Quarterly report pursuant to Section 13 or 15(d)

Summary of Significant Accounting Policies (Tables)

v3.5.0.2
Summary of Significant Accounting Policies (Tables)
6 Months Ended
Jun. 30, 2016
Accounting Policies [Abstract]  
Summary of Customer Concentration Risk Percentage

The following table illustrates the level of concentration as a percentage of total revenues during the three months and six months ended June 30, 2016 and 2015.

 

    For the Three Months Ended  
    June 30,  
    2016     2015  
Top Five Customers     68 %     65 %
Federal Agencies     8 %     27 %

 

    For the Six Months Ended  
    June 30,  
    2016     2015  
Top Five Customers     40 %     49 %
Federal Agencies     10 %     22 %

 

The following table illustrates the level of concentration as a percentage of net accounts receivable balance as of June 30, 2016 and December 31, 2015:

 

    June 30, 2016     December, 31, 2015  
Top Five Customers     73 %     93 %
Federal Agencies     0 %     1 %

Schedule of Inventories

The composition of inventory is as follows:

 

    June 30, 2016     December 31, 2015  
Raw materials   $ 407,949     $ 310,367  
Finished goods     644,433       778,004  
Inventory Reserve     (50,000 )     (50,000 )
Total   $ 1,002,382     $ 1,038,371  
Summary of Computation of Loss per Share

The following table illustrates our computation of loss per share for the three months and six months ended June 30, 2016 and 2015:

 

    For the Three Months Ended     For the Six Months Ended  
    June 30,     June 30,  
    2016     2015     2016     2015  
Numerator:                                
Net loss   $ 961,829     $ (1,386,241 )   $ (4,988,561 )   $ (2,772,232 )
Accretion of interest and amortization of debt discount     991,286       -       -       -  
Change in fair value of derivative liabilities     (2,016,593 )     -       -       -  
Preferred dividends accrued     -       (6,811 )     -       (23,479 )
Net loss applicable to common shareholders   $ (763,478 )   $ (1,393,052 )   $ (4,988,561 )   $ (2,795,711 )
                                 
Denominator for basic and diluted loss per share:                                
Weighted average common stock shares outstanding     25,953,828       19,682,632       24,481,039       19,247,895  
                                 
Net effect of dilutive common stock equivalents     44,808,781       -       -       -  
                                 
Weighted average shares outstanding - diluted     70,762,609       19,682,632       24,481,039       19,247,895  
                                 
Income (loss) per common share - basic   $ 0.04     $ (0.07 )   $ (0.20 )   $ (0.14 )
                                 
Income (loss) per common share - diluted   $ (0.00 )   $ (0.07 )   $ (0.20 )   $ (0.14 )
Summary of Anti-dilutive Securities Excluded from Computation of Earnings per Share
    As of June 30,  
    2016     2015  
Stock options     5,385,250       3,251,250  
Convertible debt     25,343,864       14,420,144  
Common stock warrants     26,403,340       19,182,201  
Convertible preferred stock:                
Series D Convertible Preferred Stock     750,000       750,000  
Series G Convertible Preferred Stock     865,700       865,700  
Series H Convertible Preferred Stock     1,000,000       1,000,000  
Series H2 Convertible Preferred Stock     2,100,000       2,100,000  
Series J Convertible Preferred Stock     3,546,000       3,546,000  
Series K Convertible Preferred Stock     6,816,000       11,416,000  
      72,210,153       56,531,295  
Summary of Stock Based Compensation Expense

    For the Three Months Ended June 30,  
    2016     2015  
Research and development     15,650       11,523  
Selling and marketing     9,803       7,099  
General and administrative     65,396       36,994  
Total stock-based compensation expense     90,849       55,616  

 

    For the Six Months Ended June 30  
    2016     2015  
Research and development     36,031       22,865  
Selling and marketing     22,493       14,075  
General and administrative     133,787       73,566  
Total stock-based compensation expense     192,311       110,506  

Schedule of Liabilities Measured at Fair Value on Recurring Basis

The following tables set forth the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of June 30, 2016:

 

          Fair value measurements at June 30, 2016 using:  
    June 30, 2016     Quoted
prices in
active
markets
(Level 1)
    Significant
other
observable
inputs (Level 2)
    Significant
unobservable
inputs (Level 3)
 
