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Document and Entity Information

v2.4.0.8
Document and Entity Information
3 Months Ended
Mar. 31, 2014
May 08, 2014
Document And Entity Information    
Entity Registrant Name Applied Nanotech Holdings, Inc.  
Entity Central Index Key 0000891417  
Document Type 10-Q  
Document Period End Date Mar. 31, 2014  
Amendment Flag false  
Current Fiscal Year End Date --12-31  
Is Entity a Well-known Seasoned Issuer? No  
Is Entity a Voluntary Filer? No  
Is Entity's Reporting Status Current? No  
Entity Filer Category Smaller Reporting Company  
Entity Common Stock, Shares Outstanding   157,053,526
Document Fiscal Period Focus Q1  
Document Fiscal Year Focus 2014  

Consolidated Balance Sheets

v2.4.0.8
Consolidated Balance Sheets (USD $)
Mar. 31, 2014
Dec. 31, 2013
Current assets:    
Cash and cash equivalents $ 159,039 $ 119,551
Accounts receivable - net of allowance for doubtful accounts 327,177 462,964
Prepaid expenses and other current assets 78,401 85,499
Total current assets 564,617 668,014
Property and equipment, net 141,692 157,772
Other assets 27,114 27,114
Total assets 733,423 852,900
Current liabilities:    
Accounts payable 704,002 642,486
Convertible notes payable 1,823,729 1,859,912
Obligations under capital lease 0 10,427
Accrued liabilities 1,376,981 1,580,194
Deposits and deferred revenue 194,355 143,323
Total current liabilities 4,099,067 4,236,342
Total liabilities 4,099,067 4,236,342
Commitments and contingencies      
Stockholders' equity (deficit):    
Preferred stock, $1.00 par value, 2,000,000 shares authorized; No shares issued and outstanding 0 0
Common stock, $.00l par value, 160,000,000 shares authorized, 157,053,526 and 147,825,202 shares issued and outstanding at March 31, 2014 and December 31, 2013, respectively 157,054 147,825
Additional paid-in capital 118,045,073 117,595,024
Accumulated deficit (121,567,771) (121,126,291)
Total stockholders' deficit (3,365,644) (3,383,442)
Total liabilities and stockholders' deficit $ 733,423 $ 852,900

Consolidated Balance Sheets (Parenthetical)

v2.4.0.8
Consolidated Balance Sheets (Parenthetical) (USD $)
Mar. 31, 2014
Dec. 31, 2013
Statement of Financial Position [Abstract]    
Preferred stock par value $ 1.00 $ 1.00
Preferred stock shares authorized 2,000,000 2,000,000
Preferred stock shares issued 0 0
Preferred stock shares outstanding 0 0
Common stock par value $ 0.001 $ 0.001
Common stock shares authorized 160,000,000 160,000,000
Common stock shares issued 157,053,526 147,825,202
Common stock shares outstanding 157,053,526 147,825,202

Consolidated Statements of Operations

v2.4.0.8
Consolidated Statements of Operations (USD $)
3 Months Ended
Mar. 31, 2014
Mar. 31, 2013
Revenues    
Government contracts $ 719,298 $ 478,826
Contract research 139,300 312,051
Product sales 23,634 72,701
License fees and royalties 0 56,073
Other 200 29,059
Total revenues 882,432 948,710
Research and development 626,355 867,672
Selling, general and administrative expenses 601,688 747,781
Operating costs and expenses 1,228,043 1,615,453
Gain on sale of property and equipment 2,555 0
Loss from operations (343,056) (666,743)
Interest expense (98,454) (708,202)
Interest income 30 5
Loss before taxes (441,480) (1,374,940)
Provision for taxes 0 0
Net loss $ (441,480) $ (1,374,940)
Loss per share - Basic and Diluted $ 0.00 $ (0.01)
Weighted average shares outstanding - Basic and Diluted 154,425,018 123,137,188

