NOTE 1.
|
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 a range of innovative wound care and mucoadhesive film products based on our patented Nanoflex® and OraDisc
TM
technologies, with the goal of improving outcomes for patients, health care professionals, and health care payers.
Basis of Presentation
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United State of America (“U.S. GAAP”) and include the accounts of ULURU Inc., a Nevada corporation, and its wholly-owned subsidiary, ULURU Delaware Inc., a Delaware corporation. Both companies have a December 31 fiscal year end.
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.
NOTE 2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
The following is a summary of significant accounting policies used in the preparation of these consolidated financial statements:
Cash and Cash Equivalents
Cash and cash equivalents include highly liquid investments with original maturities of three months or less. The carrying value of these cash equivalents approximates fair value.
We invest cash in excess of immediate requirements in money market accounts, certificates of deposit, corporate commercial paper with high quality ratings, and U.S. government securities taking into consideration the need for liquidity and capital preservation. These investments are not held for trading or other speculative purposes.
Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivable are recorded at the invoiced amount and do not bear interest. We estimate the collectability of our accounts receivable. In order to assess the collectability of these receivables, we monitor the current creditworthiness of each customer and analyze the balances aged beyond the customer's credit terms. Theses evaluations may indicate a situation in which a certain customer cannot meet its financial obligations due to deterioration of its financial viability, credit ratings or bankruptcy. The allowance requirements are based on current facts and are reevaluated and adjusted as additional information is received. Accounts receivable are subject to an allowance for collection when it is probable that the balance will not be collected. As of December 31, 2016 and 2015, the allowance for doubtful accounts was $2,679 and $100,672, respectively. For the years ended December 31, 2016 and 2015, the accounts written off as uncollectible were $72,644 and $14,347, respectively.
Inventory
Inventories are stated at the lower of cost or market value. Raw material inventory cost is determined on the first-in, first-out method. Costs of finished goods are determined by an actual cost method. 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.
Prepaid Expenses and Deferred Charges
As of December 31, 2016 and 2015, prepaid expenses were composed primarily of insurance policy costs. We amortize our insurance costs ratably over the term of each policy. Typically, our insurance policies are subject to renewal in July and October of each year.
Property, Equipment and Leasehold Improvements
Property, equipment, and leasehold improvements are recorded at cost. Depreciation is provided over the estimated useful lives of the related assets using the straight-line method. Estimated useful lives for property, equipment, and leasehold improvements categories are as follows:
Laboratory and manufacturing equipment
|
7 years
|
Computers, office equipment, and furniture
|
5 years
|
Computer software
|
3 years
|
Leasehold improvements
|
Lease term
|
Intangible Assets
We expense internal patent and application costs as incurred because, even though we believe the patents and underlying processes have continuing value, the amount of future benefits to be derived from them are uncertain. Purchased patents are capitalized and amortized over the life of the patent.
Licensing Rights
Purchased licensing rights are capitalized and amortized over the life of the patent associated with the licensed product.
Impairment of Assets
In accordance with the provisions of Accounting Standards Codification (“ASC”) Topic 350-30,
Intangibles Other than Goodwill,
our policy is to evaluate whether there has been a permanent impairment in the value of long-lived assets and certain identifiable intangibles when certain events have taken place that indicate the remaining unamortized balance may not be recoverable, or at least annually to determine the current value of the intangible asset. When factors indicate that the intangible assets should be evaluated for possible impairment, we use an estimate of undiscounted cash flows. Considerable management judgment is necessary to estimate the undiscounted cash flows. Accordingly, actual results could vary significantly from management’s estimates.
Debt Issuance Costs
We defer debt issuance costs associated with the issuance of our promissory note payable and amortize those costs over the period of the promissory note obligation using the effective interest method. In 2016, we did not incur any new debt issuance costs related to our promissory note payable with Velocitas Healthcare. In 2015, we incurred $50,000 of debt issuance costs related to our promissory note payable with Inter-Mountain Capital Corp. During 2016 and 2015, we recorded amortization of approximately $23,000 and $27,000, respectively, of debt issuance costs. Unamortized debt issuance costs at December 31, 2016 and 2015 were approximately nil and $23,000, respectively.
Shipping and Handling Costs
Shipping and handling costs incurred for product shipments are included in cost of goods sold.
Income Taxes
We use the liability method of accounting for income taxes pursuant to ASC Topic 740,
Income Taxes
. Under this method, deferred income taxes are recorded to reflect the tax consequences in future periods of temporary differences between the tax basis of assets and liabilities and their financial statement amounts at year-end.
Revenue Recognition and Deferred Revenue
License Fees
We recognize revenue from license payments not tied to achieving a specific performance milestone ratably during the period over which we are obligated to perform services. The period over which we are obligated to perform services is estimated based on available facts and circumstances. Determination of any alteration of the performance period normally indicated by the terms of such agreements involves judgment on management's part. License revenues with no specific performance criteria are recognized when received from our foreign licensee and their various foreign sub-licensees as there is no control by us over the various foreign sub-licensees and no performance criteria to which we are subject.
We recognize revenue from performance payments ratably, when such performance is substantially in our control and when we believe that completion of such performance is reasonably probable, over the period during which we estimate that we will complete such performance obligations. In circumstances where the arrangement includes a refund provision, we defer revenue recognition until the refund condition is no longer applicable unless, in our judgment, the refund circumstances are within our operating control and are unlikely to occur.
Substantive at-risk milestone payments, which are based on achieving a specific performance milestone when performance of such milestone is contingent on performance by others or for which achievement cannot be reasonably estimated or assured, are recognized as revenue when the milestone is achieved and the related payment is due, provided that there is no substantial future service obligation associated with the milestone.
