Item 1. Financial Statements
ALPHA-EN
CORPORATION
CONDENSED
CONSOLIDATED BALANCE SHEETS
(in
thousands, except share and per share data)
(Unaudited)
|
|
June
30, 2016
|
|
|
December
31, 2015
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
580
|
|
|
$
|
730
|
|
Prepaid expenses
|
|
|
168
|
|
|
|
301
|
|
Due
from related party
|
|
|
-
|
|
|
|
61
|
|
Total current assets
|
|
|
748
|
|
|
|
1,092
|
|
|
|
|
|
|
|
|
|
|
Property and
equipment, net
|
|
|
115
|
|
|
|
2
|
|
Total
assets
|
|
$
|
863
|
|
|
$
|
1,094
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’
EQUITY
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
Accounts payable
and accrued expenses
|
|
$
|
383
|
|
|
$
|
341
|
|
Advances
from related parties
|
|
|
92
|
|
|
|
62
|
|
Total current
liabilities
|
|
|
475
|
|
|
|
403
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
475
|
|
|
|
403
|
|
|
|
|
|
|
|
|
|
|
COMMITMENTS AND CONTINGENCIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’ equity:
|
|
|
|
|
|
|
|
|
Preferred stock
par value 0.01: 2,000,000 shares authorized; none issued or outstanding
|
|
|
-
|
|
|
|
-
|
|
Class B common stock
no par value: 1,000,000 shares authorized; none issued or outstanding
|
|
|
-
|
|
|
|
-
|
|
Common stock par
value 0.01: 35,000,000 shares authorized; 33,640,214 and 32,235,525 shares issued and outstanding at June 30, 2016 and December
31, 2015, respectively
|
|
|
337
|
|
|
|
322
|
|
Additional paid-in
capital
|
|
|
14,031
|
|
|
|
10,705
|
|
Treasury stock at cost: 714,750 shares
as of June 30, 2016 and December 31, 2015
|
|
|
(69
|
)
|
|
|
(69
|
)
|
Accumulated
deficit
|
|
|
(13,569
|
)
|
|
|
(10,169
|
)
|
Shareholders’
equity attributed to alpha-En Corporation stockholders
|
|
|
730
|
|
|
|
789
|
|
Non-controlling
interest
|
|
|
(342
|
)
|
|
|
(98
|
)
|
Total
stockeholders’ equity
|
|
|
388
|
|
|
|
691
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
$
|
863
|
|
|
$
|
1,094
|
|
See
notes to condensed consolidated financial statements.
ALPHA-EN
CORPORATION
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(in
thousands, except share and per share data)
(Unaudited)
|
|
For
the Three Months
|
|
|
For
the Six Months
|
|
|
|
Ended
June 30,
|
|
|
Ended
June 30,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General
and administrative
|
|
$
|
904
|
|
|
$
|
25
|
|
|
$
|
1,487
|
|
|
$
|
53
|
|
Legal and professional
fees
|
|
|
196
|
|
|
|
7
|
|
|
|
245
|
|
|
|
14
|
|
Research
and development
|
|
|
1,509
|
|
|
|
52
|
|
|
|
1,903
|
|
|
|
80
|
|
Total operating
expenses
|
|
|
2,609
|
|
|
|
84
|
|
|
|
3,635
|
|
|
|
147
|
|
Net loss
|
|
|
(2,609
|
)
|
|
|
(84
|
)
|
|
|
(3,635
|
)
|
|
|
(147
|
)
|
Less: net loss
attributable to non-controlling interest
|
|
|
(174
|
)
|
|
|
(1
|
)
|
|
|
(235
|
)
|
|
|
(2
|
)
|
Net
loss attributable to alpha-En Corporation
|
|
$
|
(2,435
|
)
|
|
$
|
(83
|
)
|
|
$
|
(3,400
|
)
|
|
$
|
(145
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share attributable to alpha-En
Corporation common stockholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
$
|
(0.07
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.10
|
)
|
|
$
|
(0.00
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
|
33,568,597
|
|
|
|
30,285,525
|
|
|
|
33,008,792
|
|
|
|
30,285,525
|
|
See
notes to condensed consolidated financial statements.
ALPHA-EN
CORPORATION
CONDENSED
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
(Unaudited)
(in
thousands, except share and per share data)
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock
|
|
|
Paid-In
|
|
|
Treasury Stock
|
|
|
Accumulated
|
|
|
Noncontrolling
|
|
|
Total
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Shares
|
|
|
Amount
|
|
|
Deficit
|
|
|
Interest
|
|
|
Equity
|
|
Balance
at December 31, 2015 (as previously reported)
|
|
|
28,649,497
|
|
|
|
286
|
|
|
|
10,741
|
|
|
|
714,750
|
|
|
|
(69
|
)
|
|
|
(10,169
|
)
|
|
|
(98
|
)
|
|
|
691
|
|
Correction to outstanding
shares (See Note 6)
|
|
|
3,586,028
|
|
|
|
36
|
|
|
|
(36
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Balance at December 31, 2015 (as adjusted)
|
|
|
32,235,525
|
|
|
|
322
|
|
|
|
10,705
|
|
|
|
714,750
|
|
|
|
(69
|
)
|
|
|
(10,169
|
)
|
|
|
(98
|
)
|
|
|
691
|
|
Options exercised
for cash
|
|
|
100,000
|
|
|
|
1
|
|
|
|
10
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
11
|
|
Stock based compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
2,641
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,641
|
|
Issuance of restricted
stock to employee
|
|
|
650,000
|
|
|
|
7
|
|
|
|
(7
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Issuance of common
stock and warrants in a private placement
|
|
|
654,689
|
|
|
|
7
|
|
|
|
598
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
605
|
|
Issuance of subsidiary
common stock for service
|
|
|
-
|
|
|
|
-
|
|
|
|
84
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(9
|
)
|
|
|
75
|
|
Net
loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,400
|
)
|
|
|
(235
|
)
|
|
|
(3,635
|
)
|
Balance at June
30, 2016
|
|
|
33,640,214
|
|
|
$
|
337
|
|
|
$
|
14,031
|
|
|
|
714,750
|
|
|
$
|
(69
|
)
|
|
$
|
(13,569
|
)
|
|
$
|
(342
|
)
|
|
$
|
388
|
|
See
notes to condensed consolidated financial statements.
