Document_and_Entity_Informatio
Document and Entity Information (USD $) | 12 Months Ended | ||
Dec. 31, 2013 | Mar. 28, 2014 | Jun. 28, 2013 | |
Document And Entity Information | ' | ' | ' |
Entity Registrant Name | 'DAIS ANALYTIC CORP | ' | ' |
Entity Central Index Key | '0001125699 | ' | ' |
Document Type | '10-K | ' | ' |
Document Period End Date | 31-Dec-13 | ' | ' |
Amendment Flag | 'false | ' | ' |
Current Fiscal Year End Date | '--12-31 | ' | ' |
Is Entity a Well-known Seasoned Issuer? | 'No | ' | ' |
Is Entity a Voluntary Filer? | 'No | ' | ' |
Is Entity's Reporting Status Current? | 'Yes | ' | ' |
Entity Filer Category | 'Smaller Reporting Company | ' | ' |
Entity Public Float | ' | ' | $3,381,907 |
Entity Common Stock, Shares Outstanding | ' | 101,109,034 | ' |
Document Fiscal Period Focus | 'FY | ' | ' |
Document Fiscal Year Focus | '2013 | ' | ' |
Balance_Sheets
Balance Sheets (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
CURRENT ASSETS | ' | ' |
Cash and cash equivalents | $27,125 | $294,150 |
Accounts receivable, net | 149,130 | 512,842 |
Other receivables | 109,106 | ' |
Inventory | 159,870 | 292,443 |
Prepaid expenses and other current assets | 47,540 | 45,945 |
Total Current Assets | 492,771 | 1,145,380 |
Property and equipment, net | 96,981 | 95,557 |
OTHER ASSETS: | ' | ' |
Deposits | 2,280 | 2,280 |
Patents, net of accumulated amortization of $176,178 and $153,796 at December 31, 2013 and December 31, 2012, respectively | 113,139 | 107,230 |
Total Other Assets | 115,419 | 109,510 |
TOTAL ASSETS | 705,171 | 1,350,447 |
CURRENT LIABILITIES: | ' | ' |
Accounts payable, including related party payables of $160,374 and $82,195 at December 31, 2013 and December 31, 2012, respectively | 641,074 | 559,946 |
Accrued compensation and related benefits | ' | 10,000 |
Accrued expenses, other | 126,990 | 140,975 |
Current portion of deferred revenue and customer deposits | 205,201 | 189,094 |
Note payable, related party | 35,000 | ' |
Total Current Liabilities | 1,008,265 | 900,015 |
LONG-TERM LIABILITIES: | ' | ' |
Accrued compensation and related benefits | 1,672,893 | 1,484,739 |
Deferred revenue, net of current portion | 1,773,525 | 1,894,627 |
Total Long-Term Liabilities | 3,446,418 | 3,379,366 |
Total Liabilities | 4,454,683 | 4,279,381 |
STOCKHOLDERS' DEFICIT | ' | ' |
Preferred stock; $0.01 par value; 10,000,000 shares authorized; 0 shares issued and outstanding | ' | ' |
Common stock, $0.01 par value; 200,000,000 shares authorized; 60,116,247 and 55,274,817 shares issued and 59,859,034 and 55,017,604 shares outstanding, respectively | 601,163 | 552,749 |
Common stock payable | ' | 19,255 |
Capital in excess of par value | 36,994,742 | 35,723,001 |
Accumulated deficit | -40,073,305 | -37,951,827 |
Total | -2,477,400 | -1,656,822 |
Treasury stock at cost, 257,213 shares | -1,272,112 | -1,272,112 |
Total Stockholders' Deficit | -3,749,512 | -2,928,934 |
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | $705,171 | $1,350,447 |
Balance_Sheets_Parenthetical
Balance Sheets (Parenthetical) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Other assets: | ' | ' |
Patents, net of accumulated amortization | $176,178 | $153,796 |
Current liabilities: | ' | ' |
Accounts payable, including related party payables | $160,374 | $82,195 |
Stockholders' deficit: | ' | ' |
Preferred stock par value | $0.01 | $0.01 |
Preferred stock shares authorized | 10,000,000 | 10,000,000 |
Preferred stock shares issued | 0 | 0 |
Preferred stock shares outstanding | 0 | 0 |
Common stock par value | $0.01 | $0.01 |
Common stock shares authorized | 200,000,000 | 200,000,000 |
Common stock shares issued | 60,116,247 | 55,274,817 |
Common stock shares outstanding | 59,859,034 | 55,017,604 |
Treasury stock shares | 257,213 | 257,213 |
Statements_Of_Operations
Statements Of Operations (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
REVENUE: | ' | ' |
Sales | $1,526,989 | $3,552,440 |
License and royalty fees | 215,606 | 103,640 |
TOTAL | 1,742,595 | 3,656,080 |
COST OF GOODS SOLD | 1,257,418 | 2,434,610 |
GROSS MARGIN | 485,177 | 1,221,470 |
OPERATING EXPENSES | ' | ' |
Research and development expenses, net of government grant proceeds of $180,956 and $67,240, respectively | 495,175 | 453,927 |
Selling, general and administrative expenses | 2,108,629 | 1,938,553 |
Impairment of equipment | 2,672 | 62,288 |
TOTAL OPERATING EXPENSES | 2,606,476 | 2,454,768 |
LOSS FROM OPERATIONS | -2,121,299 | -1,233,298 |
OTHER EXPENSE (INCOME) | ' | ' |
Change in fair value of warrant liability | ' | -1,888,218 |
Amortization of discount on convertible note payable | ' | 358,555 |
Other income | ' | -3,000 |
Interest expense | 179 | 278,091 |
Interest income | ' | -65 |
TOTAL OTHER EXPENSE (INCOME) | 179 | -1,254,637 |
NET INCOME (LOSS) | ($2,121,478) | $21,339 |
NET INCOME (LOSS) PER COMMON SHARE, BASIC | ($0.04) | $0 |
NET INCOME (LOSS) PER COMMON SHARE, DILUTED | ($0.04) | $0 |
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING, BASIC | 57,542,454 | 40,022,085 |
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING, DILUTED | 57,542,454 | 41,279,991 |
Statements_Of_Operations_Paren
Statements Of Operations (Parenthetical) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Statements Of Operations Parenthetical | ' | ' |
Research and development expenses, net of government grant | $180,956 | $67,240 |
Shareholders_Equity
Shareholders Equity (USD $) | Common Stock | Common Stock Payable | CapitalIn Excess Of Par Value | Accumulated Deficit | Treasury Stock | Total |
Beginning Balance, Amount at Dec. 31, 2011 | $377,749 | ' | $33,966,619 | ($37,973,166) | ($1,272,112) | ($4,900,910) |
Beginning Balance, Shares at Dec. 31, 2011 | 37,774,817 | ' | ' | ' | ' | ' |
Stock based compensation | ' | ' | 296,382 | ' | ' | 296,382 |
Revaluation of common stock issued to vendors for services | ' | ' | -105,000 | ' | ' | -105,000 |
Issuance of common stock for cash, Amount | 175,000 | 19,255 | 1,575,000 | ' | ' | 1,769,255 |
Issuance of common stock for cash, Shares | 17,500,000 | ' | ' | ' | ' | ' |
Stock issuance costs | ' | ' | -10,000 | ' | ' | -10,000 |
Net Loss | ' | ' | ' | 21,339 | ' | 21,339 |
Ending Balance, Amount at Dec. 31, 2012 | 552,749 | 19,255 | 35,723,001 | -37,951,827 | -1,272,112 | -2,928,934 |
Ending Balance, Shares at Dec. 31, 2012 | 55,274,817 | ' | ' | ' | ' | ' |
Stock based compensation | ' | ' | 836,011 | ' | ' | 836,011 |
Issuance of common stock for cash, Amount | 48,414 | -19,255 | 435,730 | ' | ' | 464,889 |
Issuance of common stock for cash, Shares | 4,841,430 | ' | ' | ' | ' | ' |
Net Loss | ' | ' | ' | -2,121,478 | ' | -2,121,478 |
Ending Balance, Amount at Dec. 31, 2013 | $601,163 | ' | $36,994,742 | ($40,073,305) | ($1,272,112) | ($3,749,512) |
Ending Balance, Shares at Dec. 31, 2013 | 60,116,247 | ' | ' | ' | ' | ' |
Statements_Of_Cash_Flows
Statements Of Cash Flows (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ' | ' |
Net income (loss) | ($2,121,478) | $21,339 |
Adjustments to reconcile net loss to net cash and cash equivalents used by operating activities: | ' | ' |
Depreciation and amortization | 106,725 | 61,151 |
Gain on sale of property and equipment | ' | -3,000 |
Issuance of stock options for services | 19,105 | ' |
Stock based compensation expense | 816,906 | 296,382 |
Change in fair value of warrant liability | ' | -1,888,218 |
(Decrease) in allowance for doubtful accounts | -1,745 | -22,195 |
Impairment of equipment | 2,672 | 62,288 |
Write off of deferred offering costs | ' | 55,164 |
Amortization of deferred loan costs | ' | 30,224 |
Amortization of discount on convertible note payable | ' | 358,555 |
(Increase) decrease in: | ' | ' |
Accounts receivable | 365,457 | 196,001 |
Other receivables | -109,106 | 73,648 |
Inventory | 132,573 | 50,465 |
Prepaid expenses and other assets | -1,595 | -6,237 |
Increase (decrease) in: | ' | ' |
Accounts payable and accrued expenses | 67,143 | -222,251 |
Accrued compensation and related benefits | 178,154 | 89,133 |
Deferred revenue | -104,995 | -320,099 |
Net cash used by operating activities | -650,184 | -1,167,650 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ' | ' |
Increase in patent costs | -28,291 | -42,195 |
Proceeds from sale of property and equipment | ' | 3,000 |
Purchase of property and equipment | -88,439 | -6,000 |
Net cash used by investing activities | -116,730 | -45,195 |
CASH FLOWS FROM FINANCING ACTIVITIES: | ' | ' |
Proceeds from issuance of notes payable, related party | 35,000 | 2,050,000 |
Payments on notes payable, related party | ' | -2,565,000 |
Issuance of common stock, net of offering costs | 464,889 | 1,759,255 |
Net cash provided by financing activities | 499,889 | 1,244,255 |
Net decrease in cash and cash equivalents | -267,025 | 31,410 |
Cash and cash equivalents, beginning of period | 294,150 | 262,740 |
Cash and cash equivalents, end of period | 27,125 | 294,150 |
SUPPLEMENTAL CASH FLOW INFORMATION: | ' | ' |
Cash paid for interest | 179 | 533,894 |
NON-CASH FINANCING AND INVESTING ACTIVITIES: | ' | ' |
Application of proceeds due under note payable, including interest, to purchase a license and supply agreement | ' | 2,034,521 |
Revaluation of common stock issued for services | ' | 105,000 |
Loan costs paid with note payable, related party | ' | $15,000 |
Background_Information
Background Information | 12 Months Ended |
Dec. 31, 2013 | |
Notes to Financial Statements | ' |
Note 1 - Background Information | ' |
Dais Analytic Corporation (the “Company”), a New York corporation, has developed and is commercializing applications using its nano-structure polymer technology. The first commercial product is an energy recovery ventilator (“ERV”) (cores and systems) for use in commercial Heating, Ventilating, and Air Conditioning (HVAC) applications. In addition to direct sales, the Company licenses its nano-structured polymer technology to strategic partners in the aforementioned application and is in various stages of development with regard to other applications employing its base technologies. The Company was incorporated in April of 1993 with its corporate headquarters located in Odessa, Florida. | |
The Company is dependent on third parties to manufacture the key components needed for our nano-structured based materials and value added products made with these materials. Accordingly, a supplier’s failure to supply components in a timely manner, or to supply components that meet our quality, quantity and cost requirements or our technical specifications, or the inability to obtain alternative sources of these components on a timely basis or on terms acceptable to us, would create delays in production of our products or increase our unit costs of production. Certain of the components contain proprietary products of our suppliers, or the processes used by our suppliers to manufacture these components are proprietary. If we are required to replace any of our suppliers, while we should be able to obtain comparable components from alternative suppliers at comparable costs, this would create a delay in production. | |
For the year ended December 31, 2013, one customer, Multistack LLC, accounted for approximately 83% of the Company’s revenue. At December 31, 2013, amounts due from this customer were approximately 63% of total accounts receivable. See Note 12 for a discussion of Multistack and the licensing agreement with MG Energy LLC. For the year ended December 31, 2012, four customers accounted for approximately 60% (four customers represented the following percentages of sales 6%, 7%, 8%, and 39%) of the Company’s total revenue. At December 31, 2012, amounts due from these customers was approximately 57% of total accounts receivable. |
Going_Concern
Going Concern | 12 Months Ended | |
Dec. 31, 2013 | ||
Notes to Financial Statements | ' | |
Note 2 - Going Concern | ' | |
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. For the year ended December 31, 2013, the Company generated a net loss of $2,121,478 and the Company has incurred significant losses since inception. As of December 31, 2013, the Company has an accumulated deficit of $40,073,305, negative working capital of $515,494 and a stockholders’ deficit of $3,749,512. The Company used $650,184 and $1,167,650 of cash in operations during 2013 and 2012, respectively, which was funded by proceeds from debt and equity financings. There is no assurance that such financing will be available in the future. In view of these matters, there is substantial doubt that the Company will continue as a going concern. The Company did, however, sell 37,500,000 shares of its common stock in March 2014 for $1,500,000. The Company is currently pursuing the following sources of short and long-term working capital: | ||
1 | We are currently holding preliminary discussions with parties who are interested in licensing, purchasing the rights to, or establishing a joint venture to commercialize certain applications of our technology. | |
2 | We are seeking growth capital from certain strategic and/or government (grant) related sources. In addition to said capital, these sources may, pursuant to any agreements that may be developed in conjunction with such funding, assist in the product definition and design, roll-out, and channel penetration of our products. | |
The Company’s ability to continue as a going concern is highly dependent on our ability to obtain additional sources of cash flow sufficient to fund our working capital requirements. However, there can be no assurance that the Company will be successful in its efforts to secure such cash flow. Any failure by us to timely procure additional financing or investment adequate to fund our ongoing operations, including planned product development initiatives and commercialization efforts, will have material adverse consequences on our financial condition, results of operations and cash flows. | ||
The financial statements of the Company do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern. |
Significant_Accounting_Policie
Significant Accounting Policies | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Notes to Financial Statements | ' | ||||||||
Note 3 - Significant Accounting Policies | ' | ||||||||
The significant accounting policies followed are: | |||||||||