For the year ended December 31, 2016, we recognized approximately $343,000 in licensing fees due to the one-time recognition of unamortized licensing fees related to the cancellation of distribution agreements with three distributors. For the year ended December 31, 2015, we recognized approximately $145,000 in licensing fees due to the one-time recognition of unamortized licensing fees related to the cancellation of distribution agreements with one distributor. The recognition of unamortized licensing fees is based upon the cancellation of each distribution agreements and that there are no further performance obligations that are required by the Company under each distribution agreement.
Royalty Income
We receive royalty revenues under license agreements with a number of third parties that sell products based on technology we have developed or to which we have rights. The license agreements provide for the payment of royalties to us based on sales of the licensed products. We record these revenues based on estimates of the sales that occurred during the relevant period. The relevant period estimates of sales are based on interim data provided by licensees and analysis of historical royalties we have been paid (adjusted for any changes in facts and circumstances, as appropriate).
We maintain regular communication with our licensees in order to gauge the reasonableness of our estimates. Differences between actual royalty revenues and estimated royalty revenues are reconciled and adjusted for in the period in which they become known, typically the following quarter. Historically, adjustments have not been material based on actual amounts paid by licensees. As it relates to royalty income, there are no future performance obligations on our part under these license agreements. To the extent we do not have sufficient ability to accurately estimate revenue; we record it on a cash basis.
Product Sales
We recognize revenue and related costs from the sale of our products at the time the products are shipped to the customer. Provisions for returns, rebates, and discounts are established in the same period the related product sales are recorded.
We review the supply levels of our products sold to major wholesalers in the U.S., primarily by reviewing reports supplied by our major wholesalers and available volume information for our products, or alternative approaches. When we believe wholesaler purchasing patterns have caused an unusual increase or decrease in the sales of a major product compared with underlying demand, we disclose this in our product sales discussion if we believe the amount is material to the product sales trend; however, we are not always able to accurately quantify the amount of stocking or destocking. Wholesaler stocking and destocking activity historically has not caused any material changes in the rate of actual product returns.
We establish sales return accruals for anticipated product returns. We record the return amounts as a deduction to arrive at our net product sales. Consistent with Revenue Recognition accounting guidance, we estimate a reserve when the sales occur for future product returns related to those sales. This estimate is primarily based on historical return rates as well as specifically identified anticipated returns due to known business conditions and product expiry dates. Actual product returns have been nil over the past two years.
We establish sales rebate and discount accruals in the same period as the related sales. The rebate and discount amounts are recorded as a deduction to arrive at our net product sales. We base these accruals primarily upon our historical rebate and discount payments made to our customer segment groups and the provisions of current rebate and discount contracts.
Foreign currency transaction gain (loss)
Our functional currency and our reporting currency is the U.S. dollar and foreign currency transactions are primarily undertaken in Euros. Monetary assets and liabilities are translated using the foreign currency exchange rate prevailing at the balance sheet date. Revenues, non-monetary assets and liabilities denominated in foreign currencies are translated at rates of foreign currency exchange in effect at the date of the transaction. Expenses are translated at average foreign currency exchange rates for the period. Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the determination of net income.
Research and Development Expenses
Pursuant to ASC Topic 730,
Research and Development
, our research and development costs are expensed as incurred. Research and development expenses include, but are not limited to, salaries and benefits, laboratory supplies, facilities expenses, preclinical development cost, clinical trial and related clinical manufacturing expenses, contract services, consulting fees and other outside expenses. The cost of materials and equipment or facilities that are acquired for research and development activities and that have alternative future uses are capitalized when acquired. There were no such capitalized materials, equipment or facilities for the years ended December 31, 2016 and 2015.
Basic and Diluted Net Loss Per Common Share
In accordance with 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 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 and warrants from the calculation of diluted net loss per common share because all such securities are antidilutive for all periods presented.
Concentrations of Credit Risk
Concentration of credit risk with respect to financial instruments, consisting primarily of cash and cash equivalents, that potentially expose us to concentrations of credit risk due to the use of a limited number of banking institutions and due to maintaining cash balances in banks, which, at times, may exceed the limits of amounts insured by the Federal Deposit Insurance Corporation. During 2016 and 2015, we utilized Bank of America, N.A. as our banking institution. At December 31, 2016 and December 31, 2015 our cash and cash equivalents totaled approximately $37,000 and $180,000, respectively. We also invest cash in excess of immediate requirements in money market accounts, certificates of deposit, corporate commercial paper with high quality ratings, and U.S. government securities. These investments are not held for trading or other speculative purposes. We are exposed to credit risk in the event of default by these high quality corporations.
Concentration of credit risk with respect to trade accounts receivable are customers with balances that exceed 5% of total consolidated trade accounts receivable at December 31, 2016 and at December 31, 2015. As of December 31, 2016, one customer, being one of our international distributors, exceeded the 5% threshold, with 95%. One customer, being one of our international distributors, exceeded the 5% threshold at December 31, 2015, with 92%. As a result, we believe that accounts receivable credit risk exposure is limited. We maintain an allowance for doubtful accounts, but historically have not experienced any significant losses related to an individual customer or group of customers.
Concentrations of Foreign Currency Risk
A portion of our revenues and all of our expenses are denominated in U.S. dollars. We are expecting an increase in revenues in international territories denominated in a foreign currency. Certain of our licensing and distribution agreements in international territories are denominated in Euros. Currently, we do not employ forward contracts or other financial instruments to mitigate foreign currency risk. As our international operations continue to grow, we may engage in hedging activities to hedge our exposure to foreign currency risk.
Fair Value of Financial Instruments
In accordance with portions of ASC Topic 820,
Fair Value Measurements
, 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.
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 other receivable, notes receivable and accrued interest, and convertible note payable balances approximates fair value based on a valuation methodology using the income approach and a discounted cash flow model.