ALPHA-EN
CORPORATION
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in
thousands)
(Unaudited)
|
|
For
the Six Months Ended June 30,
|
|
|
|
2016
|
|
|
2015
|
|
Cash flows from operating
activities
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(3,635
|
)
|
|
$
|
(147
|
)
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net loss to
net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
2
|
|
|
|
-
|
|
Stock-based compensation
|
|
|
2,641
|
|
|
|
63
|
|
Issuance of subsidiary
common stock for service
|
|
|
75
|
|
|
|
-
|
|
Changes in operating
assets and liabilities of business, net of acquisitions:
|
|
|
|
|
|
|
|
|
Prepaid expenses
|
|
|
133
|
|
|
|
(114
|
)
|
Due from related
parties
|
|
|
61
|
|
|
|
-
|
|
Accounts
payable and accrued expenses
|
|
|
42
|
|
|
|
3
|
|
Net cash used in operating activities
|
|
|
(681
|
)
|
|
|
(195
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from investing
activities
|
|
|
|
|
|
|
|
|
Purchase of fixed
assets
|
|
|
(115
|
)
|
|
|
(2
|
)
|
Net cash used in investing activities
|
|
|
(115
|
)
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing
activities
|
|
|
|
|
|
|
|
|
Issuance of subsidiary
common stock and warrants for cash
|
|
|
-
|
|
|
|
100
|
|
Proceeds from issuance
of common stock and warrants in private placement
|
|
|
605
|
|
|
|
-
|
|
Options exercised
for cash
|
|
|
11
|
|
|
|
-
|
|
Advances from related
parties
|
|
|
50
|
|
|
|
-
|
|
Repayments
of advances from related parties
|
|
|
(20
|
)
|
|
|
-
|
|
Net cash provided by financing activities
|
|
|
646
|
|
|
|
100
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash
|
|
|
(150
|
)
|
|
|
(97
|
)
|
Cash at beginning of period
|
|
|
730
|
|
|
|
103
|
|
Cash at end of period
|
|
$
|
580
|
|
|
$
|
6
|
|
See
notes to condensed consolidated financial statements.
ALPHA-EN
CORPORATION
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note
1 - Organization and Operations
alpha-En
Corporation (together with its subsidiaries, the “Company”) was incorporated in Delaware on March 7 1997.
On
February 25, 2009, alpha-En Corporation was granted a license for an exclusive, worldwide, transferable, perpetual license to
use certain proprietary technology for the processing of lithium for use in batteries. After much effort, it was determined the
process was not commercially feasible and efforts surrounding this technology were abandoned in 2011. The Company has settled
an amendment and release related to this license. (See Note 7)
During
2011 and 2012 alpha-En Corporation devoted its resources to developing proprietary technology to produce highly pure lithium metal.
In
2013, alpha-En Corporation invented a new process for the production of highly pure lithium metal and associated products at room
temperature and subsequently broadened its focus to develop products and processes derived from its new core proprietary technology,
including battery components and compounds of lithium.
During
the period from 2013 to the present, alpha-En Corporation has been exclusively focused on developing its own technology for the
production of highly pure lithium metal, from the bench scale through multiple demonstrations, with the end goal of commercialization.
During this time, alpha-En Corporation has also been pursuing strategic partnerships both commercially and with research institutions.
Formation
of Majority-Owned Subsidiary
In
September 2014, alpha-En Corporation formed Clean Lithium Corporation (“CLC”) under the laws of New York State as
a wholly owned subsidiary with a nominal share capital of $100,000.
Following
the sale of CLC’s shares, the ownership is as follows:
Stockholders
|
|
Shares
|
|
|
Percentage
|
|
alpha-En Corporation
|
|
|
9,095,000
|
|
|
|
90.95
|
%
|
Non-controlling
interests
|
|
|
905,000
|
|
|
|
9.05
|
%
|
Total:
|
|
|
10,000,000
|
|
|
|
100.00
|
%
|
Note
2 – Going Concern and Liquidity
The
Company has elected to adopt early application of Accounting Standards Update No. 2014-15,
“Presentation of Financial
Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a
Going Concern (“ASU 2014-15”)
.
The
Company’s condensed consolidated financial statements have been prepared assuming that it will continue as a going concern,
which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.
As
reflected in the condensed consolidated financial statements, the Company had an accumulated deficit of approximately $13.6 million
and $10.2 million at June 30, 2016 and December 31, 2015, respectively. A net loss of approximately $3.4 million and $145,000,
and approximately $681,000 and $195,000 net cash used in operating activities for the six months ended June 30, 2016 and 2015,
respectively.
The
Company is attempting to further develop the intellectual property associated with its technology; broaden its patent portfolio;
scale up our production of various products; and begin generating revenue; however, the Company’s cash position is not sufficient
to support its daily operations. While the Company believes in the viability of its strategy and in its ability to raise additional
funds by way of a public or private offering, there can be no assurances to that effect. The ability of the Company to continue
as a going concern is dependent upon its ability to raise additional funds by way of a public or private offering and its ability
to further develop its technology and generate sufficient revenue.
