to purchase 359,995 share of Company common stock under the 1998 Plan.
Subsequent to the expiration of the 1998 Plan, the Company issued, outside of the 1998 Plan, non-incentive stock options for an aggregate of 1,243,584 shares of Company common stock. Of this amount, 782,960 remain outstanding.
During 2013, we adopted the 2013 Performance Incentive Plan (the 2013 Plan), which allows us to grant options or restricted stock units to all employees, including executive officers, outside consultants and non-employee directors. An aggregate of 3.1 million shares of common stock are reserved for issuance upon the exercise of options granted under the 2013 Plan. Option vesting periods are generally four years for the 2013 Plan. Options granted under this plan generally expire ten years from the effective date of grant. As of December 31, 2015, there were outstanding options to purchase 1,412,308 shares of Company common stock and no unvested restricted stock units outstanding under the 2013 Plan.
Issuance of Shares
When options and warrants are exercised, it is the Companys policy to issue new shares.
Stock Option Activity
The following is a summary of stock option activity under our stock option plans for 2015 and 2014, and the status of stock options outstanding at December 31, 2015 and 2014:
Weighted average fair value of options granted was $1.75 and $2.84 per share for the years ended December 31, 2015 and 2014, respectively.
During the year ended December 31, 2015, stock options covering 131,388 shares of common stock with a total intrinsic value of $127,312 were exercised. During the year ended December 31, 2014, stock options covering 68,520 shares of common stock with a total intrinsic value of $155,704 were exercised.
As of December 31, 2015, there was $1,252,704 of aggregate intrinsic value of outstanding stock options, including $1,106,275 of aggregate intrinsic value of exercisable stock options. Intrinsic value is the total pretax intrinsic value for all in-the-money options (i.e., the difference between the Companys closing stock price on the last trading day of 2015 and the exercise price, multiplied by the number of shares) that would have been received by the option holders had all option holders exercised their options as of December 31, 2015. This amount will change based on the fair market value of the Companys stock.
The following table summarizes information about stock options outstanding at December 31, 2015:
The weighted average remaining contractual life of exercisable options at December 31, 2015, is 3.8 years. Total unrecognized compensation cost at December 31, 2015 of $2,075,593 is expected to be recognized over a weighted average period of 3.2 years.
Restricted Stock Units
As of December 31, 2015, there were no restricted stock units outstanding. There were no restricted stock units granted, exercised or forfeited during 2014 or 2015. |
10. Commitments & Contingencies |
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Commitments & Contingencies | Leases
On August 19, 2014 we signed an amendment to our lease agreement, which expanded the premises leased by the Company from the landlord from approximately 26,000 to approximately 30,000 rentable square feet. The term of the lease continues until July 31, 2021 with two options to extend the term of the lease, each of which is for an additional period of five years, with the first extension term commencing, if at all, on August 1, 2021, and the second extension term commencing, if at all, immediately following the expiration of the first extension term. In accordance with the amended lease agreement, our monthly base rent increased to approximately $59,700 effective January 1, 2015, with scheduled annual increases each August and again in October for the most recent amendment. The Company is also required to pay an amount equal to the Companys proportionate share of certain taxes and operating expenses.
The following is a schedule of future minimum lease payments required under the facility leases as of December 31, 2015:
Rental expense for this facility lease for the years ended December 31, 2015 and 2014 totaled $809,464 and $728,086, respectively. These amounts include the Companys proportionate share of property taxes and other operating expenses as defined by the lease.
Employment agreements
We have employment agreements with the Chief Executive Officer, Chief Financial Officer, Chief Technology Officer, Vice President, Marketing and Vice President, Global Sales. None of these employment agreements is for a definitive period, but rather each will continue indefinitely until terminated in accordance with its terms. The agreements provide for a base annual salary, payable in monthly (or shorter) installments. In addition, the agreement with the Chief Executive Officer provides for incentive bonuses at the discretion of the Board of Directors. Under certain conditions and for certain of these officers, we may be required to pay additional amounts upon terminating the officer or upon the officer resigning for good reason.
biologistex
Our agreement to form the biologistex joint venture requires us to make an initial capital contribution of $2.4 million. As of December 31, 2015 the remaining capital contribution commitment is $2.2 million. In addition, we agreed to pay SAVSU $1 million in consideration of SAVSUs participation in biologistex. As of December 31, 2015, we have recorded the entire amount and have no further commitment. In addition, biologistex is required to purchase approximately $2.6 million in Smart Containers from SAVSU, of which $0.2 million has been purchased as of December 31, 2015. See Note 1. Organization and Significant Accounting Policies Recent Developments biologistex Joint Venture for more information.
