Nevada
|
41-2118656
|
(State or Other Jurisdiction of
|
(I.R.S. Employer Identification No.)
|
Incorporation or Organization)
|
|
4410 Beltway Drive
Addison, Texas
|
75001
|
(Address of Principal Executive Offices)
|
(Zip Code)
|
Large accelerated filer
|
☐
|
Accelerated filer
|
☐
|
|||
Non-accelerated filer
|
☐
|
Smaller reporting company
|
☑
|
|||
Emerging growth company
|
☐
|
Page
|
||
September 30, 2018
|
December 31, 2017
|
|||||||
(Unaudited)
|
||||||||
ASSETS
|
||||||||
Current Assets
|
||||||||
Cash and cash equivalents
|
$
|
2,813,043
|
$
|
3,710,882
|
||||
Accounts receivable, net
|
172,593
|
256,123
|
||||||
Inventory
|
422,425
|
497,461
|
||||||
Prepaid expenses and deferred charges
|
133,712
|
170,686
|
||||||
Total Current Assets
|
3,541,773
|
4,635,152
|
||||||
Property, Equipment and Leasehold Improvements, net
|
37,282
|
53,723
|
||||||
Other Assets
|
||||||||
Intangible asset - patents, net
|
152,030
|
179,737
|
||||||
Intangible asset - licensing rights, net
|
3,345,264
|
3,656,636
|
||||||
Deposits
|
4,666
|
18,069
|
||||||
Total Other Assets
|
3,501,960
|
3,854,442
|
||||||
TOTAL ASSETS
|
$
|
7,081,015
|
$
|
8,543,317
|
||||
LIABILITIES AND STOCKHOLDERS' EQUITY
|
||||||||
Current Liabilities
|
||||||||
Accounts payable
|
$
|
1,167,976
|
$
|
1,213,246
|
||||
Accrued liabilities
|
165,050
|
163,969
|
||||||
Accrued interest
|
193,151
|
99,658
|
||||||
Convertible notes payable, current portion, net of unamortized debt discount and debt issuance costs
|
837,209
|
---
|
||||||
Deferred revenue, current portion
|
49,027
|
35,761
|
||||||
Total Current Liabilities
|
2,412,413
|
1,512,634
|
||||||
Long Term Liabilities
|
||||||||
Convertible notes payable, net of unamortized debt discount and debt issuance costs
|
---
|
570,189
|
||||||
Deferred revenue, net of current portion
|
331,800
|
352,698
|
||||||
Total Long Term Liabilities
|
331,800
|
922,887
|
||||||
TOTAL LIABILITIES
|
2,744,213
|
2,435,521
|
||||||
COMMITMENTS AND CONTINGENCIES
|
---
|
---
|
||||||
STOCKHOLDERS' EQUITY
|
||||||||
Preferred Stock - $0.001 par value; 20,000 shares authorized;
|
||||||||
Preferred Stock Series A, 1,000 shares designated; no shares issued and outstanding at September 30, 2018 and December 31, 2017, respectively
|
---
|
---
|
||||||
Preferred Stock Series B, 1,250 shares designated; no shares issued and outstanding at September 30, 2018 and December 31, 2017, respectively
|
---
|
---
|
||||||
Common Stock - $0.001 par value; 750,000,000 shares authorized;
|
||||||||
201,349,431 and 201,349,431 shares issued and outstanding at September 30, 2018 and December 31, 2017, respectively
|
201,349
|
201,349
|
||||||
Additional paid-in capital
|
68,569,329
|
68,556,734
|
||||||
Accumulated (deficit)
|
(64,433,876
|
)
|
(62,650,287
|
)
|
||||
TOTAL STOCKHOLDERS' EQUITY
|
4,336,802
|
6,107,796
|
||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
|
$
|
7,081,015
|
$
|
8,543,317
|
||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
|
Three Months Ended September 30,
|
Nine Months Ended September 30,
|
||||||||||||||||
2018
|
2017
|
2018
|
2017 |
|
|||||||||||||
Revenues
|
|
||||||||||||||||
License fees
|
$
|
---
|
$
|
1,453
|
$
|
---
|
$
|
4,311
|
|||||||||
Product sales, net
|
84,612
|
199,486
|
273,957
|
418,059
|
|||||||||||||
Total Revenues
|
84,612
|
200,939
|
273,957
|
422,370
|
|||||||||||||
Costs and Expenses
|
|||||||||||||||||
Cost of product sold
|
31,399
|
73,569
|
101,510
|
178,985
|
|||||||||||||
Regulatory, research and development
|
76,889
|
90,294
|
161,454
|
198,615
|
|||||||||||||
Selling, general and administrative
|
378,955
|
315,490
|
1,109,108
|
1,016,883
|
|||||||||||||
Amortization of intangible assets
|
114,268
|
114,268
|
339,079
|
316,602
|
|||||||||||||
Depreciation
|
5,480
|
5,481
|
16,441
|
71,039
|
|||||||||||||
Gain on sale of equipment
|
---
|
---
|
(29,179
|
)
|
---
|
||||||||||||
Total Costs and Expenses
|
606,991
|
599,102
|
1,698,413
|
1,782,124
|
|||||||||||||
Operating (Loss)
|
(522,379
|
)
|
(398,163
|
)
|
(1,424,456
|
)
|
(1,359,754
|
)
|
|||||||||
Other Income (Expense)
|
|||||||||||||||||
Interest and miscellaneous income
|
4,452
|
41
|
4,452
|
45
|
|||||||||||||
Interest expense
|
(128,098
|
)
|
(133,972
|
)
|
(380,247
|
)
|
(289,113
|
)
|
|||||||||
Foreign currency transaction loss
|
(3,701
|
)
|
(6,151
|
)
|
(10,000
|
)
|
(9,222
|
)
|
|||||||||
Gain on settlement of liability
|
---
|
---
|
---
|
114,013
|
|||||||||||||
(Loss) Before Income Taxes
|
(649,726
|
)
|
(538,245
|
)
|
(1,810,251
|
)
|
(1,544,031
|
)
|
|||||||||
Income taxes
|
---
|
---
|
---
|
---
|
|||||||||||||
Net (Loss)
|
$
|
(649,726
|
)
|
$
|
(538,245
|
)
|
$
|
(1,810,251
|
)
|
$
|
(1,544,031
|
)
|
|||||
Basic and diluted net (loss) per common share
|
$
|
(0.00
|
)
|
$
|
(0.00
|
)
|
$
|
(0.01
|
)
|
$
|
(0.02
|
)
|
|||||
Weighted average number of common shares outstanding
|
201,349,431
|
159,229,866
|
201,349,431
|
99,919,486
|
|||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
|
Nine Months Ended September 30,
|
||||||||
2018
|
2017
|
|||||||
OPERATING ACTIVITIES:
|
||||||||
Net loss
|
$
|
(1,810,251
|
)
|
$
|
(1,544,031
|
)
|
||
Adjustments to reconcile net loss to net cash used in operating activities:
|
||||||||
Amortization of intangible assets
|
339,079
|
316,602
|
||||||
Depreciation
|
16,441
|
71,039
|
||||||
Share-based compensation for stock and options issued to employees
|
---
|
7,923
|
||||||
Share-based compensation for options issued to non-employees
|
12,595
|
---
|
||||||
Amortization of debt discount on promissory notes
|
260,438
|
174,577
|
||||||
Amortization of debt issuance costs on promissory notes
|
6,582
|
3,976
|
||||||
Gain on sale of equipment
|
(29,179
|
)
|
---
|
|||||
Gain on settlement of liability
|
---
|
(114,013
|
)
|
|||||
Change in operating assets and liabilities:
|
||||||||
Accounts receivable
|
83,530
|
(101,748
|
)
|
|||||
Inventory
|
75,036
|
61,500
|
||||||
Prepaid expenses and deferred charges
|
36,974
|
(8,676
|
)
|
|||||
Deposits
|
13,403
|
---
|
||||||
Accounts payable
|
(45,270
|
)
|
(116,237
|
)
|
||||
Accrued liabilities
|
1,081
|
(112,099
|
)
|
|||||
Accrued interest
|
93,493
|
68,098
|
||||||
Deferred revenue
|
19,030
|
(14,773
|
)
|
|||||
Total
|
883,233
|
236,169
|
||||||
Net Cash Used in Operating Activities
|
(927,018
|
)
|
(1,307,862
|
)
|
||||
INVESTING ACTIVITIES:
|
||||||||
Purchase of equipment
|
---
|
(3,501
|
)
|
|||||
Proceeds from sale of equipment
|
29,179
|
---
|
||||||
Net Cash Provided / (Used) in Investing Activities
|
29,179
|
(3,501
|
)
|
|||||
FINANCING ACTIVITIES:
|
||||||||
Proceeds from issuance of convertible notes and warrant, net
|
---
|
983,092
|
||||||
Proceeds from sale of Series B preferred stock, net
|
---
|
4,915,661
|
||||||
Proceeds from issuance of promissory notes
|
---
|
120,000
|
||||||
Repayment of principle due on promissory notes
|
---
|
(140,000
|
)
|
|||||
Net Cash Provided by Financing Activities
|
---
|
5,878,753
|
||||||
Net (Decrease) / Increase in Cash
|
(897,839
|
)
|
4,567,390
|
|||||
Cash, beginning of period
|
3,710,882
|
36,615
|
||||||
Cash, end of period
|
$
|
2,813,043
|
$
|
4,604,005
|
||||
SUPPLEMENTAL CASH FLOW DISCLOSURE:
|
||||||||
Cash paid for interest
|
$
|
---
|
$
|
2,697
|
||||
Cash paid for income taxes
|
$
|
---
|
$
|
---
|
||||
Non-cash investing and financing activities:
|
||||||||
Issuance of common stock for acquisition of licensing rights
|
$
|
---
|
$
|
869,375
|
||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
|
NOTE 1.
|
COMPANY OVERVIEW AND BASIS OF PRESENTATION
|
NOTE 2.
|
THE EFFECT OF RECENTLY ISSUED ACCOUNTING STANDARDS
|
NOTE 3.
|
SIGNIFICANT ACCOUNTING POLICIES
|
§
|
identification of the contract, or contracts, with a customer;
|
§
|
recognition of revenue when, or as, we satisfy the performance obligations;
|
§
|
determination of the transaction price;
|
§
|
allocation of the transaction price to the performance obligations in the contract; and
|
§
|
recognition of revenue when, or as, we satisfy the performance obligations.
|
|
December 31, 2017
|
January 1, 2018
|
||||||||||
BALANCE SHEET
|
As Reported
|
Adjustments Due
|
As Adjusted
|
|||||||||
Under ASC 605
|
to ASC 606
|
Under ASC 606
|
||||||||||
Liabilities
|
||||||||||||
Current liabilities
|
||||||||||||
Current portion of deferred revenue
|
$
|
35,761
|
$
|
(5,764
|
)
|
$
|
29,997
|
|||||
Total current liabilities
|
1,512,634
|
(5,764
|
)
|
1,506,870
|
||||||||
Deferred revenue, net of current portion
|
352,698
|
(20,898
|
)
|
331,800
|
||||||||
Total liabilities
|
2,435,521
|
(26,662
|
)
|
2,408,859
|
||||||||
Stockholders' Equity
|
||||||||||||
Accumulated deficit
|
(62,650,287
|
)
|
26,662
|
(62,623,625
|
)
|
|||||||
Total equity
|
$
|
6,107,796
|
$
|
26,662
|
$
|
6,134,458
|
|
Nine Months Ended September 30, 2018
|
|||||||||||
STATEMENT OF OPERATIONS
|
Under
|
Effect of
|
As Reported
|
|||||||||
ASC 605
|
ASC 606
|
Under ASC 606
|
||||||||||
Revenues
|
||||||||||||
License revenues
|
$
|
1,422
|
$
|
(1,422
|
)
|
$
|
---
|
|||||
Total revenues
|
275,379
|
(1,422
|
)
|
273,957
|
||||||||
|
||||||||||||
Loss from operations
|
$
|
(1,423,034
|
)
|
$
|
(1,422
|
)
|
$
|
(1,424,456
|
)
|
|||
Net loss
|
$
|
(1,808,829
|
)
|
$
|
(1,422
|
)
|
$
|
(1,810,251
|
)
|
|||
|
||||||||||||
Basic and diluted loss per common share
|
$
|
(0.01
|
)
|
$
|
(0.00
|
)
|
$
|
(0.01
|
)
|
|
September 30, 2018
|
|||||||||||
BALANCE SHEET
|
Under
|
Effect of
|
As Reported
|
|||||||||
ASC 605
|
ASC 606
|
Under ASC 606
|
||||||||||
Liabilities and Stockholders' Equity
|
||||||||||||
Current liabilities
|
||||||||||||
Current portion of deferred revenue
|
$
|
54,791
|
$
|
(5,764
|
)
|
$
|
49,027
|
|||||
Total current liabilities
|
2,418,177
|
(5,764
|
)
|
2,412,413
|
||||||||
Deferred revenue, net of current portion
|
351,276
|
(19,476
|
)
|
331,800
|
||||||||
Total liabilities
|
2,769,453
|
(25,240
|
)
|
2,744,213
|
||||||||
|
||||||||||||
Stockholders' Equity
|
||||||||||||
Accumulated deficit
|
(64,459,116
|
)
|
25,240
|
(64,433,876
|
)
|
|||||||
Total stockholders' equity
|
$
|
4,311,562
|
$
|
25,240
|
$
|
4,336,802
|
NOTE 4.