These
factors raise substantial doubt about the Company’s ability to continue as a going concern. The condensed consolidated financial
statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts
and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
ALPHA-EN
CORPORATION
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note
3 - Significant and Critical Accounting Policies and Practices
Basis
of Presentation and Principles of Consolidation
The
accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiaries. For
consolidated entities where the Company owns less than 100% of the subsidiary, the Company records net income (loss) attributable
to non-controlling interests in its condensed consolidated statements of operations equal to the percentage of the economic or
ownership interest retained in such entities by the respective non-controlling parties.
The
unaudited condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations
of the Securities and Exchange Commission (the “SEC”) and reflect all adjustments (consisting of normal recurring
adjustments unless otherwise indicated) which, in the opinion of management, are necessary for a fair presentation of the results
for the interim periods presented.
Certain
information in footnote disclosures normally included in the financial statements prepared in conformity with accounting principles
generally accepted in the United States of America have been condensed or omitted pursuant to the SEC rules and regulations for
interim reporting. The financial results for the periods presented may not be indicative of the full year’s results.
These
unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated
financial statements and the notes thereto for the fiscal year ended December 31, 2015 included in the Company’s Annual
Report on Form 10-K filed on October 20, 2016.
The
Company’s unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiaries.
All intercompany balances and transactions have been eliminated.
Use
of Estimates
The
Company’s unaudited condensed consolidated financial statements include certain amounts that are based on management’s
best estimates and judgments. The Company’s significant estimates include, but are not limited to, useful lives assigned
to long-lived assets, fair value measurements, stock-based compensation, accrued expenses, provisions for income taxes and contingencies.
Due to the uncertainty inherent in such estimates, actual results may differ from these estimates.
Fair
Value Measurements
Accounts
Payable and Accrued Expenses.
The carrying amounts of accounts payable and accrued expenses approximate fair value as these
accounts are largely current and short term in nature.
Cash
As
of June 30, 2016 and December 31, 2015, substantially all of the Company’s cash was held at major financial institutions
and the balance at certain accounts may exceed the maximum amount insured by the Federal Deposit Insurance Corporation. However,
the Company has not experienced losses on these accounts and management believes that the Company is not exposed to significant
risks on such accounts.
Property
and Equipment
Office
equipment is recorded at cost and depreciated using the straight-line method over the estimated useful life of each asset, generally
three years.
ALPHA-EN
CORPORATION
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Impairment
of Long-Lived Assets
The
Company reviews long-lived assets, including property and equipment, for impairment whenever events or changes in business circumstances
indicate that the carrying amount of the assets may not be fully recoverable. Factors that the Company considers in deciding when
to perform an impairment review include significant underperformance of the business in relation to expectations, significant
negative industry or economic trends, and significant changes or planned changes in the use of the assets. If an impairment review
is performed to evaluate a long-lived asset for recoverability, the Company compares forecasts of undiscounted cash flows expected
to result from the use and eventual disposition of the long-lived asset to its carrying value. An impairment loss would be recognized
when estimated undiscounted future cash flows expected to result from the use of an asset are less than its carrying amount. The
impairment loss would be based on the excess of the carrying value of the impaired asset over its fair value. There was no impairment
to long lived assets during the period ended June 30, 2016.
Research
and Development
Research
and development costs are expensed as incurred. Advance payments for goods and services that will be used in future research and
development activities are expensed when the activity has been performed or when the goods have been received rather than when
the payment is made. Upfront and milestone payments due to third parties that perform research and development services on the
Company’s behalf will be expensed as services are rendered or when the milestone is achieved.
Research
and development costs primarily consist of personnel related expenses, including salaries, benefits, travel, and other related
expenses, stock-based compensation, payments made to third parties for license and milestone costs related to in-licensed products
and technology, payments made to third party contract research organizations consultants, the cost of acquiring and manufacturing
clinical trial materials, and costs associated with regulatory filings, laboratory costs and other supplies.
In
accordance with ASC 730-10-25-1,
Research and Development
, costs incurred in obtaining technology licenses are charged
to research and development expense if the technology licensed has not reached commercial feasibility and has no alternative future
use. Certain licenses purchased by the Company require substantial completion of research and development and regulatory and marketing
approval efforts in order to reach commercial feasibility and have no alternative future use.
Contingencies
The
Company records accruals for contingencies and legal proceedings expected to be incurred in connection with a loss contingency
when it is probable that a liability has been incurred and the amount can be reasonably estimated.
If
a loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, the nature of the contingent
liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed.
Stock-Based
Compensation
The
Company expenses stock-based compensation to employees over the requisite service period based on the estimated grant-date fair
value of the awards and forfeiture rates. For stock-based compensation awards to non-employees, the Company remeasures the fair
value of the non-employee awards at each reporting period prior to vesting and finally at the vesting date of the award. Changes
in the estimated fair value of these non-employee awards are recognized as compensation expense in the period of change.
The
Company estimates the fair value of stock options grants using the Black-Scholes option pricing model and the assumptions used
in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties
and the application of management’s judgment.
Income
Taxes
The
Company records income taxes using the asset and liability method. Deferred income tax assets and liabilities are recognized for
the future tax effects attributable to temporary differences between the financial statement carrying amounts of existing assets
and liabilities and their respective income tax bases, and operating loss and tax credit carryforwards. The Company establishes
a valuation allowance if it is more likely than not that the deferred tax assets will not be recovered based on an evaluation
of objective verifiable evidence. For tax positions that are more likely than not of being sustained upon audit, the Company recognizes
the largest amount of the benefit that is greater than 50% likely of being realized. For tax positions that are not more likely
than not of being sustained upon audit, the Company does not recognize any portion of the benefit.