Consolidated Statements of Cash Flows

v2.4.0.8
Consolidated Statements of Cash Flows (USD $)
3 Months Ended
Mar. 31, 2014
Mar. 31, 2013
Statement of Cash Flows [Abstract]    
Net loss $ (441,480) $ (1,374,940)
Depreciation and amortization expense 16,080 27,454
Amortization of discount on debt 59,953 637,296
Stock based compensation expense 197,376 33,414
Gain on disposal of property and equipment (2,555) 0
Accounts receivable, trade 135,787 (82,122)
Prepaid expenses and other assets 7,098 603,514
Accounts payable 91,516 (82,703)
Accrued liabilities (123,197) 227,907
Deposits and deferred revenue 51,032 96,630
Total adjustments 433,090 1,461,390
Net cash provided by (used in) operating activities (8,390) 86,450
Cash flows from investing activities:    
Proceeds from the sale of fixed assets 2,555 0
Net cash provided by investing activities 2,555 0
Cash flows from financing activities:    
Proceeds from issuance of convertible notes payable 55,750 318,000
Repayment of capital lease obligations and notes payable (10,427) (85,290)
Net cash provided by financing activities 45,323 232,710
Net increase in cash and cash equivalents 39,488 319,160
Cash and cash equivalents, beginning of period 119,551 331,579
Cash and cash equivalents, end of period $ 159,039 $ 650,739

1. Basis of Presentation

v2.4.0.8
1. Basis of Presentation
3 Months Ended
Mar. 31, 2014
Accounting Policies [Abstract]  
1. Basis of Presentation

The consolidated financial statements of the Company for the three-month periods ended March 31, 2014 and 2013, have been prepared by the Company without audit pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of the Company’s management, all adjustments necessary to present fairly the financial position, results of operations, and cash flows of the Company as of March 31, 2014 and 2013, and for the periods then ended, have been made. Those adjustments consist of normal and recurring adjustments. The consolidated balance sheet of the Company as of December 31, 2013, has been derived from the audited consolidated balance sheet of the Company as of that date.

 

Certain information and note disclosures normally included in the Company’s annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. These consolidated financial statements should be read in conjunction with a reading of the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013, as filed with the Securities and Exchange Commission.

 

The results of operations for the three-month period ended March 31, 2014, are not necessarily indicative of the results to be expected for the full year. Certain reclassifications have been made in the prior period’s consolidated financial statements to conform to the current period’s presentation.

 

The Company has a history of net losses and negative cash flow from operations. We have had losses in each of the last three years, but we have a plan to achieve positive cashflow from operations for 2014, prior to interest expense and expenses associated with the business combination discussed in Note 6. The accompanying financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of the Company as a going concern, and do not included any adjustments that may be required if it were unable to continue as a going concern. Management and the Board believe that the actions taken to date in 2014 and currently being taken will allow the Company to achieve positive cashflow from operations for 2014, prior to interest expense and expenses associated with the business combination discussed in Note 6, and to achieve profitability in future years. These actions include both significant expense cuts and the business combination with NanoHoldings as discussed in Note 6.

2. Supplemental Cash Flow Information

v2.4.0.8
2. Supplemental Cash Flow Information
3 Months Ended
Mar. 31, 2014
Supplemental Cash Flow Elements [Abstract]  
2. Supplemental Cash Flow Information

Cash paid for interest for the three months ended March 31, 2014 and 2013, was $653 and $8,796, respectively. During the three months ended March 31, 2014 and 2013, the Company had non-cash transactions related to share based payments described in greater detail in Note 5, non-cash transactions related to the conversion of accounts payable into common stock described in greater detail in Note 4, and non-cash transactions related to both the issuance of notes and the conversion of notes payable and related accrued interest into common stock that are described in greater detail in Notes 3 and 4.

3. Notes Payable and Long-Term Debt

v2.4.0.8
3. Notes Payable and Long-Term Debt
3 Months Ended
Mar. 31, 2014
Debt Disclosure [Abstract]  
3. Notes Payable and Long-Term Debt

As described in detail in our Form 10-K for the year ended December 31, 2013 we issued convertible notes from 2009 through 2013. Additional convertible notes with a face amount of $136,250 were issued in the quarter ended March 31, 2014. One of these notes in the amount of $75,000 was issued to the Company’s former chief financial officer in a noncash transaction in connection with an overall release and settlement agreement related to the termination of employment. The note is due the earlier of December 31, 2014, or upon completion of the Company’s proposed business combination (as discussed further in Note 6) and is payable in cash or with 1.5 million shares of stock in the new entity, at the option of the Company.