NOTE 3.
|
THE EFFECT OF RECENTLY ISSUED ACCOUNTING STANDARDS
|
In February 2016, Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02,
“Leases (Topic 842)”,
which requires an entity to recognize assets and liabilities arising from a lease for both financing and operating leases. The ASU will also require new qualitative and quantitative disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. We are currently evaluating the effect ASU No. 2016-02 will have on our consolidated financial statements.
In July 2015, FASB issued Update No. 2015-11,
"Simplifying the Measurement of Inventory."
Under ASU No. 2015-11, inventory should be measured at the lower of cost and net realizable value. Subsequent measurement is unchanged for inventory measured using LIFO or the retail inventory method. ASU No. 2015-11 is effective for annual reporting periods beginning after December 15, 2016, and interim periods thereafter. We do not believe ASU No. 2015-11 will have a material impact on our consolidated financial statements.
In April 2015, FASB issued Update No. 2015-03,
Simplifying the Presentation of Debt Issuance Costs,
which requires debt issuance costs related to a recognized debt liability to be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The guidance is effective January 1, 2016 with early adoption permitted. The Company has elected early adoption as the guidance is a change in financial statement presentation only and will not have a material impact in the consolidated financial results.
In August 2014, FASB issued ASU No. 2014-15,
“Presentation of Financial Statements – Going Concern”
. ASU No 2014-15 provides guidance regarding management’s responsibility to evaluate whether there exists substantial doubt about an organization’s ability to continue as a going concern and to provide related footnote disclosures in certain circumstances. ASU No. 2014-15 is effective for annual reporting periods beginning after December 15, 2016, and interim periods thereafter. We do not believe ASU No. 2015-15 will have a material effect on our financial position and results of operations.
In May 2014, FASB issued ASU No. 2014-09, “
Revenue from Contracts with Customers
,” which supersedes the revenue recognition requirements of Accounting Standards Codification (“ASC”) Topic 605, “Revenue Recognition” and most industry-specific guidance on revenue recognition throughout the ASC. The new standard is principles-based and provides a five step model to determine when and how revenue is recognized. The core principle of the new standard is that revenue should be recognized when a company transfers promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. The new standard also requires disclosure of qualitative and quantitative information surrounding the amount, nature, timing and uncertainty of revenues and cash flows arising from contracts with customers. The new standard will be effective for us in the first quarter of the year ending December 31, 2017 and can be applied either retrospectively to all periods presented or as a cumulative-effect adjustment as of the date of adoption. Early adoption is not permitted. We are currently evaluating the impact of adoption of ASU 2014-09 on our consolidated financial statements.
There are no other new accounting pronouncements adopted or enacted during the year ended December 31, 2016 that had, or are expected to have, a material impact on our financial statements.
NOTE 4.
|
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 licensees for international activities and our domestic sales activities for our products.
Revenues per geographic area, along with relative percentages of total revenues, for the year ended December 31, are summarized as follows:
Revenues
|
|
2016
|
|
|
%
|
|
|
2015
|
|
|
%
|
|
Domestic
|
|
$
|
20,326
|
|
|
|
5
|
%
|
|
$
|
28,030
|
|
|
|
3
|
%
|
International
|
|
|
422,239
|
|
|
|
95
|
%
|
|
|
907,709
|
|
|
|
97
|
%
|
Total
|
|
$
|
442,565
|
|
|
|
100
|
%
|
|
$
|
935,739
|
|
|
|
100
|
%
|
A significant portion of our revenues are derived from a few major customers. For the year ended December 31, 2016, three customers had greater than 10% of total revenues, and jointly represented 88% of total revenues. For the year ended December 31, 2015, two customers had greater than 10% of total revenues, and jointly represented 76% of total revenues.
As of December 31, 2016 and 2015, 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. For the years ended December 31, 2016 and 2015, we wrote off approximately nil and $1,600, respectively, in obsolete inventories.
The components of inventory, at the different stages of production, consisted of the following at December 31:
Inventory
|
|
2016
|
|
|
2015
|
|
Raw materials
|
|
$
|
35,800
|
|
|
$
|
38,037
|
|
Work-in-progress
|
|
|
424,741
|
|
|
|
485,123
|
|
Finished goods
|
|
|
99,059
|
|
|
|
8,261
|
|
Total
|
|
$
|
559,600
|
|
|
$
|
531,421
|
|
NOTE 6.
|
PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
|
Property, equipment and leasehold improvements, net, consisted of the following at December 31:
Property, equipment and leasehold improvements
|
|
2016
|
|
|
2015
|
|
Laboratory equipment
|
|
$
|
424,888
|
|
|
$
|
424,888
|
|
Manufacturing equipment
|
|
|
1,604,894
|
|
|
|
1,604,894
|
|
Computers, office equipment, and furniture
|
|
|
151,280
|
|
|
|
153,865
|
|
Computer software
|
|
|
4,108
|
|
|
|
4,108
|
|
Leasehold improvements
|
|
|
95,841
|
|
|
|
95,841
|
|
|
|
|
2,281,011
|
|
|
|
2,283,596
|
|
Less: accumulated depreciation and amortization
|
|
|
(2,154,270
|
)
|
|
|
(2,026,179
|
)
|
Property, equipment and leasehold improvements, net
|
|
$
|
126,741
|
|
|
$
|
257,417
|
|
Depreciation expense on property, equipment, and leasehold improvements was $132,841 and $180,480 for the years ended December 31, 2016 and 2015, respectively.