ALPHA-EN
CORPORATION
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Loss
Per Share
Basic
loss per share of common stock is computed by dividing net loss applicable to common stockholders by the weighted average number
of shares of common stock outstanding for the period. Diluted loss per share excludes the potential impact of common stock options,
unvested shares of restricted stock and outstanding common stock purchase warrants because their effect would be anti-dilutive.
Securities
that could potentially dilute loss per share in the future that were not included in the computation of diluted loss per share
at June 30, 2016 and June 30, 2015 are as follows:
|
|
As
of June 30,
|
|
|
|
2016
|
|
|
2015
|
|
Warrants to purchase common
stock
|
|
|
2,321,875
|
|
|
|
500,000
|
|
Options to purchase
common stock
|
|
|
4,170,000
|
|
|
|
2,670,000
|
|
Total
|
|
|
6,491,875
|
|
|
|
3,170,000
|
|
Non-Controlling
Interests
Non-controlling
interests in consolidated entities represent the component of equity in consolidated entities held by third parties. Any change
in ownership of a subsidiary while the controlling financial interest is retained is accounted for as an equity transaction between
the controlling and non-controlling interests.
Recent
Accounting Pronouncements
In
February 2016, the FASB issued ASU 2016-02,
Leases (Topic 842)
(“ASU 2016-02”). ASU 2016-02 requires an entity
to recognize right-of-use assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements.
Lessees and lessors are required to disclose qualitative and quantitative information about leasing arrangements to enable a user
of the financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. ASU 2016-02 is effective
for fiscal years, and interim periods within those years, beginning after December 15, 2018. Early adoption is permitted.
The Company is currently in the process of evaluating the impact of adoption of ASU 2016-02 on the consolidated financial statements
and related disclosures.
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”). Under ASU 2016-09, companies will no longer record excess tax benefits and
certain tax deficiencies in additional paid-in capital (“APIC”). Instead, they will record all excess tax benefits
and tax deficiencies as income tax expense or benefit in the income statement and the APIC pools will be eliminated. In addition,
ASU 2016-09 eliminates the requirement that excess tax benefits be realized before companies can recognize them. ASU 2016-09 also
requires companies to present excess tax benefits as an operating activity on the statement of cash flows rather than as a financing
activity. Furthermore, ASU 2016-09 will increase the amount an employer can withhold to cover income taxes on awards and still
qualify for the exception to liability classification for shares used to satisfy the employer’s statutory income tax withholding
obligation. An employer with a statutory income tax withholding obligation will now be allowed to withhold shares with a fair
value up to the amount of taxes owed using the maximum statutory tax rate in the employee’s applicable jurisdiction(s).
ASU 2016-09 requires a company to classify the cash paid to a tax authority when shares are withheld to satisfy its statutory
income tax withholding obligation as a financing activity on the statement of cash flows. Under current GAAP, it was not specified
how these cash flows should be classified. In addition, companies will now have to elect whether to account for forfeitures on
share-based payments by (1) recognizing forfeitures of awards as they occur or (2) estimating the number of awards expected to
be forfeited and adjusting the estimate when it is likely to change, as is currently required. These aspects of ASU 2016-09 are
effective for reporting periods beginning after December 15, 2016, with early adoption permitted provided that all of the guidance
is adopted in the same period. The Company is currently evaluating the impact of ASU 2016-09 on the consolidated financial statements
and related disclosures.
In
August 2016, the FASB issued ASU No. 2016-15,
Statement of Cash Flows - Classification of Certain Cash Receipts and Cash
Payments
, which addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice
in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The standard is effective
for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted,
including adoption in an interim period. The Company is currently evaluating the impact of this new pronouncement on its consolidated
statements of cash flows.
ALPHA-EN
CORPORATION
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note
4 – Property and Equipment
The
components of property and equipment as of June 30, 2016 and December 31, 2015, at cost are (dollars in thousands):
($
in thousands)
|
|
Useful
Life (Years)
|
|
|
June
30, 2016
|
|
|
December
31, 2015
|
|
Lab equipment
|
|
|
3
|
|
|
|
46
|
|
|
|
2
|
|
Office furniture and equipment
|
|
|
3
|
|
|
|
5
|
|
|
|
-
|
|
Leasehold improvement
|
|
|
|
|
|
|
66
|
|
|
|
-
|
|
Gross property and equipment
|
|
|
|
|
|
|
117
|
|
|
|
2
|
|
Less: Accumulated
depreciation
|
|
|
|
|
|
|
(2
|
)
|
|
|
-
|
|
Property and
equipment, net
|
|
|
|
|
|
$
|
115
|
|
|
$
|
2
|
|
The
Company’s depreciation expense for the three months ended June 30, 2016 and 2015 was $1,000 and $0, respectively. The Company’s
depreciation expense for the six months ended June 30, 2016 and 2015 was $2,000 and $0, respectively.
Note
5 – Related Party Transactions
Advances
from Stockholders
From
time to time, stockholders of the Company advance funds to the Company for working capital purposes. Those advances are unsecured,
non-interest bearing and due on demand.
As
of June 30, 2016 and December 31, 2015, the outstanding amount of the advances from related parties was approximately $92,000
and $62,000, respectively. During six months ended June 30, 2016, advances from related parties was $50,000 and the Company repaid
$20,000 to the related parties.
Free
Office Space
The
Company has been provided office space by its Executive Chairman of the Board at no cost. The management determined that such
cost is nominal and did not recognize the rent expense in its financial statements.
Restricted
Stock Grant to Chief Executive Officer and Associated Withholding Payments
During
six months ended June 30, 2016, Steven M. Fludder, Chief Executive Officer, paid the Company a withholding tax obligation of $198,000
related to the grant of restricted stock in 2015.
