Annual report pursuant to Section 13 and 15(d)

Summary of Significant Accounting Policies (Tables)

v3.6.0.2
Summary of Significant Accounting Policies (Tables)
12 Months Ended
Dec. 31, 2016
Accounting Policies [Abstract]  
Schedule of Inventories

The composition of inventory as of December 31, is as follows:

 

    2016     2015  
Raw materials   $ 326,228     $ 310,367  
Finished goods     599,056       778,004  
Inventory reserve     (20,000 )     (50,000 )
Total   $ 905,284     $ 1,038,371  

Summary of Customer Concentration Risk Percentage

The following table illustrates the level of concentration of the below two groups within revenue as a percentage of total revenues during the years ended December 31:

 

    2016     2015  
Top Five Customers     29 %     38 %
Federal Agencies     3 %     23 %

 

The following table illustrates the level of concentration of the below two groups within accounts receivable as a percentage of total accounts receivable balance as of December 31:

 

    2016     2015  
Top Five Customers     82 %     93 %
Federal Agencies     1 %     1 %

Summary of Computation of Loss per Share

The following table illustrates our computation of loss per share for the years ended December 31:

 

    2016     2015  
Numerator:                
Net loss   $ (2,706,984 )   $ (7,415,298 )
Preferred dividends accrued     -       (23,194 )
Net loss applicable to common shareholders   $ (2,706,984 )   $ (7,438,492 )
                 
Denominator for basic and diluted loss per share:                
Weighted average common shares outstanding     27,339,362       20,726,205  
                 
Loss per common share - basic and diluted   $ (0.10 )   $ (0.36 )

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 for the years ended December 31:

 

    2016     2015  
Stock options     5,269,250       5,571,250  
Convertible debt     26,733,955       19,689,286  
Common stock warrants     26,459,695       29,227,664  
Convertible preferred stock:                
Series D Convertible Preferred     750,000       750,000  
Series G Convertible Preferred     865,700       865,700  
Series H Convertible Preferred     1,000,000       1,000,000  
Series H2 Convertible Preferred     2,100,000       2,100,000  
Series J Convertible Preferred     3,521,000       3,546,000  
Series K Convertible Preferred     6,816,000       11,416,000  
      73,515,600       74,165,900  

Summary of Assumptions for Grants of Stock Options

The following table summarizes the assumptions we utilized for grants of stock options to the three sub-groups of our stock option recipients during the year ended December 31, 2015:

 

Assumptions   Non-Employee Board Members     CEO, other Officers and Employees  
Expected life     6.0 (yrs)       6.0 (yrs)  
Expected volatility     116.32%-141.15 %     116.32%-141.15 %
Risk-free interest rate     0.65%-2.54 %     0.65%-2.54 %
Forfeiture rate     5.00 %     5.00 %
Expected dividend yield     0.0 %     0.0 %

Summary of Stock Based Compensation Expense

The following table summarizes the effect of this stock-based compensation expense within each of the line items within our accompanying consolidated statements of operations for the years ended December 31:

 

    2016     2015  
Research and development   $ 65,500     $ 50,617  
Selling and marketing     42,315       32,704  
General and administrative     272,149       125,668  
Total stock-based compensation expense   $ 379,964     $ 208,989  

Schedule of Liabilities Measured at Fair Value on Recurring Basis

The following tables set forth the Company’s financial assets and financial liabilities that were accounted for at fair value on a recurring basis as of December 31, 2016 and December 31, 2015. The development of the unobservable inputs for Level 3 fair value measurements and fair value calculations are the responsibility of the Company’s management.

 

          Fair value measurements at December 31, 2016 using:  
    December 31, 2016     Quoted prices in
active markets
(Level 1)
    Significant other
observable inputs
(Level 2)
    Significant
unobservable inputs
(Level 3)
 
Available-For-Sale Equity Securities     25,865       25,865       -       -  
Total Financial Assets   $ 25,865     $ 25,865     $ -     $ -  

 

    December 31, 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   $ 23,313       -       -     $ 23,313  
Warrants Issued with Convertible Debt     1,661,795       -       -       1,661,795  
Conversion Option Derivative Liabilities     951,059       -       -       951,059  
Total Derivatives   $ 2,636,167     $ -     $ -     $ 2,636,167  

 

          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  

 

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:

 

    January 1, 2016     Issuance
fair value
    Change in
fair value
    December 31, 2016  
Series D Preferred Stock Purchase Warrants   $ 173,526     $ -     $ (150,213 )   $ 23,313  
Warrants Issued with Convertible Debt     3,122,450       1,094,432       (2,555,087 )     1,661,795  
Conversion Option Derivative Liabilities     3,940,791       1,547,127       (4,536,859 )     951,059  
Total Derivatives   $ 7,236,767     $ 2,641,559     $ (7,242,159 )   $ 2,636,167  

 

    January 1, 2015     Issuance fair value     Change in fair value     Gain on extinguishment of derivative liabilities     December 31, 2015  
Series D Preferred Stock Purchase Warrants   $ 159,875     $ -     $ 13,651     $ -     $ 173,526  
Warrants Issued with Convertible Debt     -       2,320,021       802,429       -       3,122,450  
Conversion Option Derivative Liabilities     590,341       5,305,185       600,445       (2,555,180 )     3,940,791  
Total Derivatives   $ 750,216     $ 7,625,206     $ 1,416,525     $ (2,555,180 )   $ 7,236,767  

Schedule of Fair Value Assumptions

The fair value of the derivative liabilities was determined using a binomial pricing model. 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
December 31, 2016
 
Expected life (in months)     60.0       11.0       5.0  
Expected volatility     104.5 %     104.9 %     83.5 %
Risk-free interest rate     0.875 %     0.65 %     0.62 %
Exercise price   $ 0.81     $ 0.25     $ 0.25  
Fair value per warrant   $ 0.54     $ 0.16     $ 0.02  

 

The assumptions for the binomial pricing model are represented in the table below for the warrants issued with the Convertible Debt in 2015 and 2016 reflected on a per share common stock equivalent basis.

 

Assumptions   At
Issuance
Fair value
    Warrants revalued
at
December 31, 2015
    Warrants revalued
at
December 31, 2016
 
Expected life (in months)     60.0       55.0-60.0       43.0-51.0  
Expected volatility     118.3-120.1 %     136.3-141.6 %     110.0-116.0 %
Risk-free interest rate     1.48-1.69 %     1.29-1.76 %     1.93 %
Exercise price   $ 0.40     $ 0.40     $ 0.40  
Fair value per warrant   $ 0.19-$0.21     $ 0.30     $ 0.12-0.14  

 

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 December 31, 2015     Conversion options revalued at December 31, 2016  
Expected life (in months)     6.0-24.0       0-18.0       18-24       6.0-15.0  
Expected volatility     104.2-153.8 %     86.9%-142.2 %     112.2-114.7 %     84.4-94.8 %
Risk-free interest rate     0.05-0.99 %     0.01-0.72 %     1.06 %     0.62-0.85 %
Exercise price   $ 0.10-$0.35     $ 0.10-$0.25     $ 0.28     $ 0.28  
Fair value per conversion option   $ 0.09-$0.28     $ 0.07-$0.26     $ 0.14-$0.33     $ 0.03-$0.06