Use of estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. | |||||||||
Cash and cash equivalents – For purposes of the Statements of Cash Flows, the Company considers all highly liquid debt instruments with a maturity of three months or less to be cash equivalents. Cash and cash equivalents are maintained at financial institutions and, at times, balances may exceed federally insured limits. The Company has never experienced any losses related to these balances. | |||||||||
Accounts receivable - Accounts receivable consist primarily of receivables from the sale of our ERV products. The Company regularly reviews accounts receivable for any bad debts based on an analysis of the Company’s collection experience, customer credit worthiness, and current economic trends. After all attempts to collect a receivable have failed, the receivable is written off against the allowance. Based on management’s review of accounts receivable, we have recorded an allowance for doubtful accounts of $831 and $2,576 at December 31, 2013 and 2012. | |||||||||
Other receivables - Accounts receivable consist primarily of receivables from the U.S. Department of Defense and the U.S. Department of Energy ARPA-E grant program (See Note 3- Research and development expenses, and grant proceeds). The Company prepares invoices as it meets grant program milestones. Based on management’s review of other receivables, management has determined that no allowance for uncollectibilty is necessary at December 31, 2013. | |||||||||
Inventory - Inventory consists of raw materials and work-in-process and is stated at the lower of cost, determined by first-in, first-out method, or market. Market is determined based on the net realizable value, with appropriate consideration given to obsolescence, excessive levels, deterioration and other factors. At December 31, 2013 and 2012, the Company had $78,240 and $90,124 of in-process inventory, respectively. A reserve is recorded for any inventory deemed excessive or obsolete. No reserve is considered necessary at December 31, 2013 and 2012. | |||||||||
Property and equipment - Property and equipment are recorded at cost. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets ranging from 3 to 7 years. Depreciation expense was approximately $84,300 and $36,300 the years ended December 31, 2013 and 2012, respectively. Gains and losses upon disposition are reflected in the statement of operations in the period of disposition. Maintenance and repair expenditures are charged to expense as incurred. | |||||||||
Intangible assets - Identified intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The Company’s existing intangible assets consist solely of patents. Patents are amortized over their estimated useful or economic lives of 17 to 20 years. Patent amortization expense was approximately $22,400 and $24,800 for the years ended December 31, 2013 and 2012, respectively. Total patent amortization expense is estimated to be approximately $16,000 per year and $33,000 thereafter. | |||||||||
Long-lived assets - Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the book value of the asset may not be recoverable. The Company periodically evaluates whether events and circumstances have occurred that indicate possible impairment. When impairment indicators exist, the Company uses market quotes, if available or an estimate of the future undiscounted net cash flows of the related asset or asset group over the remaining life in measuring whether or not the asset values are recoverable. During the years ended December 31, 2013 and 2012, the Company recognized $2,672 and $62,288, respectively, in impairment costs. | |||||||||
Government Grants - Grants are recognized when there is reasonable assurance that the grant will be received and that any conditions associated with the grant will be met. When grants are received related to property and equipment, the Company reduces the basis of the assets on the balance sheet, resulting in lower depreciation expense over the life of the associated asset. Grants received related to expenses are reflected as a reduction of the associated expense in the period in which the expense is incurred. | |||||||||
Research and development expenses, and grant proceeds - Expenditures for research, development, and engineering of products are expensed as incurred. For the years ended December 31, 2013 and 2012, the Company incurred research and development costs of approximately $676,100 and $521,100, respectively. The Company accounts for proceeds received from government grants for research as a reduction in research and development costs. For the years ended December 31, 2013 and 2012, the Company recorded approximately $181,000 and $67,200, respectively, in grant proceeds against research and development expenses on the statements of operations. | |||||||||
On January 23, 2013, the U.S. Department of Defense and the U.S. Department of Energy approved an ARPA-E grant of up to $800,000 to the Company for the funding of a project to developing an energy-efficient, compact dehumidification system utilizing a polymer membrane that allows moisture to pass through. The grant is conditioned upon the Company contributing $200,000 of the proposed total project cost of $1,000,000. For the year ended December 31, 2013, the Company has incurred approximately $181,000 in expenses and recognized the same amount as a reduction to research and development expense related to this grant award. | |||||||||
On September 17, 2010, the U.S. Department of Energy approved a grant of up to $681,322 to the Company for the funding of a project to scale up, in size and field trial, a dehumidification system similar to the Company’s NanoAir prototype. The grant is conditioned upon the Company contributing $171,500 of the proposed total project cost of $852,822. For the years ended December 31, 2012 and 2011, the Company has incurred $781 and $601,059, respectively, in expenses and recognized the same amount as a reduction to research and development expense related to this grant award. This grant was fully expended as of December 31, 2012. | |||||||||
In December 2010, Pasco County Florida approved a grant of $254,500 to the Company for the funding of the NanoAir product into commercialization. The grant from Pasco County requires us to pay the county 2% of the gross sales of products using a certain unique pump assembly for 5 years or for a total of $1,000,000 whichever comes first. For the years ended December 31, 2012 and 2011, the Company has incurred $66,459 and $168,095, respectively, in expenses and recognized the same amount as a reduction to research and development expense related to this grant award. This grant was fully expended as of December 31, 2012. | |||||||||
Stock issuance costs - Stock issuance costs are recorded as a reduction of the related proceeds through a charge to stockholders’ equity. | |||||||||
Common stock - The Company records common stock issuances when all of the legal requirements for the issuance of such common stock have been satisfied. | |||||||||
Revenue recognition - Generally, the Company recognizes revenue for its products upon shipment to customers, provided no significant obligations remain and collection is probable. | |||||||||
In certain instances, our ConsERV product may carry a warranty of up to two years for all parts contained therein with the exception of the energy recovery ventilator core which may carry a warranty of up to ten years. The warranty includes replacement of defective parts. The Company has recorded an accrual of approximately $92,100 and $92,800 for future warranty expenses at December 31, 2013 and 2012, respectively, which is included in the line item for accrued expenses, other. | |||||||||
Revenue derived from the sale of licenses is deferred and recognized as revenue on a straight-line basis over the life of the license, or until the license arrangement is terminated. The Company recognized revenue of $189,100 and $103,640, respectively, from license agreements for the years ended December 31, 2013 and 2012. The Company recognized revenue of $26,512 and $0, respectively, from royalties for the years ended December 31, 2013 and 2012. | |||||||||
The Company accounts for revenue arrangements with multiple elements under the provisions of the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 605-25, "Revenue Recognition—Multiple-Element Arrangements," In order to account for these agreements, the Company must identify the deliverables included within the agreement and evaluate which deliverables represent separate units of accounting based on if certain criteria are met, including whether the delivered element has stand-alone value to the licensee. The consideration received is allocated among the separate units of accounting, and the applicable revenue recognition criteria are applied to each of the separate units. | |||||||||
Stock based compensation - The Company recognizes all share-based payments to employees, including grants of employee stock options, as compensation expense in the financial statements based on their fair values. That expense will be recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period). | |||||||||
The value of each grant is estimated at the grant date using the Black-Scholes option model with the following assumptions for options granted during the years ended December 31, 2013 and 2012: | |||||||||
Years Ended December 31, | |||||||||
2013 | 2012 | ||||||||
Dividend rate | 0 | % | 0 | % | |||||
Risk free interest rate | 2.03% – 2.20 | % | 0.61% – 1.04 | % | |||||
Expected term | 10 years | 5 – 6.5 years | |||||||
Expected volatility | 135% – 177 | % | 123% – 125 | % | |||||
The basis for the above assumptions are as follows: the dividend rate is based upon the Company’s history of dividends; the risk-free interest rate for periods within the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant; the expected term was calculated based on the Company’s historical pattern of options granted and the period of time they are expected to be outstanding; and expected volatility was calculated based upon historical trends in the Company’s common stock, as well as a peer company’s historical common stock activity. | |||||||||
Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Based on historical experience of forfeitures, the Company estimated forfeitures at 0% for each of the years ended December 31, 2013 and 2012. | |||||||||
Non-employee stock-based compensation - The Company’s accounting policy for equity instruments issued to consultants and vendors in exchange for goods and services follows the provisions of ASC 505-50 Equity-Based Payments to Non-Employees. Stock-based compensation related to non-employees is accounted for based on the fair value of the related stock or options or the fair value of the services, whichever is more readily determinable. The measurement date for the fair value of the equity instruments issued is determined at the earlier of (i) the date at which a commitment for performance by the consultant or vendor is reached or (ii) the date at which the consultant or vendor’s performance is complete. In the case of equity instruments issued to consultants, the fair value of the equity instrument is recognized over the term of the consulting agreement. | |||||||||
The fair value of stock options issued to consultants in 2013 was calculated using the Black-Scholes model with the following assumptions: Expected life in years: 2 years; Estimated volatility 165%; Risk-free interest rate: 0.26%; Dividend yield: 0%. The fair value of stock options issued to consultants in 2012 was calculated using the Black-Scholes model with the following assumptions: Expected life in years: 10 years; Estimated volatility 110%; Risk-free interest rate: 1.62%; Dividend yield: 0%. | |||||||||
Financial instruments - The Company accounts for financial instruments in accordance with FASB Accounting Standards Codification (ASC) 820 “Fair Value Measurements and Disclosures” (ASC 820). ASC 820 (as amended in May 2011) defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. ASC 820 was amended to clarify the application of existing fair value measurements and to change certain fair value measurement and disclosure requirements. Amendments that change measurement and disclosure requirements relate to (i) fair value measurement of financial instruments that are managed within a portfolio, (ii) application of premiums and discounts in a fair value measurement, and (iii) additional disclosures about fair value measurements categorized in Level 3 of the fair value hierarchy. ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below: | |||||||||
▪ | Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. | ||||||||
▪ | Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means. | ||||||||
▪ | Level 3 - Inputs that are both significant to the fair value measurement and unobservable. | ||||||||
Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of December 31, 2013. The Company uses the market approach to measure fair value for its Level 1 financial assets and liabilities, which include cash equivalents of which there were none at December 31, 2013. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets and liabilities. | |||||||||
The respective carrying value of certain on-balance sheet financial instruments approximated their fair values due to the short-term nature of these instruments. These financial instruments include cash, accounts receivable, other receivables, accounts payable, accrued compensation and accrued expenses. The fair value of the Company’s related party notes payable is estimated based on current rates that would be available for debt of similar terms which is not significantly different from its stated value. | |||||||||
The Company’s financial liabilities measured at fair value consisted of warrants as of December 31, 2012 and were valued at zero as discussed in Note 11. As of December 31, 2012 there was only one month remaining until the warrants expired, and therefore, changes to unobservable inputs would not have resulted in a significantly higher or lower fair value measurement. The fair value of the warrant liability was $1,888,218 as of December 31, 2011, which was reduced to zero through at December 31, 2012 through Other income – Changes in fair value of warrant liability. | |||||||||