Note
6 – Stockholders’ Equity
Adjustment
to Outstanding Shares and Options
In
the consolidated financial statements for the years ended December 31, 2015 and 2014 filed with the SEC, the Company incorrectly
excluded 3.6 million shares of common stock and 150,000 non-employee stock options, of which 75,000 were vested, in the calculation
of basic and diluted earnings per share, weighted average and number of common shares outstanding. Given the net loss in 2014
and 2015, the excluded stock options had no impact earnings per share as their effect, if included, would have been anti-dilutive.
In addition, the exclusion of 3.6 million shares of common stock also did not have a material effect on earnings per share. As
a result, net loss per common share outstanding, basic and diluted, weighted average and the number of common shares outstanding
were misstated by an amount that the Company has determined to be immaterial. The exclusion of such shares does not affect total stockholders’
equity or net loss.
ALPHA-EN
CORPORATION
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The
following table provides a comparison between the previously filed numbers and the numbers after the correction as of December,
31(in thousands, except share):
|
|
Previous
Filings
|
|
|
After
Correction of Error
|
|
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
|
Total shares outstanding
|
|
|
28,649,497
|
|
|
|
26,699,497
|
|
|
|
32,235,525
|
|
|
|
30,285,525
|
|
Common stock
|
|
$
|
286
|
|
|
$
|
267
|
|
|
$
|
322
|
|
|
$
|
303
|
|
Additional paid-in capital
|
|
$
|
10,741
|
|
|
$
|
8,130
|
|
|
$
|
10,705
|
|
|
$
|
8,094
|
|
The
following table provides a comparison between the previously filed numbers and the numbers after the correction for the years
ended December, 31:
|
|
Previous
Filings
|
|
|
After
Correction of Error
|
|
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
|
Net loss
|
|
$
|
1,792,000
|
|
|
$
|
47,000
|
|
|
$
|
1,792,000
|
|
|
$
|
47,000
|
|
Net loss per share
|
|
$
|
(0.07
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.06
|
)
|
|
$
|
(0.00
|
)
|
Weighted-average shares
|
|
|
27,263,059
|
|
|
|
26,394,554
|
|
|
|
30,849,087
|
|
|
|
29,980,582
|
|
In
accordance with the SEC’s Staff Accounting Bulletin Nos. 99 (“SAB 99”), the Company evaluated this error and,
based on an analysis of quantitative and qualitative factors, determined that the error was immaterial to the prior reporting
periods affected. Therefore, as permitted by SAB 99, the Company corrected, in the current filing, the calculation of basic earnings
per share and weighted average number of common shares outstanding as of December 31, 2015.
Common
Stock
During
six months ended June 30, 2016, the Company entered into eight private placement offerings with eight investors to issue 654,689
shares of its common stock and warrants to purchase 471,875 shares of common stock for $605,000. The warrants have a 5-year term
and a weighted-average exercise price of $2.46. 100,000 shares issued in this offering is subjected to “price protection”
for a twelve month period. Specifically, in the event the Company issues to any person common stock or their equivalent at a lower
price per share than $2.50 (the “Lower Price”), the Company shall, simultaneously with the issuance of such shares,
issued that investor a number of additional common shares (the “Additional Shares”) necessary to cause the 100,000
purchased plus the Additional Shares to have a combined average cost per share equal to the Lower Price, provided that in no event
shall the Additional Shares exceed 100,000 shares. The price protection featured was analyzed by the Company and the Company determined
that such feature was not required to be bifurcated from the common stock and recorded as a derivative as the price protection
feature is clearly and closely related to an equity host. In November 2016 the Lower Price was triggered and the Company became
obligated to issue an additional 100,000 shares of common stock under the arrangement.
During
the six months ended June 30, 2016, the company also issued 75,000 shares of its subsidiary, CLC, to a consultant for the service
provided, and the shares were valued at $1.00.
As
of June 30, 2016, there were warrants to purchase 2,321,875 shares of common stock issued and outstanding.
Stock
Options
The
grant date fair value of stock options granted during the six months ended June 30, 2016 was approximately $223,000. The fair
value of the Company’s common stock was based upon the publicly quoted price on the date that the final approval of the
awards was obtained. The Company does not expect to pay dividends in the foreseeable future so therefore the expected dividend
yield is 0%. The expected term for stock options granted with service conditions represents the average period the stock options
are expected to remain outstanding and is based on the expected term calculated using the approach prescribed by the Securities
and Exchange Commission’s Staff Accounting Bulletin for “plain vanilla” options. The expected term for stock
options granted with performance and/or market conditions represents the estimated period estimated by management by which the
performance conditions will be met. The Company obtained the risk-free interest rate from publicly available data published by
the Federal Reserve. The Company uses a methodology in estimating its volatility percentage from a computation that was based
on a comparison of average volatility rates of similar companies to a computation based on the standard deviation of the Company’s
own underlying stock price’s daily logarithmic returns. The fair value of options granted in the six months ended June 30,
2016 was estimated using the following weighted-average assumptions:
|
|
As
of June 30, 2016
|
|
Exercise price
|
|
$
|
0.90
|
|
Expected stock price volatility
|
|
|
80
|
%
|
Risk-free rate of interest
|
|
|
1.34
|
%
|
Term (years)
|
|
|
4.6
|
|
ALPHA-EN
CORPORATION
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
A
summary of option activity under the Company’s employee stock option plan for the six months ended June 30, 2016 is presented
below:
|
|
Number
of Shares
|
|
|
Weighted
Average
Exercise Price
|
|
|
Total
Intrinsic Value
|
|
|
Weighted
Average
Remaining
Contractual Life
(in years)
|
|
Outstanding as of December
31, 2015
|
|
|
1,050,000
|
|
|
$
|
0.27
|
|
|
$
|
757,000
|
|
|
|
5.1
|
|
Employee
options granted
|
|
|
400,000
|
|
|
|
0.90
|
|
|
|
872,000
|
|
|
|
6.5
|
|
Outstanding as
of June 30, 2016
|
|
|
1,450,000
|
|
|
$
|
0.44
|
|
|
$
|
3,823,000
|
|
|
|
5.1
|
|
Options vested and expected
to vest as of June 30, 2016
|
|
|
1,450,000
|
|
|
$
|
0.44
|
|
|
$
|
3,823,000
|
|
|
|
5.1
|
|
Options vested and exercisable as of June 30,
2016
|
|
|
237,500
|
|
|
$
|
0.12
|
|
|
$
|
703,000
|
|
|
|
1.8
|
|
Estimated
future stock-based compensation expense relating to unvested stock options for employees is approximately $258,000 as of June
30, 2016 and will be amortized over 3.5 years.
