Quarterly report pursuant to Section 13 or 15(d)

3. Summary of Significant Accounting Policies (Tables)

v2.4.1.9
3. Summary of Significant Accounting Policies (Tables)
 3 Months Ended
Mar. 31, 2015
Notes to Financial Statements  
Inventories Table

 

    March 31,     December 31,  
    2015     2014  
Raw materials   $ 306,105     $ 304,928  
Finished goods     542,890       595,624  
Inventory reserve     (50,000 )     (50,000 )
Total   $ 798,995     $ 850,552  
Customer Concentration

The following table illustrates the level of concentration as a percentage of total revenues during the three months ended March 31, 2015 and 2014.

 

    For the Three Months Ended  
    March 31,  
    2015     2014  
Top Five Customers     64 %     65 %
Federal Agencies     26 %     1 %

 

The following table illustrates the level of concentration as a percentage of net accounts receivable balance as of March 31, 2015 and December 31, 2014:

 

    March 31,     December 31,  
    2015     2014  
Top Five Customers     70 %     86 %
Federal Agencies     19 %     9 %
Computation of Loss per Share

The following table illustrates our computation of loss per share for the three months ended March 31, 2015 and 2014:

 

    For the Three Months Ended  
    March 31,  
    2015     2014  
Numerator:            
Net loss   $ (2,047,455 )   $ (1,759,655 )
Accrued dividend for Preferred Stock     (16,668 )     (44,987 )
Deemed dividend on Series K Convertible Preferred Stock     -       (1,280,066 )
Net loss applicable to common shareholders   $ (2,064,123 )   $ (3,084,708 )
                 
Denominator for basic and diluted loss per share:                
Weighted average common stock shares outstanding     18,840,390       12,122,045  
                 
Loss per common share - basic and diluted   $ (0.11 )   $ (0.25 )
Stockholders' Equity Activity Series C Preferred Convertible Securities Exchange
    For the Three Months Ended  
    March 31,  
    2015     2014  
Stock options     3,406,250       1,730,750  
Convertible debt     8,555,938       932,500  
Common stock warrants     19,182,201       18,222,827  
Convertible preferred stock:                
  Series D Convertible Preferred Stock     750,000       750,000  
Series G Convertible Preferred Stock     865,700       1,453,200  
Series H Convertible Preferred Stock     1,000,000       1,000,000  
Series H2 Convertible Preferred Stock     2,100,000       -  
Series J Convertible Preferred Stock     3,546,000       5,087,500  
Series K Convertible Preferred Stock     11,416,000       10,729,000  
      50,822,089       39,905,777  
Stock based compensation expense

The following table summarizes the effect of this stock-based compensation expense within each of the line items of our costs and expenses within our Condensed Consolidated Statements of Operations:

 

   

For the Three Months Ended

 March 31,

  
    2015     2014  
Research and development   $ 11,343     $ 7,553  
Selling and marketing     6,975       5,991  
General and administrative     36,572       5,352  
Total stock-based compensation expense   $ 54,890     $ 18,896  
Liabilities measured at fair value on recurring basis

The following tables set forth the Company’s financial liabilities that were accounted for at fair value on a recurring basis as of March 31, 2015.

  

          Fair value measurements at March 31, 2015 using:  
    March 31, 2015     Quoted prices in active markets (Level 1)     Significant other observable inputs (Level 2)     Significant unobservable inputs (Level 3)  
Series D Preferred Stock Purchase Warrants   $ 210,906       -       -     $ 210,906  
                                 

 

    January 1, 2015     Change in Fair Value     Reclassified to Equity     March 31, 2015  
Series D Preferred Stock Purchase Warrants   $ 159,875     $ 51,031       -     $ 210,906  
                                 

 

          Fair value measurements at March 31, 2015 using:  
    March 31, 2015     Quoted prices in active markets (Level 1)     Significant other observable inputs (Level 2)     Significant unobservable inputs (Level 3)  
September 26, 2014 note, conversion option   $ 119,355                 $ 119,355  
November 10, 2014 note, conversion option     107,026                   107,026  
November 17, 2014 note, conversion option     113,684                   113,684  
February 2, 2015 note, conversion option     83,672                   83,672  
February 2, 2015 note, conversion option     100,406                   100,406  
February 25, 2015 note, conversion option     149,653                   149,653  
March 4, 2015 note, conversion option     46,080                   46,080  
March 9, 2015 note, conversion option     70,447                   70,447  
March 17, 2015 note, conversion option     176,147                   176,147  
March 17, 2015 note, conversion option     38,448       -       -       38,448  
March 20, 2015 note, conversion option     17,789       -       -       17,789  
March 26, 2015 note conversion option     138,585       -       -       138,585  
March 27, 2015 note, conversion option     46,538       -       -       46,538  
March 27, 2015 note, conversion option     135,055       -       -       135,055  
Embedded conversion options   $ 1,342,885       -       -     $ 1,342,885  

