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)
 9 Months Ended
Sep. 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 nine months ended September 30, 2016 and 2015.

 

    For the Three Months Ended  
    September 30,  
    2016     2015  
Top Five Customers     60 %     43 %
Federal Agencies     9 %     2 %

 

    For the Nine Months Ended  
    September 30,  
    2016     2015  
Top Five Customers     31 %     34 %
Federal Agencies     3 %     14 %

 

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

 

    September 30, 2016     December, 31, 2015  
Top Five Customers     55 %     93 %
Federal Agencies     9 %     1 %

Schedule of Inventories

The composition of inventory is as follows:

 

    September 30, 2016     December 31, 2015  
Raw materials   $ 491,254     $ 310,367  
Finished goods     566,884       778,004  
Inventory Reserve     (50,000 )     (50,000 )
Total   $ 1,008,138     $ 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 nine months ended September 30, 2016 and 2015:

 

    For the Three Months Ended     For the Nine Months Ended  
    September 30,     September 30,  
    2016     2015     2016     2015  
Numerator:                                
Net loss   $ (945,207 )   $ (657,928 )   $ (5,933,768 )   $ (3,430,160 )
Preferred dividends accrued     —         1,711       —         (21,768 )
Net loss applicable to common shareholders   $ (945,207 )   $ (656,217 )   $ (5,933,768 )   $ (3,451,928 )
                                 
Denominator for basic and diluted loss per share:                                
Weighted average common stock shares outstanding     29,425,362       20,737,827       26,139,740       19,771,323  
                                 
Income (loss) per common share – basic and diluted   $ (0.03 )   $ (0.03 )   $ (0.23 )   $ (0.17 )

Summary of Anti-dilutive Securities Excluded from Computation of Earnings per Share

The following table presents securities that could potentially dilute basic loss per share in the future. For all periods presented, the potentially dilutive securities were not included in the computation of diluted loss per share because these securities would have been anti-dilutive to our net loss. The Series D Convertible Preferred Stock, Series G Convertible Preferred Stock, Series H Convertible Preferred Stock, Series J Convertible Preferred Stock and Series K Convertible Preferred Stock are presented below as if they were converted into common shares according to the conversion terms.

 

    As of September 30,  
    2016     2015  
Stock options     5,269,250       3,201,250  
Convertible debt     26,971,732       26,015,029  
Common stock warrants     24,824,695       26,125,127  
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     3,521,000       3,546,000  
Series K Convertible Preferred Stock     6,816,000       11,399,000  
      72,118,377       75,002,106  

Summary of 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 September 30,  
    2016     2015  
Research and development   $ 14,735     $ 18,307  
Selling and marketing     9,911       13,310  
General and administrative     65,854       43,247  
Total stock-based compensation expense   $ 90,500     $ 74,864  

 

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 Nine Months Ended September 30  
    2016     2015  
Research and development   $ 50,766     $  41,172  
Selling and marketing     32,404       27,386  
General and administrative     199,641       116,812  
Total stock-based compensation expense   $ 282,811     $ 185,370  

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 September 30, 2016:

 

          Fair value measurements at September 30, 2016 using:  
    September 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   $ 59,550     $ 59,550     $ -     $ -  
Total Financial Assets   $ 59,550     $ 59,550     $ -     $ -  

 

    September 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   $ 189,884     $ —       $ —       $ 189,884  
Warrants Issued with Convertible Debt     4,135,980       —         —         4,135,980  
Conversion Option Derivative Liabilities     4,627,452       —         —         4,627,452  
Total Derivatives   $ 8,953,316     $ —       $ —       $ 8,953,316  

 

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 nine months ended September 30, 2016:

 

    December 31,2015     Issuance
fair value 		    Change
in fair
value 		    Gain on
extinguishment
of derivative
liabilities 		    September 30, 2016  
Available-For-Sale Equity Securities   $ 294,522     $ -      $ (234,972 )   $ —       $ 59,550  
Total Financial Assets   $ 294,522     $ —       $ (234,972 )   $ —       $ 59,550  

 

    December 31, 2015     Issuance
fair value 		    Change in
fair value 		    September 30, 2016  
Series D Preferred Stock Purchase Warrants   $ 173,526     $ —       $ 16,358     $ 189,884  
Convertible Debt Warrants     3,122,450       1,094,432       (80,902 )     4,135,980  
Conversion Option Liabilities     3,940,791       1,547,127       (860,466 )     4,627,452  
Total Derivatives   $ 7,236,767     $ 2,641,559     $ (925,010 )   $ 8,953,316  

 

The amounts above valued at issuance includes $1,337,510 that was charged directly to “change in fair value of derivative liabilities” at issuance.

 

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
September 30, 2016 		 
Expected life (in months)     60.0       11.0       8.0  
Expected volatility     104.5 %     104.9 %     92.4 %
Risk-free interest rate     0.875 %     0.65 %     0.45 %
Exercise price   $ 0.81     $ 0.25     $ 0.25  
Fair value per warrant   $ 0.54     $ 0.16     $ 0.18  

 

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 September 30, 2016  
Expected life (in months)     36.0-60.0       55.0-60.0       46.0-54.0  
Expected volatility     114.3 - 138.3 %     136.3-141.6 %       116.2 -137.4 %
Risk-free interest rate     0.86-1.69 %     1.29-1.76  %     1.01 %
Exercise price $ 0.40-0.42     0.40     $ 0.40  
Fair value per warrant $ 0.19-$.40     0.30     $ 0.30-$1.35  

 

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
September 30, 2016 		 
Expected life (in months)     3-24       18-24       10-18  
Expected volatility     97.6-153.8 %     112.2-114.7 %     94.3%-96.6 %
Risk-free interest rate     0.37-0.99 %     1.06 %     0.59-0.77 %
Exercise price   $ 0.24-$0.45     $ 0.28     $ 0.28  
Fair value per conversion option   $ 0.07-$0.30     $ 0.14-$0.33     $ 0.17-$0.21