Litigation
From time to time, the Company is subject to various legal proceedings that arise in the ordinary course of business, none of which are currently material to the Companys business. |
1. Organization and Significant Accounting Policies (Policies) |
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Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
Principles of Consolidation | The consolidated financial statements include the accounts of the Company and its majority-owned subsidiary. All intercompany balances and transactions have been eliminated in consolidation. |
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Use of estimates | The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. |
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Net loss per share | Basic net loss per common share is calculated by dividing the net loss by the weighted average number of common shares outstanding during the period. Diluted earnings per share is calculated using the weighted average number of common shares outstanding plus dilutive common stock equivalents outstanding during the period. Common stock equivalents are excluded for the years ending December 31, 2015 and 2014 since the effect is anti-dilutive due to the Companys net losses. Common stock equivalents include stock options and warrants.
Basic weighted average common shares outstanding, and the potentially dilutive securities excluded from loss per share computations because they are antidilutive, are as follows for the years ended December 31, 2015 and 2014:
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Cash and cash equivalents | Cash equivalents consist primarily of interest-bearing money market accounts. We consider all highly liquid debt instruments purchased with an initial maturity of three months or less to be cash equivalents. We maintain cash balances that may exceed federally insured limits. We do not believe that this results in any significant credit risk.
No cash was paid for either interest expense or income taxes for the years ended December 31, 2015 and 2014. |
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Investments | The Company's investments consist primarily of commercial paper, corporate debt, and other debt securities. Investments are classified as available-for-sale and are reported at fair value based on quoted market prices with unrealized gains and losses, net of applicable taxes, recorded in accumulated other comprehensive income (loss), a component of shareholders' equity. The realized gains and losses for available-for-sale securities are included in other income and expense in the Consolidated Statements of Operations. Realized gains and losses are calculated based on the specific identification method.
The Company monitors its investment portfolio for impairment on a periodic basis. When the amortized cost basis of an investment exceeds its fair value and the decline in value is determined to be an other-than-temporary decline, and when the Company does not intend to sell the debt security and it is not more likely than not that the Company will be required to sell the debt securities prior to recovery of its amortized cost basis, the Company records an impairment charge in the amount of the credit loss and the balance, if any, to other comprehensive income (loss). |
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Inventories | Inventories represent biopreservation solutions, raw materials used to make biopreservation solutions and finished evo Smart Shippers, and are stated at the lower of cost or market. Cost is determined using the first-in, first-out (FIFO) method. |
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Accounts receivable | Accounts receivable are stated at principal amount, do not bear interest, and are generally unsecured. We provide an allowance for doubtful accounts based on an evaluation of customer account balances past due ninety days from the date of invoicing. Accounts considered uncollectible are charged against the established allowance. |
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Property and equipment | Property and equipment are stated at cost and are depreciated using the straight-line method over estimated useful lives of three to ten years. |
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Intangible asset | Our intangible asset represents exclusive distribution rights to the Smart Containers associated with our biologistex CCM, LLC joint venture discussed previously. The intangible asset was recorded at its fair value of $2,215,385 at the date contributed. We will review the intangible asset for impairment whenever an impairment indicator exists. We will assess recoverability by determining whether the carrying value of such asset will be recovered through the undiscounted expected future cash flows. If the future undiscounted cash flows are less than the carrying amount of these assets, we will recognize an impairment loss based on any excess of the carrying amount over the fair value of the assets. We did not recognize any intangible asset impairment charges in 2015 or 2014. We will amortize this asset over its estimated useful life of 20 years, the life of the distribution agreement with SAVSU with expected amortization of $0.1 million per year. Amortization is expected to begin in the first quarter of 2016 with the initial commercial shipments of the Smart Containers. Amortization is based on the pattern in which the economic benefits of the intangible asset will be consumed or on a straight-line basis when the consumption pattern is not apparent. |
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Internal Use Software | We capitalize costs associated with the development of the biologistex web and mobile applications, which we consider internal-use software. Capitalization of costs began in the first quarter of 2015, when we reached the application development stage. Such capitalized costs include external direct costs utilized in developing or obtaining the applications and payroll and payroll-related expenses for employees, who are directly associated with the development of the applications. Capitalization will cease once we have completed all substantial testing, at which time the applications are complete and ready for their intended use.
