Commitments and Contingencies

6 Months Ended

Jun. 30, 2019

Commitments and Contingencies Disclosure [Abstract]

5. COMMITMENTS AND CONTINGENCIES

Sponsored Research and License Agreements

Research and development of the Company's high efficiency solar thin films and OPV technologies are conducted in collaboration with University partners through sponsored research agreements.

The Company established direct research and development agreements with Michigan on June 16, 2016, which were amended on July 21, 2016, to provide engineering support and facility access associated with technology transfer and commercialization of its high efficiency thin film solar technologies. Such research agreements were terminated on August 31, 2017 and replaced with a time and materials contract for access to Michigan's Labs by the Company's technicians.

A separate research agreement dated December 20, 2013, among the Company and USC (the "2013 Research Agreement"), governs research conducted by USC and Michigan on high efficiency thin film and OPV technologies. Michigan is a subcontractor to USC on this research agreement. The 2013 Research Agreement expires on January 31, 2021.

On August 8, 2016, the Company amended the 2013 Research Agreement with USC, suspending the agreement effective as of August 15, 2016. The Company requested this amendment to suspend its OPV-related sponsored research activities to reduce near-term expenditures to allow the Company to bring its account with USC current through a payment plan. The suspension is to continue until the date that is 30 days after expenses incurred by USC have been reimbursed by the Company. Under this amendment, the Company repaid expenses to USC in quarterly installments of $206,000 from November 2016 through February 2018.

Under the Company's currently effective License Agreement, as amended on August 22, 2016, among the Company and USC, Michigan, and Princeton (the "Fourth Amendment to License Agreement"), wherein the Company has obtained the exclusive worldwide license and right to sublicense any and all intellectual property resulting from the Company's sponsored research agreements, we have agreed to pay for all reasonable and necessary out of pocket expenses incurred in the preparation, filing, maintenance, renewal and continuation of patent applications designated by the Company. In addition, the Company is required to pay to USC 3% of net sales of licensed products or licensed processes used, leased or sold by the Company, 3% of revenues received by the Company from the sublicensing of patent rights and 23% of revenues (net of costs and expenses, including legal fees) received by the Company from final judgments in infringement actions respecting the patent rights licensed under the agreement. A previous amendment to the License Agreement (the Third Amendment to License Agreement dated December 20, 2013) amended the minimum royalty section to eliminate the accrual of any such royalties until 2014. Furthermore, the amounts of the non-refundable minimum royalties, which would be applicable starting in 2014, were adjusted to be lower than the amounts in the previous License Agreement. Minimum royalties are $100,000 per year for the remainder of the contract.

There is currently no ongoing research activity at Princeton, USC and Michigan related to the Company, although the Company maintains licensing rights to technology previously developed there.

Leases

The Company has two operating leases, one for office space in Scottsdale, Arizona and one for laboratory and office space in Ann Arbor, Michigan. The office lease in Scottsdale, Arizona is renewed on a monthly basis and was therefore scoped out of ASC 842 while the laboratory and office space lease in Ann Arbor, Michigan has a remaining term of 1.3 years. When this lease expires, it becomes renewable on a monthly basis. In June 2019, an addendum was added to this lease increasing the monthly payments to $2,875 in exchange for more office space. Lease expense was $14,232 for the six months ended June 30, 2019.

Supplemental cash flow information related to leases for the six months ending June 30, 2019 was as follows:

Right-of-use assets obtained in exchange for lease obligations		$	56,047
Cash payments for operating leases		$	15,375

Supplemental balance sheet information related to leases as of June 30, 2019 was as follows:

Operating lease right-of-use asset		$	41,815
Operating lease liabilities		$	41,815

Future minimum annual lease payments of operating leases as of June 30, 2019:

Remainder of 2019	$	17,250
2020		25,875
Total future lease payments		43,125
Less imputed interest		(1,310	)
Total lease liability balance	$	41,815

Concentrations

All of the Company's revenue and accounts receivable were earned from one customer.

NanoFlex Power Corp 10-Q