NOTE 7.
|
INTANGIBLE ASSETS
|
Patents
Intangible patent assets are composed of patents acquired in October 2005. Intangible patent assets, net consisted of the following at December 31:
Intangible assets - patents
|
|
2016
|
|
|
2015
|
|
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
|
|
|
(7,381,847
|
)
|
|
|
(6,905,397
|
)
|
Less: reserve for impairment
|
|
|
(2,027,310
|
)
|
|
|
---
|
|
Intangible assets, net
|
|
$
|
216,781
|
|
|
$
|
2,720,541
|
|
We performed an evaluation of our intangible patent assets for purposes of determining possible impairment as of December 31, 2016. Based upon recent market conditions and comparable market transactions for similar intangible assets, we determined that an income approach using a discounted cash flow model was an appropriate valuation methodology to determine each intangible asset’s fair value. The income approach converts future amounts to a single present value amount (discounted cash flow model). Our discounted cash flow models are highly reliant on various assumptions, including estimates of future cash flow (including long-term growth rates), discount rate, and expectations about variations in the amount and timing of cash flows and the probability of achieving the estimated cash flows, all of which we consider level 3 inputs for determination of fair value. We believe we have appropriately reflected our best estimate of the assumptions that market participants would use in determining the fair value of our intangible assets at the measurement date. Upon completion of the evaluation, the fair value of our intangible patent assets exceeded the recorded remaining book value except for the valuation of two patents; “Amlexanox (OraDisc™ A)” and “OraDisc™”. We recognized an impairment charge of $2,027,310 for the year ended December 31, 2016.
Amortization expense for intangible patent assets was $476,450 and $475,148 for the years ended December 31, 2016 and 2015, respectively. The future aggregate amortization expense for intangible patent assets, remaining as of December 31, 2016, is as follows:
Calendar Years
|
|
Future Amortization
Expense
|
|
2017
|
|
$
|
37,044
|
|
2018
|
|
|
37,044
|
|
2019
|
|
|
37,044
|
|
2020
|
|
|
37,145
|
|
2021
|
|
|
37,044
|
|
2022 & Beyond
|
|
|
31,460
|
|
Total
|
|
$
|
216,781
|
|
Licensing rights
On December 24, 2015, we entered into and closed the transaction contemplated by a License Purchase and Termination Agreement (the “Altrazeal Termination Agreement”) with Altrazeal Trading GmbH (“Altrazeal Trading”) and IPMD GmbH (“IPMD”). The Altrazeal Termination Agreement relates to the License and Supply Agreement dated January 11, 2012 (the “Altrazeal License”), under which Altrazeal Trading and its affiliates were authorized by the Company to distribute our Altrazeal® wound care product in the European Union, Australia, New Zealand, Middle East (excluding Jordan and Syria), North Africa, Albania, Bosnia, Croatia, Kosovo, Macedonia, Montenegro, and Serbia. Under the Altrazeal Termination Agreement, the Altrazeal License was assigned to the Company, thereby effecting its termination, and the Company’s 25% ownership interest in Altrazeal Trading was cancelled. In addition, the Company agreed to assume from Altrazeal Trading and certain affiliated entities rights and future obligations under sub-distribution agreements in numerous territories within the scope of the Altrazeal License and related consulting agreements.
Under the terms of the Altrazeal Termination Agreement, we agreed to pay to Altrazeal Trading a net transfer fee of €1,570,271 and to pay IPMD a transfer fee of €703,500. The net transfer fee to Altrazeal Trading includes adjustments for amounts owed by Altrazeal Trading to the Company. The Company paid the net transfer fee (a) to Altrazeal Trading by means of the issuance of 4,441,606 shares of Common Stock together with warrants to purchase 444,161 shares of Common Stock and (b) to IPMD by means of the issuance of 2,095,241 shares of Common Stock, together with warrants to purchase 209,525 shares of Common Stock. The warrants have an exercise price of $0.68 per share and a term of one-year and, as a result, have expired.
Altrazeal Trading also agreed to return inventory of Altrazeal® blisters held in its possession in an amount up to €88,834 (“Inventory Payment”). To the extent Altrazeal Trading does not return the entire inventory, we may deduct from the Inventory Payment €4.20 per Altrazeal® blister not returned in usable condition. We are currently in the process of confirming with Altrazeal Trading the actual number of Altrazeal® blisters to be returned.
Under the Altrazeal Termination Agreement, we also agreed to file within twenty (20) days of closing a registration statement registering the resale of 2,500,000 shares of Common Stock issued under the Altrazeal Termination Agreement and to use all commercially reasonable efforts to cause such registration Statement to become effective. In accordance with our obligations under the Altrazeal Termination Agreement, we filed with the SEC a registration statement that was declared effective on February 16, 2016. We are required to keep the registration statement effective at all times with respect to such 2,500,000 shares, other than permitted suspension periods, until the earliest of (i) June 24, 2016, (ii) the date when Altrazeal Trading and IPMD may sell all of the registered shares under Rule 144 under the Securities Act without volume limitations, or (iii) the date when Altrazeal Trading and IPMD no longer own any of the registered shares. As of the date of this filing, shares cannot be sold under the registration statement because the associated prospectus is not current.
In connection with the Altrazeal Termination Agreement, we also entered into a Mutual Termination and Release Agreement, dated December 24, 2015, for the purpose of terminating the Binding Term Sheet dated May 12, 2015 with Altrazeal Trading and Firnron LTD (the “Term Sheet”). Under the Term Sheet, it was contemplated that the Company would acquire all of the remaining equity interests in Altrazeal Trading.