In 2015, we capitalized $1.7 million in costs related to the development of the biologistex web and mobile applications. Of this amount, $0.3 million was unpaid as of December 31, 2015. Maintenance and enhancement costs, including those costs in the post-implementation stages, will be expensed as incurred, unless such costs relate to substantial upgrades and enhancements to the software that result in added functionality, in which case the costs are capitalized. Capitalized costs will be amortized on a straight-line basis over estimated useful life of three years once the software has been commercially deployed. |
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Deferred Rent | For our operating leases, we recognize rent expense on a straight-line basis over the terms of the leases and, accordingly, we record the difference between cash rent payments and the recognition of rent expense as a deferred rent liability. Landlord-funded leasehold improvements, to the extent the improvements are not landlord property upon lease termination, are also recorded as deferred rent liabilities and are amortized as a reduction of rent expense over the non-cancelable term of the related operating lease. |
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Revenue recognition | We recognize product revenue, including shipping and handling charges billed to customers, upon shipment of product when title and risk of loss pass to customers. Shipping and handling costs are classified as part of cost of product sales. We may also receive fees from our contract manufacturing customers for validation of the manufacturing process. This typically occurs prior to production for those customers and revenue is recognized upon successful completion of all obligations related to the validation process. |
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Income taxes | We account for income taxes using an asset and liability method which generally requires recognition of deferred tax assets and liabilities for the expected future tax effects of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are recognized for the future tax effects of differences between tax bases of assets and liabilities, and financial reporting amounts, based upon enacted tax laws and statutory rates applicable to the periods in which the differences are expected to affect taxable income. We evaluate the likelihood of realization of deferred tax assets and provide an allowance where, in managements opinion, it is more likely than not that the asset will not be realized.
We have not recorded any liabilities for uncertain tax positions or any related interest and penalties. Our tax returns are open to audit for years ending December 31, 2012 to 2015. |
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Advertising | Advertising costs are expensed as incurred and totaled $69,091 and $19,584 for the years ended December 31, 2015 and 2014, respectively. |
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Operating segments | As described above, our activities are directed in the life sciences field of biopreservation products and services. As of December 31, 2015 and 2014 this is the Companys only operating unit and segment. |
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Concentrations of credit risk and business risk | In 2015 and 2014, we derived approximately 10% and 11%, respectively, of our revenue from our relationship with one distributor of our products. In 2014, we also derived 18% of our revenue from our relationship with one contract-manufacturing customer. Revenue from customers located in foreign countries represented 21% and 16% of total revenue during the years ended December 31, 2015 and 2014, respectively. At December 31, 2015, three customers accounted for 53% of gross accounts receivable. At December 31, 2014, two customers accounted for 28% of gross accounts receivable. |
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Research and development | Research and development costs are expensed as incurred. |
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Stock-based compensation | We use the Black-Scholes option pricing model as our method of valuation for stock option awards. Restricted stock unit grants are valued at the fair value of our common stock on the date of grant. Share-based compensation expense is based on the value of the portion of the stock-based award that will vest during the period, adjusted for expected forfeitures. Our determination of the fair value of stock option awards on the date of grant using an option pricing model is affected by our stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, the expected life of the award, expected stock price volatility over the term of the award and historical and projected exercise behaviors. The estimation of share-based awards that will ultimately vest requires judgment, and to the extent actual or updated results differ from our current estimates, such amounts will be recorded in the period estimates are revised. Although the fair value of stock option awards is determined in accordance with authoritative guidance, the Black-Scholes option pricing model requires the input of highly subjective assumptions and other reasonable assumptions could provide differing results. Share-based compensation expense is recognized ratably over the applicable requisite service period based on the fair value of such share-based awards on the grant date.
The fair value of options at the date of grant is determined under the Black-Scholes option pricing model. During the years ended December 31, 2015 and 2014, the following weighted-average assumptions were used:
The risk-free interest rate was based on the U.S. Treasury yield curve in effect at the time of grant. We do not anticipate declaring dividends in the foreseeable future. Volatility was based on historical data. We utilize the simplified method in determining option lives. The simplified method is used due to the fact that we have had significant structural changes in our business such that our historical exercise data may not provide a reasonable basis to estimate option lives.