A
summary of options that the Company granted to non-employees for the six months ended June 30, 2016 is presented below:
|
|
Number
of Shares
|
|
|
Weighted
Average
Exercise Price
|
|
|
Total
Intrinsic Value
|
|
|
Weighted
Average Remaining Contractual Life (in years)
|
|
Outstanding as of December
31, 2015 (as reported)
|
|
|
2,670,000
|
|
|
$
|
0.20
|
|
|
$
|
2,118,000
|
|
|
|
4.0
|
|
Adjustment
to stock options
|
|
|
150,000
|
|
|
|
0.10
|
|
|
|
134,000
|
|
|
|
2.1
|
|
Outstanding as of December 31, 2015 (as adjusted)
|
|
|
2,820,000
|
|
|
$
|
0.19
|
|
|
$
|
2,252,000
|
|
|
|
3.9
|
|
Non-employee
options exercised
|
|
|
(100,000
|
)
|
|
|
0.11
|
|
|
|
-
|
|
|
|
-
|
|
Outstanding as
of June 30, 2016
|
|
|
2,720,000
|
|
|
$
|
0.19
|
|
|
$
|
7,848,600
|
|
|
|
3.6
|
|
Options vested and expected
to vest as of June 30, 2016
|
|
|
2,720,000
|
|
|
$
|
0.19
|
|
|
$
|
7,848,600
|
|
|
|
3.6
|
|
Options vested and exercisable as of June 30,
2016
|
|
|
995,000
|
|
|
$
|
0.19
|
|
|
$
|
2,877,000
|
|
|
|
3.6
|
|
Restricted
Stock
A
summary of the restricted stock award activity for the six months ended June 30, 2016 is as follows:
|
|
Number
of Units
|
|
|
Weighted
Average
Grant Date Fair
Value
|
|
Nonvested at December 31, 2015
|
|
|
650,000
|
|
|
$
|
0.40
|
|
Vested
|
|
|
(650,000
|
)
|
|
$
|
0.40
|
|
Nonvested at June 30, 2016
|
|
|
-
|
|
|
$
|
-
|
|
ALPHA-EN
CORPORATION
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Warrants
A
summary of the status of the Company’s outstanding warrants as of June 30, 2016 and changes during the six months ended
June 30, 2016 is presented below:
|
|
Number
of Warrants
|
|
|
Weighted
Average
Exercise Price
|
|
|
Total
Intrinsic Value
|
|
|
Weighted
Average
Remaining
Contractual Life
(in years)
|
|
Outstanding as of December
31, 2015
|
|
|
1,850,000
|
|
|
$
|
0.31
|
|
|
$
|
1,249,000
|
|
|
|
4.3
|
|
Issued
|
|
|
471,875
|
|
|
|
2.46
|
|
|
|
468,000
|
|
|
|
4.8
|
|
Outstanding as
of June 30, 2016
|
|
|
2,321,875
|
|
|
$
|
0.75
|
|
|
$
|
5,584,000
|
|
|
|
4.0
|
|
Warrants exercisable as of June 30, 2016
|
|
|
2,321,875
|
|
|
$
|
0.75
|
|
|
$
|
5,584,000
|
|
|
|
4.0
|
|
Stock-based
Compensation Expense
Stock-based
compensation expense for the three and six months ended June 30, 2016 and 2015 was comprised of the following (dollars in thousands):
|
|
For
the Three Months Ended June 30,
|
|
|
For
the Six Months Ended June 30,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
Employee restricted stock
awards
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
136
|
|
|
$
|
-
|
|
Employee stock option awards
|
|
|
55
|
|
|
|
2
|
|
|
|
86
|
|
|
|
6
|
|
Non-employee
option awards
|
|
|
1,958
|
|
|
|
26
|
|
|
|
2,419
|
|
|
|
57
|
|
Total compensation
expense
|
|
$
|
2,013
|
|
|
$
|
28
|
|
|
$
|
2,641
|
|
|
$
|
63
|
|
Note
7 – Contingencies and Commitments
On
March 22, 2016, the Company entered into a lease (the “Lease”) with Hudson View Building #3, LLC (the “Landlord”),
for office and laboratory space located in Yonkers, New York (the “Leased Premise”). The Leased Premise consists of
approximately 8,000 square feet. The Lease has a term of 87 months from the lease commencement date, which is the date upon which
the Landlord has substantially completed certain interior leasehold improvements to the Leased Premise. The annual rent for the
first year of the lease is approximately $208,000, increasing by 1.5% on each anniversary of the lease commencement date. In the
event of a termination of the Lease following a default by the Company, the Company will be obligated to pay the sum of the rent
payable for the remainder of the Lease term.