|
SEGMENT INFORMATION
|
Three Months Ended September 30,
|
Nine months Ended September 30,
|
|||||||||||||||||||||||||||||||
Revenues
|
2018
|
%
|
2017
|
%
|
2018
|
%
|
2017
|
%
|
||||||||||||||||||||||||
Domestic
|
$
|
19,523
|
23
|
%
|
$
|
3,012
|
2
|
%
|
32,625
|
12
|
%
|
$
|
8,427
|
2
|
%
|
|||||||||||||||||
International
|
65,089
|
77
|
%
|
197,927
|
98
|
%
|
241,332
|
88
|
%
|
413,943
|
98
|
%
|
||||||||||||||||||||
Total
|
$
|
84,612
|
100
|
%
|
$
|
200,939
|
100
|
%
|
$
|
273,957
|
100
|
%
|
$
|
422,370
|
100
|
%
|
NOTE 5.
|
INVENTORY
|
Inventory
|
September 30, 2018
|
December 31, 2017
|
||||||
Packaging and raw materials
|
$
|
40,327
|
$
|
32,329
|
||||
Work-in-progress
|
318,297
|
311,632
|
||||||
Finished goods
|
63,801
|
153,500
|
||||||
Total
|
$
|
422,425
|
$
|
497,461
|
NOTE 6.
|
PROPERTY, EQUIPMENT and LEASEHOLD IMPROVEMENTS
|
Property, equipment and leasehold improvements
|
September 30, 2018
|
December 31, 2017
|
||||||
Laboratory equipment
|
$
|
424,888
|
$
|
424,888
|
||||
Manufacturing equipment
|
1,589,286
|
1,604,894
|
||||||
Computers, office equipment, and furniture
|
154,781
|
154,781
|
||||||
Computer software
|
4,108
|
4,108
|
||||||
Leasehold improvements
|
95,841
|
95,841
|
||||||
2,268,904
|
2,284,512
|
|||||||
Less: accumulated depreciation and amortization
|
(2,231,622
|
)
|
(2,230,789
|
)
|
||||
Property, equipment and leasehold improvements, net
|
$
|
37,282
|
$
|
53,723
|
NOTE 7.
|
INTANGIBLE ASSETS
|
Intangible assets – patents
|
September 30, 2018
|
December 31, 2017
|
||||||
Patent - Amlexanox (Aphthasol®)
|
$
|
2,090,000
|
$
|
2,090,000
|
||||
Patent - Amlexanox (OraDisc™ A)
|
6,873,080
|
6,873,080
|
||||||
Patent - OraDisc™
|
73,000
|
73,000
|
||||||
Patent - Hydrogel nanoparticle aggregate
|
589,858
|
589,858
|
||||||
9,625,938
|
9,625,938
|
|||||||
Less: accumulated amortization
|
(7,446,598
|
)
|
(7,418,891
|
)
|
||||
Less: reserve for impairment
|
(2,027,310
|
)
|
(2,027,310
|
)
|
||||
Intangible assets - patents, net
|
$
|
152,030
|
$
|
179,737
|
Calendar Years
|
Future Amortization
Expense
|
|||
2018 (Three months)
|
$
|
9,337
|
||
2019
|
37,044
|
|||
2020
|
37,145
|
|||
2021
|
37,044
|
|||
2022
|
31,460
|
|||
Total
|
$
|
152,030
|
Intangible assets - licensing rights
|
September 30, 2018
|
December 31, 2017
|
||||||
Intangible assets – licensing rights, gross
|
$
|
4,381,881
|
$
|
4,381,881
|
||||
Less: accumulated amortization
|
(1,036,617
|
)
|
(725,245
|
)
|
||||
Intangible assets - licensing rights, net
|
$
|
3,345,264
|
$
|
3,656,636
|
Calendar Years
|
Future Amortization
Expense
|
|||
2018 (Three months)
|
$
|
104,931
|
||
2019
|
416,303
|
|||
2020
|
416,303
|
|||
2021
|
416,303
|
|||
2022
|
416,303
|
|||
2023 & Beyond
|
1,575,121
|
|||
Total
|
$
|
3,345,264
|
NOTE 8.
|
ACCRUED LIABILITIES
|
Accrued Liabilities
|
September 30, 2018
|
December 31, 2017
|
||||||
Accrued compensation/benefits
|
$
|
117,419
|
$
|
124,819
|
||||
Accrued property taxes
|
4,413
|
---
|
||||||
Accrued royalties
|
43,218
|
39,144
|
||||||
Product rebates/returns
|
--- |
6
|
||||||
Total accrued liabilities
|
$
|
165,050
|
$
|
163,969
|
NOTE 9.
|
CONVERTIBLE NOTE PAYABLE – RELATED PARTY
|
As of September 30, 2018
|
|||||||||||||||||||||||||||||
Transaction
|
Initial
Principal
Amount
|
Interest
Rate
|
Maturity
Date
|
Conversion Price
|
Principal
Balance
|
Unamortized
Debt
Discount
|
Unamortized Debt Issuance Costs
|
Carrying
Value
|
|||||||||||||||||||||
Initial Note
|
$
|
500,000
|
12.5
|
%
|
02/27/2019
|
$
|
0.04
|
$
|
500,000
|
$
|
73,589
|
$
|
1,991
|
$
|
424,420
|
||||||||||||||
Second Note
|
$
|
500,000
|
12.5
|
%
|
03/31/2019
|
$
|
0.04
|
$
|
500,000
|
$
|
84,929
|
$
|
2,282
|
$
|
412,789
|
||||||||||||||
Total
|
$
|
1,000,000
|
$
|
1,000,000
|
$
|
158,518
|
$
|
4,273
|
$
|
837,209
|
NOTE 10.
|
EQUITY TRANSACTIONS
|
NOTE 11.
|
STOCKHOLDERS' EQUITY
|
Number of Shares of Common Stock Subject to Exercise
|
Weighted – Average
Exercise Price
|
|||||||
Balance as of December 31, 2017
|
83,234,617
|
$
|
0.06
|
|||||
Warrants issued
|
---
|
---
|
||||||
Warrants exercised
|
---
|
---
|
||||||
Warrants cancelled
|
(660,000
|
)
|
$
|
0.60
|
||||
Balance as of September 30, 2018
|
82,574,617
|
$
|
0.06
|
Date of Expiration
|
Number of Warrant Shares of Common Stock Subject to Expiration
|
|||
January 15, 2019
|
80,000
|
|||
April 30, 2020
|
194,118
|
|||
March 30, 2021
|
25,245,442
|
|||
March 31, 2027
|
57,055,057
|
|||
Total
|
82,574,617
|
NOTE 12.
|
EARNINGS PER SHARE
|
September 30, 2018
|
December 31, 2017
|
|||||||
Warrants to purchase Common Stock
|
82,574,617
|
83,234,617
|
||||||
Stock options to purchase Common Stock
|
2,630,000
|
150,736
|
||||||
Common Stock issuable upon the assumed conversion of our convertible promissory notes (1)
|
31,250,000
|
31,250,000
|
||||||
Total
|
116,454,617
|
114,635,353
|
(1)
|
As part of the Initial Note and the Second Note, at the holder's option, all unpaid principle and interest due under each convertible promissory note may be converted into shares of Common Stock based on a conversion price of $0.04 per share. The Initial Note and the Second Note mature on February 27, 2019 and March 31, 2019, respectively, and on each maturity date each convertible promissory note, and accrued interest thereon, is subject to mandatory conversion based on a conversion price of $0.04 per share, unless an event of default has occurred and is continuing. For the purposes of this Table, we have assumed that all outstanding principal and interest will be converted on each applicable maturity date.
|
NOTE 13.
|
SHARE BASED COMPENSATION
|
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
|||||||||||||||
2018 (1)
|
2017 (2)
|
2018
|
2017 (2)
|
|||||||||||||
Quantity
|
1,000,000
|
---
|
2,500,000
|
---
|
||||||||||||
Weighted average fair value per share
|
$
|
0.03
|
---
|
$
|
0.03
|
---
|
||||||||||
Fair value
|
$
|
34,960
|
---
|
$
|
79,960
|
---
|
(1)
|
On July 20, 2018, the Company granted to certain consultants stock option awards to purchase up to 1,000,000 shares of common stock at an exercise price of $0.05 per share during a term expiring on July 19, 2028 as payment for consulting services provided by such consultants. The stock option awards vest based upon the respective consultant achieving certain revenue and performance goals. The Company has evaluated the probability of each consultant's achievement of each revenue and performance goal and will continue such evaluation over the term of the stock option award.
|
|
(2)
|
The Company did not award any shared-based compensation for the three and nine months ended September 30, 2017
|
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
|||||||||||||||
Stock Option Awards
|
2018
|
2017 (1)
|
2018
|
2017 (1)
|
||||||||||||
Expected volatility (1)
|
138.7
|
%
|
---
|
137.3
|
%
|
---
|
||||||||||
Risk-free interest rate % (2)
|
2.89
|
%
|
---
|
2.69
|
%
|
---
|
||||||||||
Expected term (in years)
|
10.0
|
---
|
7.0
|
---
|
||||||||||||
Dividend yield (3)
|
---
|
---
|
---
|
---
|
(1)
|
Expected volatility assumption was based upon a combination of historical stock price volatility measured on a daily basis and an estimate of expected future stock price volatility
|
(2)
|
Risk-free interest rate assumption is based upon U.S. Treasury bond interest rates appropriate for the term of the stock options.
|
(3)
|
The Company does not currently intend to pay cash dividends, thus has assumed a 0% dividend yield.
|
(4)
|
The Company did not award any shared-based compensation for the three and nine months ended September 30, 2017.
|
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
|||||||||||||||
2018
|
2017
|
2018
|
2017
|
|||||||||||||
Regulatory, research and development
|
$
|
5,670
|
$
|
(3,345
|
)
|
$
|
11,469
|
$
|
---
|
|||||||
Selling, general and administrative
|
1,126
|
2,571
|
1,126
|
7,923
|
||||||||||||
Total share-based compensation expense
|
$
|
6,796
|
$
|
(774
|
)
|
$
|
12,595
|
$
|
7,923
|
Stock Options
|
Weighted Average Exercise Price per Share
|
|||||||
Outstanding as of December 31, 2017
|
150,736
|
$
|
4.26
|
|||||
Granted
|
2,500,000
|
$
|
0.05
|
|||||
Forfeited/cancelled
|
(20,736
|
)
|
$
|
27.33
|
||||
Exercised
|
---
|
---
|
||||||
Outstanding as of September 30, 2018
|
2,630,000
|
$
|
0.08
|
|||||
Exercisable as of September 30, 2018
|
130,000
|
$
|
0.58
|
NOTE 14.
|
FAIR VALUE MEASUREMENTS
|
|
Level 1
|
—
|
Valuations based on quoted prices (unadjusted) for identical assets or liabilities in active markets.
|
|
Level 2
|
—
|
Valuations based on observable inputs other than quoted prices in Level 1, such as quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, and other inputs that are observable or can be corroborated by observable market data.
|
|
Level 3
|
—
|
Valuations based on unobservable inputs reflecting the Company's own assumptions, consistent with reasonably available assumptions made by other market participants.
|
Description
|
September 30, 2018
|
December 31, 2017
|
||||||
Liabilities:
|
||||||||
Convertible Note Payable – Related Party – March 2017
|
$
|
500,000
|
$
|
500,000
|
||||
Convertible Note Payable – Related Party – February 2017
|
$
|
500,000
|
$
|
500,000
|
||||
Total
|
$
|
1,000,000
|
$
|
1,000,000
|
NOTE 15.
|
INCOME TAXES
|
NOTE 16.
|
COMMITMENTS AND CONTINGENCIES
|
Calendar Years
|
Future Lease Expense
|
|||
2018 (Three months)
|
$
|
16,415
|
||
2019
|
60,367
|
|||
2020
|
---
|
|||
2021
|
---
|
|||
Total
|
$
|
76,782
|
NOTE 17.
|
LEGAL PROCEEDINGS
|
NOTE 18.