We recognize compensation expense for only the portion of options that are expected to vest. Therefore, management applies an estimated forfeiture rate that is derived from historical employee termination data. The estimated forfeiture rate applied for the years ended December 31, 2015 and 2014 was 7.00%. If the actual number of forfeitures differs from those estimated by management, additional adjustments to compensation expense may be required in future periods. Our stock price volatility, option lives and expected forfeiture rates involve managements best estimates at the time of such determination, all of which impact the fair value of the option calculated under the Black-Scholes methodology and, ultimately, the expense that will be recognized over the life of the option. |
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Recent accounting pronouncements | In January 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities: Topic 825 (ASU 2016-01). The updated guidance enhances the reporting model for financial instruments, which includes amendments to address aspects of recognition, measurement, presentation and disclosure. Adoption of ASU 2016-01 is required for fiscal reporting periods beginning after December 15, 2017, including interim reporting periods within those fiscal years. The Company is currently evaluating the potential impact of the pending adoption of ASU 2016-01 on its consolidated financial statements.
In November 2015, FASB issued Accounting Standards Update No. 2015-17, Balance Sheet Classification of Deferred Taxes: Topic 740 (ASU 2015-17). Current GAAP requires the deferred taxes for each jurisdiction to be presented as a net current asset or liability and net noncurrent asset or liability. This requires a jurisdiction-by-jurisdiction analysis based on the classification of the assets and liabilities to which the underlying temporary differences relate, or, in the case of loss or credit carryforwards, based on the period in which the attribute is expected to be realized. Any valuation allowance is then required to be allocated on a pro rata basis, by jurisdiction, between current and noncurrent deferred tax assets. The new guidance requires that all deferred tax assets and liabilities, along with any related valuation allowance, be classified as noncurrent on the balance sheet. As a result, each jurisdiction will now only have one net noncurrent deferred tax asset or liability. The guidance does not change the existing requirement that only permits offsetting within a jurisdiction. Adoption of ASU 2015-17 is required for fiscal reporting periods beginning after December 15, 2016, including interim reporting periods within those fiscal years, and either prospective or retrospective application is permitted. Early adoption of ASU 2015-17 is permitted. At the time of adoption, all of the Company's deferred tax assets and liabilities, along with any related valuation allowance, will be classified as noncurrent on its Consolidated Balance Sheet. The Company does not plan to early adopt ASU 2015-17.
In July 2015, the FASB issued ASU No. 2015-11, Simplifying the Measurement of Inventory: Topic 330 (ASU 2015-11). Topic 330 currently requires an entity to measure inventory at the lower of cost or market. Market could be replacement cost, net realizable value, or net realizable value less an approximately normal profit margin. ASU 2015-11 requires that inventory measured using either the first-in, first-out (FIFO) or average cost method be measured at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Adoption of ASU 2015-11 is required for fiscal reporting periods beginning after December 15, 2016, including interim reporting periods within those fiscal years. The Company does not expect adoption of ASU 2015-11 to have a material impact on its consolidated financial statements.
On May 28, 2014, FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, Topic 606, requiring an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The updated standard will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective and permits the use of either the retrospective or cumulative effect transition method. Early adoption is not permitted. The updated standard becomes effective for us in the first quarter of fiscal 2018. We have not yet selected a transition method and we are currently evaluating the effect that the updated standard will have on our consolidated financial statements and related disclosures.