 

As of March 31, 2014, there are notes with a total face amount of $1,883,058 outstanding. These notes are due at dates throughout 2014 and through February 2015. As of March 31, 2014, notes totaling $1,713,058 of these notes were past due and considered demand notes. These notes bear interest at rates ranging from less than 1% to 8%, and $95,000 of the notes outstanding included a 10% original issuance discount. The notes are convertible at fixed rates ranging from $0.08 to $0.25 per share and $95,000 of the face amount of the notes are convertible at a floating discounts of 30% to the market price of our common stock at the date of conversion.

 

At the time of issuance, the value of the beneficial conversion feature of these notes is calculated, recorded as a discount to the note, and amortized to expense over the term of the note. If the notes are converted before maturity, any unamortized expense at the time of conversion is expensed at the time of conversion. As of March 31, 2014, there is $59,329 of unamortized discount remaining to be amortized in future periods during 2014. A total of $59,953 and $637,296 of discount was amortized to interest expense during the three month periods ending March 31, 2014 and 2013, respectively.

4. Stockholders Equity

v2.4.0.8
4. Stockholders Equity
3 Months Ended
Mar. 31, 2014
Equity [Abstract]  
4. Stockholders Equity

During the three months ended March 31, 2014, we issued 8,028,324 shares of common stock as the result of the conversion of notes payable and related accrued interest in the amount of $168,331. During the three months ended March 31, 2013, we issued 8,275,461 shares of common stock as the result of the conversion of notes payable and related accrued interest in the amount of $824,437. We also issued 470,085 shares in connection with a cashless exercise of 1,692,307 warrants issued in January 2013 in connection with the issuance of convertible notes.

 

During the three months ended March 31, 2014 and 2013, respectively, we issued 1,200,000 and 600,000 shares, respectively, of common stock related to the payment of $30,000 and $60,000, respectively, of trade payables in exempt offerings under Regulation D of the Securities Act of 1933. We also issued 12,948 shares of common stock in connection with restricted stock payments to employees during the period ended March 31, 2013.

5. Share-Based Payments

v2.4.0.8
5. Share-Based Payments
3 Months Ended
Mar. 31, 2014
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
5. Share-Based Payments

We use the fair value method to account for stock based compensation. We recorded $197,376 and $33,414 in compensation expense in the periods ended March 31, 2014 and 2013, respectively, related to options issued under our stock-based incentive compensation plans and commitments to issue restricted stock. This includes expense related to both options issued and committed, as well as unissued restricted stock during the period ended, March 31, 2013, but only unissued restricted stock in the current period, The fair value of options was calculated using the Black-Scholes option pricing model. Information related to the assumptions used in this model is set forth in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013. The value of restricted stock grants is based upon the market price of the Company’s stock on the date of the grant.

6. Contingencies

v2.4.0.8
6. Contingencies
3 Months Ended
Mar. 31, 2014
Commitments and Contingencies Disclosure [Abstract]  
6. Contingencies

Proposed Business Combination

 

On March 10, 2014, we entered into an agreement for a proposed business combination between the Company and NanoHolding, Inc., a privately held company with a leading market position for specialty optical coatings, cleaners, and nano-composite products. The specific mechanics of the proposed transaction are included in an 8-K dated March 11, 2014, but the business combination, if approved by stockholders, will result in a combined entity with the Company and NanoHolding, Inc., operating under the name PEN, Inc.

 

If the Company’s stockholders approve the proposed business combination and the business combination is completed, the Company will be obligated to issue 7,074,000 shares of restricted common stock to all outside Directors of the Company, except for Director David Li, as compensation for management functions assumed by those Directors in 2013 and 2014 that went beyond their role as Directors, as well as the role that they played in facilitating the business combination. No liability for the issuance of these shares is recorded in the financial statements as of March 31, 2014 as the Company has no obligation to issue these shares unless the business combination is completed.

 

In addition, all of the outside Directors have been deferring a portion of their normal monthly compensation. As of March 31, 2014, the financial statements reflect a liability of approximately $194,000 for these deferred fees. If the business combination is completed, the Directors have agreed to accept payment of these fees in the stock of PEN, Inc. based on a price of $0.05 per share. If the stock of PEN, Inc. is trading above $0.05 per share at the time of payment, that will result in additional expense beyond that currently reflected in the financial statements, based on the difference between the price at the time and $0.05 per share.