Intangible licensing rights, net consisted of the following at December 31:
Intangible assets - licensing rights
|
|
2016
|
|
|
2015
|
|
European Union, Australia, New Zealand, Middle East (excluding Jordan and Syria), North Africa, Albania, Bosnia, Croatia, Kosovo, Macedonia, Montenegro, and Serbia.
|
|
$
|
3,512,506
|
|
|
$
|
3,512,506
|
|
Less: accumulated amortization
|
|
|
(331,419
|
)
|
|
|
(6,271
|
)
|
Licensing rights, net
|
|
$
|
3,181,087
|
|
|
$
|
3,506,235
|
|
We performed an evaluation of our intangible licensing rights assets for purposes of determining possible impairment as of December 31, 2016. Based upon recent market conditions and comparable market transactions for similar licensing rights, we determined that an income approach using a discounted cash flow model was an appropriate valuation methodology to determine each licensing rights asset fair value. The income approach converts future amounts to a single present value amount (discounted cash flow model). Our discounted cash flow models are highly reliant on various assumptions, including estimates of future cash flow (including long-term growth rates), discount rate, and expectations about variations in the amount and timing of cash flows and the probability of achieving the estimated cash flows, all of which we consider level 3 inputs for determination of fair value. We believe we have appropriately reflected our best estimate of the assumptions that market participants would use in determining the fair value of our intangible licensing rights assets at the measurement date. Upon completion of the evaluation, the fair value of our intangible licensing rights assets exceeded the recorded remaining book value.
Amortization expense for intangible licensing rights assets was $325,148 and $6,271 for the years ended December 31, 2016 and 2015, respectively. The future aggregate amortization expense for intangible licensing rights assets, remaining as of December 31, 2016, is as follows:
Calendar Years
|
|
Future Amortization
Expense
|
|
2017
|
|
$
|
325,148
|
|
2018
|
|
|
325,148
|
|
2019
|
|
|
325,148
|
|
2020
|
|
|
325,148
|
|
2021
|
|
|
325,148
|
|
2022 & Beyond
|
|
|
1,555,347
|
|
Total
|
|
$
|
3,181,087
|
|
NOTE 8.
|
INVESTMENT IN UNCONSOLIDATED SUBSIDIARY
|
We use the equity method of accounting for investments in other companies that are not controlled by us and in which our interest is generally between 20% and 50% of the voting shares or we have significant influence over the entity, or both.
Altrazeal Trading GmbH
On January 11, 2012, we executed a shareholders’ agreement for the establishment of Altrazeal Trading Ltd., a single purpose entity to be used for the exclusive marketing of Altrazeal® throughout the European Union, Australia, New Zealand, North Africa, and the Middle East. As a result of this transaction, we received a non-dilutable 25% ownership interest in Altrazeal Trading Ltd. On February 1, 2014, Altrazeal Trading Ltd. transferred all of their rights and obligations under the existing shareholders’ agreement to Altrazeal Trading GmbH (“Altrazeal Trading”). As a result of this transfer, we were entitled to receive a non-dilutable 25% ownership interest in Altrazeal Trading.
On December 24, 2015, we completed the Altrazeal Termination Agreement with Altrazeal Trading and IPMD as more fully described in Note 7. Under the Altrazeal Termination Agreement, our ownership interest in Altrazeal Trading was cancelled.
Altrazeal AG
On February 1, 2014, we executed a shareholders’ agreement with Altrazeal AG, a single purpose entity for the marketing of Altrazeal® in several territories, including Africa (markets not already licensed), Latin America, Georgia, Turkmenistan, Ukraine, the Commonwealth of Independent States, Jordan, Syria, Asia and the Pacific (excluding China, Hong Kong, Macau, Taiwan, South Korea, Japan, Australia, and New Zealand). As a result of this transaction, we were entitled to receive a non-dilutable 25% ownership interest in Altrazeal AG.
In late March 2016, we provided Altrazeal AG with a notice identifying certain breaches in the Exclusive License and Supply Agreement, dated September 30, 2013 with Altrazeal AG (as amended, the “AG Agreement”). On or about March 24, 2016, we learned that Altrazeal AG had commenced an insolvency proceeding in Switzerland and immediately sent an additional notice of termination referencing the insolvency. On or about April 18, 2016, we learned that the insolvency petition filed by Altrazeal AG in Switzerland has been accepted by the court and an administrator was appointed. As a result of the breaches by Altrazeal AG in the AG Agreement, the AG Agreement has been terminated in accordance with its terms. As a result of the accepted insolvency petition, we believe that our ownership interest in Altrazeal AG is deemed to be worthless and certain net accounts receivables with Altrazeal AG are uncollectible.
ORADISC GmbH
On October 19, 2012, we executed a shareholders’ agreement for the establishment of ORADISC GmbH, through which OraDisc™ erodible film technology products would be developed and marketed. We were entitled to receive a non-dilutable 25% ownership interest in ORADISC GmbH.
In October 2012, we also executed a License and Supply Agreement with ORADISC GmbH for the marketing of applications of our OraDisc™ erodible film technology. On December 31, 2015 we informed ORADISC GmbH that their right to use the OraDisc™ erodible film technology had expired. In March 2016, we also provided ORADISC GmbH with a notice identifying certain breaches in the License and Supply Agreement with ORADISC GmbH. As a result of the breaches by ORADISC GmbH in the License and Supply Agreement, the License and Supply Agreement has been terminated in accordance with its terms and ORADISC GmbH has ceased to be a product distributor for the Company.
As a result of the termination of the License and Supply Agreement, we believe that our ownership interest in ORADISC GmbH is deemed to be worthless.
NOTE 9.
|
ACCRUED LIABILITIES
|
Accrued liabilities consisted of the following at December 31:
Accrued Liabilities
|
|
2016
|
|
|
2015
|
|
Accrued compensation/benefits
|
|
$
|
274,874
|
|
|
$
|
329,131
|
|
Accrued insurance payable
|
|
|
40,422
|
|
|
|
73,074
|
|
Product rebates/returns
|
|
|
4
|
|
|
|
9
|
|
Total accrued liabilities
|
|
$
|
315,300
|
|
|
$
|
402,214
|
|
NOTE 10.
|
PROMISSORY NOTE PAYABLE
|
Debt Financing – December 2016
On December 15, 2016, we issued a Promissory Note (the “December 2016 Note”) to Velocitas Partners, LLC (“Velocitas”) with a purchase price of $20,000. The December 2016 Note bears interest at the rate of 6.0% per annum with payment of principal and interest due on the earlier of (i) 180 days from the date of issuance, (ii) the date of closing of any debt or equity financing transaction by and between Uluru and Velocitas, or (iii) the payment to Uluru of certain invoices due from selected Company’s distributors. The December 2016 Note is secured by a pledge of certain product inventory and there were no debt issuance costs incurred by the Company. Subsequent to December 31, 2016, the December 2016 Note was repaid in connection with the issuance of the Initial Note under the Purchase Agreement with Velocitas.