 

    Jan. 1, 2015     Issuance fair value     Change in fair value     Reclassification into equity     March 31, 2015  
July 7, 2014 note, conversion option     53,673       -       15,026       (68,699 )     -  
July 7, 2014 note, conversion option     70,604       -       25,574       (96,178 )     -  
August 28, 2014 note conversion option     25,146       -       63,383       (88,529 )     -  
September 3 2014 note, conversion option     95,938       -       125,823       (221,761 )     -  
September 10, 2014 note, conversion option     99,124       -       87,173       (186,297 )     -  
September 26, 2014 note, conversion option     92,699       -       26,656       -       119,355  
November 10, 2014 note, conversion option     74,343       -       32,683       -       107,026  
November 17, 2014 note, conversion option     78,814       -       34,870       -       113,684  
February 2, 2015 note, conversion option     -       62,219       21,453       -       83,672  
February 2, 2015 note, conversion option     -       74,663       25,743       -       100,406  
February 25, 2015 note, conversion option     -       312,718       (163,065 )     -       149,653  
March 4, 2015 note, conversion option     -       53,213       (7,133 )     -       46,080  
March 9, 2015 note, conversion option     -       61,597       8,850       -       70,447  
March 17, 2015 note, conversion option     -       212,918       (36,771 )     -       176,147  
March 17, 2015 note, conversion option     -       64,382       (25,934 )     -       38,448  
March 20, 2015 note, conversion option     -       25,077       (7,288 )     -       17,789  
March 26, 2015 note conversion option     -       164,581       (25,996 )     -       138,585  
March 27, 2015 note, conversion option     -       57,502       (10,964 )     -       46,538  
March 27, 2015 note conversion option     -       154,359       (19,304 )     -       135,055  
Embedded conversion options   $ 590,341     $ 1,243,229     $ 170,779     $ (661,464 )   $ 1,342,885  
Fair value assumptions

The assumptions for the binomial pricing model are represented in the table below for the warrants issued in the Series D private placement reflected on a per share common stock equivalent basis.

 

Assumptions   November 10, 2011     Warrants revalued at December 31, 2014     Warrants revalued at March 31, 2015  
Expected life (in months)     60.0       22.0       19.0  
Expected volatility     104.5 %     116.0 %     124.4 %
Risk-free interest rate     0.875 %     0.58 %     0.31 %
Exercise price   $ 0.81     $ 0.25     $ 0.25  
Fair value per warrant   $ 0.54     $ 0.15     $ 0.20  

 

The assumptions for the binomial pricing model are represented in the table below for the conversion options reflected on a per share common stock equivalent basis.

 

Assumptions   July 7, 2014     Conversion options revalued at Jan. 9, 2015  
Expected life (in months)     12       6  
Expected volatility     117.9 %     114.9 %
Risk-free interest rate     0.12 %     0.12 %
Exercise price   $ 0.21     $ 0.14  
Fair value per conversion option   $ 0.18     $ 0.12  

 

Assumptions   July 7, 2014     Conversion options revalued at Jan. 9, 2015  
Expected life (in months)     12       6  
Expected volatility     117.9 %     114.9 %
Risk-free interest rate     0.12 %     0.12 %
Exercise price   $ 0.21     $ 0.14  
Fair value per conversion option   $ 0.18     $ 0.12  
                 
Assumptions   August 28, 2014     Conversion options revalued at Feb. 26, 2015  
Expected life (in months)     6       -  
Expected volatility     104.4 %     0.8 %
Risk-free interest rate     0.05 %     0.01 %
Exercise price   $ 0.14     $ 0.10  
Fair value per conversion option   $ 0.15     $ 0.26  
                 
Assumptions   Sept. 3, 2014     Conversion options revalued at March 2, 2015  
Expected life (in months)     36       -  
Expected volatility     153.8 %     437.5 %
Risk-free interest rate     0.99 %     0.01 %
Exercise price   $ 0.35     $ 0.12  
Fair value per conversion option   $ 0.24     $ 0.16  

 

Assumptions   Sept. 10, 2014     Conversion options revalued at March 11, 2015  
Expected life (in months)     12       2  
Expected volatility     117.6 %     142.2 %
Risk-free interest rate     0.12 %     0.18 %
Exercise price   $ 0.13     $ 0.10  
Fair value per conversion option   $ 0.17     $ 0.18  

 