The
Company estimated the lease commencement date is in February, 2017. Contractual minimal lease payments are as follows (in thousands):
2016
|
|
$
|
-
|
|
2017
|
|
|
139
|
|
2018
|
|
|
210
|
|
2019
|
|
|
213
|
|
2020
|
|
|
217
|
|
Thereafter
|
|
|
744
|
|
Total
|
|
$
|
1,523
|
|
On
February 25, 2009, the Company was granted an exclusive, worldwide, transferable, perpetual license to use certain proprietary
technology for the processing of lithium for use in batteries and other fields. Commencing in October 2010, working through a
third party, the Company conducted a series of tests to determine if the process worked and, based on the results, initially believed
that the process produced lithium, however it did not prove to be commercially feasible and research and development efforts involving
this license were abandoned. In exchange for the license, the Company had certain financial, share issuance and royalty obligations
if certain sale thresholds were met. However, since contractually agreed thresholds were not met and the technology was not used,
the Company negotiated an amendment and release related to this license in November 2016. Pursuant to the amendment and release,
and subject to certain contingencies set forth in the amendment and release, the third party will retain two million of the three
million total shares from the original license and will forfeit the remaining one million shares. The two million shares to be
retained by the third party will be subject to customary transfer restrictions for restricted shares. No effect has been given
to this transaction in the accompanying financial statements.
ALPHA-EN
CORPORATION
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note
8 – Subsequent Events
The
Company has evaluated all events that occurred after the balance sheet date through the date when the financial statements were
issued to determine if they must be reported. The Management of the Company determined that the following reportable subsequent
event(s) need to be disclosed:
In
August 2016, the Company entered into a private placement offering with an investor and issued 40,000 shares of its common stock
and 100,000 warrants for $100,000. The warrants have a 5-year term and an exercise price of $2.94.
In
August 2016, 221,875 warrants with a weighted average exercise price of $0.97 were exercised for cash consideration of $215,000.
The investors were granted 221,875 additional warrants in August 2016 with a 5-year term and an exercise price of $2.70 per share.
On
November 1, 2016, the Company entered into an additional private placement offering with an investor and sold 100,000 shares of
common stock and 250,000 warrants for $100,000.
On
February 25, 2009, the Company was granted an exclusive, worldwide, transferable, perpetual license to use certain proprietary
technology for the processing of lithium for use in batteries and other fields by a third party. However, since contractually
agreed thresholds were not met and the technology was not used, the Company negotiated an amendment and release related to this
license in November 2016. Pursuant to the amendment and release, and subject to certain contingencies set forth in the amendment
and release, the third party will retain two million of the three million total shares from the original license and will forfeit
the remaining one million shares. The two million shares to be retained by the third party will be subject to customary transfer
restrictions for restricted shares. No effect has been given to this transaction in the accompanying financial statements.
On
December 6, 2016, the Company cancelled 210,000 shares and exchanged 210,000 shares into 210,000 options with an exercise price
of $1.08 and a 5 year term to a consultant who previously performed services prior to 2014. The consultant is related to George
McKeegan, a Board member of the Company.
Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Organization
and Operations
alpha-En
Corporation (together with its subsidiaries, the “Company”) was incorporated in Delaware on March 7, 1997.
On
February 25, 2009, alpha-En Corporation was granted a license for an exclusive, worldwide, transferable, perpetual license to
use certain proprietary technology for the processing of lithium for use in batteries. After much effort, it was determined the
process was not commercially feasible and efforts surrounding this technology were abandoned in 2011. We have settled an amendment
and release related to this license.
During
2011 to 2012, alpha-En Corporation devoted its resources to developing proprietary technology to produce highly pure lithium metal.
In
2013, alpha-En Corporation invented a new process for the production of highly pure lithium metal and associated products at room
temperature and subsequently broadened its focus to develop products and processes derived from its new core proprietary technology,
including battery components and compounds of lithium.
During
the years 2013to the present, alpha-En Corporation has been exclusively focused on developing its own technology for the production
of highly pure lithium metal, from the bench scale through multiple demonstrations, with the end goal of commercialization. During
this time, alpha-En Corporation has also been pursuing strategic partnerships both commercially and with research institutions.
In
September 2014, alpha-En Corporation formed Clean Lithium Corporation (“CLC”) under the laws of New York State with
a nominal share capital of $100,000. CLC was formed to hold certain of our intellectual property and to further develop and commercialize
our technology. As of June 30, 2016, we owned approximately 91.0 % of CLC’s outstanding capital stock.
Three
Months Ended June 30, 2016 compared to Three Months Ended June 30, 2015
General
and administrative expenses were approximately $904,000 for the three months ended June 30, 2016 as compared to approximately
$25,000 for three months ended June 30, 2015. The increase in general and administrative expenses mostly relates the change in
fair value of unvested non-employee awards which was approximately $750,000 for the three months ended June 30, 2016 as compared
to approximately $16,000 for three months ended June 30, 2015.
Legal
and professional fees were approximately $196,000 for the three months ended June 30, 2016 as compared to approximately $7,000
for three months ended June 30, 2015. The increase in legal and professional fees was due to accounting and legal services incurred
in relation to the filing of our annual and quarterly financials.
Research
and development expenses were approximately $1.5 million for the three months ended June 30, 2016 as compared to approximately
$52,000 for three months ended June 30, 2015. The increase in research and development expenses mostly relates to increased stock
based compensation which was approximately $1.3 million for the three months ended June 30, 2016 as compared to approximately
$12,000 for three months ended June 30, 2015. Other increase in research and development expenses resulted from scaling up of
our efforts to develop and demonstrate our technology.