|
SUBSEQUENT EVENTS
|
Consolidated Cash Flow Data
|
||||||||
Nine Months Ended September 30,
|
||||||||
Net Cash Provided by (Used in)
|
2018
|
2017
|
||||||
Operating activities
|
$
|
(927,000
|
)
|
$
|
(1,308,000
|
)
|
||
Investing activities
|
29,000
|
(4,000
|
)
|
|||||
Financing activities
|
---
|
5,879,000
|
||||||
Net increase in cash and cash equivalents
|
$
|
(898,000
|
)
|
$
|
4,567,000
|
§
|
our ability to successfully commercialize our wound management product and the market acceptance of this product;
|
§
|
our ability to establish and maintain collaborative arrangements with business partners for the development and commercialization of certain product opportunities;
|
§
|
scientific progress in our development programs;
|
§
|
the marketing and sales efforts of our distributors and sub-distributors;
|
§
|
the costs involved in filing, prosecuting and enforcing patent claims and our maintenance of patent rights;
|
§
|
our ability to obtain favorable reimbursement approvals in various jurisdictions;
|
§
|
the cost of manufacturing and production scale-up;
|
§
|
competing product developments;
|
§
|
the trading volume and price of our capital stock;
|
§
|
the actions of parties whose consents, waivers or prompt responses are required for approval of a financing (such as parties with rights of first refusal or consent rights); and
|
§
|
our general financial situation, including our revenues, liquidity, capitalization, and other factors.
|
Payments Due By Period
|
||||||||||||||||||||
Contractual Cash Obligations
|
Total
|
Less Than
1 Year
|
1-2
Years
|
3-5
Years
|
After 5
Years
|
|||||||||||||||
Operating leases
|
$
|
76,782
|
$
|
63,710
|
$
|
13,072
|
$
|
---
|
$
|
---
|
||||||||||
Total contractual cash obligations
|
$
|
76,782
|
$
|
63,710
|
$
|
13,072
|
$
|
---
|
$
|
---
|
|
ULURU Inc.
|
|||
|
||||
Date: November 14, 2018
|
By:
|
/s/ Vaidehi Shah
|
||
|
Vaidehi Shah
|
|||
Chief Executive Officer
|
||||
|
|
(Principal Executive Officer)
|
||
|
|
|||
|
|
|||
Date: November 14, 2018
|
By:
|
/s/ Terrance K. Wallberg
|
||
Terrance K. Wallberg
|
||||
Chief Financial Officer and Vice President
|
||||
|
(Principal Financial and Accounting Officer)
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of ULURU Inc.;
|
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
|
4.
|
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:
|
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
(c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and
|
|
(d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
|
5.
|
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
Date: November 14, 2018
|
/s/ Vaidehi Shah
|
||
Vaidehi Shah
|
|||
Chief Executive Officer
|
|||
(Principal Executive Officer)
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of ULURU Inc.;
|
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
|
4.
|
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:
|
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
(c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and
|
|
(d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
|
5.
|
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
Date: November 14, 2018
|
/s/ Terrance K. Wallberg
|
||
Terrance K. Wallberg
|
|||
Vice President and Chief Financial Officer
|
|||
(Principal Financial and Accounting Officer)
|
(1.)
|
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2.)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Date: November 14, 2018
|
/s/ Vaidehi Shah
|
||
Vaidehi Shah
|
|||
Chief Executive Officer
|
|||
(Principal Executive Officer)
|
(1.)
|
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2.)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Date: November 14, 2018
|
/s/ Terrance K. Wallberg
|
||
Terrance K. Wallberg
|
|||
Vice President and Chief Financial Officer
|
|||
(Principal Financial and Accounting Officer)
|
Document and Entity Information - shares |
9 Months Ended | |
---|---|---|
Sep. 30, 2018 |
Nov. 14, 2018 |
|
Entity Information [Line Items] | ||
Entity Registrant Name | ULURU INC. | |
Entity Central Index Key | 0001168220 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Ex Transition Period | false | |
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Sep. 30, 2018 | |
Document Fiscal Year Focus | 2018 | |
Document Fiscal Period Focus | Q3 | |
Common Stock [Member] | ||
Entity Information [Line Items] | ||
Entity Common Stock, Shares Outstanding | 201,349,431 | |
Series A Preferred Stock [Member] | ||
Entity Information [Line Items] | ||
Entity Common Stock, Shares Outstanding | 0 | |
Series B Preferred Stock [Member] | ||
Entity Information [Line Items] | ||
Entity Common Stock, Shares Outstanding | 0 |
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - $ / shares |
Sep. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
STOCKHOLDERS' EQUITY | ||
Preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized (in shares) | 20,000 | 20,000 |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized (in shares) | 750,000,000 | 750,000,000 |
Common stock, shares issued (in shares) | 201,349,431 | 201,349,431 |
Common stock, shares outstanding (in shares) | 201,349,431 | 201,349,431 |
Series A Preferred Stock [Member] | ||
STOCKHOLDERS' EQUITY | ||
Shares designated (in shares) | 1,000 | 1,000 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Preferred stock, shares outstanding (in shares) | 0 | 0 |
Series B Preferred Stock [Member] | ||
STOCKHOLDERS' EQUITY | ||
Shares designated (in shares) | 1,250 | 1,250 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Preferred stock, shares outstanding (in shares) | 0 | 0 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Revenues | ||||
Total revenues | $ 84,612 | $ 200,939 | $ 273,957 | $ 422,370 |
Costs and Expenses | ||||
Cost of product sold | 31,399 | 73,569 | 101,510 | 178,985 |
Regulatory, research and development | 76,889 | 90,294 | 161,454 | 198,615 |
Selling, general and administrative | 378,955 | 315,490 | 1,109,108 | 1,016,883 |
Amortization of intangible assets | 114,268 | 114,268 | 339,079 | 316,602 |
Depreciation | 5,480 | 5,481 | 16,441 | 71,039 |
Gain on sale of equipment | 0 | 0 | (29,179) | 0 |
Total Costs and Expenses | 606,991 | 599,102 | 1,698,413 | 1,782,124 |
Operating (Loss) | (522,379) | (398,163) | (1,424,456) | (1,359,754) |
Other Income (Expense) | ||||
Interest and miscellaneous income | 4,452 | 41 | 4,452 | 45 |
Interest expense | (128,098) | (133,972) | (380,247) | (289,113) |
Foreign currency transaction loss | (3,701) | (6,151) | (10,000) | (9,222) |
Gain on settlement of liability | 0 | 0 | 0 | 114,013 |
(Loss) Before Income Taxes | (649,726) | (538,245) | (1,810,251) | (1,544,031) |
Income taxes | 0 | 0 | 0 | 0 |
Net (Loss) | $ (649,726) | $ (538,245) | $ (1,810,251) | $ (1,544,031) |
Basic and diluted net (loss) per common share (in dollars per share) | $ 0 | $ 0 | $ (0.01) | $ (0.02) |
Weighted average number of common shares outstanding (in shares) | 201,349,431 | 159,229,866 | 201,349,431 | 99,919,486 |
License Fees [Member] | ||||
Revenues | ||||
Total revenues | $ 0 | $ 1,453 | $ 0 | $ 4,311 |
Product Sales, Net [Member] | ||||
Revenues | ||||
Total revenues | $ 84,612 | $ 199,486 | $ 273,957 | $ 418,059 |
COMPANY OVERVIEW AND BASIS OF PRESENTATION |
9 Months Ended | ||
---|---|---|---|
Sep. 30, 2018 | |||
COMPANY OVERVIEW AND BASIS OF PRESENTATION [Abstract] | |||
COMPANY OVERVIEW AND BASIS OF PRESENTATION |
Company Overview ULURU Inc. (hereinafter “we”, “our”, “us”, “ULURU”, or the “Company”) is a Nevada corporation. We are a specialty medical technology company committed to developing and commercializing innovative wound care and drug delivery systems based on our patented technologies. Our mission is to improve the lives of patients the world over by delivering comprehensive solutions that optimize outcomes for the key stakeholders in our healthcare systems: patients, providers, and payers. Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and include the accounts of ULURU Inc., a Nevada corporation, and its wholly-owned subsidiary, Uluru Delaware Inc., a Delaware corporation. They do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. All adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the Company’s financial position as of September 30, 2018 and the results of its operations for the three and nine months ended September 30, 2018 and 2017 and cash flows for the nine months ended September 30, 2018 and 2017 have been made. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, as well as disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results may differ from those estimates and assumptions. These differences are usually minor and are included in our consolidated financial statements as soon as they are known. Our estimates, judgments, and assumptions are continually evaluated based on available information and experience. Because of the use of estimates inherent in the financial reporting process, actual results could differ from those estimates. All intercompany transactions and balances have been eliminated in consolidation. Certain prior period amounts have been reclassified to conform to current period presentations. Operating results for the three and nine months ended September 30, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018. These condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, as filed with the Securities and Exchange Commission on March 30, 2018 (the “2017 Form 10-K”), including the risk factors set forth therein. |
THE EFFECT OF RECENTLY ISSUED ACCOUNTING STANDARDS |
9 Months Ended | ||
---|---|---|---|
Sep. 30, 2018 | |||
THE EFFECT OF RECENTLY ISSUED ACCOUNTING STANDARDS [Abstract] | |||
THE EFFECT OF RECENTLY ISSUED ACCOUNTING STANDARDS |
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (“Topic 606”), which amends the guidance for accounting for revenue from contracts with customers and requires revenue recognition based on the transfer of promised goods or services to customers in an amount that reflects consideration the Company expects to be entitled to in exchange for goods or services. Topic 606 supersedes prior revenue recognition requirements in ASC Topic 605 and most industry-specific accounting guidance. In 2015 and 2016, the FASB issued additional updated guidance, which clarified certain aspects of the Topic 606 and the related implementation guidance issued by the FASB-IASB Joint Transition Resource Group for Revenue Recognition. Topic 606 became effective for the Company on January 1, 2018, and was adopted using the modified retrospective method under which previously presented financial statements are not restated and the cumulative effect of adopting the new revenue standard on contracts in process is recognized by an adjustment to retained earnings at the effective date. The cumulative effect of applying the new revenue standard was an increase of $26,662 to stockholder’s equity as of January 1, 2018. The adoption of ASC 606 does not materially impact the Company’s revenue recognition as the Company’s revenue primarily comes from the sale of products which do not required long term contracts, contracts with multiple deliverables or performance obligations. Additionally, the Company already historically accounted for variable consideration on its product sales such as sale returns and discounts as part of revenue recognition. Topic 606 requires more robust disclosures than required by previous guidance, including disclosures related to disaggregation of revenue into appropriate categories, performance obligations, the judgements made in revenue recognition determinations, adjustments to revenue which relate to activities from previous quarters or years, any significant reversals of revenue, and costs to obtain or fulfill contracts. See Note 3, “Revenue Recognition.” In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”), which supersedes current lease accounting guidance. The primary difference between current GAAP and the new standard is the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under current GAAP. The standard requires a modified retrospective approach upon adoption, with practical expedients that may be available to elect. The standard is effective for the Company in the first quarter of 2019 and early adoption is permitted. The Company is evaluating the impact of the ASU on its consolidated financial statements. In March 2016, the FASB issued ASU No. 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”). ASU 2016-09 simplifies several aspects of the accounting for share-based payment transactions, including the accounting for income taxes, classification of awards as either equity or liabilities, the estimation of forfeitures, statutory tax withholding requirements, and classification in the statement of cash flows. This guidance is effective for the Company on January 1, 2017 and early adoption was permitted. The Company adopted ASU 2016-09 during the first fiscal quarter ended on March 31, 2017. As part of the adoption of this guidance, the Company elected to continue estimating forfeitures in its calculation of stock-based compensation expense. The excess tax benefits and tax deficiencies from stock-based compensation awards accounted for under ASC 718 are recognized as income tax benefit or expense, respectively, in the statement of operations and comprehensive loss. The income tax related items had no effect on the current period presentation as the Company maintains a full valuation allowance against its deferred tax assets. In addition, excess tax benefits for share-based payments are presented as an operating activity in the statement of cash flows rather than financing activity. The changes have been applied retrospectively in accordance with the ASU and prior periods have not been adjusted. The adoption of ASU 2016-09 did not have a material impact on our consolidated financial statements. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”), providing additional guidance on eight specific cash flow classification issues. The goal of ASU 2016-15 is to reduce diversity in practice of classifying certain items. The amendments in ASU 2016-15 are effective for the Company in the first quarter of 2018 using a retrospective transition method, and early adoption is permitted. The Company’s adoption of ASU 2016-15 did not have a material impact on its consolidated financial statements. In November 2016, the FASB issued ASU No. 2016-18, Restricted Cash, Statement of Cash Flows (Topic 230) (“ASU 2016-18”). ASU 2016-18 requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. ASU 2016-18 is effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted. The amendments in ASU 2016-18 should be applied using a retrospective transition method to each period presented. The Company’s adoption of ASU 2016-18 did not have a material impact on its consolidated financial statements. In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (“ASU 2017-04”). The amended guidance eliminates a step from the goodwill impairment test. Under the amended guidance, an entity should perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity would recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The Company adopted this new guidance in the fourth quarter of 2017. The Company’s adoption of ASU 2017-04 did not have a material impact on its consolidated financial statements. In May 2017, the FASB issued ASU No. 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting (“ASU 2017-09”). ASU 2017-09 provides clarity when a change to terms or conditions of a share-based payment award must be accounted for as a modification. The new guidance requires modification accounting if the vesting condition, fair value or the award classification is not the same both before and after a change to the terms and conditions of the award. The new guidance is effective on a retrospective basis beginning on January 1, 2018 with early adoption permitted. The Company’s adoption of ASU 2017-09 did not have a material impact on its consolidated financial statements. In June 2018, the FASB issued ASU 2018-07 “Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting” (“ASU 2018-07”) which expands the scope of Topic 718, “Compensation – Stock Compensation”, to include share-based payment transactions for acquiring goods and services from non-employees. The objective of ASU 2018-07 is to maintain or improve the usefulness of the information provided to the users of financial statements while reducing cost and complexity by simplifying several aspects of existing guidance. The amendments are effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year and early adoption is permitted. The Company’s adoption of ASU 2018-07, effective on January 1, 2018, did not have a material impact on its consolidated financial statements. In July 2018, the FASB issued ASU 2018-11 “Leases (Topic 842) Targeted Improvements”(“ASU 2018-11”) which provides entities with an alternative transition method for adopting the new lease standard described in ASU 2016-02, which is described above. Entities can elect to initially apply the new leases standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings. Consequently, comparative periods will continue to be accounted for in accordance with the current lease standard (Topic 840) and the disclosures will be in accordance with ASC 840. The Company is assessing this option in conjunction with its analysis of ASU 2016-02. |
