Quarterly report pursuant to Section 13 or 15(d)

Summary of Significant Accounting Policies (Tables)

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Summary of Significant Accounting Policies (Tables)
 9 Months Ended
Sep. 30, 2015
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, 2015 and 2014.

 

    For the Three Months Ended  
    September 30,  
    2015     2014  
Top Five Customers     43 %     53 %
Federal Agencies     2 %     1 %

 

    For the Nine Months Ended  
    September 30,  
      2015       2014  
Top Five Customers     34 %     31 %
Federal Agencies     14 %     1 %

 

The following table illustrates the level of concentration as a percentage of net accounts receivable balance as of September 30, 2015 and December 31, 2014:

 

    September 30, 2015     December 31, 2014  
Top Five Customers     61 %     86 %
Federal Agencies     1 %     9 %

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, 2015 and 2014:

 

    For the Three Months Ended     For the Nine Months Ended  
    September 30,     September 30,  
    2015     2014     2015     2014  
Numerator:                                
Net loss   $ (657,928 )   $ (959,050 )   $ (3,430,160 )   $ (3,321,892 )
Accrued dividend for Preferred Stock     1,711       (43,362 )     (21,768 )     (97,955 )
Deemed dividend on Series K Convertible Preferred Stock     -       -       -       (1,388,062 )
Net loss applicable to common shareholders   $ (656,217 )   $ (1,002,412 )   $ (3,451,928 )   $ (4,807,909 )
                                 
Denominator for basic and diluted loss per share:                                
Weighted average common stock shares outstanding     20,737,827       15,238,466       19,771,323       13,648,795  
                                 
Loss per common share - basic and diluted   $ (0.03 )   $ (0.07 )   $ (0.17 )   $ (0.35 )

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.

 

    For the Nine Months Ended  
    September 30,  
    2015     2014  
Stock options     3,201,250       3,356,250  
Convertible debt     26,015,029       4,091,151  
Common stock warrants     26,125,127       17,895,717  
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       -  
Series J Convertible Preferred Stock     3,546,000       3,548,000  
Series K Convertible Preferred Stock     11,399,000       11,399,000  
      75,002,106       42,905,818  

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, 		 
    2015     2014  
Research and development   $ 18,307     $ 1,749  
Selling and marketing     13,310       1,391  
General and administrative     43,247       3,247  
Total stock-based compensation expense   $ 74,864     $ 6,387  

 

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, 		 
    2015     2014  
Research and development   $ 41,172     $ 19,602  
Selling and marketing     27,386       13,296  
General and administrative     116,812       13,873  
Total stock-based compensation expense   $ 185,370     $ 46,771  

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, 2015.

 

          Fair value measurements at September 30, 2015 using:  
             
    September 30,     Quoted prices in active markets     Significant other observable inputs     Significant unobservable inputs  
    2015     (Level 1)     (Level 2)     (Level 3)  
Series D Preferred Stock Purchase Warrants   $ 122,692       -       -     $ 122,692  
Available-For-Sale Equity Securities     322,860       322,860       -       -  
Convertible Debt Warrants     1,418,438       -       -       1,418,438  
Conversion Option Liabilities     2,227,330       -       -       2,227,330  
Total Derivatives   $ 4,091,320     $ 322,860     $ -     $ 3,768,460  

 

    January 1, 2015     Issuance fair value     Change in fair value     Gain on extinguishment of derivative liabilities     September 30, 2015  
Series D Preferred Stock Purchase Warrants   $ 159,875     $ -     $ (37,183 )   $ -     $ 122,692  
Convertible Debt Warrants     -       1,418,927       (489 )     -       1,418,438  
Conversion Option Liabilities     590,341       4,143,051       (477,738 )     (2,028,324 )     2,227,330  
Total Derivatives   $ 750,216     $ 5,561,978     $ (515,410 )   $ (2,028,324 )   $ 3,768,460  

Schedule of Fair Value Assumptions

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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 
September 30, 2015 		 
Expected life (in months)     60.0       22.0       13.0  
Expected volatility     104.5 %     116.0 %     117.5 %
Risk-free interest rate     0.875 %     0.58 %     0.33 %
Exercise price   $ 0.81     $ 0.25     $ 0.25  
Fair value per warrant   $ 0.54     $ 0.15     $ 0.11  

 

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

 

Assumptions   For the three months ended September 30, 2015     Warrants revalued at
September 30, 2015 		 
Expected life (in months)     60.0       60.0  
Expected volatility     118.3 - 120.1 %     136.5 -138.2 %
Risk-free interest rate     1.48-1.69 %     1.37 %
Exercise price   $ 0.40     $ 0.40  
Fair value per warrant   $ 0.19-$.21     $ 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   At Issuance
fair value 		  At Settlement
fair value 		  Conversion options
revalued at
September 30, 2015 		 
Expected life (in months)   6-24   0-18   2-21  
Expected volatility   104.2-153.8%   86.9%-142.2%   88.6-130.6%  
Risk-free interest rate   0.05-0.99%   0.01-0.72%   0.01-0.64%  
Exercise price   $0.10-$0.35   $0.10-$0.25   $0.11-$0.25  
Fair value per conversion option   $0.09-$0.28   $0.07-$0.26   $0.08-$0.16