With the exception of the new revenue standard discussed above, there have been no new accounting pronouncements not yet effective that have significance, or potential significance, to our Consolidated Financial Statements. |
1. Organization and Significant Accounting Policies (Tables) |
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2. Accumulated Other Comprehensive Loss (Tables) |
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3. Fair Value Measurement (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2015 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Assets Measured on Recurring Basis |
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4. Short Term Investments (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2015 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Investments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Amortized cost and fair value of short term investments |
The amortized cost and fair value of short term investments as of December 31, 2015 were as follows:
The amortized cost and fair value of short term investments as of December 31, 2014 were as follows:
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Amortized cost and fair value of short term investments by contractual maturity |
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5. Inventories (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2015 | ||||||||||||||||||||||||||||||||||||||||||||||
Notes to Financial Statements | ||||||||||||||||||||||||||||||||||||||||||||||
Inventories |
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6. Deferred Rent (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2015 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Notes to Financial Statements | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Deferred rent |
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7. Income Taxes (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2015 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income tax reconciliation |
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Deferred taxes |
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Operating loss tax carryforwards |
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8. Warrants (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Warrants Tables | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Warrants |
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9. Share-based Compensation (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2015 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Notes to Financial Statements | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of stock option activity |
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Stock options outstanding by price range |
|
10. Commitments & Contingencies (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2015 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Notes to Financial Statements | |||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of future minimum lease payments |
|
1. Organization and Significant Accounting Policies - Potentially dilutive securities (Details) - shares |
12 Months Ended | |
---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Basic and diluted weighted average common stock shares outstanding | 12,177,396 | 10,447,030 |
Common stock options | ||
Potentially dilutive securities excluded from loss per share computations: | ||
Shares | 2,555,263 | 1,390,770 |
Warrants | ||
Potentially dilutive securities excluded from loss per share computations: | ||
Shares | 7,195,997 | 7,428,141 |
1. Organization and Significant Accounting Policies - Assumptions (Details 1) |
12 Months Ended | |
---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Assumptions | ||
Risk-free rate | 1.77% | 2.01% |
Annual rate of dividends | 0.00% | 0.00% |
Historical volatility | 105.20% | 105.20% |
Expected life | 7 years | 7 years |
1. Organization and Significant Accounting Policies (Details Narrative) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Advertising costs | $ 69,091 | $ 19,584 |
Revenue from customers located in foreign countries | 21% | 16% |
One contract manufacturing customer percentage of revenue | ||
Concentration of risk | 18.00% | |
One license revenue and core product revenue customer percentage of revenue | ||
Concentration of risk | 10.00% | 11.00% |
Three customers percentage of accounts receivable | ||
Concentration of risk | 53.00% | |
Two customers percentage of accounts receivable | ||
Concentration of risk | 28.00% |
2. Accumulated Other Comprehensive Loss (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Equity [Abstract] | ||
Beginning Balance | $ (6,448) | $ 0 |
Unrealized Loss on Investments, Current Period | 5,997 | (6,448) |
Ending Balance | $ (451) | $ (6,448) |
3. Fair Value Measurement (Details) - USD ($) |
Dec. 31, 2015 |
Dec. 31, 2014 |
---|---|---|