Income taxes - Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due plus deferred taxes resulting from temporary differences. Such temporary differences result from differences in the carrying value of assets and liabilities for tax and financial reporting purposes. The deferred tax assets and liabilities represent the future tax consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. | |||||||||
The Company identifies and evaluates uncertain tax positions, if any, and recognizes the impact of uncertain tax positions for which there is a less than more-likely-than-not probability of the position being upheld when reviewed by the relevant taxing authority. Such positions are deemed to be unrecognized tax benefits and a corresponding liability is established on the balance sheet. The Company has not recognized a liability for uncertain tax positions. If there were an unrecognized tax benefit, the Company would recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. The Company’s remaining open tax years subject to examination by the Internal Revenue Service generally remain open for three years from the date of filing. | |||||||||
Derivative Financial Instruments - The Company does not use derivative instruments to hedge exposure to cash flow, market or foreign currency risk. Terms of convertible promissory note instruments are reviewed to determine whether or not they contain embedded derivative instruments that are required under ASC 815 “Derivative and Hedging” (ASC 815) to be accounted for separately from the host contract, and recorded on the balance sheet at fair value. The fair value of derivative liabilities, if any, is required to be revalued at each reporting date, with corresponding changes in fair value recorded in current period operating results. | |||||||||
Freestanding warrants issued by the Company in connection with the issuance or sale of debt and equity instruments are considered to be derivative instruments and are evaluated and accounted for in accordance with the provisions of ASC 815. Pursuant to ASC 815, an evaluation of specifically identified conditions is made to determine whether fair value of warrants issued is required to be classified as equity or as a derivative liability. | |||||||||
Earnings (loss) per share - Basic income (loss) per share is computed by dividing net income (loss) attributable to common stockholders by the weighted average common shares outstanding for the period. Diluted income (loss) per share is computed giving effect to all potentially dilutive common shares. Potentially dilutive common shares may consist of incremental shares issuable upon the exercise of stock options and warrants and the conversion of notes payable to common stock. In periods in which a net loss has been incurred, all potentially dilutive common shares are considered anti-dilutive and thus are excluded from the calculation. Common share equivalents of 39,365,082 and 36,966,415 were excluded from the computation of diluted earnings per share for the years ended December 31, 2013 and 2012, respectively, because their effect is anti-dilutive. | |||||||||
The following sets forth the computation of basic and diluted net earnings (loss) per common share for the years ended December 31, 2013 and 2012: | |||||||||
For the Years Ended | |||||||||
December 31, | |||||||||
2013 | 2012 | ||||||||
Numerator: | |||||||||
Net income (loss) | $ | (2,121,478 | ) | $ | 21,339 | ||||
Denominator: | |||||||||
Weighted average basic shares outstanding | 57,542,454 | 40,022,085 | |||||||
Potential shares under stock options | - | 4,184,058 | |||||||
Less shares assumed repurchased under the treasury stock method | - | (2,926,152 | ) | ||||||
Weighted average fully diluted shares outstanding | 57,542,454 | 41,279,991 | |||||||
Net income (loss) per common share – basic | $ | (0.04 | ) | $ | 0 | ||||
Net income (loss) per common share – diluted | $ | (0.04 | ) | $ | 0 | ||||
Recent Accounting Pronouncements. | |||||||||
Recent accounting pronouncements issued by the Financial Accounting Standards Board (FASB) did not or are not believed by management to have a material impact on the Company’s present or future financial statements. |
Property_and_Equipment
Property and Equipment | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Notes to Financial Statements | ' | ||||||||
Note 4 - Property and Equipment | ' | ||||||||
Property and equipment consist of the following: | |||||||||
December 31, | |||||||||
2013 | 2012 | ||||||||
Furniture and fixtures | $ | 38,764 | $ | 38,764 | |||||
Computer equipment | 64,305 | 66,980 | |||||||
Demonstration equipment | 92,733 | 106,841 | |||||||
Office and lab equipment | 224,174 | 217,523 | |||||||
419,976 | 430,108 | ||||||||
Less accumulated depreciation | 322,995 | 334,551 | |||||||
$ | 96,981 | $ | 95,557 | ||||||
Prepaid_Expenses_and_Other_Cur
Prepaid Expenses and Other Current Assets | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Notes to Financial Statements | ' | ||||||||
Note 5 - Prepaid Expenses and Other Current Assets | ' | ||||||||
Prepaid expenses and other current assets consist of the following: | |||||||||
December 31, | |||||||||
2013 | 2012 | ||||||||
Prepaid expenses | $ | 11,700 | $ | 10,496 | |||||
Prepaid insurance | 35,840 | 35,449 | |||||||
$ | 47,540 | $ | 45,945 |
Accrued_Expenses_Other
Accrued Expenses, Other | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Notes to Financial Statements | ' | ||||||||
Note 6 - Accrued Expenses, Other | ' | ||||||||
Accrued expenses, other consists of the following: | |||||||||
December 31, | |||||||||
2013 | 2012 | ||||||||
Accrued expenses, other | $ | 34,890 | $ | 29,946 | |||||
Accrued registration rights penalty | - | 5,000 | |||||||
Accrued warranty costs | 92,100 | 92,829 | |||||||
Contractual obligation | - | 13,200 |
Notes_Payable
Notes Payable | 12 Months Ended |
Dec. 31, 2013 | |
Notes Payable | ' |
Note 7 - Notes Payable | ' |
2011 Convertible Note | |
In December 2009, the Company entered into a $1,000,000 unsecured note payable with an investor which carried interest at 10% per annum. On March 22, 2011, the Company entered into a securities amendment and exchange agreement and an amended and restated convertible promissory note (collectively “Exchange Agreements”) with the investor. Pursuant to the terms and subject to the conditions set forth in the Exchange Agreements, the Company and the investor amended and restated the $1,000,000 unsecured promissory note to, among other things, add a conversion option and extend the maturity date (as amended and restated, the “2011 Convertible Note”). The initial conversion price was $0.26 per share, which was subject to adjustment for standard anti-dilution provisions. Interest in the amount of 10% per annum, commencing on December 17, 2009 and calculated on a 365 day year, and the principal amount of $1,000,000 was due in full on March 22, 2012, which was subsequently extended to May 7, 2012. The Company did not repay the 2011 Convertible Note by May 7, 2012 and on June 15, 2012, the Company entered into a forbearance agreement with the investor as discussed below. | |
On March 22, 2011, in connection with the above Exchange Agreements, the Company entered into amendments to existing warrant agreements with the investor to extend the terms of the existing stock purchase warrants, dated on or about December 31, 2007 and March 12, 2009, respectively, to March 22, 2016 and to provide for cashless exercise unless such warrant shares are registered for resale under a registration statement. In addition, on March 22, 2011, the Company issued an additional stock purchase warrant to the investor. Subject to the terms of the warrant, the investor may purchase 1,000,000 shares of the Company’s common stock at $0.45 per share, exercisable commencing on the earliest of the consummation of the qualified offering (as defined in the Exchange Agreements), the date of conversion of the 2011 Convertible Note in full, or the date of conversion of the Convertible Note by the investor in the greatest number of shares of the Company’s common stock not to exceed 9.99% beneficial ownership of Company outstanding common stock and terminating on March 22, 2016. | |
Secured Note | |
Also, on March 22, 2011, the Company entered into a 10% note and warrant purchase agreement, secured convertible promissory note (the “Secured Note”) and a patent security agreement (“Financing Agreements”) with the investor. Pursuant to the terms and subject to the conditions set forth in the Financing Agreements, the investor provided a loan in the principal amount of $1,500,000 to the Company, which was secured by all patents, patent applications and similar protections of the Company and all rents, royalties, license fees and “accounts” with respect to such intellectual property assets. The initial conversion price was $0.26 per share, which was subject to adjustment for standard anti-dilution provisions. Interest in the amount of 10% per annum, calculated on a 365 day year, and the principal amount of $1,500,000 was due and payable on March 22, 2012, subsequently extended to May 7, 2012. The Company did not repay the Secured Note by May 7, 2012 and on June 15, 2012, the Company entered into a forbearance agreement with the investor as discussed below. | |
On March 22, 2011, in connection with the Financing Agreements, the Company issued a stock purchase warrant to the investor to purchase 3,000,000 shares of the Company’s common stock at $0.45 per share, exercisable until March 22, 2016. The Warrant was fair valued on the date of issuance, which amounted to $1,204,787. The warrant value was recorded as a debt discount based on the relative fair value of the warrant to the total proceeds received, which amounted to $435,240. The warrant was fair valued using the Black-Scholes-Merton valuation model. In addition, the debt contained a beneficial conversion feature, which was valued at the date of issuance at $1,762,163; however, since this amount is in excess of the net value of the debt less the warrant discount, the beneficial conversion feature will be limited to $1,064,760 and recorded as a discount on the loan. The total debt discount of $1,500,000 is being amortized using the effective interest method over the 12-month term of the Secured Note. For the year ended December 31, 2012, the Company recognized $358,555 in additional expense representing amortization of this debt discount. The debt discount was fully amortized during 2012. | |
Forbearance Agreement | |
On June 15, 2012, we entered into a forbearance agreement (the “Forbearance Agreement”), with the investor. Under the Forbearance Agreement, the investor agreed to forebear from disposing of or selling any collateral secured by the patent security agreement until the earliest of: (i) July 15, 2012; (ii) two business days after our receipt of a written notice after any subsequent event of default, (iii) two business days after our receipt of a written notice that any representations, warranties or information we provided to the investor in any document or instrument in connection with the Forbearance Agreement is materially false, incomplete or misleading, (iv) two business days after our receipt of a written notice that a proceeding or other action has been commenced by any creditor against us, other than the investor (v) the date on which a court enters an order for relief or take any similar action in respect of us in an involuntary case under any applicable bankruptcy law, or (vi) the date on which a petition for relief under any applicable bankruptcy, is filed by or against us, each as further described in the Forbearance Agreement. | |
In connection with the Forbearance Agreement, interest on the 2011 Convertible Note and the Secured Note was increased to 20% per annum effective June 14, 2012. | |
On July 13, 2012 we paid in full all principal and interest due pursuant to the Secured Note and the patent security agreement was terminated. On October 29, 2012 we paid in full all principal and interest due pursuant to the 2011 Convertible Note. Upon payment of the 2011 Convertible Note the Forbearance Agreement was terminated. | |
2012 Secured Convertible Promissory Note | |
On July 13, 2012, the Company issued a secured convertible promissory note and patent security agreement (collectively, the “Agreements”) to an investor who is a shareholder of the Company. Pursuant to the terms and subject to the conditions set forth in the Agreements, the investor provided a loan in the amount of $2,000,000 to the Company, which was secured by all current and future patents, patent applications and similar protections of the Company and all rents, royalties, license fees and “accounts” with respect to such intellectual property assets. Pursuant to the secured convertible promissory note (the “2012 Note”), interest in the amount of 6% per annum, calculated on a 365 day year, and the principal amount of $2,000,000 and accrued interest was originally due on or before October 15, 2012, subsequently extended to October 26, 2012. The investor has the right to convert principal and accrued interest into the Company’s common stock at $0.26 per share. The initial conversion price may be adjusted pursuant to standard anti-dilution provisions. The proceeds of this 2012 Note were used in part to pay, in full, all outstanding principal and interest due pursuant to the Secured Note issued March 22, 2011. | |
The Company performed an analysis pursuant to ASC 815 in order to determine whether the embedded conversion option included in the 2012 Note was required to be accounted for separately from the host contract and recorded on the balance sheet at fair value. The Company concluded that the embedded conversion option did not meet the requirements for such classification. | |
Pursuant to the patent security agreement, the Company shall not, without the investor’s prior consent, sell, dispose or otherwise transfer all or any portion of the Collateral, except for license grants in the ordinary course of business. In addition, the Company will take all actions reasonably necessary to prosecute to allowance applications for patents and maintain all patents, and to seek to recover damages for infringement, misappropriation or dilution of the Collateral with limited exceptions. | |