 

If the stockholders approve the proposed business combination and the business combination is completed, the Company will be obligated to issue up to 6.8 million shares of restricted common stock to the Company’s Chief Operating Officer (“COO”) as part of an amended compensation package. These restricted stock grants will vest based on achievement of certain price targets for the stock of new entity. No liability is recorded in the financial statements as of March 31, 2014 for this potential grant, since the Company has no obligation to issue this grant unless the business combination is completed. The Company does have a liability of $215,427 recorded for unpaid compensation due to the COO. The previously described restricted stock grant will supersede and replace any amounts due to the COO, including accrued compensation, or any severance due to the COO upon termination of employment.

 

Litigation

 

The Company is a defendant in minor lawsuits described in greater detail in its 2013 Annual Report on Form 10-K. The Company expects any potential eventual payment to have no material effect on the financial statements.

 

Authorized shares

 

As discussed in the Annual Report on Form 10-K for the fiscal year ended December 31, 2013, the Company has potential commitments to issue shares in excess of its current authorized share limit. It intends to increase its authorized shares at the next shareholder meeting, however; if its share price increases significantly prior to an increase in the authorized limit, the Company may be liable to convertible note holders or optionees for damages equal to their lost profits if it is unable to deliver shares in accordance with its existing agreements. As discussed in note 7 below, in April and May 2014, the Company amended the majority of its notes payable to lower the conversion price. These lowered conversion prices increase the amount of shares the Company is committed to release, as the conversion price was lowered to below the existing market price of common stock on a significant amount of the notes.

7. Subsequent Events

v2.4.0.8
7. Subsequent Events
3 Months Ended
Mar. 31, 2014
Subsequent Events [Abstract]  
7. Subsequent Events

During the Period from April 1, 2014 through May 8, 2014, the Company issued $65,000 of convertible notes payable. These notes are due July 15, 2015, bear interest at a rate of 8%, and are convertible into common stock at a discount of 25% from the market price of the common stock at the time of conversion. If the proposed business combination occurs, the notes will be automatically convertible into common stock of the merged entity under the same terms. A total of $40,000 of these notes were issued to existing Directors of the Company and a total of $10,000 were issued to proposed Directors of the new merged entity that are not currently Directors of the Company.

 

During the Period from April 1, 2014 through May 8, 2014, the Company retired a total of $27,500 in notes payable that were issued in January 2014 by making cash payments.

 

During the Period from April 1, 2014 through May 8, 2014, the Company amended notes payable with a total face amount of $1,713,058 that were past due at March 31, 2014 to extend the due date to August 15, 2014, provide for automatic conversion if the business combination is completed, and lower the conversion price in most instances. The conversion price for $760,000 of these notes was lowered to $0.05 per share, to $0.10 per share for $915,058 of these notes, and the conversion price remained unchanged at $0.08 per share for the remaining $38,000 of notes. 

2. Supplemental Cash Flow Information (Details Narrative)

v2.4.0.8
2. Supplemental Cash Flow Information (Details Narrative) (USD $)
3 Months Ended
Mar. 31, 2014
Mar. 31, 2013
Supplemental Cash Flow Elements [Abstract]    
Cash paid for interest $ 653 $ 8,796

3. Notes Payable and Long-Term Debt (Details Narrative)

v2.4.0.8
3. Notes Payable and Long-Term Debt (Details Narrative) (USD $)
3 Months Ended
Mar. 31, 2014
Mar. 31, 2013
Debt Disclosure [Abstract]    
Face amount notes issued $ 1,883,058  
Maturity dates of notes 2014 through February 2015  
Interest rates of notes less than 1% to 8%  
Unamortized discount 59,329  
Discount amortized to interest expense $ 59,953 $ 637,296

4. Stockholders Equity (Details Narrative)

v2.4.0.8
4. Stockholders Equity (Details Narrative) (USD $)
3 Months Ended
Mar. 31, 2014
Mar. 31, 2013
Equity [Abstract]    
Stock issued in conversion of notes payable and related interest, shares 8,028,324 8,275,461
Stock issued in conversion of notes payable and related interest, value $ 168,331 $ 824,437
Stock issued in connection with cashless exercise of warrants, shares 470,085  
Stock issued for conversion of accounts payable-shares 1,200,000 600,000
Stock issued for conversion of accounts payable 30,000 60,000
Restricted stock issued to employees   $ 12,948

5. Share-Based Payments (Details Narrative)

v2.4.0.8
5. Share-Based Payments (Details Narrative) (USD $)
3 Months Ended
Mar. 31, 2014
Mar. 31, 2013
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]    
Share-based compensation $ 197,376 $ 33,414