Bank deposits | $ 440,809 | $ 972,891 |
Money market funds | 1,732,449 | 1,565,867 |
Cash and cash equivalents | 2,173,258 | 2,538,758 |
Corporate debt securities | 1,401,453 | 6,799,702 |
Commercial paper | 249,888 | 599,934 |
Short term investments | 1,651,341 | 7,399,636 |
Total | 3,824,599 | 9,938,394 |
Level 1 | ||
Bank deposits | 440,809 | 972,891 |
Money market funds | 1,732,449 | 1,565,867 |
Cash and cash equivalents | 2,173,258 | 2,538,758 |
Corporate debt securities | 1,401,453 | 6,799,702 |
Commercial paper | 249,888 | 599,934 |
Short term investments | 1,651,341 | 7,399,636 |
Total | 3,824,599 | 9,938,394 |
Level 2 | ||
Bank deposits | 0 | 0 |
Money market funds | 0 | 0 |
Cash and cash equivalents | 0 | 0 |
Corporate debt securities | 0 | 0 |
Commercial paper | 0 | 0 |
Short term investments | 0 | 0 |
Total | $ 0 | $ 0 |
4. Short Term Investments (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Amortized Cost | $ 1,651,792 | $ 7,406,084 |
Gross Unrealized Gains | 0 | 0 |
Gross Unrealized Losses | (451) | (6,448) |
Fair Value | 1,651,341 | 7,399,636 |
Corporate debt securities | ||
Amortized Cost | 1,401,904 | 6,806,150 |
Gross Unrealized Gains | 0 | 0 |
Gross Unrealized Losses | (451) | (6,448) |
Fair Value | 1,401,453 | 6,799,702 |
Commercial paper | ||
Amortized Cost | 249,888 | 599,934 |
Gross Unrealized Gains | 0 | 0 |
Gross Unrealized Losses | 0 | 0 |
Fair Value | $ 249,888 | $ 599,934 |
4. Short Term Investments (Details 1) |
Dec. 31, 2015
USD ($)
|
---|---|
Amortized Cost | |
Due in 1 year or less | $ 1,651,792 |
Total marketable securities | 1,651,792 |
Fair Value | |
Due in 1 year or less | 1,651,341 |
Total marketable securities | $ 1,651,341 |
5. Inventories (Details) - USD ($) |
Dec. 31, 2015 |
Dec. 31, 2014 |
---|---|---|
Inventories Details | ||
Raw materials | $ 299,952 | $ 362,656 |
Work in progress | 666,124 | 79,012 |
Finished goods | 868,559 | 523,556 |
Total | $ 1,834,635 | $ 965,224 |
6. Deferred Rent (Details) - USD ($) |
Dec. 31, 2015 |
Dec. 31, 2014 |
---|---|---|
Deferred Rent Details | ||
Landlord-funded leasehold improvements | $ 1,124,790 | $ 1,124,790 |
Less accumulated amortization | (375,530) | (248,531) |
Total (current portion $130,216 at December 31, 2015 and 2014) | 749,260 | 876,259 |
Straight line rent adjustment | 165,414 | 128,782 |
Total deferred rent | $ 914,674 | $ 1,005,041 |
6. Deferred Rent (Details Narrative) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Deferred rent | $ 36,632 | $ 39,509 |
Landlord Funded Leasehold Improvements [Member] | ||
Deferred rent | 0 | 125,000 |
Payment offset to landlord | 0 | 47,237 |
Deferred rent amortization | $ 126,999 | $ 115,468 |
7. Income Taxes - Provision for income taxes (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Income Taxes - Provision For Income Taxes Details | ||
Federal tax (benefit) at statutory rate | $ (1,698,428) | $ (1,122,270) |
Change in valuation allowance | 1,430,291 | 1,122,900 |
Add back tax benefit on loss attributable to non-controlling interest in subsidiary | 265,690 | 0 |
Other | 2,447 | (630) |
Provision for income taxes, net | $ 0 | $ 0 |
7. Income Taxes - Deferred tax asset (Details 1) - USD ($) |
Dec. 31, 2015 |
Dec. 31, 2014 |
---|---|---|
Deferred tax assets (liabilities) | ||
Net operating loss carryforwards | $ 11,080,303 | $ 10,046,713 |
Accrued compensation | 120,344 | 170,161 |
Depreciation | 21,835 | 14,282 |
Section 263a inventory adjustment | 79,110 | 20,233 |
Stock-based compensation | 565,349 | 434,740 |
Suspended loss of subsidiary | 246,241 | 0 |
Other | 25,323 | 22,085 |
Total | 12,138,505 | 10,708,214 |
Less: Valuation allowance | (12,138,505) | (10,708,214) |
Net deferred tax asset | $ 0 | $ 0 |
8. Warrants (Details) - $ / shares |
12 Months Ended | |
---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Wtd. Avg. Exercise Price | ||
Outstanding at end of year | $ 1.80 | |
Warrants | ||
Shares | ||
Outstanding at beginning of year | 7,428,141 | 517,858 |
Granted | 0 | 6,910,283 |
Exercised | (232,144) | 0 |
Forfeited/Expired | 0 | 0 |
Outstanding at ending of year | 7,195,997 | 7,428,141 |
Exercisable at year end | 7,195,997 | 7,428,141 |
Wtd. Avg. Exercise Price | ||
Outstanding at beginning of year | $ 4.49 | $ 1.02 |
Granted | 0.00 | 4.75 |
Exercised | 1.03 | 0.00 |
Forfeited | 0.00 | 0.00 |
Outstanding at end of year | 4.60 | 4.49 |
Exercisable at year end | $ 4.60 | $ 4.49 |
10. Commitments & Contingencies (Details) |
Dec. 31, 2015
USD ($)
|
---|---|
Schedule of future minimum lease payments required | |
2016 | $ 676,000 |
2017 | 690,000 |
2018 | 704,000 |
2019 | 718,000 |
2020 | 733,000 |
Thereafter | 433,000 |
Total | $ 3,954,000 |
10. Commitments & Contingencies (Details Narrative) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Commitments Contingencies Details Narrative | ||
Rental expense | $ 809,464 | $ 728,086 |
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