Debt Financing – April 2015
On April 15, 2015, we entered into a Securities Purchase Agreement dated April 14, 2015 (the “Inter-Mountain Purchase Agreement”) with Inter-Mountain Capital Corp. (“Inter-Mountain”) related to our issuance of a $550,000 Promissory Note (the “April 2015 Note”). The purchase price for the April 2015 Note, which reflected a $50,000 original issue discount, was $500,000. The Inter-Mountain Purchase Agreement also included representations and warranties, restrictive covenants and indemnification provisions standard for similar transactions. On August 11, 2016, the Company remitted the final installment due under the April 2015 Note and brought the balance outstanding to zero.
The April 2015 Note bore interest at the rate of 10.0% per annum, with monthly installment payments of $45,000 commencing on the date that was 120 calendar days after the issuance date of the April 2015 Note. At our option, subject to certain volume, price and other conditions, the monthly installments may have been paid in whole, or in part, in cash or in Common Stock. If the monthly installments were paid in Common Stock, such shares being issued being based on a price that is 80% of the average of the three lowest volume weighted average prices of the shares of Common Stock during the preceding twenty trading days. The percentage declines to 70% if the average of the three lowest volume weighted average prices of the shares of Common Stock during the preceding twenty trading days was less than $0.05 per share. At our option, the outstanding principal balance of the April 2015 Note, or a portion thereof, may have been prepaid in cash at 120% of the amount elected to be prepaid. The April 2015 Note was unsecured and was not subject to conversion at the discretion of Inter-Mountain.
Events of default under the April 2015 Note included failure to make required payments, the entry of a $100,000 judgment not stayed within 30 days, breach of representations or covenants under the transaction documents, various events associated with insolvency or failure to pay debts, delisting of the Common Stock, a restatement of financial statements and a default under certain other agreements. In the event of default, the interest rate under the April 2015 Note would have increased to 18% and the April 2015 Note becomes callable at a premium. In addition, Inter-Mountain had all remedies under law and equity.
As part of the debt financing, Inter-Mountain also received a warrant (the “Warrant”) to purchase up to an aggregate of 194,118 shares of Common Stock. The Warrant has an exercise price of $0.85 per share and expires on April 30, 2020. The Warrant includes a standard net cashless exercise provision and provisions requiring proportionate adjustments in connection with a recapitalization transaction.
As part of the debt financing, we entered into a Registration Rights Agreement whereby we agreed to prepare and file with the Securities and Exchange Commission (the “SEC”) a registration statement no later than May 11, 2015 and to cause such registration statement to be declared effective no later than 120 after the closing date and to keep such registration statement effective for a period of no less than 180 days. In accordance with our obligations under the Registration Rights Agreement, we filed with the SEC a registration statement that was declared effective on June 4, 2015. Such registration statement ceased to be effective in April 2016.
On January 11, 2016, we executed a Waiver Agreement with Inter-Mountain. The Waiver Agreement relates to the April 2015 Note and our failure to make the installment payment under the April 2015 Note due in November 2015 on a timely basis. Subsequent installment payments with respect to 2015 and 2016 were all made on a timely basis. Under the terms of the Waiver Agreement, we agreed to remit the November 2015 installment payment of $45,000 in cash and to pay Inter-Mountain an accommodation fee of $25,000, with the accommodation fee being added to the outstanding loan balance.
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 April 2015 Note is as follows:
|
|
|
|
|
|
|
|
|
|
As of December 31, 2016
|
|
|
|
|
Transaction
|
|
Initial
Principal
Amount
|
|
|
Interest
Rate
|
|
Maturity
Date
|
Conversion Price (1)
|
|
Principal
Balance (2)
|
|
|
Unamortized
Debt
Discount
|
|
|
Unamortized Debt Issuance Costs
|
|
|
Carrying
Value
|
|
April 2015 Note
|
|
$
|
550,000
|
|
|
|
10.0
|
%
|
08/12/2016
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
Total
|
|
$
|
550,000
|
|
|
|
|
|
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
(1)
|
As part of the April 2015 Note, at our option, subject to certain volume, price and other conditions, the monthly installments of principle and interest due under the April 2015 Note may be paid in whole, or in part, in cash or in Common Stock. If the monthly installments are paid in Common Stock, such shares being issued will be based on a price that is 80% of the average of the three lowest volume weighted average prices of the shares of Common Stock during the preceding twenty trading days. The percentage declines to 70% if the average of the three lowest volume weighted average prices of the shares of Common Stock during the preceding twenty trading days is less than $0.05 per share.
|
(2)
|
On August 11, 2016, the Company issued the final installment payment due under the April 2015 Note.
|
For the year ended December 31, 2016, we remitted six installment payments in cash totaling $343,526 and have remitted one installment payment by issuing 694,056 shares of Common Stock for principal and interest due under the April 2015 Note. For the year ended December 31, 2015, we issued 1,648,421 shares of Common Stock for four installment payments of principal and interest due under the April 2015 Note.
The amount of interest cost recognized from our promissory note was $14,079 and $37,110 for the years ended December 31, 2016 and 2015, respectively.
The amount of debt discount amortized from our promissory note was $32,015 and $37,120 for the years ended December 31, 2016 and 2015, respectively.