Net
loss attributable to non-controlling interest was approximately $174,000 for the three months ended June 30, 2016 as compared
to approximately $1,000 for three months ended June 30, 2015. The increase was partly due to the increase in the non-controlling
interest’s ownership percentage of CLC from 2.5% for the three months ended June 30, 2015 to 9.1% for the three months ended
June 30, 2016 and partly due to the increased loss of CLC.
Six
Months Ended June 30, 2016 compared to Six Months Ended June 30, 2015
General
and administrative expenses were approximately $1.5 million for the six months ended June 30, 2016 as compared to approximately
$53,000 for the six months ended June 30, 2015. The increase in general and administrative expenses mostly relates the change
in fair value of unvested non-employee awards which was approximately $1.1 million for the six months ended June 30, 2016 as compared
to approximately $35,000 for the six months ended June 30, 2015.
Legal
and professional fees were approximately $245,000 for the six months ended June 30, 2016 as compared to approximately $14,000
for the six months ended June 30, 2015. The increase in legal and professional fees was due to accounting and legal services incurred
in relation to the filing of our annual and quarterly financials.
Research
and development expenses were approximately $1.9 million for the six months ended June 30, 2016 as compared to approximately $80,000
for the six months ended June 30, 2015. The increase in research and development expenses mostly relates to increased stock based
compensation which was approximately $1.5 million for the six months ended June 30, 2016 as compared to approximately $28,000
for the six months ended June 30, 2015. Other increase in research and development expenses resulted from scaling up of our efforts
to develop and demonstrate our technology.
Net
loss attributable to non-controlling interest was approximately $235,000 for the six months ended June 30, 2016 as compared to
approximately $2,000 for the six months ended June 30, 2015. The increase was partly due to the increase in the non-controlling
interest’s ownership percentage of CLC from 1.5% for the six months ended June 30, 2015 to 9.1% for the six months ended
June 30, 2016 and partly due to the increased loss of CLC.
Going
Concern
The
Company’s condensed consolidated financial statements have been prepared assuming that it will continue as a going concern,
which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.
As
reflected in the condensed consolidated financial statements, the Company had an accumulated deficit of approximately $13.6 million
and $10.2 million at June 30, 2016 and December 31, 2015, respectively. A net loss of approximately $3.4 million and $145,000,
and approximately $681,000 and $195,000 net cash used in operating activities for the six months ended June 30, 2016 and 2015,
respectively.
The
Company is attempting to further develop the intellectual property associated with its technology; broaden its patent portfolio;
scale up our production of various products; and begin generating revenue; however, the Company’s cash position is not sufficient
to support its daily operations. While the Company believes in the viability of its strategy and in its ability to raise additional
funds by way of a public or private offering, there can be no assurances to that effect. The ability of the Company to continue
as a going concern is dependent upon its ability to raise additional funds by way of a public or private offering and its ability
to further develop its technology and generate sufficient revenue.
These
factors raise substantial doubt about the Company’s ability to continue as a going concern. The condensed consolidated financial
statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts
and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
Liquidity
and Capital Resources
As
of June 30, 2016, we had working capital of approximately $273,000 compared to approximately $689,000 at December 31, 2015.
In
August 2016, we entered into a private placement offering with an investor and issued 40,000 shares of our common stock and 100,000
warrants for $100,000. The warrants have a 5-year term and an exercise price of $2.94.
On
November 1, 2016, the Company entered into an additional private placement offering with an investor and sold 100,000 shares of
common stock and 250,000 warrants for $100,000. The warrants have a 5-year term and an exercise price of $1.16 per share.
The
table below sets forth selected cash flow data for the periods presented (dollars in thousands):
|
|
Six
Months Ended
June 30,
|
|
|
|
2016
|
|
|
2015
|
|
Net cash used in operating
activities
|
|
$
|
(681
|
)
|
|
$
|
(195
|
)
|
Net cash used in investing activities
|
|
|
(115
|
)
|
|
|
(2
|
)
|
Net cash provided
by financing activities
|
|
|
646
|
|
|
|
100
|
|
Net decrease
in cash and cash equivalents
|
|
$
|
(150
|
)
|
|
$
|
(97
|
)
|
The
success of our business plan during the next 12 months and beyond is contingent upon us generating sufficient revenue to cover
our costs of operations, or upon us obtaining additional financing. We believe that our current capital resources are not sufficient
to support our operations for the next 12 months. We intend to finance our operations through debt and/or equity financings. There
can be no assurance that such additional financing will be available to us on acceptable terms, or at all. We intend to use all
commercially-reasonable efforts at our disposal to raise sufficient capital to run our operations on a go forward basis.
Off
Balance Sheet Arrangements
None
Commitments
On
March 22, 2016, we entered into a lease (the “Lease”) with Hudson View Building #3, LLC (the “Landlord”),
for office and laboratory space located in Yonkers, New York (the “Leased Premise”). The Leased Premise consists of
approximately 8,000 square feet. The Lease has a term of 87 months from the lease commencement date, which is the date upon which
the Landlord has substantially completed certain interior leasehold improvements to the Leased Premise. The annual rent for the
first year of the lease is approximately $208,000, increasing by 1.5% on each anniversary of the lease commencement date. In the
event of a termination of the Lease following a default by us, we will be obligated to pay the sum of the rent payable for the
remainder of the Lease term.
We
estimated the lease commencement date is in February, 2017. Contractual minimal lease payments are as follows (in thousands):
2016
|
|
$
|
-
|
|
2017
|
|
|
139
|
|
2018
|
|
|
210
|
|
2019
|
|
|
213
|
|
2020
|
|
|
217
|
|
Thereafter
|
|
|
744
|
|
Total
|
|
$
|
1,523
|
|