Available-For-Sale Equity Securities     81,783       81,783       0       0  
Total Financial Assets   $ 81,783     $ 81,783     $ -     $ 0  

 

    June 30, 2016     Quoted
prices in
active
markets
(Level 1)
    Significant
other
observable
inputs
(Level 2)
    Significant
unobservable
inputs (Level 3)
 
Series D Preferred Stock Purchase Warrants   $ 167,702       -       -     $ 167,702  
Warrants Issued with Convertible Debt     4,385,293       -       -       4,385,293  
Conversion Option Derivative Liabilities     5,023,449       -       -       5,023,449  
Total Derivatives   $ 9,576,444     $ -     $ -     $ 9,576,444  

 

The following table provides a summary of the changes in fair value, including net transfers in and/or out, of the derivative financial instruments, measured at fair value on a recurring basis using significant unobservable inputs for the six months ended June 30, 2016:

 

    December 31, 2015     Issuance
fair value
    Change
in fair
value
    Gain on
extinguishment
of derivative
liabilities
    June 30, 2016  
Available-For-Sale Equity Securities   $ 294,522             $ (212,739 )   $ -     $ 81,783  
Total Financial Assets   $ 294,522     $ -     $ (212,739 )   $ -     $ 81,783  

 

    December 31, 2015     Issuance
fair value
    Change in
fair value
    June 30, 2016  
Series D Preferred Stock Purchase Warrants   $ 173,526     $ -     $ (5,824 )   $ 167,702  
Convertible Debt Warrants     3,122,450       1,094,432       168,411       4,385,293  
Conversion Option Liabilities     3,940,791       1,547,127       (464,469 )     5,023,449  
Total Derivatives   $ 7,236,767     $ 2,641,559     $ (301,882 )   $ 9,576,444  

 

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

 

          Fair value measurements at December 31, 2015 using:  
    December 31, 2015     Quoted
prices in
active
markets
(Level 1)
   

Significant
other
observable
inputs

(Level 2)

    Significant
unobservable
inputs
(Level 3)
 
Available-For-Sale Equity Securities     294,522       294,522       -       -  
Total Financial Assets   $ 294,522     $ 294,522     $ -     $ -  

 

    December 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   $ 173,526       -       -     $ 173,526  
Warrants Issued with Convertible Debt     3,122,450       -       -       3,122,450  
Conversion Option Derivative Liabilities     3,940,791       -       -       3,940,791  
Total Derivatives   $ 7,236,767     $ -     $ -     $ 7,236,767  

Schedule of 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, 2015
    Warrants
revalued at
June 30, 2016
 
Expected life (in months)     60.0       11.0       4.0  
Expected volatility     104.5 %     104.9 %     96.2 %
Risk-free interest rate     0.875 %     0.65 %     0.26 %
Exercise price   $ 0.81     $ 0.25     $ 0.25  
Fair value per warrant   $ 0.54     $ 0.16     $ 0.16  

 

The assumptions for the binomial pricing model are represented in the table below for the warrants issued with the Convertible Debt throughout the period reflected on a per share common stock equivalent basis.

 

Assumptions   At Issuance
Fair value
    Warrants
revalued at
December 31, 2015
    Warrants
revalued at
June 30, 2016
 
Expected life (in months)     36.0-60.0       55.0-60.0       48.0-60.0  
Expected volatility     114.3 - 138.3 %     136.3-141.6 %     137.9 -142.2 %
Risk-free interest rate     0.86-1.69 %     1.29-1.76 %     1.01-1.21 %
Exercise price   $ 0.40-0.42       0.40     $ 0.40  
Fair value per warrant   $ 0.19-$.40       0.30     $ 0.32-$0.40  

 

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   At Issuance
fair value
    Conversion
options
revalued at
December 31, 2015
    Conversion
options
revalued at
June 30, 2016
 
Expected life (in months)     3-24       18-24       6-24  
Expected volatility     97.6-153.8 %     112.2-114.7 %     94.8-113.67 %
Risk-free interest rate     0.37-0.99 %     1.06 %     0.36-0.73 %
Exercise price   $ 0.24-$0.45     $ 0.28     $ 0.28-$0.45  
Fair value per conversion option   $ 0.07-$0.30     $ 0.14-$0.33     $ 0.08-$0.30