The amount of debt issuance costs amortized from our promissory note was $22,927 and $27,073 for the years ended December 31, 2016 and 2015, respectively.
NOTE 11.
|
EQUITY TRANSACTIONS
|
Common Stock Transactions
March 2016 Offering
On March 29, 2016, we entered into a Stock Purchase Agreement with fifteen investors for the offer and sale of 25,245,442 shares of Common Stock and warrants to purchase an additional 25,245,442 shares of Common Stock at a purchase price of $0.0713 per unit, with each unit consisting of one share and one warrant to purchase Common Stock, for an aggregate purchase price of $1,800,000 (the “March 2016 Offering). The issue price of the shares sold was based on a 10% discount to the average closing price between March 7, 2016 and March 11, 2016 and the warrant exercise price was based on a 10% premium to the same average closing price. The warrants have an exercise price of $0.0871 per share and a five-year term. The warrants also include cashless exercise provisions and a “full ratchet” anti-dilution provision under which the exercise price of such warrants resets to any lower sales price at which the Company offers or sells Common Stock or Common Stock equivalents for one year (subject to standard exceptions).
The March 2016 Offering resulted in gross proceeds of $1,800,000, of which $1,439,000 was received in March 2016 and $361,000 was received in April 2016. As part of the offering expenses, we paid to a European placement agent a referral fee of $29,000 which is equal to 10% of the gross proceeds, provided that the investors referred by such placement agent were not U.S. Persons and were solicited outside the United States.
Purchasers in the March 2016 Offering include Michael I. Sacks ($1,000,000), the father of Bradley J. Sacks, the Chairman of our Board of Directors, Centric Capital Ventures, LLC ($19,000), an investment entity controlled by Bradley J. Sacks, Terrance K. Wallberg ($50,000), our Vice President and Chief Financial Officer, and Daniel G. Moro ($10,000), our Vice President of Polymer Drug Delivery.
October 2015 Offering
On September 6, 2015, we entered into a Securities Purchase Agreement with several institutional investors from Europe (collectively, the “Investors”) relating to an equity investment of $1,588,225 by the Investors for 4,179,539 shares of our common stock, at a per-share purchase price of $0.38 (the “October 2015 Offering”). As of the date of this Report, the October 2015 Offering has resulted in net proceeds to the Company of approximately $1,257,000, of which approximately $1,050,000 was received in October 2015 and $207,000 was received in November 2015.
As part of the offering expenses, we paid to a European placement agent a referral fee equal to 12% of the gross proceeds immediately following each closing, provided that the investors are not U.S. Persons and were solicited outside the United States.
We also entered into a Registration Rights Agreement with the Investors under which we agreed to prepare and file with the Securities and Exchange Commission (the “SEC”) a registration statement with respect to the resale of the Shares no later than September 26, 2015 and thereafter use all commercially reasonable efforts to cause such registration statement to become effective. In accordance with our obligations under the Registration Rights Agreement, we filed with the SEC a registration statement that was declared effective on October 9, 2015. We are required to keep such registration statement effective until the earliest of (i) the date that is six months after the Closing Date under the SPA, (ii) the date when the respective Investor may sell all of the Shares under Rule 144 without volume limitations, or (iii) the date the Investor no longer owns any of the Shares. Such registration statement has ceased to be effective.
NOTE 12.
|
STOCKHOLDERS’ EQUITY
|
Common Stock
As of December 31, 2016, we had 62,974,431 shares of common stock issued and outstanding.
For the year ended December 31, 2016, we issued 26,139,498 shares of Common Stock composed of 25,245,442 shares of Common Stock issued to investors pursuant to the March 2016 offering, 694,056 shares of Common Stock issued for installment payments due under the April 2015 Note with Inter-Mountain, and 200,000 shares issued for consulting services related to investor relations.
Preferred Stock
As of December 31, 2016, we had no shares of Series A Preferred Stock (the “Series A Shares”) issued and outstanding. For the year ended December 31, 2016, we did not issue any new Series A Shares.
Warrants
The following table summarizes the warrants outstanding and the number of shares of common stock subject to exercise as of December 31, 2016 and the changes therein during the two years then ended:
|
|
Number of Shares of Common Stock Subject to Exercise
|
|
|
Weighted – Average
Exercise Price
|
|
Balance as of December 31, 2014
|
|
|
1,676,401
|
|
|
$
|
1.14
|
|
|
|
|
|
|
|
|
|
|
Warrants issued
|
|
|
847,804
|
|
|
|
0.72
|
|
Warrants exercised
|
|
|
(392,857
|
)
|
|
|
0.35
|
|
Warrants cancelled
|
|
|
(357,155
|
)
|
|
|
2.85
|
|
Balance as of December 31, 2015
|
|
|
1,774,193
|
|
|
$
|
0.77
|
|
|
|
|
|
|
|
|
|
|
Warrants issued
|
|
|
25,245,442
|
|
|
$
|
0.09
|
|
Warrants exercised
|
|
|
---
|
|
|
|
---
|
|
Warrants cancelled
|
|
|
(840,075
|
)
|
|
$
|
0.84
|
|
Balance as of December 31, 2016
|
|
|
26,179,560
|
|
|
$
|
0.11
|
|
For the year ended December 31, 2016, we issued warrants to purchase up to an aggregate of 25,245,442 shares of our Common Stock at an exercise price of $0.0871 per shares pursuant to the March 2016 Offering.