SIGNIFICANT ACCOUNTING POLICIES |
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SIGNIFICANT ACCOUNTING POLICIES [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SIGNIFICANT ACCOUNTING POLICIES |
Please refer to the notes in the Company’s 2017 Form 10-K for additional details of the Company’s financial condition and a description of the Company’s accounting policies, which have been continued without change except for the Company’s Revenue Recognition accounting policy, which has been updated as a result of the Company’s adoption of ASU 2014-09 in the first quarter of 2018. Revenue Recognition The Company’s product, Altrazeal®, is distributed to and through a limited number of specialty distributors internationally and a combination of wholesalers and direct to customer sales in the United States. The Company recognizes revenue as the transfer of control of its products to the Company’s customers in an amount reflecting the consideration the Company expects to be entitled. In order to achieve this core principle, the Company applies the following five-step approach:
The Company considers customer purchase orders, which in some cases are governed by master distribution agreements, to be the contracts with the customer. For each contract, the Company considers the promise to transfer products, each of which are distinct, to be the identified performance obligations. In determining the transaction price, the Company evaluates whether the price is subject to refund or adjustment to determine the net consideration to which the Company expects to be entitled. In addition, the Company evaluates the customer’s ability to pay as part of its consideration of the contract. As the Company’s standard payment terms are less than one year, the Company elected the practical expedient under Accounting Standards Codification (ASC) 606-10-32-18, and determined that its contracts do not have a significant financing component. The Company allocates the transaction price to each distinct product based on the relative standalone selling price. Revenue is recognized when control of the product is transferred to the customer, the customer is obligated to pay the Company, and the Company has no remaining obligations, which is typically at shipment. In certain locations, primarily outside the United States, product shipping terms may vary. Thus, in such locations, the point at which control of the product transfers to the customer and revenue recognition occurs will vary accordingly. Customer returns of non-conforming products are estimated at the time revenue is recognized. In certain customer relationships, rebates exist, which are recognized according to the terms and conditions of the contractual relationship. Customer returns, rebates, and discounts are not material to the Company’s consolidated financial statements. The Company has elected to recognize the revenue and cost for freight and shipping when control over the products has transferred to the customer. When applicable, taxes collected from Customers relating to product sales and remitted to governmental authorities are excluded from revenues. The Company has elected to immediately expense contract costs from obtaining a contract as the amortization period of the asset the Company otherwise would have recognized would have been less than a year. Reserves for Variable Consideration Revenues from product sales are recorded at the transaction price, which includes estimates of variable consideration for which reserves are established and which result from discounts, returns, and other allowances that are offered within contracts between the Company and its customers. These reserves are based on the amounts earned or to be claimed on the related sales and are classified as reductions of accounts receivable (if the amount is payable to the customer) or a current liability (if the amount is payable to a party other than a customer). Where appropriate, these estimates take into consideration a range of possible outcomes and contemplates relevant factors such as the Company’s historical experience, current contractual and statutory requirements, specific known market events and trends, industry data and forecasted customer buying and payment patterns. Overall, these reserves reflect the Company’s best estimates of the amount of consideration to which it is entitled based on the terms of the contract. The amount of variable consideration which is included in the transaction price may be constrained, and is included in the net sales price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period. Actual amounts of consideration ultimately received may differ from the Company’s estimates. The Company believes that the reserves it has established are reasonable based upon current facts and circumstances. Applying different judgments or interpretations to the same facts and circumstances could result in the estimated amount for reserves to vary. If actual results vary with respect to the Company’s reserves, the Company may need to adjust its estimates, which could have a material effect on the Company’s results of operations in the period of adjustment. To date, such adjustments have not been material. Trade Discounts and Allowances The Company receives sales order management, marketing and promotions, data and distribution services from certain customers. To the extent the services received are distinct from the Company’s sale of products to the customer, these payments are classified in selling, general and administrative expenses in the consolidated statements of operations of the Company. The company revenue recognition is net of estimated trade discounts and allowances. Other Revenues The Company enters into licensing agreements, from time to time, which are within the scope of Topic 606, under which it may license certain rights to its products or product candidates to third parties. The terms of these arrangements typically include payment to the Company of one or more of the following: non-refundable, up-front license fees; development, regulatory and commercial milestone payments; and royalties on net sales of licensed products. Each of these payments results in revenues recognized and classified as other revenues. Licenses of intellectual property: If the license of the Company’s intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenues from non-refundable, up-front fees allocated to the license when the license is transferred to the customer and the customer is able to use and benefit from the license. For licenses that are bundled with other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, up-front fees. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition. Milestone Payments: At the inception of each arrangement that includes development milestone payments, the Company evaluates whether the milestones are considered probable of being reached and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the control of the Company or the licensee, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. The transaction price is then allocated to each performance obligation on a relative stand-alone selling price basis, for which the Company recognizes revenue as or when the performance obligations under the contract are satisfied. At the end of each subsequent reporting period, the Company re-evaluates the probability of achievement of such development milestones and any related constraint, and if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect license, collaboration and other revenues and earnings in the period of adjustment. Royalties: For arrangements that include sales-based royalties, including milestone payments based on the level of sales, and the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). Under the Company’s various contracts, the Company may receive up-front payments and fees, which may require deferral of revenue recognition to a future period until the Company performs its obligations under these arrangements. Amounts are recorded as accounts receivable when the Company’s right to consideration is unconditional. The Company does not assess whether a contract has a significant financing component if the expectation at contract inception is such that the period between payment by the customer and the transfer of the promised goods or services to the customer will be one year or less. We received upfront cash payments for licenses of our technology in years 2007 to 2013. The revenue was recognized straight-line over the life of the patent. Our obligation was performed at the time the license was granted. Following the revenue recognition policies in accordance with ASC 606, we decreased the accumulated deficit by $26,662 as of January 1, 2018 and decreased deferred revenue by the same amount. Effective January 1, 2018, we adopted Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers, as amended (commonly referred to as ASC 606) using the modified retrospective transition method. The cumulative effect of applying the standard was an increase of $26,662 to stockholder’s equity as of January 1, 2018. Our statement of operations for the three and nine months ended September 30, 2018 and our balance sheet as of September 30, 2018 are presented under ASC 606, while our statement of operations for the three and nine months ended September 30, 2017 and our balance sheet as of December 31, 2017 are presented under ASC 605, Revenue Recognition. See below for disclosure of the impact of the adoption of ASC 606 on our statement of operations and balance sheet for the three and nine months ended September 30, 2018, and the effect of changes made to our consolidated balance sheet as of January 1, 2018. The table below presents the cumulative effect of the changes made to the consolidated January 1, 2018 balance sheet due to the adoption of ASC 606.
The table below presents the impact of the adoption of ASC 606 on our statement of operations.
The table below presents the impact of the adoption of ASC 606 on our balance sheet.
Disaggregation of Revenue Revenue is disaggregated by primary geographic markets, as we believe this best depicts how the nature, amount, timing, and uncertainty of our revenue and cash flows are affected by economic factors. For more information on the Company’s disaggregated revenue, see Note 4, Segment Information. |
SEGMENT INFORMATION |
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SEGMENT INFORMATION [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SEGMENT INFORMATION |
Our entire business is managed by a single management team, which reports to the Chief Executive Officer. Our corporate headquarters in the United States collects proceeds from product sales, licensing fees, royalties, and sponsored research revenues from our arrangements with external customers and licensees. Our revenues are currently derived primarily from distribution partners for international activities and our domestic sales activities for our products. Revenues per geographic area for the three and nine months ended September 30 are summarized as follows:
A significant portion of our revenues are derived from a few major customers. For the three months ended September 30, 2018 and 2017, four customers and one customer, respectively, had greater than 10% of total revenues and represented in aggregate 89% and 98%, respectively, of total revenues. For the nine months ended September 30, 2018 and 2017, two customers and two customers, respectively, had greater than 10% of total revenues and represented in aggregate 81% and 97%, respectively, of total revenues. |
INVENTORY |
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INVENTORY [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||
INVENTORY |
As of September 30, 2018, our inventory was comprised of Altrazeal® finished goods, manufacturing costs incurred in the production of Altrazeal®, and raw materials. Inventories are stated at the lower of cost (first in, first out method) or net realizable value. We regularly review inventories on hand and write down the carrying value of our inventories for excess and potentially obsolete inventories based on historical usage and estimated future usage. In assessing the ultimate realization of our inventories, we are required to make judgments as to future demand requirements. As actual future demand or market conditions may vary from those projected by us, adjustment to inventories may be required. The components of inventory, at the different stages of production, consisted of the following at September 30, 2018 and December 31, 2017:
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PROPERTY, EQUIPMENT and LEASEHOLD IMPROVEMENTS |
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PROPERTY, EQUIPMENT and LEASEHOLD IMPROVEMENTS |
Property, equipment and leasehold improvements, net, consisted of the following at September 30, 2018 and December 31, 2017:
Depreciation expense on property, equipment and leasehold improvements was $5,480 and $5,481 for the three months ended September 30, 2018 and 2017, respectively, and was $16,441 and $71,039 for the nine months ended September 30, 2018 and 2017, respectively. |
INTANGIBLE ASSETS |
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INTANGIBLE ASSETS [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INTANGIBLE ASSETS |
Patents Intangible patent assets are composed of patents acquired in October, 2005. Intangible assets, net consisted of the following at September 30, 2018 and December 31, 2017:
Amortization expense for intangible patent assets was $9,337 and $9,337 for the three months ended September 30, 2018 and 2017, respectively, and was $27,707 and $27,707 for the nine months ended September 30, 2018 and 2017, respectively. The future aggregate amortization expense for intangible patent assets, remaining as of September 30, 2018, is as follows:
Licensing rights Acquisition of Licensing Rights – 2017 On February 27, 2017, we entered into a Note, Warrant and Preferred Stock Purchase Agreement (the “Purchase Agreement”) with Velocitas Partners, LLC (“Velocitas") and Velocitas I LLC (“Velo LLC”), an entity controlled by Velocitas, with respect to an aggregate financing of up to $6,000,000. Refer to a description in greater detail of the financing event with Velocitas and Velo LLC in Note 9. Convertible Debt. At the second closing of the financing event with Velocitas and Velo LLC, which occurred on March 31, 2017, the Company acquired the Altrazeal® distributor agreements Velocitas had with its sub-distributors in exchange for the issuance of 13,375,000 shares of Common Stock. The Company has valued the acquisition of the Altrazeal® distributor agreements from Velocitas at $869,375 based on the closing price of $0.065 per share of the Company’s Common Stock on March 31, 2017. Licensing rights, net consisted of the following at September 30, 2018 and December 31, 2017:
Amortization expense for intangible licensing rights assets was $104,931 and $104,931 for the three months ended September 30, 2018 and 2017, respectively, and was $311,372 and $288,895 for the nine months ended September 30, 2018 and 2017, respectively. The future aggregate amortization expense for intangible licensing rights assets, remaining as of September 30, 2018, is as follows:
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ACCRUED LIABILITIES |
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ACCRUED LIABILITIES |
Accrued liabilities consisted of the following at September 30, 2018 and December 31, 2017:
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CONVERTIBLE NOTE PAYABLE - RELATED PARTY |
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CONVERTIBLE NOTE PAYABLE - RELATED PARTY [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CONVERTIBLE NOTE PAYABLE - RELATED PARTY |