On October 30, 2012, the Company and MG Energy LLC, a Delaware limited liability company (“MG Energy”), entered into the License and Supply Agreement (the “Agreement”), effective October 26, 2012 as discussed in Note 12. As consideration for the Agreement, MG Energy agreed to retire the 2012 Note including all interest accrued thereon, issued by the Company to the investor, who assigned the 2012 Note to MG Energy, a company in which the investor holds a position. This retirement is nonrefundable and noncreditable. Coincident with the retirement of the 2012 Note, the related patent security agreement was terminated. In accordance with ASC Subtopic 470-50, Debt Modifications and Extinguishments, the Company determined the reacquisition price of the debt to be equal to the fair value of the debt as it was more clearly evident than the fair value of the License and Supply Agreement. The fair value of the debt approximated its carrying value and, accordingly, there was no gain or loss on the extinguishment of the debt. | |
Other Notes and Accrued Interest | |
On November 25, 2013, the Company entered into an agreement with a related party to borrow $35,000 which is due on demand and bears interest at 6%. The Company paid all interest and principal due under this note on March 7, 2014. During the year ended December 31, 2012, the Company entered into an agreement with a related party to borrow $50,000 which was due on demand and bears interest at 4%. The Company paid all interest and principal due under this note on August 1, 2012. |
Related_Party_Transactions
Related Party Transactions | 12 Months Ended |
Dec. 31, 2013 | |
Notes to Financial Statements | ' |
Note 8 - Related Party Transactions | ' |
Timothy N. Tangredi, our Chief Executive Officer and Chairman, is a founder and a member of the board of directors of Aegis BioSciences, LLC (“Aegis”). Mr. Tangredi currently owns 52% of Aegis’ outstanding equity and spends approximately one to two days per month on Aegis business for which he is compensated by Aegis. Aegis has two exclusive, world-wide licenses from us under which it has the right to use and sell products containing our polymer technologies in biomedical and health care applications. As a result of a $150,000 payment made by Aegis, the first license is considered fully paid and as such no additional license revenue will be forthcoming. Pursuant to the second license Aegis made an initial one-time payment of $50,000 and is to make royalty payments of 1.5% of the net sales price it receives with respect to any personal hygiene product, surgical drape or clothing products (the latter when employed in medical and animal related fields) and license revenue it receives should Aegis grant a sublicense to a third party. To date Aegis has sold no such products nor has it received any licensing fees requiring a royalty payment be made to us. All obligations for such payments will end on the earlier of June 2, 2015 or upon the aggregate of all sums paid to us by Aegis under the agreement reaching $1 million. The term of each respective license runs for the duration of the patented technology. | |
The Company rents a building that is owned by two stockholders of the Company, one of which is the Chief Executive Officer. Rent expense for this building is $4,066 per month, including sales tax. The Company recognized rent expense of approximately $49,000 in each of the years ended December 31, 2013 and 2012. At December 31, 2013 and 2012, $124,917 and $82,195, respectively, were included in accounts payable for amounts owed to these stockholders for rent. | |
The Company also has accrued compensation due to the Chief Executive Officer and two other employees for deferred salaries earned and unpaid as of December 31, 2013 and 2012 of $1,672,893 and 1,494,739, respectively. The Company determined that a portion of the accrued payroll, $1,672,893 and $1,484,739 as of December 31, 2013 and 2012, respectively, is a long term liability, as the Company does not believe it will be repaid within the next year. | |
The above terms and amounts are not necessarily indicative of the terms and amounts that would have been incurred had comparable transactions been entered into with independent parties. |
Equity_Transactions
Equity Transactions | 12 Months Ended |
Dec. 31, 2013 | |
Notes to Financial Statements | ' |
Note 9 - Equity Transactions | ' |
Preferred Stock | |
The Company’s Board of Directors has authorized 10,000,000 million shares of preferred stock with a par value of $0.01 to be issued in series with terms and conditions to be determined by the Board of Directors. The Company has designated 400,000 shares of Series A convertible preferred stock; 1,000,000 shares of Series B convertible preferred stock; 500,000 shares of Series C convertible preferred stock; and 1,100,000 shares of Series D convertible preferred stock. The Series A through D convertible preferred stock rank senior to the common stock as to dividends and liquidation. Each share of Series A through D convertible preferred stock is convertible into one share of common stock, except in specified circumstances as defined by the Company’s Certificate of Incorporation, and is automatically converted into common stock upon the occurrence of an initial public offering that meets certain criteria. No dividend or distribution may be paid on any shares of the Company’s common stock unless an equivalent dividend or distribution is paid on the Series A through D convertible preferred stock. | |
Common Stock | |
The Company’s Board of Directors has authorized 200,000,000 million shares of common stock with a par value of $0.01 to be issued in series with terms and conditions to be determined by the Board of Directors. | |
In November of 2012, the Company issued, in connection with a private offering, 17,500,000 shares of common stock to Green Valley International Investment Management Company Limited (“GVI”) at $0.10 per share for cash proceeds of $1,750,000 and the Company recorded a common stock payable for $19,255 related to 192,550 unissued shares at December 31, 2012. These shares were issued in 2013. In addition, under the terms of the private placement offering, GVI also received a warrant to purchase 4,375,000 shares of the Company’s common stock with an exercise period of five years from the date of issue at an exercise price of $0.30 per share. | |
During the year ended December 31, 2012, the Company issued options to purchase 250,000 shares of common stock to a consultant for its services related to the private placement. The options vest immediately and may be exercised through November 30, 2022 at a price of $0.12 per share. The $26,577 value of the options which was determined using the Black-Scholes model is considered an offering cost of the private placement and, as a result, has no effect on capital in excess of par value. | |
In March 2013, the Company received $29,973 from GVI towards the purchase of common stock at $0.10 per share. The Company issued 492,280 shares of common stock for the $29,973 payment received in March and the $19,255 common stock payable. The Company also issued GVI warrants to purchase 123,070 shares of the Company’s common stock at $0.30 per share. The warrants are exercisable for 60 months from the date of issuance. | |
In May 2013, the Company received $149,915 from GVI towards the purchase of common stock at $0.10 per share. The Company issued 1,499,150 shares of common stock with warrants to purchase 374,788 shares of the Company’s common stock at $0.50 per share. The warrants are exercisable for 60 months from the date of issuance. All warrants issued to GVI are subject to standard anti-dilution adjustments for stock splits and other subdivisions. | |
In the third quarter of 2013, the Company issued, pursuant to a Stock Purchase Agreement with a limited liability company controlled by a person who subsequently was appointed a director of the Company, 2,850,000 restricted shares of the Company’s common stock at a purchase price of $0.10 per share for a total of $285,000. With the issuance of the common stock, the Company issued warrants to purchase 712,500 shares of the Company’s common stock at $0.50 per share. The warrants are exercisable for 60 months from the date of issuance. The warrants are subject to standard anti-dilution adjustments for stock splits and other subdivisions. |
Stock_Options_and_Warrants
Stock Options and Warrants | 12 Months Ended | ||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||
Notes to Financial Statements | ' | ||||||||||||||||
Note 10 - Stock Options and Warrants | ' | ||||||||||||||||
In June 2000 and November 2009, our Board of Directors adopted, and our shareholders approved, the 2000 Incentive Compensation Plan (“2000 Plan”) and the 2009 Long-Term Incentive Plan (“2009 Plan”), respectively (together the “Plans”). The Plans provide for the granting of options to qualified employees of the Company, independent contractors, consultants, directors and other individuals. The Company’s Board of Directors approved and made available 11,093,882 and 15,000,000 shares of common stock to be issued pursuant to the 2000 Plan and the 2009 Plan, respectively. The 2000 Plan permits grants of options to purchase common shares authorized and approved by our Board of Directors and shareholders for issuance prior to the enactment of the 2000 Plan. The Plans permit grants of options to purchase common shares authorized and approved by the Company’s Board of Directors. | |||||||||||||||||
The average fair value of options granted at market during 2013 and 2012 was $0.14 and $0.12 per option, respectively. The total intrinsic value of options exercised during the years ended December 31, 2013 and 2011 was $0 and $0, respectively. | |||||||||||||||||
The following summarizes the information relating to outstanding stock options under the Plans during 2013 and 2012: | |||||||||||||||||
Common | Weighted Average | Weighted Average | Aggregate | ||||||||||||||
Shares | Exercise Price | Remaining | Intrinsic | ||||||||||||||
Contractual Term | Value | ||||||||||||||||
(in years) | |||||||||||||||||
Outstanding at December 31, 2011 | 17,402,757 | $ | 0.32 | 6.66 | $ | 352,065 | |||||||||||
Granted | 2,700,000 | $ | 0.12 | ||||||||||||||
Forfeited or expired | (1,455,425 | ) | $ | 0.33 | |||||||||||||
Outstanding at December 31, 2012 | 18,647,332 | $ | 0.29 | 6.06 | $ | 26,345 | |||||||||||
Granted | 5,468,000 | 0.14 | |||||||||||||||
Forfeited or expired | (2,583,916 | ) | 0.14 | ||||||||||||||
Outstanding at December 31, 2013 | 21,531,416 | 0.26 | 5.91 | - | |||||||||||||
Exercisable at December 31, 2013 | 20,926,276 | 0.27 | 5.83 | - | |||||||||||||
Stock compensation expense for options granted to both employees and consultants was approximately $836,000 for the year ended December 31, 2013 and $296,000 for the year ended December 31, 2012. The total fair value of shares vested during the years ended December 31, 2013 and 2012 was approximately $778,000 and $370,000, respectively. | |||||||||||||||||
As of December 31, 2013, there was approximately $54,000 of unrecognized employee stock-based compensation expense related to non vested stock options, of which $31,000, $22,000 and $1,000 is expected to be recognized for the years ended December 31, 2014, 2015 and 2016, respectively. | |||||||||||||||||
The following table represents our non vested share-based payment activity with employees for the years ended December 31, 2013 and 2012: | |||||||||||||||||
Number of Options | Weighted Average Grant Date Fair Value | ||||||||||||||||
Nonvested options - December 31, 2011 | 1,094,236 | $ | 0.29 | ||||||||||||||
Granted | 2,700,000 | $ | 0.12 | ||||||||||||||
Vested | (2,415,070 | ) | $ | 0.14 | |||||||||||||
Forfeited | (143,611 | ) | $ | 0.32 | |||||||||||||
Nonvested options - December 31, 2012 | 1,235,555 | $ | 0.16 | ||||||||||||||
Granted | 5,468,000 | 0.16 | |||||||||||||||
Forfeited | (1,392,915 | ) | 0.24 | ||||||||||||||
Vested | (4,705,500 | ) | 0.17 | ||||||||||||||
Nonvested options - December 31, 2013 | 605,140 | 0.13 | |||||||||||||||
Warrants | |||||||||||||||||
At December 31, 2013, the Company had outstanding warrants to purchase the Company’s common stock which were issued in connection with multiple financing arrangements and consulting agreements. Information relating to these warrants is summarized as follows: | |||||||||||||||||
Warrants | Remaining | Weighted Average | Weighted Average | ||||||||||||||
Number Outstanding | Remaining Life | Exercise Price | |||||||||||||||
(Years) | |||||||||||||||||
Warrants-Financing | 7,000,000 | 2.22 | $0.34 | ||||||||||||||
Warrants-Consulting Agreement | 825,000 | 0.77 | $0.30 | ||||||||||||||
Warrants-Note Conversions | 2,302,538 | 1.3 | $0.39 | ||||||||||||||
Warrants-Stock Purchases | 7,306,128 | 3.42 | $0.35 | ||||||||||||||
Warrants-Services | 400,000 | 1.06 | $0.50 | ||||||||||||||
Total | 17,833,666 |
Derivative_Financial_Instrumen
Derivative Financial Instruments | 12 Months Ended | ||||
Dec. 31, 2013 | |||||
Notes to Financial Statements | ' | ||||
Note 11 - Derivative Financial Instruments | ' | ||||
The Company has accounted for certain warrants in accordance with ASC 815-10, Derivatives and Hedging (ASC 815-10). ASC 815-10 provides guidance for determining whether an equity-linked financial instrument (or embedded feature) is indexed to an entity’s own stock. This applies to any freestanding financial instrument or embedded feature that has all the characteristics of a derivative under ASC 815-10, including any freestanding financial instrument that is potentially settled in an entity’s own stock. | |||||