Of the warrant shares subject to exercise as of December 31, 2016, expiration of the right to exercise is as follows:
Date of Expiration
|
|
Number of Warrant Shares of Common Stock Subject to Expiration
|
|
March 14, 2018
|
|
|
660,000
|
|
January 15, 2019
|
|
|
80,000
|
|
April 30, 2020
|
|
|
194,118
|
|
March 30, 2021
|
|
|
25,245,442
|
|
Total
|
|
|
26,179,560
|
|
NOTE 13.
|
EARNINGS PER SHARE
|
Basic and Diluted Net Loss Per Share
In accordance with FASB Accounting Standards Codification (“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 December 31:
|
|
2016
|
|
|
2015
|
|
Warrants to purchase Common Stock
|
|
|
26,179,560
|
|
|
|
1,774,193
|
|
Stock options to purchase common stock
|
|
|
691,237
|
|
|
|
1,664,573
|
|
Common stock issuable upon the assumed conversion of payments due under our promissory note from April 2015 (1)
|
|
|
---
|
|
|
|
1,934,718
|
|
Total
|
|
|
26,870,797
|
|
|
|
5,373,484
|
|
(1)
|
As part of the April 2015 Note, at our option, subject to certain volume, price and other conditions, the monthly installments of principle and interest due under the April 2015 Note have been paid in whole, or in part, in cash or in Common Stock. If the monthly installments were paid in Common Stock, such shares being issued were based on a price that is 80% of the average of the three lowest volume weighted average prices of the shares of Common Stock during the preceding twenty trading days. The percentage declines to 70% if the average of the three lowest volume weighted average prices of the shares of Common Stock during the preceding twenty trading days is less than $0.05 per share. For the purposes of this Table, we have assumed that all outstanding monthly installments of principal and interest were paid in Common Stock based on a price of $0.10 per share (80% of the average of the three lowest volume weighted average prices of the shares of Common Stock during the preceding twenty trading days prior to December 31, 2015), subject to certain ownership limitations.
On August 11, 2016, the Company issued the final installment payment due under the April 2015 Note.
|
NOTE 14.
|
SHARE BASED COMPENSATION
|
The Company’s share-based compensation plan, the 2006 Equity Incentive Plan (“Incentive Plan”), is administered by the compensation committee of the Board of Directors, 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.
Our Board did not grant any incentive stock option awards to executives or employees or any nonstatutory stock option awards to directors or non-employees for the years ended December 31, 2016 and 2015, respectively.
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.
Stock Options (Incentive and Nonstatutory)
The following table summarizes share-based compensation related to stock options for the years ended December 31:
|
|
2016
|
|
|
2015
|
|
Research and development
|
|
$
|
7,614
|
|
|
$
|
69,028
|
|
Selling, general and administrative
|
|
|
12,360
|
|
|
|
83,956
|
|
Total share-based compensation expense
|
|
$
|
19,974
|
|
|
$
|
152,984
|
|
At December 31, 2016, 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 $13,000. The period over which the unearned share-based compensation is expected to be recognized is approximately nine months.
The following table summarizes the stock options outstanding and the number of shares of common stock subject to exercise as of December 31, 2016 and the changes therein during the two years then ended:
|
|
Stock Options
|
|
|
Weighted Average Exercise Price per Share
|
|
Outstanding as of December 31, 2014
|
|
|
1,699,907
|
|
|
$
|
1.73
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
---
|
|
|
|
---
|
|
Forfeited/cancelled
|
|
|
(35,334
|
)
|
|
|
1.77
|
|
Exercised
|
|
|
---
|
|
|
|
---
|
|
Outstanding as of December 31, 2015
|
|
|
1,664,573
|
|
|
$
|
1.73
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
---
|
|
|
|
---
|
|
Forfeited/cancelled
|
|
|
(973,336
|
)
|
|
|
1.58
|
|
Exercised
|
|
|
---
|
|
|
|
---
|
|
Outstanding as of December 31, 2016
|
|
|
691,237
|
|
|
$
|
1.94
|
|
The following table presents the stock option grants outstanding and exercisable as of December 31, 2016:
Options Outstanding
|
|
|
Options Exercisable
|
|
Stock Options Outstanding
|
|
|
Weighted Average Exercise Price per Share
|
|
|
Weighted Average Remaining Contractual Life in Years
|
|
|
Stock Options Exercisable
|
|
|
Weighted Average Exercise Price per Share
|
|
|
422,500
|
|
|
$
|
0.33
|
|
|
|
6.2
|
|
|
|
422,500
|
|
|
$
|
0.33
|
|
|
240,000
|
|
|
|
1.15
|
|
|
|
7.7
|
|
|
|
240,000
|
|
|
|
1.15
|
|
|
28,737
|
|
|
|
32.28
|
|
|
|
1.2
|
|
|
|
28,737
|
|
|
|
32.28
|
|
|
691,237
|
|
|
$
|
1.94
|
|
|
|
6.5
|
|
|
|
691,237
|
|
|
$
|
1.94
|
|
Restricted Stock Awards
Restricted stock awards, which typically vest over a period of six months to five years, are issued to certain key employees and are subject to forfeiture until the end of an established restriction period. We utilize the market price on the date of grant as the fair market value of restricted stock awards and expense the fair value on a straight-line basis over the vesting period.
For the years ended December 31, 2016 and 2015, we did not grant any restricted stock awards. At December 31, 2016, the balance of unearned share-based compensation to be expensed in future periods related to restricted stock awards, as adjusted for expected forfeitures, is nil.
Summary of Plans
2006 Equity Incentive Plan
In March 2006, our Board adopted and our stockholders approved our 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 the annual meetings of the stockholders held on May 8, 2007, December 17, 2009, June 15, 2010, June 14, 2012, June 13, 2013, and on June 5, 2014, our stockholders approved amendments to the Equity Incentive Plan to increase the total number of shares of Common Stock issuable under the Equity Incentive Plan pursuant to stock options and other equity awards by 266,667 shares, 200,000 shares, 200,000 shares, 400,000 shares, 600,000 shares, and 1,000,000 shares, respectively, to a total of 2,800,000 shares.