Debt Financing – February and March 2017 On February 27, 2017, the Company entered into the Purchase Agreement with Velocitas and Velo LLC under which the Company received gross proceeds of $6,000,000 in two closings, with the initial closing occurring on February 27, 2017 and the second closing occurring on March 31, 2017, which we refer to as the “March 2017 Offering”. Refer to a description in greater detail of the Company’s related party affiliation with Velocitas and Velo LLC in Note 16. Related Party Transactions and Concentration. The first closing, which occurred on February 27, 2017, included the purchase by Velocitas at face value of a Secured Convertible Note, dated February 27, 2017, in the principal amount of $500,000 (the “Initial Note”), with the Initial Note accruing interest at 12.5% per annum and having a term of two years (subject to acceleration under certain circumstances). The second closing, which occurred on March 31, 2017, included the purchase by Velocitas at face value of an additional $500,000 Secured Convertible Note, dated March 31, 2017, (the “Second Note”) with the Second Note accruing interest at 12.5% per annum and having a term of two years (subject to acceleration under certain circumstances), and Velo LLC purchasing 1,250 shares of Series B Convertible Preferred Stock of the Company for gross proceeds of $5,000,000, at an as-converted-to-Common Stock purchase price of $0.04 per share. The Company received of $983,092 of net proceeds from the issuance of the Initial Note and the Second Note due to $16,908 of debt issuance costs and received of $4,915,661 of net proceeds from the sale of the Series B Convertible Preferred Stock due to $84,339 of equity issuance costs. The Initial Note and the Second Note are convertible into shares of Common Stock at a conversion price of $0.04 per share, subject to equitable adjustments, with mandatory conversion of all unpaid principal and interest required on the second anniversary of each such note, unless an event of default has occurred and is continuing. The Initial Note and the Second Note are secured by all of the assets of the Company and its subsidiaries pursuant to a Security Agreement executed at the initial closing. The Series B Convertible Preferred Stock that was issued in connection with the second closing provided, among other things, that it would automatically convert into Common Stock when the number of authorized shares of Common Stock is increased within 190 days of the second closing as necessary to permit all outstanding convertible or exercisable securities (including the Series B Convertible Preferred Stock) to convert to Common Stock. Following stockholder approval of an amendment to our articles of incorporation increasing the number of authorized shares of Common Stock from 200,000,000 shares to 750,000,000 shares, the Company filed on July 26, 2017 with the State of Nevada an amendment to its articles of incorporation implementing such increase. This resulted in the conversion of all 1,250 outstanding shares of Series B Convertible Preferred Stock held by Velo LLC into 125,000,000 shares of Common Stock. As a condition of the March 2017 Offering, the Company issued to Velocitas at the second closing a warrant to purchase up to 57,055,057 shares of Common Stock (the “Warrant”). The Warrant has an exercise price of $0.04 per share, a 10-year term and is subject to cashless exercise. In addition, at the second closing, the Company acquired the Altrazeal distributor agreements Velocitas had with its sub-distributors in exchange for the issuance of 13,375,000 shares of Common Stock. The Company, Velocitas, Velo LLC, and certain affiliates also signed a Voting Agreement (the “Voting Agreement”) pursuant to which the parties agreed to set the size of the Board of Directors at six directors, and agreed to vote for the election to the Board of Directors of four persons designated by Velocitas (initially to be Anish Shah, Oksana Tiedt, Vaidehi Shah and Arindam Bose), one director designated by Bradley Sacks and one additional director designated by a major investor or by the Board of Directors. In addition, the parties to the Voting Agreement agreed to vote in favor of a proposal to amend the Company’s articles of incorporation to increase the authorized shares as required to permit the conversion of the Series B Convertible Preferred Stock. In addition, the Company, Velocitas, Velo LLC, and certain affiliates entered into an Investor Rights Agreement (the “Investor Rights Agreement”) that provides the parties thereto with demand, Form S-3 and piggy back registration rights, Rule 144 information rights, and a right of first offer (or preemptive right) in connection with future sales of securities by the Company (subject to standard exceptions). The Investor Rights Agreement includes indemnification obligations associated with the registration rights. Michael Sacks and Bradley Sacks and affiliates are parties to the Investor Rights Agreement, in part in exchange for the termination by certain of such persons and The Punch Trust of a Registration Rights Agreement dated as of January 31, 2014. Using specific guidelines in accordance with U.S. GAAP, we allocated the value of the proceeds received to the promissory note and to the Warrant on a relative fair value basis. We calculated the fair value of the Warrant issued with the debt instrument using the Black-Scholes valuation method, using the same assumptions used for valuing employee stock options, except the contractual life of the Warrant was used. Using the effective interest method, the allocated fair value of the Warrant was recorded as a debt discount and is being amortized over the expected term of the promissory note to interest expense. Information relating to the Initial Note and the Second Note is as follows:
As part of the Initial Note and the Second Note, at the holder’s option, all unpaid principle and interest due under each convertible promissory note may be converted into shares of Common Stock based on a conversion price of $0.04 per share. The Initial Note and the Second Note mature on February 27, 2019 and March 31, 2019, respectively, and on each such maturity date each convertible promissory note, and accrued interest thereon, is subject to mandatory conversion based on a conversion price of $0.04 per share, unless an event of default has occurred and is continuing. The amount of interest cost recognized from our promissory notes and our convertible debt was $31,507 and $31,507 for the three months ended September 30, 2018 and 2017, respectively, and $93,493 and $68,848 for the nine months ended September 30, 2018 and 2017, respectively. The amount of debt discount amortized from our convertible debt was $87,767 and $87,571 for the three months ended September 30, 2018 and 2017, respectively, and $260,438 and $174,577 for the nine months ended September 30, 2018 and 2017, respectively. The amount of debt issuance costs amortized from our convertible debt was $2,253 and $2,060 for the three months ended September 30, 2018 and 2017, respectively, and $6,582 and $3,976 for the nine months ended September 30, 2018 and 2017, respectively. |
EQUITY TRANSACTIONS |
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EQUITY TRANSACTIONS [Abstract] | |||
EQUITY TRANSACTIONS |
Preferred Stock Transaction March 2017 Offering On February 27, 2017, the Company entered into the Purchase Agreement with Velocitas and Velo LLC under which the Company received gross proceeds of $6,000,000, in two closing with the initial closing occurring on February 27, 2017 and the second closing occurring on March 31, 2017. The second closing included, among other transaction components, the purchase by Velo LLC of 1,250 shares of Series B Convertible Preferred Stock of the Company for $5,000,000. The Company received of $4,915,661 of net proceeds from the sale of the Series B Convertible Preferred Stock due to $84,339 of equity issuance costs. On July 26, 2017, all 1,250 outstanding shares of Series B Convertible Preferred Stock held by Velo LLC were converted into 125,000,000 shares of Common Stock. Refer to a description in greater detail of the financing event with Velocitas and Velo LLC in Note 9. Convertible Debt. |
STOCKHOLDERS' EQUITY |
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STOCKHOLDERS' EQUITY [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
STOCKHOLDERS' EQUITY |
Common Stock As of September 30, 2018, we had 201,349,431 shares of Common Stock issued and outstanding. For the nine months ended September 30, 2018, we did not issue or redeem any shares of Common Stock. Preferred Stock As of September 30, 2018, we had no shares of Series A Preferred Stock (the “Series A Shares”) issued and outstanding. For the nine months ended September 30, 2018, we did not issue or redeem any Series A Shares. As of September 30, 2018, we had no shares of Series B Preferred Stock (the “Series B Shares”) issued and outstanding. For the nine months ended September 30, 2018, we did not issue or redeem any Series B Shares. Warrants The following table summarizes the warrants outstanding and the number of shares of Common Stock subject to exercise as of September 30, 2018 and the changes therein during the nine months then ended:
For the nine months ended September 30, 2018, we did not issue or redeem any warrants. Of the warrant shares subject to exercise as of September 30, 2018, expiration of the right to exercise is as follows:
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EARNINGS PER SHARE |
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EARNINGS PER SHARE [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||
EARNINGS PER SHARE |
Basic and Diluted Net Loss Per Share In accordance with FASB ASC Topic 260, Earnings per Share, basic earnings (loss) per common share is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per common share is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period, increased to include potential dilutive common shares. The effect of outstanding stock options, restricted vesting Common Stock, convertible debt, convertible preferred stock, and warrants, when dilutive, is reflected in diluted earnings (loss) per common share by application of the treasury stock method. We have excluded all outstanding stock options, restricted vesting Common Stock, convertible debt, convertible preferred stock, and warrants from the calculation of diluted net loss per common share because all such securities are antidilutive for all periods presented. Shares used in calculating basic and diluted net loss per common share exclude these potential common shares as of September 30, 2018 and December 31, 2017:
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SHARE BASED COMPENSATION |
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SHARE BASED COMPENSATION [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SHARE BASED COMPENSATION |
The Company maintains the 2006 Equity Incentive Plan and the 2018 Equity Incentive Plan. Each of the Equity Incentive Plans are administered by the Board of Directors, acting in lieu of a compensation committee, which selects persons to receive awards and determines the number of shares subject to each award and the terms, conditions, performance measures, and other provisions of the award. As of March 29, 2016, the 2006 Equity Incentive Plan expired by its terms, and no additional awards may be granted thereunder. The expiration of the 2006 Equity Incentive Plan does not affect outstanding awards. On March 28, 2018, the Board of Directors approved the 2018 Equity Incentive Plan, which was subsequently ratified at the Company’s 2018 Annual Meeting of Stockholders held on June 11, 2018. The 2018 Equity Incentive Plan allows for the Company to grant awards for up to 20,000,000 shares of Common Stock. Awards under the 2018 Equity Incentive Plan may include the following award types: stock options, which may be either incentive stock options or nonqualified stock options; stock appreciation rights; restricted stock; RSUs; other stock-based awards, including unrestricted shares; or any combination of the foregoing. The exercise price of stock options granted under the 2018 Equity Incentive Plan is equal to or greater than the closing price of a share of the Company’s Common Stock on the grant date. Our Board has granted the following stock option awards for the three and nine months ended September 30:
We account for share-based compensation under FASB ASC Topic 718, Stock Compensation, which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees, consultants, and directors based on estimated fair values of the award on the grant date. We use the Black-Scholes option-pricing model to estimate the fair value of share-based awards with the following weighted average assumptions for the three and nine months ended September 30:
Stock Options (Incentive and Nonstatutory) The following table summarizes share-based compensation related to stock options for the three and nine months ended September 30:
As of September 30, 2018, the balance of unearned share-based compensation to be expensed in future periods related to unvested stock option awards, as adjusted for expected forfeitures, is approximately $50,000. The period over which the unearned share-based compensation is expected to be recognized is approximately seventy two months. The following table summarizes the stock options outstanding and the number of shares of Common Stock subject to exercise as of September 30, 2018 and the changes therein during the nine months then ended:
Summary of Plans 2006 Equity Incentive Plan In March 2006, our Board adopted and our stockholders approved our 2006 Equity Incentive Plan, which initially provided for the issuance of up to 133,333 shares of our Common Stock pursuant to stock option and other equity awards. At subsequent annual meetings of the stockholders held in 2007, 2009, 2010, 2012, 2013, and 2014, our stockholders approved amendments to the 2006 Equity Incentive Plan that increased the number of shares of Common Stock issuable under the 2006 Equity Incentive Plan to a total of 2,800,000 shares. In December 2006, we began issuing stock options to employees, consultants, and directors. The stock options issued generally vest over a period of one to four years and have a maximum contractual term of ten years. In January 2007, we began issuing restricted stock awards to our employees. Restricted stock awards generally vest over a period of six months to five years after the date of grant. Prior to vesting, restricted stock awards do not have dividend equivalent rights, do not have voting rights and the shares underlying the restricted stock awards are not considered issued and outstanding. Shares of Common Stock are issued on the date the restricted stock awards vest. As of September 30, 2018, we had granted options to purchase 2,061,167 shares of Common Stock since the inception of the 2006 Equity Incentive Plan, of which 130,000 were outstanding at a weighted average exercise price of $0.58 per share, and we had granted awards for 68,616 shares of restricted stock since the inception of the 2006 Equity Incentive Plan, of which none were outstanding. As of March 29, 2016, the 2006 Equity Incentive Plan expired by its terms, and no additional awards may be granted thereunder. The expiration of the 2006 Equity Incentive Plan does not affect outstanding awards. 2018 Equity Incentive Plan On March 28, 2018, our Board of Directors adopted and approved our 2018 Equity Incentive Plan which initially provides for the issuance of up to 20,000,000 shares of our Common Stock pursuant to stock options and other equity awards. As of September 30, 2018, we had granted options to purchase 2,500,000 shares of Common Stock since the inception of the 2018 Equity Incentive Plan, of which 2,500,000 were outstanding at a weighted average exercise price of $0.05 per share. As of September 30, 2018, there were 17,500,000 shares that remain available for future grants under the 2018 Equity Incentive Plan. |
FAIR VALUE MEASUREMENTS |
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FAIR VALUE MEASUREMENTS |
In accordance with FASB ASC Topic 820, Fair Value Measurements, (“ASC Topic 820”) certain assets and liabilities of the Company are required to be recorded at fair value. Fair value is determined based on the exchange price that would be received for an asset or paid to transfer a liability in an orderly transaction between market participants. The guidance in ASC Topic 820 also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimized the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are based on market data obtained from independent sources, while unobservable inputs are based on our market assumptions. Unobservable inputs require significant management judgment or estimation. In some cases, the inputs used to measure an asset or liability may fall into different levels of the fair value hierarchy. In those instances, the fair value measurement is required to be classified using the lowest level of input that is significant to the fair value measurement. Such determination requires significant management judgment. The three-tier value hierarchy, which prioritizes the inputs used in the valuation methodologies, is as follows: Level 1—Valuations based on quoted prices (unadjusted) for identical assets or liabilities in active markets. Level 2—Valuations based on observable inputs other than quoted prices in Level 1, such as quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, and other inputs that are observable or can be corroborated by observable market data. Level 3—Valuations based on unobservable inputs reflecting the Company’s own assumptions, consistent with reasonably available assumptions made by other market participants. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurements. We review the fair value hierarchy classification on a quarterly basis. Changes in the observability of valuation inputs may result in a reclassification of levels for certain securities within the fair value hierarchy. Our financial instruments, including cash, cash equivalents, accounts receivable, and accounts payable are carried at cost, which approximates their fair value because of the short-term maturity of these instruments. We believe that the carrying value of our promissory note payable balances approximates fair value based on a valuation methodology using the income approach and a discounted cash flow model. The following table summarizes the fair value of our financial instruments at September 30, 2018 and December 31, 2017.