Due to certain adjustments that may be made to the exercise price of the warrants issued in December 2007, January 2008 and August 2008 (the “2008 Warrants”), if the Company issues or sell shares of its common stock at a price which is less than the then current warrant exercise price of the 2008 Warrants, the exercise price of the 2008 Warrants would be adjusted. These warrants have been classified as a liability as opposed to equity in accordance ASC 815-10 as it was determined that these warrants were not indexed to the Company’s stock. As a result, the fair market value of these warrants is remeasured at each financial reporting period using the Black-Scholes option-pricing model with the following assumptions: | |||||
For the Year Ended December 31, 2012 | |||||
Exercise price | $ | 0.2 | |||
Market value of stock at end of period | $ | 0.12 | |||
Expected dividend rate | N/A | ||||
Expected volatility | 29 | % | |||
Risk-free interest rate | 0.04 | % | |||
Expected life in years | 0.08 | ||||
Shares underlying warrants outstanding classified as liabilities | 2,401,333 | ||||
At December 31, 2012, the fair value of the 2008 Warrants was determined to be zero. All of the 2008 Warrants expired in January 2013. All warrants issued by the Company other than the above noted warrants are classified as equity. |
Deferred_Revenue
Deferred Revenue | 12 Months Ended |
Dec. 31, 2013 | |
Notes to Financial Statements | ' |
Note 12 - Deferred Revenue | ' |
The Company entered into a licensing agreement during the year ended December 31, 2003 and received an initial fee of $770,000. This fee is deferred and recognized on a straight-line basis over the life of the license agreement of 10 years. In addition, the Company received royalties of $100,000 in each of the first three years of the agreement. The Company recognized revenue of approximately $39,000 and $77,000 for this agreement during the years ended December 31, 2013 and 2012, respectively. This agreement expired in 2013. | |
The Company entered into a licensing agreement with a biomedical entity during the year ended December 31, 2005 and received an initial license fee of $50,000. This fee is deferred and recognized on a straight-line basis over the life of the license agreement of 7 years. The Company recognized revenue of approximately $5,000 for this agreement during each of the years ended December 31, 2013 and 2012. | |
On October 30, 2012, the Company and MG Energy LLC, a Delaware limited liability company (“MG Energy”) , a company in which a shareholder of the Company holds a position , entered into a License and Supply Agreement (the “Agreement”), effective October 26, 2012, pursuant to which the Company licensed certain intellectual property and improvements thereto to MG Energy, for use in the manufacture and sale of energy recovery ventilators (“ERV”) and certain other HVAC systems for installation in commercial, residential or industrial buildings in North America and South America in exchange for the cancellation of $2,034,521 of debt due to MG Energy (see Note 7). MG Energy also agreed to purchase its requirements of certain ConsERV products from the Company for MG Energy’s use, pursuant to the terms and conditions of the Agreement. MG Energy will also pay royalties, as defined, to the Company on the net sales of each product or system sold. The term of the Agreement will expire upon the last to expire of the underlying patent rights for the licensed technology. | |
The Company has identified all of the deliverables under the Agreement and has determined significant deliverables to be the license for the intellectual property and the supply services. In determining the units of accounting, the Company evaluated whether the license has stand alone value to MG Energy based upon consideration of the relevant facts and circumstances of the Agreement. The Company determined that the license does not have stand alone value to the licensee and, therefore, should be combined with the supply agreement as one unit of accounting. The initial payment for the license agreement will be treated as an advance payment and recognized over the performance period of the supply agreement. Royalties will be recognized as revenue when earned. The Company recognized license and royalty revenue of approximately $146,200 and $21,600 for this Agreement during the years ended December 31, 2013 and 2012, respectively. | |
MG Energy entered into a sublicense with Multistack, LLC. Michael Gostomski, one of the Company’s shareholders with approximately 2,500,000 shares at December 31, 2013, has an ownership interest in both MG Energy and Multistack, LLC. For the year ended December 31, 2013, Multistack, LLC, accounted for approximately 83% of the Company’s revenue. At December 31, 2013, amounts due from Multistack, LLC were approximately 63% of total accounts receivable. |
Commitments
Commitments | 12 Months Ended | |
Dec. 31, 2013 | ||
Notes to Financial Statements | ' | |
Note 13 - Commitments | ' | |
The Company has employment agreements with some of its key employees and executives. These agreements provide for minimum levels of compensation during current and future years. In addition, these agreements call for grants of stock options and for payments upon termination of the agreements. | ||
Timothy Tangredi. The Company entered into an amended and restated employment agreement with Mr. Timothy N. Tangredi, our President, Chief Executive Officer, and director, dated as of September 14, 2011. Mr. Tangredi’s employment agreement provides for an initial term of three years commencing on September 14, 2011 with the term extending on the second anniversary thereof for an additional two year period and on each subsequent anniversary of the commencement date for an additional year. Mr. Tangredi’s initial base salary is $200,000. Mr. Tangredi’s base salary shall be increased annually, if applicable, by a sum equal to his current base salary multiplied by one third of the percentage increase in our yearly revenue compared to our prior fiscal year revenue; provided however any annual increase in Mr. Tangredi’s base salary shall not exceed a maximum of 50% for any given year. Any further increase in Mr. Tangredi’s base salary shall be at the sole discretion of our board of directors or compensation committee (if applicable). Additionally, at the discretion of our board of directors and its compensation committee, Mr. Tangredi may be eligible for an annual bonus, if any, of up to 100% of his then-effective base salary, if he meets or exceeds certain annual performance goals established by the board of directors. In addition to this bonus, Mr. Tangredi may be eligible for a separate merit bonus if approved by the board of directors, for specific extraordinary events or achievements such as a sale of a division, major license or distribution arrangement or merger. Mr. Tangredi is entitled to medical, disability and life insurance, as well as four weeks of paid vacation annually, an automobile allowance, reimbursement of all reasonable business expenses, automobile insurance and maintenance, and executive conference or educational expenses. | ||
Under his employment agreement, in addition to any other compensation which he may receive, if we complete a secondary Public Offering, Mr. Tangredi will be granted an option under our 2009 Plan to purchase up to 520,000 shares of our common stock with an exercise price equal to the fair market value per share on the date of grant. This option will become vested and exercisable in thirds, with one third vested upon grant, another third at the one-year anniversary of the grant, and another third upon the second anniversary of the grant. The option shall have a term of ten years, shall be exercisable for up to three years after termination of employment (unless termination is for cause, in which event it shall expire on the date of termination), shall have a “cashless” exercise feature, and shall be subject to such additional terms and conditions as are then applicable to options granted under such plan provided they do not conflict with the terms set forth in the agreement. | ||
If Mr. Tangredi’s employment is terminated for any reason, we will be obligated to pay him his accrued but unpaid base salary, bonus and accrued vacation pay, and any unreimbursed expenses (“Accrued Sums”). | ||
In addition to any Accrued Sums owed, if Mr. Tangredi’s employment is terminated by us in the event of his disability or without cause or by Mr. Tangredi for good reason, he shall be entitled to: | ||
(i) | an amount equal to the sum of (A) the greater of 150% of the base salary then in effect or $320,000 plus (B) the cash bonus and/or merit bonus, if any, awarded for the most recent year; | |
(ii) | health and life insurance, a car allowance and other benefits set forth in the agreement until two years following termination of employment, and thereafter to the extent required by COBRA or similar statute; and | |
(iii) | all stock options, to the extent they were not exercisable at the time of termination of employment, shall become exercisable in full. | |
In addition to any Accrued Sum owed, in the event of termination upon death, Mr. Tangredi shall be entitled to (i) and (iii) above. | ||
In addition to any Accrued Sums owed, in the event that Mr. Tangredi elects to terminate employment within one year following a change in control, he shall receive a lump sum payment equal to the sum of (a) the greater of his then current base salary or $210,000 plus (b) the cash bonus and merit bonus, if any, awarded in the most recent year. In addition, he will be entitled to (ii) and (iii) above. | ||
The employment agreement also contains customary covenants restricting the use of our confidential information and solicitation of employees, which are similarly applicable to our other executive officers. In addition we are obligated to indemnify Mr. Tangredi for any claims made against him in connection with his employment with us, to advance indemnification expenses, and maintain his coverage under our directors’ and officers’ liability insurance policy. | ||
Under the employment agreement, we and Mr. Tangredi have agreed that we will retain an independent compensation consultant, whose recommendations shall be obtained by January 31, 2012 which may modify the compensation program for Mr. Tangredi and other officers, subject to certain conditions including approval of the board of directors. Notwithstanding the recommendation and board consideration, Mr. Tangredi has the right to continue the current terms of the employment agreement. No amendment has been made as of the date of this filing. | ||
Patricia Tangredi. In April 2011, the Company entered into an employment agreement with the Company’s General Counsel, Patricia Tangredi. The employment term is for four years with automatic renewals. The agreement includes an annual base salary of $120,000 with an increase to $150,000 upon completion of a successful Secondary Public Offering of at least $10 million. The agreement also provides for a minimum of 50,000 options to be awarded annually along with other standard employment benefits. | ||
Litigation | ||
In the ordinary course of business, the Company may become a party to various legal proceedings generally involving contractual matters, infringement actions, product liability claims and other matters. In November 2013, the Company’s Chief Operating Officer resigned from the Company. The former Chief Operating Officer alleges that the resignation was for Good Reason, as defined in the former Chief Operating Officer’s employment agreement, and filed a demand for arbitration in December 2013. The former Chief Operating Officer is seeking severance pay equal to $60,000, which is 50% of her annual salary in effect as of the date of resignation. The Company intends to vigorously defend itself against these allegations and, at this stage, the Company does not have an estimate of the likelihood or the amount of any potential expense for this lawsuit. |
Income_Taxes
Income Taxes | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Notes to Financial Statements | ' | ||||||||
Note 14 - Income Taxes | ' | ||||||||
There is no current or deferred income tax expense or benefit for the years ended December 31, 2013 and 2012. The provision for income taxes is different from that which would be obtained by applying the statutory federal income tax rate to income before income taxes. The items causing this difference are as follows: | |||||||||
Year ended December 31, | |||||||||
2013 | 2012 | ||||||||
Tax (benefit) at U.S. statutory rate | $ | (721,000 | ) | $ | 7,000 | ||||
State income tax (benefit), net of federal benefit | (77,000 | ) | 1,000 | ||||||
Employee stock-based compensation | 284,000 | 101,000 | |||||||
Change in warrant valuation | — | (642,000 | ) | ||||||
Amortization of debt discount | — | 87,000 | |||||||
Other adjustments | (39,000 | ) | (13,000 | ) | |||||
Expiration of net operating loss | — | 81,000 | |||||||
Change in valuation allowance | 553,000 | 378,000 | |||||||
$ | — | $ | — | ||||||
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are as follows: | |||||||||
December 31, | |||||||||
2013 | 2012 | ||||||||
Deferred tax assets (liabilities), current: | |||||||||
Allowance for doubtful accounts | $ | 2,200 | $ | 1,000 | |||||
Stock warrant consideration and other | 114,100 | 119,300 | |||||||
Accrued shareholder interest | 120,600 | — | |||||||
Deferred license revenue | 81,800 | 70,600 | |||||||
Valuation allowance | (318,700 | ) | (190,900 | ) | |||||
$ | — | $ | — | ||||||
Deferred tax assets (liabilities), noncurrent: | |||||||||
Deferred license revenue | $ | 662,000 | $ | 713,500 | |||||
Depreciation | 7,500 | 3,400 | |||||||
Bonus payable | 108,300 | 108,300 | |||||||
Accrued deferred compensation payable | 523,500 | 446,900 | |||||||
Research and development credit | 45,400 | — | |||||||
Net operating loss carryforward | 3,137,700 | 7,836,600 | |||||||
Valuation allowance | (9,534,400 | ) | (9,108,700 | ) | |||||
$ | — | $ | — | ||||||
As of December 31, 2013 and 2012, the Company had federal and state net operating loss carry-forwards totaling approximately $21,800,000 and $21,000,000, respectively, which expire through 2033. The Company has established a valuation allowance to fully reserve all deferred tax assets at December 31, 2013 and 2012 because it is more likely than not that the Company will not be able to utilize these assets. The change in the valuation allowance for the years ended December 31, 2013 and 2012 was an increase of $553,000 and $378,000, respectively. | |||||||||