Assumptions   Sept. 26, 2014     Conversion options revalued at March 31, 2015  
Expected life (in months)     12       6  
Expected volatility     116.6 %     144.6 %
Risk-free interest rate     0.11 %     0.17 %
Exercise price   $ 0.16     $ 0.17  
Fair value per conversion option   $ 0.19     $ 0.18  

 

Assumptions   Nov. 10, 2014     Conversion options revalued at March 31, 2015  
Expected life (in months)     10       5  
Expected volatility     104.2 %     148.4 %
Risk-free interest rate     0.10 %     0.18 %
Exercise price   $ 0.13     $ 0.14  
Fair value per conversion option   $ 0.23     $ 0.20  

 

Assumptions   Nov. 17, 2014     Conversion options revalued at March 31, 2015  
Expected life (in months)     12       7  
Expected volatility     117.9 %     132.4 %
Risk-free interest rate     0.12 %     0.15 %
Exercise price   $ 0.17     $ 0.17  
Fair value per conversion option   $ 0.20     $ 0.18  

 

Assumptions   Feb. 2, 2015     Conversion options revalued at March 31, 2015  
Expected life (in months)     6       4  
Expected volatility     111.7 %     146.0 %
Risk-free interest rate     0.07 %     0.07 %
Exercise price   $ 0.14     $ 0.20  
Fair value per conversion option   $ 0.09     $ 0.14  

 

Assumptions   Feb. 2, 2015     Conversion options revalued at March 31, 2015  
Expected life (in months)     6       4  
Expected volatility     111.7 %     146.0 %
Risk-free interest rate     0.07 %     0.07 %
Exercise price   $ 0.14     $ 0.19  
Fair value per conversion option   $ 0.09     $ 0.16  

 

Assumptions   Feb. 25, 2015     Conversion options revalued at March 31, 2015  
Expected life (in months)     6       5  
Expected volatility     132.1 %     149.4 %
Risk-free interest rate     0.08 %     0.08 %
Exercise price   $ 0.10     $ 0.14  
Fair value per conversion option   $ 0.28     $ 0.19  

 

Assumptions   March 4, 2015     Conversion options revalued at March 31, 2015  
Expected life (in months)     6       5  
Expected volatility     138.9 %     150.5 %
Risk-free interest rate     0.08 %     0.08 %
Exercise price   $ 0.17     $ 0.19  
Fair value per conversion option   $ 0.17     $ 0.16  

 

Assumptions   March 9, 2015     Conversion options revalued at March 31, 2015  
Expected life (in months)     6       5  
Expected volatility     139.2 %     149.8 %
Risk-free interest rate     0.08 %     0.08 %
Exercise price   $ 0.20     $ 0.21  
Fair value per conversion option   $ 0.13     $ 0.15  

 

Assumptions   March 17, 2015     Conversion options revalued at March 31, 2015  
Expected life (in months)     6       6  
Expected volatility     143.3 %     149.3 %
Risk-free interest rate     0.08 %     0.08 %
Exercise price   $ 0.21     $ 0.21  
Fair value per conversion option   $ 0.19     $ 0.16  

 

Assumptions   March 17, 2015     Conversion options revalued at March 31, 2015  
Expected life (in months)     6       6  
Expected volatility     143.3 %     149.3 %
Risk-free interest rate     0.08 %     0.08 %
Exercise price   $ 0.17     $ 0.20  
Fair value per conversion option   $ 0.22     $ 0.16  

 

Assumptions   March 20, 2015     Conversion options revalued at March 31, 2015  
Expected life (in months)     6       6  
Expected volatility     140.9 %     147.2 %
Risk-free interest rate     0.08 %     0.08 %
Exercise price   $ 0.20     $ 0.21  
Fair value per conversion option   $ 0.20     $ 0.15  
                 

 

Assumptions   March 26, 2015     Conversion options revalued at March 31, 2015  
Expected life (in months)     6       6  
Expected volatility     143.2 %     144.9 %
Risk-free interest rate     0.07 %     0.07 %
Exercise price   $ 0.18     $ 0.18  
Fair value per conversion option   $ 0.20     $ 0.17  
                 

 

Assumptions   March 27, 2015     Conversion options revalued at March 31, 2015  
Expected life (in months)     6       6  
Expected volatility     142.6 %     144.3 %
Risk-free interest rate     0.06 %     0.06 %
Exercise price   $ 0.18     $ 0.19  
Fair value per conversion option   $ 0.20     $ 0.17  

 

Assumptions   March 27, 2015     Conversion options revalued at March 31, 2015  
Expected life (in months)     6       6  
Expected volatility     142.6 %     144.9 %
Risk-free interest rate     0.06 %     0.06 %
Exercise price   $ 0.14     $ 0.14  
Fair value per conversion option   $ 0.22     $ 0.19