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INCOME TAXES |
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INCOME TAXES |
There was no current federal tax provision or benefit recorded for any period since inception, nor were there any recorded deferred income tax assets and the Company has provided a full valuation allowance. As a result, the effective tax rate is zero and the net deferred tax assets are zero. |
COMMITMENTS AND CONTINGENCIES |
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COMMITMENTS AND CONTINGENCIES |
Operating Leases On January 31, 2006 we entered into a lease agreement for office and laboratory space in Addison, Texas. The lease commenced on April 1, 2006 and originally continued until April 1, 2013. The lease required a minimum monthly lease obligation of $9,330, which was inclusive of monthly operating expenses, until April 1, 2011 and at such time increased to $9,776, which was inclusive of monthly operating expenses. On February 22, 2013, we executed an Amendment to Lease Agreement (the “Lease Amendment”) that renewed and extended our lease until March 31, 2015. The Lease Amendment required a minimum monthly lease obligation of $9,193, which was inclusive of monthly operating expenses, until March 31, 2014 and at such time, increased to $9,379, which was inclusive of monthly operating expenses. On March 17, 2015, we executed a Second Amendment to Lease Agreement (the “Second Amendment”) that renewed and extended our lease until March 31, 2018. The Second Amendment required a minimum monthly lease obligation of $9,436, which was inclusive of monthly operating expenses. On December 15, 2017, we entered into a Termination of Lease Agreement whereby we cancelled our existing lease for office and laboratory space and concurrently entered into a new lease agreement (the “Office Lease”) that will continue until December 2019. The Office Lease encompasses approximately 2,500 rentable square feet and currently requires a minimum monthly lease obligation of $2,729, which is inclusive of monthly operating expenses. We are also subject to two lease agreements for storage, housing, and warehouse space with each lease commencing in 2018 and continuing until no later than December 2019. The lease agreements currently require a minimum monthly lease obligation of $2,783, which is inclusive of monthly operating expenses. The future minimum lease payments under the Office Lease and the Warehouse Lease are as follows as of September 30, 2018:
Rent expense for our operating leases amounted to $13,875 and $30,301 for the three months ended September 30, 2018 and 2017, respectively, and $42,654 and $96,245 for the nine months ended September 30, 2018 and 2017, respectively. Indemnification In accordance with our restated articles of incorporation and our amended and restated bylaws, we have indemnification obligations to our officers and directors for certain events or occurrences, subject to certain limits, while they are serving at our request in their respective capacities. We have a director and officer insurance policy that enables us to recover a portion of any amounts paid for future potential claims. We have also entered into contractual indemnification agreements with each of our officers and directors. Related Party Transactions and Concentration Note, Warrant and Preferred Stock Purchase Agreement On February 27, 2017, we entered into the Purchase Agreement with Velocitas and Velo LLC, an entity controlled by Velocitas, with respect to an aggregate financing of up to $6,000,000. Refer to a description in greater detail of the financing event with Velocitas and Velo LLC in Note 9. Convertible Debt. On March 31, 2017, the second closing of the Purchase Agreement included, among other transaction components, the Company acquiring the Altrazeal distributor agreements Velocitas had with its sub-distributors in exchange for the issuance of 13,375,000 shares of Common Stock. The Company has valued the acquisition of the Altrazeal distributor agreement from Velocitas at $869,375 based on the closing price of $0.065 per share of the Company’s Common Stock on March 31, 2017. For the nine months ended September 30, 2018 and 2017, the Company recorded revenues, in approximate numbers, of nil and $214,000, respectively, with Velocitas GmbH, an affiliated entity of Velocitas, which represented 0% and 51% of our total revenues, respectively. As of September 30, 2018 and December 31, 2017, Velocitas GmbH did not have any outstanding net accounts receivable. Consulting Agreement – Velocitas GmbH On April 1, 2017, the Company entered into a Consulting Agreement with Velocitas GmbH to provide the Company with operational support services in the fields of regulatory administration, finance, international customer account management, manufacturing, supply chain logistics, and other services required by the Company. Velocitas GmbH receives a monthly payment of $25,833 for providing such services to the Company. Related Party Obligations Since 2011, our named executive officers and certain key executives have temporarily deferred portions of their compensation as part of a plan to conserve and manage the Company’s cash and financial resources. As of September 30, 2018 and December 31, 2017, the Company’s obligation to these executives for temporarily deferred compensation was approximately $72,000 which was included in accrued liabilities. Contingent Milestone Obligations We are subject to paying Access Pharmaceuticals, Inc. (“Access”) for certain milestones based on our achievement of certain annual net sales, cumulative net sales, and/or our having reached certain defined technology milestones including licensing agreements and advancing products to clinical development. As of September 30, 2018, the future milestone obligations that we are subject to paying Access, if the milestones related thereto are achieved, total $4,750,000. Such milestones are based on total annual sales of 20 and 40 million dollars of certain products, annual sales of 20 million dollars of any one certain product, and cumulative sales of such products of 50 and 100 million dollars. As of September 30, 2018, the Company has accrued approximately $43,000 of expense relating to future milestone payments to Access. On March 7, 2008, we terminated the license agreement with ProStrakan Ltd. for Amlexanox-related products in the United Kingdom and Ireland. As part of the termination, we agreed to pay ProStrakan Ltd. a royalty of 30% on any future payments received by us from a new licensee in the United Kingdom and Ireland territories, up to a maximum of $1,400,000. On November 17, 2008, we entered into a licensing agreement for Amlexanox-related product rights to the United Kingdom and Ireland territories with MEDA AB. Prescription Drug User Fee Obligation The Company was assessed prescription drug user fees (“PDUFA”) of approximately $535,000 by the United States Department of Health and Human Services (the “DHHS”) for the sale and manufacture of Aphthasol® from 2009 to 2012. In November 2017, the Company negotiated a settlement payment of $400,000 with DHHS thereby cancelling certain unpaid invoices and accrued penalties and interest thereon. There continues to be a PDUFA fee and accrued penalties and interest that remains unpaid as of this Report. Since the Company has not yet reached a settlement with the DHHS on the unpaid PDUFA fee, it is possible that the Company may be subject to additional collection costs. |
LEGAL PROCEEDINGS |
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LEGAL PROCEEDINGS [Abstract] | |||
LEGAL PROCEEDINGS |
From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. We are not currently a party to any legal proceedings, the adverse outcome of which, in management’s opinion, individually or in the aggregate, would have a material adverse effect on the results of our operations or financial position. There are no material proceedings to which any director, officer or any of our affiliates, any owner of record or beneficially of more than five percent of any class of our voting securities, or any associate of any such director, officer, our affiliates, or security holder, is a party adverse to us or our consolidated subsidiary or has a material interest adverse thereto; however, one or more events may lead to a formal dispute or proceeding in the future. |
SUBSEQUENT EVENTS |
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SUBSEQUENT EVENTS [Abstract] | |||
SUBSEQUENT EVENTS |
On November 1, 2018, we issued to each of two consulting firms a warrant to purchase up to 500,000 shares of common stock with one warrant having an exercise price of $0.05 per share and the other warrant having an exercise price of $0.06 per share with each warrant having a term expiring on November 1, 2028 as payment for consulting services provided by such consulting firms. The warrants vest based upon the respective consultant achieving certain performance goals, including the Company’s receipt of specified revenue through customers referred by such consultants and/or the successful registration of the Company’s product in specified jurisdictions. |
COMPANY OVERVIEW AND BASIS OF PRESENTATION (Policies) |
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COMPANY OVERVIEW AND BASIS OF PRESENTATION [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and include the accounts of ULURU Inc., a Nevada corporation, and its wholly-owned subsidiary, Uluru Delaware Inc., a Delaware corporation. They do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. All adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the Company’s financial position as of September 30, 2018 and the results of its operations for the three and nine months ended September 30, 2018 and 2017 and cash flows for the nine months ended September 30, 2018 and 2017 have been made. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, as well as disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results may differ from those estimates and assumptions. These differences are usually minor and are included in our consolidated financial statements as soon as they are known. Our estimates, judgments, and assumptions are continually evaluated based on available information and experience. Because of the use of estimates inherent in the financial reporting process, actual results could differ from those estimates. All intercompany transactions and balances have been eliminated in consolidation. Certain prior period amounts have been reclassified to conform to current period presentations. Operating results for the three and nine months ended September 30, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018. These condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, as filed with the Securities and Exchange Commission on March 30, 2018 (the “2017 Form 10-K”), including the risk factors set forth therein. |
SIGNIFICANT ACCOUNTING POLICIES (Policies) |
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SIGNIFICANT ACCOUNTING POLICIES [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue Recognition | Revenue Recognition The Company’s product, Altrazeal®, is distributed to and through a limited number of specialty distributors internationally and a combination of wholesalers and direct to customer sales in the United States. The Company recognizes revenue as the transfer of control of its products to the Company’s customers in an amount reflecting the consideration the Company expects to be entitled. In order to achieve this core principle, the Company applies the following five-step approach:
The Company considers customer purchase orders, which in some cases are governed by master distribution agreements, to be the contracts with the customer. For each contract, the Company considers the promise to transfer products, each of which are distinct, to be the identified performance obligations. In determining the transaction price, the Company evaluates whether the price is subject to refund or adjustment to determine the net consideration to which the Company expects to be entitled. In addition, the Company evaluates the customer’s ability to pay as part of its consideration of the contract. As the Company’s standard payment terms are less than one year, the Company elected the practical expedient under Accounting Standards Codification (ASC) 606-10-32-18, and determined that its contracts do not have a significant financing component. The Company allocates the transaction price to each distinct product based on the relative standalone selling price. Revenue is recognized when control of the product is transferred to the customer, the customer is obligated to pay the Company, and the Company has no remaining obligations, which is typically at shipment. In certain locations, primarily outside the United States, product shipping terms may vary. Thus, in such locations, the point at which control of the product transfers to the customer and revenue recognition occurs will vary accordingly. Customer returns of non-conforming products are estimated at the time revenue is recognized. In certain customer relationships, rebates exist, which are recognized according to the terms and conditions of the contractual relationship. Customer returns, rebates, and discounts are not material to the Company’s consolidated financial statements. The Company has elected to recognize the revenue and cost for freight and shipping when control over the products has transferred to the customer. When applicable, taxes collected from Customers relating to product sales and remitted to governmental authorities are excluded from revenues. The Company has elected to immediately expense contract costs from obtaining a contract as the amortization period of the asset the Company otherwise would have recognized would have been less than a year. Reserves for Variable Consideration Revenues from product sales are recorded at the transaction price, which includes estimates of variable consideration for which reserves are established and which result from discounts, returns, and other allowances that are offered within contracts between the Company and its customers. These reserves are based on the amounts earned or to be claimed on the related sales and are classified as reductions of accounts receivable (if the amount is payable to the customer) or a current liability (if the amount is payable to a party other than a customer). Where appropriate, these estimates take into consideration a range of possible outcomes and contemplates relevant factors such as the Company’s historical experience, current contractual and statutory requirements, specific known market events and trends, industry data and forecasted customer buying and payment patterns. Overall, these reserves reflect the Company’s best estimates of the amount of consideration to which it is entitled based on the terms of the contract. The amount of variable consideration which is included in the transaction price may be constrained, and is included in the net sales price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period. Actual amounts of consideration ultimately received may differ from the Company’s estimates. The Company believes that the reserves it has established are reasonable based upon current facts and circumstances. Applying different judgments or interpretations to the same facts and circumstances could result in the estimated amount for reserves to vary. If actual results vary with respect to the Company’s reserves, the Company may need to adjust its estimates, which could have a material effect on the Company’s results of operations in the period of adjustment. To date, such adjustments have not been material. Trade Discounts and Allowances The Company receives sales order management, marketing and promotions, data and distribution services from certain customers. To the extent the services received are distinct from the Company’s sale of products to the customer, these payments are classified in selling, general and administrative expenses in the consolidated statements of operations of the Company. The company revenue recognition is net of estimated trade discounts and allowances. Other Revenues The Company enters into licensing agreements, from time to time, which are within the scope of Topic 606, under which it may license certain rights to its products or product candidates to third parties. The terms of these arrangements typically include payment to the Company of one or more of the following: non-refundable, up-front license fees; development, regulatory and commercial milestone payments; and royalties on net sales of licensed products. Each of these payments results in revenues recognized and classified as other revenues. Licenses of intellectual property: If the license of the Company’s intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenues from non-refundable, up-front fees allocated to the license when the license is transferred to the customer and the customer is able to use and benefit from the license. For licenses that are bundled with other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, up-front fees. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition. Milestone Payments: At the inception of each arrangement that includes development milestone payments, the Company evaluates whether the milestones are considered probable of being reached and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the control of the Company or the licensee, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. The transaction price is then allocated to each performance obligation on a relative stand-alone selling price basis, for which the Company recognizes revenue as or when the performance obligations under the contract are satisfied. At the end of each subsequent reporting period, the Company re-evaluates the probability of achievement of such development milestones and any related constraint, and if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect license, collaboration and other revenues and earnings in the period of adjustment. Royalties: For arrangements that include sales-based royalties, including milestone payments based on the level of sales, and the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). Under the Company’s various contracts, the Company may receive up-front payments and fees, which may require deferral of revenue recognition to a future period until the Company performs its obligations under these arrangements. Amounts are recorded as accounts receivable when the Company’s right to consideration is unconditional. The Company does not assess whether a contract has a significant financing component if the expectation at contract inception is such that the period between payment by the customer and the transfer of the promised goods or services to the customer will be one year or less. We received upfront cash payments for licenses of our technology in years 2007 to 2013. The revenue was recognized straight-line over the life of the patent. Our obligation was performed at the time the license was granted. Following the revenue recognition policies in accordance with ASC 606, we decreased the accumulated deficit by $26,662 as of January 1, 2018 and decreased deferred revenue by the same amount. Effective January 1, 2018, we adopted Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers, as amended (commonly referred to as ASC 606) using the modified retrospective transition method. The cumulative effect of applying the standard was an increase of $26,662 to stockholder’s equity as of January 1, 2018. Our statement of operations for the three and nine months ended September 30, 2018 and our balance sheet as of September 30, 2018 are presented under ASC 606, while our statement of operations for the three and nine months ended September 30, 2017 and our balance sheet as of December 31, 2017 are presented under ASC 605, Revenue Recognition. See below for disclosure of the impact of the adoption of ASC 606 on our statement of operations and balance sheet for the three and nine months ended September 30, 2018, and the effect of changes made to our consolidated balance sheet as of January 1, 2018. The table below presents the cumulative effect of the changes made to the consolidated January 1, 2018 balance sheet due to the adoption of ASC 606.