As of December 31, 2013, the Company has not performed an IRC Section 382 study to determine the amount, if any, of its net operating losses that may be limited as a result of the ownership change percentages during 2013. However, the Company will complete the study prior to the utilization of any of its recorded net operating losses. |
Subsequent_Events
Subsequent Events | 12 Months Ended |
Dec. 31, 2013 | |
Notes to Financial Statements | ' |
Note 15 - Subsequent Events | ' |
Securities Purchase Agreement | |
The Company entered into a Securities Purchase Agreement (the “SPA”) with an investor, Soex (Hong Kong) Industry & Investment Co., Ltd., a Hong Kong corporation (the “Investor”), pursuant to which the Company agreed to sell 37.5 million shares of the Company’s common stock, $0.01 par value per share (the “Common Stock”), for $1.5 million, at $0.04 per share pursuant to Regulation S. The Company received the $1.5 million from the Investor on March 3, 2014, ahead of the March 7, 2014 deadline specified in the SPA and has issued the 37.5 million shares of Common Stock to the Investor. | |
The Company shall use the proceeds from the sale of the Common Stock for working capital, business development and as registered capital in an entity, which the Company is expected to be the majority owner (the “China Subsidiary”), to be incorporated in China with the Investor. Upon formation of this entity, the Investor shall provide additional funds to the China Subsidiary, to be negotiated and agreed upon between the Parties and as needed to fund the China Subsidiary including, but not limited to funds to secure and pay personnel and build the required facilities and infrastructure to sell the Company’s ConsERV and Aqualyte materials products in China. | |
Litigation | |
In March 2014, the Company received notice of a lawsuit against the Company and one of its OEM customers for damages in connection with the installation of equipment by a contractor involved in a construction project. The contractor makes claims for breach or warranties, negligence and products liability. In the complaint, the contractor alleges that it paid $180,000 to the general contractor of the project for damages, including consequential and incidental damages, allegedly caused by equipment manufactured by the Company and its customer. The Company intends to vigorously defend itself against these allegations and, at this stage, the Company does not have an estimate of the likelihood or the amount of any potential expense for this lawsuit. | |
No other material events have occurred subsequent to December 31, 2013 that require recognition or disclosure in these financial statements. |
Significant_Accounting_Policie1
Significant Accounting Policies (Policies) | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Significant Accounting Policies Policies | ' | ||||||||
Use of estimates | ' | ||||||||
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. | |||||||||
Cash and cash equivalents | ' | ||||||||
For purposes of the Statements of Cash Flows, the Company considers all highly liquid debt instruments with a maturity of three months or less to be cash equivalents. Cash and cash equivalents are maintained at financial institutions and, at times, balances may exceed federally insured limits. The Company has never experienced any losses related to these balances. | |||||||||
Accounts receivable | ' | ||||||||
Accounts receivable consist primarily of receivables from the sale of our ERV products. The Company regularly reviews accounts receivable for any bad debts based on an analysis of the Company’s collection experience, customer credit worthiness, and current economic trends. After all attempts to collect a receivable have failed, the receivable is written off against the allowance. Based on management’s review of accounts receivable, we have recorded an allowance for doubtful accounts of $831 and $2,576 at December 31, 2013 and 2012. | |||||||||
Other receivables | ' | ||||||||
Accounts receivable consist primarily of receivables from the U.S. Department of Defense and the U.S. Department of Energy ARPA-E grant program (See Note 3- Research and development expenses, and grant proceeds). The Company prepares invoices as it meets grant program milestones. Based on management’s review of other receivables, management has determined that no allowance for uncollectibilty is necessary at December 31, 2013. | |||||||||
Inventory | ' | ||||||||
Inventory consists of raw materials and work-in-process and is stated at the lower of cost, determined by first-in, first-out method, or market. Market is determined based on the net realizable value, with appropriate consideration given to obsolescence, excessive levels, deterioration and other factors. At December 31, 2013 and 2012, the Company had $78,240 and $90,124 of in-process inventory, respectively. A reserve is recorded for any inventory deemed excessive or obsolete. No reserve is considered necessary at December 31, 2013 and 2012. | |||||||||
Property and equipment | ' | ||||||||
Property and equipment are recorded at cost. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets ranging from 3 to 7 years. Depreciation expense was approximately $84,300 and $36,300 the years ended December 31, 2013 and 2012, respectively. Gains and losses upon disposition are reflected in the statement of operations in the period of disposition. Maintenance and repair expenditures are charged to expense as incurred. | |||||||||
Intangible assets | ' | ||||||||
Identified intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The Company’s existing intangible assets consist solely of patents. Patents are amortized over their estimated useful or economic lives of 17 to 20 years. Patent amortization expense was approximately $22,400 and $24,800 for the years ended December 31, 2013 and 2012, respectively. Total patent amortization expense is estimated to be approximately $16,000 per year and $33,000 thereafter. | |||||||||
Long-lived assets | ' | ||||||||
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the book value of the asset may not be recoverable. The Company periodically evaluates whether events and circumstances have occurred that indicate possible impairment. When impairment indicators exist, the Company uses market quotes, if available or an estimate of the future undiscounted net cash flows of the related asset or asset group over the remaining life in measuring whether or not the asset values are recoverable. During the years ended December 31, 2013 and 2012, the Company recognized $2,672 and $62,288, respectively, in impairment costs. | |||||||||
Government grants | ' | ||||||||
Grants are recognized when there is reasonable assurance that the grant will be received and that any conditions associated with the grant will be met. When grants are received related to property and equipment, the Company reduces the basis of the assets on the balance sheet, resulting in lower depreciation expense over the life of the associated asset. Grants received related to expenses are reflected as a reduction of the associated expense in the period in which the expense is incurred. | |||||||||
Research and development expenses and grant proceeds | ' | ||||||||
Expenditures for research, development, and engineering of products are expensed as incurred. For the years ended December 31, 2013 and 2012, the Company incurred research and development costs of approximately $676,100 and $521,100, respectively. The Company accounts for proceeds received from government grants for research as a reduction in research and development costs. For the years ended December 31, 2013 and 2012, the Company recorded approximately $181,000 and $67,200, respectively, in grant proceeds against research and development expenses on the statements of operations. | |||||||||
On January 23, 2013, the U.S. Department of Defense and the U.S. Department of Energy approved an ARPA-E grant of up to $800,000 to the Company for the funding of a project to developing an energy-efficient, compact dehumidification system utilizing a polymer membrane that allows moisture to pass through. The grant is conditioned upon the Company contributing $200,000 of the proposed total project cost of $1,000,000. For the year ended December 31, 2013, the Company has incurred approximately $181,000 in expenses and recognized the same amount as a reduction to research and development expense related to this grant award. | |||||||||
On September 17, 2010, the U.S. Department of Energy approved a grant of up to $681,322 to the Company for the funding of a project to scale up, in size and field trial, a dehumidification system similar to the Company’s NanoAir prototype. The grant is conditioned upon the Company contributing $171,500 of the proposed total project cost of $852,822. For the years ended December 31, 2012 and 2011, the Company has incurred $781 and $601,059, respectively, in expenses and recognized the same amount as a reduction to research and development expense related to this grant award. This grant was fully expended as of December 31, 2012. | |||||||||
In December 2010, Pasco County Florida approved a grant of $254,500 to the Company for the funding of the NanoAir product into commercialization. The grant from Pasco County requires us to pay the county 2% of the gross sales of products using a certain unique pump assembly for 5 years or for a total of $1,000,000 whichever comes first. For the years ended December 31, 2012 and 2011, the Company has incurred $66,459 and $168,095, respectively, in expenses and recognized the same amount as a reduction to research and development expense related to this grant award. This grant was fully expended as of December 31, 2012. | |||||||||
Stock issuance costs | ' | ||||||||
Stock issuance costs are recorded as a reduction of the related proceeds through a charge to stockholders’ equity. | |||||||||
Common stock | ' | ||||||||
The Company records common stock issuances when all of the legal requirements for the issuance of such common stock have been satisfied. | |||||||||
Revenue recognition | ' | ||||||||
Generally, the Company recognizes revenue for its products upon shipment to customers, provided no significant obligations remain and collection is probable. | |||||||||
In certain instances, our ConsERV product may carry a warranty of up to two years for all parts contained therein with the exception of the energy recovery ventilator core which may carry a warranty of up to ten years. The warranty includes replacement of defective parts. The Company has recorded an accrual of approximately $92,100 and $92,800 for future warranty expenses at December 31, 2013 and 2012, respectively, which is included in the line item for accrued expenses, other. | |||||||||
Revenue derived from the sale of licenses is deferred and recognized as revenue on a straight-line basis over the life of the license, or until the license arrangement is terminated. The Company recognized revenue of $189,100 and $103,640, respectively, from license agreements for the years ended December 31, 2013 and 2012. The Company recognized revenue of $26,512 and $0, respectively, from royalties for the years ended December 31, 2013 and 2012. | |||||||||
The Company accounts for revenue arrangements with multiple elements under the provisions of the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 605-25, "Revenue Recognition—Multiple-Element Arrangements," In order to account for these agreements, the Company must identify the deliverables included within the agreement and evaluate which deliverables represent separate units of accounting based on if certain criteria are met, including whether the delivered element has stand-alone value to the licensee. The consideration received is allocated among the separate units of accounting, and the applicable revenue recognition criteria are applied to each of the separate units. | |||||||||
Stock based compensation | ' | ||||||||
The Company recognizes all share-based payments to employees, including grants of employee stock options, as compensation expense in the financial statements based on their fair values. That expense will be recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period). | |||||||||
The value of each grant is estimated at the grant date using the Black-Scholes option model with the following assumptions for options granted during the years ended December 31, 2013 and 2012: | |||||||||
Years Ended December 31, | |||||||||
2013 | 2012 | ||||||||
Dividend rate | 0 | % | 0 | % | |||||
Risk free interest rate | 2.03% – 2.20 | % | 0.61% – 1.04 | % | |||||
Expected term | 10 years | 5 – 6.5 years | |||||||
Expected volatility | 135% – 177 | % | 123% – 125 | % | |||||
The basis for the above assumptions are as follows: the dividend rate is based upon the Company’s history of dividends; the risk-free interest rate for periods within the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant; the expected term was calculated based on the Company’s historical pattern of options granted and the period of time they are expected to be outstanding; and expected volatility was calculated based upon historical trends in the Company’s common stock, as well as a peer company’s historical common stock activity. | |||||||||
Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Based on historical experience of forfeitures, the Company estimated forfeitures at 0% for each of the years ended December 31, 2013 and 2012. | |||||||||
Non-employee stock-based compensation | ' | ||||||||
The Company’s accounting policy for equity instruments issued to consultants and vendors in exchange for goods and services follows the provisions of ASC 505-50 Equity-Based Payments to Non-Employees. Stock-based compensation related to non-employees is accounted for based on the fair value of the related stock or options or the fair value of the services, whichever is more readily determinable. The measurement date for the fair value of the equity instruments issued is determined at the earlier of (i) the date at which a commitment for performance by the consultant or vendor is reached or (ii) the date at which the consultant or vendor’s performance is complete. In the case of equity instruments issued to consultants, the fair value of the equity instrument is recognized over the term of the consulting agreement. | |||||||||