The table below presents the impact of the adoption of ASC 606 on our statement of operations.
The table below presents the impact of the adoption of ASC 606 on our balance sheet.
Disaggregation of Revenue Revenue is disaggregated by primary geographic markets, as we believe this best depicts how the nature, amount, timing, and uncertainty of our revenue and cash flows are affected by economic factors. For more information on the Company’s disaggregated revenue, see Note 4, Segment Information. |
SIGNIFICANT ACCOUNTING POLICIES (Tables) |
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SIGNIFICANT ACCOUNTING POLICIES [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cumulative Effect of Changes Made to Consolidated Balance Sheet | The table below presents the cumulative effect of the changes made to the consolidated January 1, 2018 balance sheet due to the adoption of ASC 606.
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Impact of Adoption of ASC 606 on Balance Sheet and Statement of Operations | The table below presents the impact of the adoption of ASC 606 on our statement of operations.
The table below presents the impact of the adoption of ASC 606 on our balance sheet.
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SEGMENT INFORMATION (Tables) |
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SEGMENT INFORMATION [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenues per Geographic Area | Revenues per geographic area for the three and nine months ended September 30 are summarized as follows:
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INVENTORY (Tables) |
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INVENTORY [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
Components of Inventory | The components of inventory, at the different stages of production, consisted of the following at September 30, 2018 and December 31, 2017:
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PROPERTY, EQUIPMENT and LEASEHOLD IMPROVEMENTS (Tables) |
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PROPERTY, EQUIPMENT and LEASEHOLD IMPROVEMENTS [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Equipment and Leasehold Improvements | Property, equipment and leasehold improvements, net, consisted of the following at September 30, 2018 and December 31, 2017:
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INTANGIBLE ASSETS (Tables) |
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Intangible Assets [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Intangible Assets | Intangible assets, net consisted of the following at September 30, 2018 and December 31, 2017:
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Future Aggregate Amortization Expense for Intangible Assets | The future aggregate amortization expense for intangible patent assets, remaining as of September 30, 2018, is as follows:
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Licensing Rights [Member] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Intangible Assets | Licensing rights, net consisted of the following at September 30, 2018 and December 31, 2017:
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Future Aggregate Amortization Expense for Intangible Assets | The future aggregate amortization expense for intangible licensing rights assets, remaining as of September 30, 2018, is as follows:
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ACCRUED LIABILITIES (Tables) |
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ACCRUED LIABILITIES [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accrued Liabilities | Accrued liabilities consisted of the following at September 30, 2018 and December 31, 2017:
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CONVERTIBLE NOTE PAYABLE - RELATED PARTY (Tables) |
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CONVERTIBLE NOTE PAYABLE - RELATED PARTY [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Information Relating to Convertible Debt | Information relating to the Initial Note and the Second Note is as follows:
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STOCKHOLDERS' EQUITY (Tables) |
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STOCKHOLDERS' EQUITY [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Warrants Outstanding and Number of Shares of Common Stock Subject to Exercise | The following table summarizes the warrants outstanding and the number of shares of Common Stock subject to exercise as of September 30, 2018 and the changes therein during the nine months then ended:
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Expiration Dates for Warrants Subject to Exercise | Of the warrant shares subject to exercise as of September 30, 2018, expiration of the right to exercise is as follows:
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EARNINGS PER SHARE (Tables) |
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EARNINGS PER SHARE [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||
Common Shares Excluded from Calculating Basic and Diluted Net Loss per Common Share | Shares used in calculating basic and diluted net loss per common share exclude these potential common shares as of September 30, 2018 and December 31, 2017:
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SHARE BASED COMPENSATION (Tables) |
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SHARE BASED COMPENSATION [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock Option Awards Granted | Our Board has granted the following stock option awards for the three and nine months ended September 30:
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Weighted Average Assumptions | We use the Black-Scholes option-pricing model to estimate the fair value of share-based awards with the following weighted average assumptions for the three and nine months ended September 30:
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Allocated Share-based Compensation Expense | The following table summarizes share-based compensation related to stock options for the three and nine months ended September 30:
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Stock Option Activity | The following table summarizes the stock options outstanding and the number of shares of Common Stock subject to exercise as of September 30, 2018 and the changes therein during the nine months then ended:
|
FAIR VALUE MEASUREMENTS (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||
FAIR VALUE MEASUREMENTS [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
Fair Value of Financial Instruments | The following table summarizes the fair value of our financial instruments at September 30, 2018 and December 31, 2017.
|
COMMITMENTS AND CONTINGENCIES (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2018 | |||||||||||||||||||||||||||||||
COMMITMENTS AND CONTINGENCIES [Abstract] | |||||||||||||||||||||||||||||||
Future Minimum Lease Payments | The future minimum lease payments under the Office Lease and the Warehouse Lease are as follows as of September 30, 2018:
|
THE EFFECT OF RECENTLY ISSUED ACCOUNTING STANDARDS (Details) |
Dec. 31, 2017
USD ($)
|
---|---|
ASU 2014-09 [Member] | |
Revenue, Initial Application Period Cumulative Effect Transition [Abstract] | |
Cumulative effect of new accounting principle in period of adoption | $ 26,662 |
SEGMENT INFORMATION (Details) |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2018
USD ($)
Customer
|
Sep. 30, 2017
USD ($)
Customer
|
Sep. 30, 2018
USD ($)
Customer
|
Sep. 30, 2017
USD ($)
Customer
|
|
Revenues per geographic area [Abstract] | ||||
Total revenues | $ 84,612 | $ 200,939 | $ 273,957 | $ 422,370 |
Total revenue, percentage | 100.00% | 100.00% | 100.00% | 100.00% |
Revenue [Member] | Customer Concentration Risk [Member] | ||||
Revenues per geographic area [Abstract] | ||||
Number of major customers | Customer | 4 | 1 | 2 | 2 |
Total revenue, percentage | 89.00% | 98.00% | 81.00% | 97.00% |
Reportable Geographical Components [Member] | Domestic [Member] | ||||
Revenues per geographic area [Abstract] | ||||
Total revenues | $ 19,523 | $ 3,012 | $ 32,625 | $ 8,427 |
Total revenue, percentage | 23.00% | 2.00% | 12.00% | 2.00% |
Reportable Geographical Components [Member] | International [Member] | ||||
Revenues per geographic area [Abstract] | ||||
Total revenues | $ 65,089 | $ 197,927 | $ 241,332 | $ 413,943 |
Total revenue, percentage | 77.00% | 98.00% | 88.00% | 98.00% |
INVENTORY (Details) - USD ($) |
Sep. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Components of inventory [Abstract] | ||
Packaging and raw materials | $ 40,327 | $ 32,329 |
Work-in-progress | 318,297 | 311,632 |
Finished goods | 63,801 | 153,500 |
Total | $ 422,425 | $ 497,461 |
ACCRUED LIABILITIES (Details) - USD ($) |
Sep. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Accrued liabilities [Abstract] | ||
Accrued compensation/benefits | $ 117,419 | $ 124,819 |
Accrued property taxes | 4,413 | 0 |
Accrued royalties | 43,218 | 39,144 |
Product rebates/returns | 0 | 6 |
Total accrued liabilities | $ 165,050 | $ 163,969 |
STOCKHOLDERS' EQUITY (Details) - shares |
Sep. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Common Stock [Abstract] | ||
Common stock, shares issued (in shares) | 201,349,431 | 201,349,431 |
Common stock, shares outstanding (in shares) | 201,349,431 | 201,349,431 |
Series A Preferred Stock [Member] | ||
Preferred Stock [Abstract] | ||
Preferred stock, shares issued (in shares) | 0 | 0 |
Preferred stock, shares outstanding (in shares) | 0 | 0 |
Series B Preferred Stock [Member] | ||
Preferred Stock [Abstract] | ||
Preferred stock, shares issued (in shares) | 0 | 0 |
Preferred stock, shares outstanding (in shares) | 0 | 0 |
SHARE BASED COMPENSATION, Stock option, restricted stock and summary of plans (Details) - USD ($) |
3 Months Ended | 9 Months Ended | |||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jul. 20, 2018 |
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
Mar. 28, 2018 |
Mar. 31, 2006 |
|||||||||||||||
Options Granted [Abstract] | |||||||||||||||||||||
Quantity (in shares) | 1,000,000 | [1] | 0 | [2] | 2,500,000 | 0 | [2] | ||||||||||||||
Weighted average fair value per share (in dollars per share) | $ 0.03 | [1] | $ 0 | [2] | $ 0.03 | $ 0 | [2] | ||||||||||||||
Fair value | $ 34,960 | [1] | $ 0 | [2] | $ 79,960 | $ 0 | [2] | ||||||||||||||
Weighted average assumptions to estimate the fair value of share-based awards [Abstract] | |||||||||||||||||||||
Expected volatility | [3] | 138.70% | 0.00% | 137.30% | 0.00% | ||||||||||||||||
Risk-fee interest rate % | [4] | 2.89% | 0.00% | [3] | 2.69% | 0.00% | [3] | ||||||||||||||
Expected term | 10 years | 0 years | [3] | 7 years | 0 years | [3] | |||||||||||||||
Dividend yield | [5] | 0.00% | 0.00% | [3] | 0.00% | 0.00% | [3] | ||||||||||||||
Options, Outstanding [Roll Forward] | |||||||||||||||||||||
Granted (in shares) | 1,000,000 | [1] | 0 | [2] | 2,500,000 | 0 | [2] | ||||||||||||||
Stock Options [Member] | |||||||||||||||||||||
Options Granted [Abstract] | |||||||||||||||||||||
Quantity (in shares) | 2,500,000 | ||||||||||||||||||||
Exercise price (in dollars per share) | $ 0.05 | $ 0.05 | |||||||||||||||||||
Nonvested Awards, unearned share-based compensation [Abstract] | |||||||||||||||||||||
Unearned share-based compensation expense | $ 50,000 | $ 50,000 | |||||||||||||||||||
Unearned share-based compensation, recognition period | 72 months | ||||||||||||||||||||
Options, Outstanding [Roll Forward] | |||||||||||||||||||||
Outstanding, beginning of period (in shares) | 150,736 | ||||||||||||||||||||