The fair value of stock options issued to consultants in 2013 was calculated using the Black-Scholes model with the following assumptions: Expected life in years: 2 years; Estimated volatility 165%; Risk-free interest rate: 0.26%; Dividend yield: 0%. The fair value of stock options issued to consultants in 2012 was calculated using the Black-Scholes model with the following assumptions: Expected life in years: 10 years; Estimated volatility 110%; Risk-free interest rate: 1.62%; Dividend yield: 0%. | |||||||||
Financial instruments | ' | ||||||||
The Company accounts for financial instruments in accordance with FASB Accounting Standards Codification (ASC) 820 “Fair Value Measurements and Disclosures” (ASC 820). ASC 820 (as amended in May 2011) defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. ASC 820 was amended to clarify the application of existing fair value measurements and to change certain fair value measurement and disclosure requirements. Amendments that change measurement and disclosure requirements relate to (i) fair value measurement of financial instruments that are managed within a portfolio, (ii) application of premiums and discounts in a fair value measurement, and (iii) additional disclosures about fair value measurements categorized in Level 3 of the fair value hierarchy. ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below: | |||||||||
▪ | Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. | ||||||||
▪ | Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means. | ||||||||
▪ | Level 3 - Inputs that are both significant to the fair value measurement and unobservable. | ||||||||
Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of December 31, 2013. The Company uses the market approach to measure fair value for its Level 1 financial assets and liabilities, which include cash equivalents of which there were none at December 31, 2013. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets and liabilities. | |||||||||
The respective carrying value of certain on-balance sheet financial instruments approximated their fair values due to the short-term nature of these instruments. These financial instruments include cash, accounts receivable, other receivables, accounts payable, accrued compensation and accrued expenses. The fair value of the Company’s related party notes payable is estimated based on current rates that would be available for debt of similar terms which is not significantly different from its stated value. | |||||||||
The Company’s financial liabilities measured at fair value consisted of warrants as of December 31, 2012 and were valued at zero as discussed in Note 11. As of December 31, 2012 there was only one month remaining until the warrants expired, and therefore, changes to unobservable inputs would not have resulted in a significantly higher or lower fair value measurement. The fair value of the warrant liability was $1,888,218 as of December 31, 2011, which was reduced to zero through at December 31, 2012 through Other income – Changes in fair value of warrant liability. | |||||||||
Income taxes | ' | ||||||||
Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due plus deferred taxes resulting from temporary differences. Such temporary differences result from differences in the carrying value of assets and liabilities for tax and financial reporting purposes. The deferred tax assets and liabilities represent the future tax consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. | |||||||||
The Company identifies and evaluates uncertain tax positions, if any, and recognizes the impact of uncertain tax positions for which there is a less than more-likely-than-not probability of the position being upheld when reviewed by the relevant taxing authority. Such positions are deemed to be unrecognized tax benefits and a corresponding liability is established on the balance sheet. The Company has not recognized a liability for uncertain tax positions. If there were an unrecognized tax benefit, the Company would recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. The Company’s remaining open tax years subject to examination by the Internal Revenue Service generally remain open for three years from the date of filing. | |||||||||
Derivative financial instruments | ' | ||||||||
The Company does not use derivative instruments to hedge exposure to cash flow, market or foreign currency risk. Terms of convertible promissory note instruments are reviewed to determine whether or not they contain embedded derivative instruments that are required under ASC 815 “Derivative and Hedging” (ASC 815) to be accounted for separately from the host contract, and recorded on the balance sheet at fair value. The fair value of derivative liabilities, if any, is required to be revalued at each reporting date, with corresponding changes in fair value recorded in current period operating results. | |||||||||
Freestanding warrants issued by the Company in connection with the issuance or sale of debt and equity instruments are considered to be derivative instruments and are evaluated and accounted for in accordance with the provisions of ASC 815. Pursuant to ASC 815, an evaluation of specifically identified conditions is made to determine whether fair value of warrants issued is required to be classified as equity or as a derivative liability. | |||||||||
Earnings (loss) per share | ' | ||||||||
Basic income (loss) per share is computed by dividing net income (loss) attributable to common stockholders by the weighted average common shares outstanding for the period. Diluted income (loss) per share is computed giving effect to all potentially dilutive common shares. Potentially dilutive common shares may consist of incremental shares issuable upon the exercise of stock options and warrants and the conversion of notes payable to common stock. In periods in which a net loss has been incurred, all potentially dilutive common shares are considered anti-dilutive and thus are excluded from the calculation. Common share equivalents of 39,365,082 and 36,966,415 were excluded from the computation of diluted earnings per share for the years ended December 31, 2013 and 2012, respectively, because their effect is anti-dilutive. | |||||||||
The following sets forth the computation of basic and diluted net earnings (loss) per common share for the years ended December 31, 2013 and 2012: | |||||||||
For the Years Ended | |||||||||
December 31, | |||||||||
2013 | 2012 | ||||||||
Numerator: | |||||||||
Net income (loss) | $ | (2,121,478 | ) | $ | 21,339 | ||||
Denominator: | |||||||||
Weighted average basic shares outstanding | 57,542,454 | 40,022,085 | |||||||
Potential shares under stock options | - | 4,184,058 | |||||||
Less shares assumed repurchased under the treasury stock method | - | (2,926,152 | ) | ||||||
Weighted average fully diluted shares outstanding | 57,542,454 | 41,279,991 | |||||||
Net income (loss) per common share – basic | $ | (0.04 | ) | $ | 0 | ||||
Net income (loss) per common share – diluted | $ | (0.04 | ) | $ | 0 | ||||
Recent accounting pronouncements | ' | ||||||||
Recent accounting pronouncements issued by the Financial Accounting Standards Board (FASB) did not or are not believed by management to have a material impact on the Company’s present or future financial statements. |
Significant_Accounting_Policie2
Significant Accounting Policies (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Significant Accounting Policies Tables | ' | ||||||||
Stock based compensation | ' | ||||||||
The value of each grant is estimated at the grant date using the Black-Scholes option model with the following assumptions for options granted during the years ended December 31, 2013 and 2012: | |||||||||
Years Ended December 31, | |||||||||
2013 | 2012 | ||||||||
Dividend rate | 0 | % | 0 | % | |||||
Risk free interest rate | 2.03% – 2.20 | % | 0.61% – 1.04 | % | |||||
Expected term | 10 years | 5 – 6.5 years | |||||||
Expected volatility | 135% – 177 | % | 123% – 125 | % | |||||
Computation of basic and diluted net earnings (loss) per common share | ' | ||||||||
The following sets forth the computation of basic and diluted net earnings (loss) per common share for the years ended December 31, 2013 and 2012: | |||||||||
For the Years Ended | |||||||||
December 31, | |||||||||
2013 | 2012 | ||||||||
Numerator: | |||||||||
Net income (loss) | $ | (2,121,478 | ) | $ | 21,339 | ||||
Denominator: | |||||||||
Weighted average basic shares outstanding | 57,542,454 | 40,022,085 | |||||||
Potential shares under stock options | - | 4,184,058 | |||||||
Less shares assumed repurchased under the treasury stock method | - | (2,926,152 | ) | ||||||
Weighted average fully diluted shares outstanding | 57,542,454 | 41,279,991 | |||||||
Net income (loss) per common share – basic | $ | (0.04 | ) | $ | 0 | ||||
Net income (loss) per common share – diluted | $ | (0.04 | ) | $ | 0 |
Property_and_Equipment_Tables
Property and Equipment (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Property And Equipment Tables | ' | ||||||||
Property and equipment | ' | ||||||||
Property and equipment consist of the following: | |||||||||
December 31, | |||||||||
2013 | 2012 | ||||||||
Furniture and fixtures | $ | 38,764 | $ | 38,764 | |||||
Computer equipment | 64,305 | 66,980 | |||||||
Demonstration equipment | 92,733 | 106,841 | |||||||
Office and lab equipment | 224,174 | 217,523 | |||||||
419,976 | 430,108 | ||||||||
Less accumulated depreciation | 322,995 | 334,551 | |||||||
$ | 96,981 | $ | 95,557 |
Prepaid_Expenses_and_Other_Cur1
Prepaid Expenses and Other Current Assets (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Prepaid Expenses And Other Current Assets Tables | ' | ||||||||
Prepaid expenses and other current assets | ' | ||||||||
Prepaid expenses and other current assets consist of the following: | |||||||||
December 31, | |||||||||
2013 | 2012 | ||||||||
Prepaid expenses | $ | 11,700 | $ | 10,496 | |||||
Prepaid insurance | 35,840 | 35,449 | |||||||
$ | 47,540 | $ | 45,945 |
Accrued_Expenses_Other_Tables
Accrued Expenses, Other (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Accrued Expenses Other Tables | ' | ||||||||
Accrued expenses and other expenses | ' | ||||||||
Accrued expenses, other consists of the following: | |||||||||
December 31, | |||||||||
2013 | 2012 | ||||||||
Accrued expenses, other | $ | 34,890 | $ | 29,946 | |||||
Accrued registration rights penalty | - | 5,000 | |||||||
Accrued warranty costs | 92,100 | 92,829 | |||||||
Contractual obligation | - | 13,200 | |||||||
$ | 126,990 | $ | 140,975 |
Stock_Options_and_Warrants_Tab
Stock Options and Warrants (Tables) | 12 Months Ended | ||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||
Stock Options And Warrants Tables | ' | ||||||||||||||||
Outstanding stock options activity | ' | ||||||||||||||||
The following summarizes the information relating to outstanding stock options under the Plans during 2013 and 2012: | |||||||||||||||||
Common | Weighted Average | Weighted Average | Aggregate | ||||||||||||||
Shares | Exercise Price | Remaining | Intrinsic | ||||||||||||||
Contractual Term | Value | ||||||||||||||||
(in years) | |||||||||||||||||
Outstanding at December 31, 2011 | 17,402,757 | $ | 0.32 | 6.66 | $ | 352,065 | |||||||||||
Granted | 2,700,000 | $ | 0.12 | ||||||||||||||
Forfeited or expired | (1,455,425 | ) | $ | 0.33 | |||||||||||||
Outstanding at December 31, 2012 | 18,647,332 | $ | 0.29 | 6.06 | $ | 26,345 | |||||||||||
Granted | 5,468,000 | 0.14 | |||||||||||||||
Forfeited or expired | (2,583,916 | ) | 0.14 | ||||||||||||||
Outstanding at December 31, 2013 | 21,531,416 | 0.26 | 5.91 | - | |||||||||||||
Exercisable at December 31, 2013 | 20,926,276 | 0.27 | 5.83 | - | |||||||||||||
Non vested share-based payment activity | ' | ||||||||||||||||
The following table represents our non vested share-based payment activity with employees for the years ended December 31, 2013 and 2012: | |||||||||||||||||
Number of Options | Weighted Average Grant Date Fair Value | ||||||||||||||||
Nonvested options - December 31, 2011 | 1,094,236 | $ | 0.29 | ||||||||||||||
Granted | 2,700,000 | $ | 0.12 | ||||||||||||||
Vested | (2,415,070 | ) | $ | 0.14 | |||||||||||||
Forfeited | (143,611 | ) | $ | 0.32 | |||||||||||||
Nonvested options - December 31, 2012 | 1,235,555 | $ | 0.16 | ||||||||||||||
Granted | 5,468,000 | 0.16 | |||||||||||||||
Forfeited | (1,392,915 | ) | 0.24 | ||||||||||||||
Vested | (4,705,500 | ) | 0.17 | ||||||||||||||
Nonvested options - December 31, 2013 | 605,140 | 0.13 | |||||||||||||||
Warrants | ' | ||||||||||||||||
At December 31, 2013, the Company had outstanding warrants to purchase the Company’s common stock which were issued in connection with multiple financing arrangements and consulting agreements. Information relating to these warrants is summarized as follows: | |||||||||||||||||
Warrants | Remaining | Weighted Average | Weighted Average | ||||||||||||||
Number Outstanding | Remaining Life | Exercise Price | |||||||||||||||
(Years) | |||||||||||||||||
Warrants-Financing | 7,000,000 | 2.22 | $0.34 | ||||||||||||||
Warrants-Consulting Agreement | 825,000 | 0.77 | $0.30 | ||||||||||||||
Warrants-Note Conversions | 2,302,538 | 1.3 | $0.39 | ||||||||||||||
Warrants-Stock Purchases | 7,306,128 | 3.42 | $0.35 | ||||||||||||||
Warrants-Services | 400,000 | 1.06 | $0.50 | ||||||||||||||
Total | 17,833,666 | ||||||||||||||||
Derivative_Financial_Instrumen1
Derivative Financial Instruments (Tables) | 12 Months Ended | ||||
Dec. 31, 2013 | |||||
Derivative Financial Instruments Tables | ' | ||||
Fair value of the warrants | ' | ||||
Fair market value of these warrants is remeasured at each financial reporting period using the Black-Scholes option-pricing model with the following assumptions: | |||||
For the Year Ended December 31, 2012 | |||||
Exercise price | $ | 0.2 | |||
Market value of stock at end of period | $ | 0.12 | |||
Expected dividend rate | N/A | ||||
Expected volatility | 29 | % | |||
Risk-free interest rate | 0.04 | % | |||