Granted (in shares) | 2,500,000 | ||||||||||||||||||||
Forfeited/cancelled (in shares) | (20,736) | ||||||||||||||||||||
Exercised (in shares) | 0 | ||||||||||||||||||||
Outstanding, end of period (in shares) | 2,630,000 | 2,630,000 | |||||||||||||||||||
Exercisable (in shares) | 130,000 | 130,000 | |||||||||||||||||||
Outstanding, Weighted Average Exercise Price [Roll Forward] | |||||||||||||||||||||
Outstanding, beginning of period (in dollars per share) | $ 4.26 | ||||||||||||||||||||
Granted (in dollars per share) | $ 0.05 | 0.05 | |||||||||||||||||||
Forfeited/cancelled (in dollars per share) | 27.33 | ||||||||||||||||||||
Exercised (in dollars per share) | 0 | ||||||||||||||||||||
Outstanding, end of period (in dollars per share) | $ 0.08 | 0.08 | |||||||||||||||||||
Exercisable (in dollars per share) | $ 0.58 | $ 0.58 | |||||||||||||||||||
Stock Options [Member] | Maximum [Member] | |||||||||||||||||||||
Options Granted [Abstract] | |||||||||||||||||||||
Maximum number of shares purchased per award (in shares) | 1,000,000 | ||||||||||||||||||||
Additional disclosures [Abstract] | |||||||||||||||||||||
Number of shares authorized (in shares) | 1,000,000 | ||||||||||||||||||||
2006 Equity Incentive Plan [Member] | |||||||||||||||||||||
Options Granted [Abstract] | |||||||||||||||||||||
Maximum number of shares purchased per award (in shares) | 2,800,000 | 2,800,000 | 133,333 | ||||||||||||||||||
Additional disclosures [Abstract] | |||||||||||||||||||||
Number of shares authorized (in shares) | 2,800,000 | 2,800,000 | 133,333 | ||||||||||||||||||
2006 Equity Incentive Plan [Member] | Stock Options [Member] | |||||||||||||||||||||
Additional disclosures [Abstract] | |||||||||||||||||||||
Number of options granted to date (in shares) | 2,061,167 | 2,061,167 | |||||||||||||||||||
2006 Equity Incentive Plan [Member] | Stock Options [Member] | Minimum [Member] | |||||||||||||||||||||
Additional disclosures [Abstract] | |||||||||||||||||||||
Vesting period | 1 year | ||||||||||||||||||||
2006 Equity Incentive Plan [Member] | Stock Options [Member] | Maximum [Member] | |||||||||||||||||||||
Additional disclosures [Abstract] | |||||||||||||||||||||
Vesting period | 4 years | ||||||||||||||||||||
Contractual term | 10 years | ||||||||||||||||||||
2006 Equity Incentive Plan [Member] | Restricted Stock [Member] | |||||||||||||||||||||
Additional disclosures [Abstract] | |||||||||||||||||||||
Number of restricted shares granted to date (in shares) | 68,616 | 68,616 | |||||||||||||||||||
2006 Equity Incentive Plan [Member] | Restricted Stock [Member] | Minimum [Member] | |||||||||||||||||||||
Additional disclosures [Abstract] | |||||||||||||||||||||
Vesting period | 6 months | ||||||||||||||||||||
2006 Equity Incentive Plan [Member] | Restricted Stock [Member] | Maximum [Member] | |||||||||||||||||||||
Additional disclosures [Abstract] | |||||||||||||||||||||
Vesting period | 5 years | ||||||||||||||||||||
2018 Equity Incentive Plan [Member] | |||||||||||||||||||||
Options Granted [Abstract] | |||||||||||||||||||||
Maximum number of shares purchased per award (in shares) | 20,000,000 | ||||||||||||||||||||
Additional disclosures [Abstract] | |||||||||||||||||||||
Number of shares authorized (in shares) | 20,000,000 | ||||||||||||||||||||
Number of shares available for grant (in shares) | 17,500,000 | 17,500,000 | |||||||||||||||||||
2018 Equity Incentive Plan [Member] | Stock Options [Member] | |||||||||||||||||||||
Options Granted [Abstract] | |||||||||||||||||||||
Quantity (in shares) | 2,500,000 | ||||||||||||||||||||
Exercise price (in dollars per share) | $ 0.05 | ||||||||||||||||||||
Options, Outstanding [Roll Forward] | |||||||||||||||||||||
Granted (in shares) | 2,500,000 | ||||||||||||||||||||
Outstanding, Weighted Average Exercise Price [Roll Forward] | |||||||||||||||||||||
Granted (in dollars per share) | $ 0.05 | ||||||||||||||||||||
Additional disclosures [Abstract] | |||||||||||||||||||||
Number of options granted to date (in shares) | 2,500,000 | 2,500,000 | |||||||||||||||||||
2018 Equity Incentive Plan [Member] | Stock Options [Member] | Maximum [Member] | |||||||||||||||||||||
Options Granted [Abstract] | |||||||||||||||||||||
Quantity (in shares) | 20,000,000 | ||||||||||||||||||||
Options, Outstanding [Roll Forward] | |||||||||||||||||||||
Granted (in shares) | 20,000,000 | ||||||||||||||||||||
|
SHARE BASED COMPENSATION, Allocated compensation expense (Details) - Stock Options [Member] - USD ($) |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Employee Service Share-based Compensation, Aggregate Disclosures [Abstract] | ||||
Share-based compensation expense | $ 6,796 | $ (774) | $ 12,595 | $ 7,923 |
Regulatory, Research and Development [Member] | ||||
Employee Service Share-based Compensation, Aggregate Disclosures [Abstract] | ||||
Share-based compensation expense | 5,670 | (3,345) | 11,469 | 0 |
Selling, General and Administrative [Member] | ||||
Employee Service Share-based Compensation, Aggregate Disclosures [Abstract] | ||||
Share-based compensation expense | $ 1,126 | $ 2,571 | $ 1,126 | $ 7,923 |
FAIR VALUE MEASUREMENTS (Details) - USD ($) |
Sep. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Liabilities [Abstract] | ||
Note payable | $ 1,000,000 | $ 1,000,000 |
Convertible Note Payable - Related Party - March 2017 [Member] | ||
Liabilities [Abstract] | ||
Note payable | 500,000 | 500,000 |
Convertible Note Payable - Related Party - February 2017 [Member] | ||
Liabilities [Abstract] | ||
Note payable | $ 500,000 | $ 500,000 |
COMMITMENTS AND CONTINGENCIES (Details) |
3 Months Ended | 9 Months Ended | 12 Months Ended | 13 Months Ended | 23 Months Ended | 36 Months Ended | 60 Months Ended | |||
---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2018
USD ($)
LeaseAgreement
|
Sep. 30, 2017
USD ($)
|
Sep. 30, 2018
USD ($)
|
Sep. 30, 2017
USD ($)
|
Mar. 16, 2015
USD ($)
|
Mar. 31, 2014
USD ($)
|
Feb. 22, 2013
USD ($)
|
Mar. 31, 2018
USD ($)
|
Mar. 31, 2011
USD ($)
|
Dec. 15, 2017
ft²
|
|
Future minimum lease payments [Abstract] | ||||||||||
2018 (Three months) | $ 16,415 | $ 16,415 | ||||||||
2019 | 60,367 | 60,367 | ||||||||
2020 | 0 | 0 | ||||||||
2021 | 0 | 0 | ||||||||
Total | 76,782 | 76,782 | ||||||||
Rent expense for operating lease | 13,875 | $ 30,301 | 42,654 | $ 96,245 | ||||||
Storage, Housing and Warehouse [Member] | ||||||||||
Leases [Abstract] | ||||||||||
Minimum monthly lease obligation | $ 2,783 | |||||||||
Number of lease agreements | LeaseAgreement | 2 | |||||||||
Office and Laboratory Space [Member] | ||||||||||
Leases [Abstract] | ||||||||||
Minimum monthly lease obligation | $ 2,729 | $ 9,379 | $ 9,193 | $ 9,776 | $ 9,436 | $ 9,330 | ||||
Office rentable square feet | ft² | 2,500 |
COMMITMENTS AND CONTINGENCIES, Related Party (Details) - USD ($) |
3 Months Ended | 9 Months Ended | ||||||
---|---|---|---|---|---|---|---|---|
Feb. 27, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
Mar. 31, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
Dec. 31, 2017 |
Apr. 02, 2017 |
|
Related Party Obligations [Abstract] | ||||||||
Concentration risk, percentage | 100.00% | 100.00% | 100.00% | 100.00% | ||||
Summary of compensation earned, compensation paid in cash, and compensation temporarily deferred [Abstract] | ||||||||
Deferred compensation | $ 72,000 | $ 72,000 | $ 72,000 | |||||
Velocitas Partners, LLC [Member] | ||||||||
Related Party Obligations [Abstract] | ||||||||
Expected gross proceeds | $ 6,000,000 | |||||||
Velocitas Partners, LLC [Member] | Maximum [Member] | ||||||||
Related Party Obligations [Abstract] | ||||||||
Expected gross proceeds | $ 6,000,000 | |||||||
Velocitas Partners, LLC [Member] | Second Closing [Member] | ||||||||
Related Party Obligations [Abstract] | ||||||||
Warrants to purchase shares of common stock (in shares) | 13,375,000 | |||||||
Velocitas Partners, LLC [Member] | Second Closing [Member] | Maximum [Member] | ||||||||
Related Party Obligations [Abstract] | ||||||||
Warrants to purchase shares of common stock (in shares) | 57,055,057 | |||||||
Altrazeal Trading GmbH [Member] | Second Closing [Member] | ||||||||
Related Party Obligations [Abstract] | ||||||||
Warrants to purchase shares of common stock (in shares) | 13,375,000 | |||||||
Acquisition value | $ 869,375 | |||||||
Altrazeal Distributors [Member] | Second Closing [Member] | ||||||||
Related Party Obligations [Abstract] | ||||||||
Warrants to purchase shares of common stock (in shares) | 13,375,000 | |||||||
Acquisition value | $ 869,375 | |||||||
Closing price of common stock (in dollars per share) | $ 0.065 | |||||||
Velocitas GmbH [Member] | ||||||||
Related Party Obligations [Abstract] | ||||||||
Monthly payment | $ 25,833 | |||||||
Velocitas GmbH [Member] | Revenue [Member] | ||||||||
Related Party Obligations [Abstract] | ||||||||
Related party sales | $ 0 | $ 214,000 | ||||||
Concentration risk, percentage | 0.00% | 51.00% | ||||||
Velocitas GmbH [Member] | Accounts Receivable [Member] | ||||||||
Related Party Obligations [Abstract] | ||||||||
Outstanding accounts receivable | $ 0 | $ 0 | $ 0 |
COMMITMENTS AND CONTINGENCIES, Contingent Milestone Obligations (Details) - USD ($) |
9 Months Ended | |
---|---|---|
Sep. 30, 2018 |
Mar. 07, 2008 |
|
Access Pharmaceuticals [Member] | ||
Loss Contingency [Abstract] | ||
Future milestone obligations | $ 4,750,000 | |
Accrued expenses related to future milestone payments | 43,000 | |
Access Pharmaceuticals [Member] | Annual Sales, Certain Products [Member] | Minimum [Member] | ||
Loss Contingency [Abstract] | ||
Milestone for payment | 20,000,000 | |
Access Pharmaceuticals [Member] | Annual Sales, Certain Products [Member] | Maximum [Member] | ||
Loss Contingency [Abstract] | ||
Milestone for payment | 40,000,000 | |
Access Pharmaceuticals [Member] | Annual Sales, Any One Certain Product [Member] | ||
Loss Contingency [Abstract] | ||
Milestone for payment | 20,000,000 | |
Access Pharmaceuticals [Member] | Cumulative Sales, Certain Products [Member] | Minimum [Member] | ||
Loss Contingency [Abstract] | ||
Milestone for payment | 50,000,000 | |
Access Pharmaceuticals [Member] | Cumulative Sales, Certain Products [Member] | Maximum [Member] | ||
Loss Contingency [Abstract] | ||
Milestone for payment | $ 100,000,000 | |
ProStrakan Ltd [Member] | ||
Loss Contingency [Abstract] | ||
Royalty percentage | 30.00% | |
ProStrakan Ltd [Member] | Maximum [Member] | ||
Loss Contingency [Abstract] | ||
Future milestone obligations | $ 1,400,000 |
COMMITMENTS AND CONTINGENCIES, Prescription Drug User Fee Obligation (Details) - USD ($) |
1 Months Ended | |
---|---|---|
Nov. 30, 2017 |
Sep. 30, 2018 |
|
Loss Contingency [Abstract] | ||
Settlement payment amount to DHHS | $ 400,000 | |
Assessed Prescription Drug User Fee [Member] | ||
Loss Contingency [Abstract] | ||
Prescription drug user fees | $ 535,000 |
LEGAL PROCEEDINGS (Details) |
9 Months Ended |
---|---|
Sep. 30, 2018 | |
LEGAL PROCEEDINGS [Abstract] | |
Maximum percentage of material proceedings/interest | 5.00% |
SUBSEQUENT EVENTS (Details) - Subsequent Event [Member] |
Nov. 01, 2018
Firm
$ / shares
shares
|
---|---|
Warrants [Abstract] | |
Number of consulting firms | Firm | 2 |
Maximum [Member] | |
Warrants [Abstract] | |
Warrants to purchase shares of common stock (in shares) | shares | 500,000 |
Warrant One [Member] | |
Warrants [Abstract] | |
Warrants exercise price (in dollars per share) | $ 0.05 |
Warrant Two [Member] | |
Warrants [Abstract] | |
Warrants exercise price (in dollars per share) | $ 0.06 |
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