Expected life in years | 0.08 | ||||
Shares underlying warrants outstanding classified as liabilities | 2,401,333 |
Income_Taxes_Tables
Income Taxes (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Income Taxes Tables | ' | ||||||||
Provision for income taxes | ' | ||||||||
The provision for income taxes is different from that which would be obtained by applying the statutory federal income tax rate to income before income taxes. The items causing this difference are as follows: | |||||||||
Year ended December 31, | |||||||||
2013 | 2012 | ||||||||
Tax (benefit) at U.S. statutory rate | $ | (721,000 | ) | $ | 7,000 | ||||
State income tax (benefit), net of federal benefit | (77,000 | ) | 1,000 | ||||||
Employee stock-based compensation | 284,000 | 101,000 | |||||||
Change in warrant valuation | — | (642,000 | ) | ||||||
Amortization of debt discount | — | 87,000 | |||||||
Other adjustments | (39,000 | ) | (13,000 | ) | |||||
Expiration of net operating loss | — | 81,000 | |||||||
Change in valuation allowance | 553,000 | 378,000 | |||||||
$ | — | $ | — | ||||||
Deferred tax assets and deferred tax liabilities | ' | ||||||||
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are as follows: | |||||||||
December 31, | |||||||||
2013 | 2012 | ||||||||
Deferred tax assets (liabilities), current: | |||||||||
Allowance for doubtful accounts | $ | 2,200 | $ | 1,000 | |||||
Stock warrant consideration and other | 114,100 | 119,300 | |||||||
Accrued shareholder interest | 120,600 | — | |||||||
Deferred license revenue | 81,800 | 70,600 | |||||||
Valuation allowance | (318,700 | ) | (190,900 | ) | |||||
$ | — | $ | — | ||||||
Deferred tax assets (liabilities), noncurrent: | |||||||||
Deferred license revenue | $ | 662,000 | $ | 713,500 | |||||
Depreciation | 7,500 | 3,400 | |||||||
Bonus payable | 108,300 | 108,300 | |||||||
Accrued deferred compensation payable | 523,500 | 446,900 | |||||||
Research and development credit | 45,400 | — | |||||||
Net operating loss carryforward | 3,137,700 | 7,836,600 | |||||||
Valuation allowance | (9,534,400 | ) | (9,108,700 | ) | |||||
$ | — | $ | — |
Background_Information_Details
Background Information (Details Narrative) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Customers accounted for percentages of accounts receivable | 63.00% | 57.00% |
Four customers accounted for total percentages of sales | 60.00% | ' |
Customers one accounted for total percentages of sales | 6.00% | ' |
Customers two accounted for total percentages of sales | 7.00% | ' |
Customers three accounted for total percentages of sales | 8.00% | ' |
Customers four accounted for total percentages of sales | 39.00% | ' |
Multistack, LLC [Member] | ' | ' |
Customers accounted for percentages of Company's revenue | 83.00% | ' |
Going_Concern_Details_Narrativ
Going Concern (Details Narrative) (USD $) | 12 Months Ended | ||
Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | |
Going Concern Details Narrative | ' | ' | ' |
Net income (loss) | ($2,121,478) | $21,339 | ' |
Accumulated deficit | 40,073,305 | 37,951,827 | ' |
Working capital | 515,494 | ' | ' |
Stockholders' deficit | 3,749,512 | 2,928,934 | 4,900,910 |
Cash in operations | $650,184 | $1,167,650 | ' |
Significant_Accounting_Policie3
Significant Accounting Policies (Details) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Dividend rate | 0.00% | 0.00% |
Risk free interest rate, Minimum | 2.03% | 0.61% |
Risk free interest rate, Maximum | 2.20% | 1.04% |
Expected volatility Minimum | 135.00% | 123.00% |
Expected volatility Maximum | 177.00% | 125.00% |
Minimum [Member] | ' | ' |
Expected term Maximum | ' | '5 years |
Maximum [Member] | ' | ' |
Expected term Maximum | '10 years | '6 years 6 months |
Significant_Accounting_Policie4
Significant Accounting Policies (Details 1) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Significant Accounting Policies Details 1 | ' | ' |
Net income (loss) | ($2,121,478) | $21,339 |
Weighted average basic shares outstanding | 57,542,454 | 40,022,085 |
Potential shares under stock options | ' | 4,184,058 |
Less shares assumed repurchased under the treasury stock method | ' | -2,926,152 |
Weighted average fully diluted shares outstanding | $57,542,454 | $41,279,991 |
Net income (loss) per common share - basic | ($0.04) | $0 |
Net income (loss) per common share - diluted | ($0.04) | $0 |
Significant_Accounting_Policie5
Significant Accounting Policies (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Significant Accounting Policies Details Narrative | ' | ' |
Allowance for doubtful accounts | $831 | $2,576 |
In-process inventory | 78,240 | 90,124 |
Depreciation expense | 84,300 | 36,300 |
Property and equipment estimated useful life | '3 to 7 years | ' |
Patents estimated useful life | '17 to 20 years | ' |
Patent amortization expense | 22,400 | 24,800 |
Future amortization expense per year | 16,000 | ' |
Future amortization expense thereafter | 33,000 | ' |
Impairment costs | 2,672 | 62,288 |
Research and development costs | 676,100 | 521,100 |
Grant proceeds against research and development expenses | 181,000 | 67,200 |
Warranty accrual | 92,100 | 92,800 |
Revenue recognition from license agreements | 189,100 | 103,640 |
Revenue recognition from royalties | $26,512 | $0 |
Forfeiture | 0.00% | 0.00% |
Customers accounts receivable percentage | 99.90% | ' |
Estimated volatility | 165.00% | 110.00% |
Risk-free interest rate | 0.26% | 1.62% |
Dividend yield | 0.00% | 0.00% |
Dilutive common shares | 39,365,082 | 36,966,415 |
Property_and_Equipment_Details
Property and Equipment (Details) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Property And Equipment Details | ' | ' |
Furniture and fixtures | $38,764 | $38,764 |
Computer equipment | 64,305 | 66,980 |
Demonstration equipment | 92,733 | 106,841 |
Office and lab equipment | 224,174 | 217,523 |
Property and Equipment total | 419,976 | 430,108 |
Less accumulated depreciation | 322,995 | 334,551 |
Property and Equipment net | $96,981 | $95,557 |
Prepaid_Expenses_and_Other_Cur2
Prepaid Expenses and Other Current Assets (Details) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Prepaid Expenses And Other Current Assets Details | ' | ' |
Prepaid expenses | $11,700 | $10,496 |
Prepaid insurance | 35,840 | 35,449 |
Prepaid Expenses and Other Current Assets | $47,540 | $45,945 |
Accrued_Expenses_Other_Details
Accrued Expenses, Other (Details) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Accrued Expenses Other Details | ' | ' |
Accrued expenses, other | $34,890 | $29,946 |
Accrued registration rights penalty | ' | 5,000 |
Accrued warranty costs | 92,100 | 92,829 |
Contractual obligation | ' | 13,200 |
Accrued Expenses | $126,990 | $140,975 |
Notes_Payable_Details_Narrativ
Notes Payable (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Notes Payable Details Narrative | ' | ' |
Agreement with related party for borrowing | $35,000 | $50,000 |
Interest rate on borrowing | 6.00% | 4.00% |
Additional expense representing amortization of debt discount | ' | $358,555 |
Related_Party_Transactions_Det
Related Party Transactions (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Related Party Transactions Details Narrative | ' | ' |
Rent expense recognized | $49,000 | $49,000 |
Accounts payable for rent | 124,917 | 82,195 |
Deferred salaries earned and unpaid | 1,672,893 | 1,494,739 |
Accrued payroll | $1,672,893 | $1,484,739 |
Equity_Transactions_Details_Na
Equity Transactions (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2012 | Dec. 31, 2013 | |
Equity Transactions Details Narrative | ' | ' |
Common stock payable | $19,255 | ' |
Common stock payable unissued shares | 192,550 | ' |
Common stock payable unissued shares issued | ' | 192,550 |
Company issued options to purchase | 250,000 | ' |
Stock_Options_and_Warrants_Det
Stock Options and Warrants (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Stock Options And Warrants Details | ' | ' |
Common shares outstanding | 18,647,332 | 17,402,757 |
Common shares granted | 5,468,000 | 2,700,000 |
Common shares expired/forfeited | -2,583,916 | -1,455,425 |
Outstanding at December 31, 2013 | 21,531,416 | 18,647,332 |
Exercisable at December 31, 2013 | 20,926,276 | ' |
Weighted average exercise price of shares outstanding | $0.29 | $0.32 |
Weighted average exercise price of shares Granted | $0.14 | $0.12 |
Weighted average exercise price of shares expired/forfeited | $0.14 | $0.33 |
Weighted average exercise price of shares outstanding at December 31, 2013 | $0.26 | $0.29 |
Weighted average exercise price of shares exercisable December 31, 2013 | $0.27 | ' |
Weighted average remaining contractual term (in years) of shares outstanding, Begining Balance | '6 years 22 days | '6 years 7 months 28 days |
Weighted average remaining contractual term (in years) of shares outstanding, Ending Balance | '5 years 10 months 28 days | '6 years 22 days |
Weighted average remaining contractual term (in years) of shares exercisable, Ending Balance | '5 years 9 months 29 days | ' |
Aggregate intrinsic value of shares outstanding, Beggining Balance | $26,345 | $352,065 |
Aggregate intrinsic value of shares outstanding, Ending Balance | ' | $26,345 |
Stock_Options_and_Warrants_Det1
Stock Options and Warrants (Details 1) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Non vested share-based payment activity with employees | ' | ' |
Nonvested options, Number of Options | 1,235,555 | 1,094,236 |
Granted, Number of Options | 5,468,000 | 2,700,000 |
Vested, Number of Options | -1,392,915 | -2,415,070 |
Forfeited, Number of Options | -4,705,500 | -143,611 |
Nonvested options, Number of Options | 605,140 | 1,235,555 |
Nonvested options beginning, Weighted Average Grant Date Fair Value | $0.16 | $0.29 |
Granted, Weighted Average Grant Date Fair Value | $0.16 | $0.12 |
Forfeited, Weighted Average Grant Date Fair Value | $0.24 | $0.14 |
Vested, Weighted Average Grant Date Fair Value | $0.17 | $0.32 |
Nonvested options ending, Weighted Average Grant Date Fair Value | $0.13 | $0.16 |
Stock_Options_and_Warrants_Det2
Stock Options and Warrants (Details 2) (USD $) | Dec. 31, 2013 |
Remaining Number Outstanding | $17,833,666 |
Warrants Financing [Member] | ' |
Remaining Number Outstanding | 7,000,000 |
Weighted Average Remaining Life | '2 years 2 months 19 days |
Weighted Average Exercise Price | $0.34 |
Warrants Consulting Agreement [Member] | ' |
Remaining Number Outstanding | 825,000 |
Weighted Average Remaining Life | '9 months 7 days |
Weighted Average Exercise Price | $0.30 |
Warrants Note Conversions [Member] | ' |
Remaining Number Outstanding | 2,302,538 |
Weighted Average Remaining Life | '1 year 3 months 18 days |
Weighted Average Exercise Price | $0.39 |
Warrants Stock Purchases [Member] | ' |
Remaining Number Outstanding | 7,306,128 |
Weighted Average Remaining Life | '3 years 5 months 1 day |
Weighted Average Exercise Price | $0.35 |
Warrants Services [Member] | ' |
Remaining Number Outstanding | $400,000 |
Weighted Average Remaining Life | '1 year 22 days |
Weighted Average Exercise Price | $0.50 |
Stock_Options_and_Warrants_Det3
Stock Options and Warrants (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Stock Options And Warrants Details Narrative | ' | ' |
Fair value of options granted at market value | $0.14 | $0.12 |
Options exercised | $0 | $0 |
Stock compensation expense | 836,000 | 296,000 |
Total fair value of shares vested | 778,000 | 370,000 |
Unrecognized employee stock-based compensation expense related to non vested stock options | $54,000 | ' |
Derivative_Financial_Instrumen2
Derivative Financial Instruments (Details) (USD $) | 12 Months Ended |
Dec. 31, 2012 | |
Derivative Financial Instruments Details | ' |
Exercise price | $0.20 |
Market value of stock at end of period | $0.12 |
Expected dividend rate | ' |
Expected volatility rate | 29.00% |
Risk-free interest rate | 0.04% |
Expected life in years | '29 days |
Shares underlying warrants outstanding classified as liabilities | 2,401,333 |
Deferred_Revenue_Details_Narra
Deferred Revenue (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Recognized revenue | $39,000 | $77,000 |
Shares held by Multistack, LLC, approximately | 2,500,000 | ' |
Company recognized revenue agreement | 5,000 | 5,000 |
License and royalty revenue | ' | ' |
Recognized revenue | 146,200 | 21,600 |
Product sales | ' | ' |
Recognized revenue | $1,075,402 | ' |
Multistack, LLC [Member] | ' | ' |
Percentage of revenue | 83.00% | ' |
Percentage of accounts receivable | 63.00% | ' |
Income_Taxes_Details
Income Taxes (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Income Taxes Details | ' | ' |
Tax (benefit) at U.S. statutory rate | ($721,000) | $7,000 |
State income tax (benefit), net of federal benefit | -77,000 | 1,000 |
Employee stock-based compensation | 284,000 | 101,000 |
Change in warrant valuation | ' | -642,000 |
Amortization of debt discount | ' | 87,000 |
Other adjustments | -39,000 | -13,000 |
Expiration of net operating loss | ' | 81,000 |
Change in valuation allowance | 553,000 | 378,000 |
Income taxes | ' | ' |
Income_Taxes_Details_1
Income Taxes (Details 1) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Deferred tax assets (liabilities), current: | ' | ' |
Allowance for doubtful accounts | $2,200 | $1,000 |
Stock warrant consideration and other | 114,100 | 119,300 |
Accrued shareholder interest | 120,600 | ' |
Deferred license revenue | 81,800 | 70,600 |
Valuation allowance | -318,700 | -190,900 |
Deferred tax assets (liabilities), current | ' | ' |
Deferred tax assets (liabilities), noncurrent: | ' | ' |
Deferred license revenue | 662,000 | 713,500 |
Depreciation | 7,500 | 3,400 |
Bonus payable | 108,300 | 108,300 |
Accrued deferred compensation payable | 523,500 | 446,900 |
Research and development credit | 45,400 | ' |
Net operating loss carryforward | 3,137,700 | 7,836,600 |
Valuation allowance | -9,534,400 | -9,108,700 |
Deferred tax assets (liabilities), noncurrent | ' | ' |
Income_Taxes_Details_Narrative
Income Taxes (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Income Taxes Details Narrative | ' | ' |
Federal and state net operating loss carry-forwards | $21,800,000 | $21,000,000 |
Change in the valuation allowance | $553,000 | $378,000 |
Operating loss carryforwards expiration year | '2033 | ' |