Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2015 | Nov. 06, 2015 | |
Document And Entity Information | ||
Entity Registrant Name | DIGITAL ALLY INC | |
Entity Central Index Key | 1,342,958 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2015 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 5,180,481 | |
Trading Symbol | DGLY | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2,015 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 |
Current assets: | ||
Cash and cash equivalents | $ 7,812,761 | $ 3,049,716 |
Restricted cash | 1,500,000 | |
Accounts receivable-trade, less allowance for doubtful accounts of $74,997 - 2015 and $65,977 - 2014 | $ 3,180,886 | 3,043,899 |
Accounts receivable-other | 128,588 | 139,204 |
Inventories, net | 12,635,401 | 9,243,455 |
Prepaid expenses | 548,447 | 372,326 |
Total current assets | 24,306,083 | 17,348,600 |
Furniture, fixtures and equipment | 1,867,314 | 4,228,139 |
Less accumulated depreciation and amortization | 856,718 | 3,182,473 |
Net furniture, fixtures and equipment | 1,010,596 | 1,045,666 |
Intangible assets, net | 369,843 | 245,684 |
Other assets | 332,491 | 234,342 |
Total assets | 26,019,013 | 18,874,292 |
Current liabilities: | ||
Accounts payable | 1,808,109 | 2,410,876 |
Accrued expenses | $ 1,209,671 | 1,142,973 |
Senior secured convertible note payable-current | 2,019,720 | |
Subordinated note payable-short-term, net of discount of $0 - 2015 and $55,187 - 2014 | 2,444,813 | |
Derivative liabilities | $ 66,631 | 2,186,214 |
Capital lease obligation-current | 36,607 | 61,140 |
Deferred revenue-current | 451,050 | 138,052 |
Income taxes payable | $ 7,957 | 7,954 |
Customer deposits | 1,878 | |
Total current liabilities | $ 3,580,025 | 10,413,620 |
Long-term liabilities: | ||
Secured convertible note payable- less current portion, at fair value | 1,253,711 | |
Capital lease obligations-less current portion | $ 49,195 | 3,849 |
Deferred revenue- less current portion | 1,486,172 | 939,100 |
Total long term liabilities | $ 1,535,367 | $ 2,196,660 |
Commitments and contingencies | ||
Stockholders' equity: | ||
Common stock, $0.001 par value; 25,000,000 shares authorized; shares issued: 5,055,999 - 2015 and 3,092,497 - 2014 | $ 5,056 | $ 3,092 |
Additional paid in capital | 57,308,816 | 33,326,908 |
Treasury stock, at cost (shares: 63,518 - 2015 and 63,518 - 2014) | (2,157,226) | (2,157,226) |
Accumulated deficit | (34,253,025) | (24,908,762) |
Total stockholders' equity | 20,903,621 | 6,264,012 |
Total liabilities and stockholders' equity | $ 26,019,013 | $ 18,874,292 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 |
Statement of Financial Position [Abstract] | ||
Allowance for doubtful accounts receivable | $ 74,997 | $ 65,977 |
Discount on subordinated notes payable, short-term | $ 0 | $ 55,187 |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 25,000,000 | 25,000,000 |
Common stock, shares issued | 5,055,999 | 3,092,497 |
Treasury stock shares | 63,518 | 63,518 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Income Statement [Abstract] | ||||
Product revenue | $ 4,914,411 | $ 4,563,084 | $ 14,471,609 | $ 11,682,138 |
Other revenue | 181,677 | 103,629 | 507,480 | 342,670 |
Total revenue | 5,096,088 | 4,666,713 | 14,979,089 | 12,024,808 |
Cost of revenue | 3,056,314 | 2,204,780 | 8,193,381 | 5,313,547 |
Gross profit | 2,039,774 | 2,461,933 | 6,785,708 | 6,711,261 |
Selling, general and administrative expenses: | ||||
Research and development expense | 720,640 | 654,142 | 2,247,863 | 2,204,492 |
Selling, advertising and promotional expense | 1,175,498 | 836,471 | 2,951,791 | 2,107,692 |
Stock-based compensation expense | 479,084 | 262,598 | 1,077,485 | 576,864 |
General and administrative expense | 1,805,337 | 1,749,281 | 5,429,511 | 4,374,574 |
Total selling, general and administrative expenses | 4,180,559 | 3,502,492 | 11,706,650 | 9,263,622 |
Operating loss | (2,140,785) | (1,040,559) | (4,920,942) | (2,552,361) |
Interest income | 4,430 | 2,388 | 12,573 | 12,412 |
Change in warrant derivative liabilities | $ 89,645 | (4,440,376) | 371,428 | (4,343,234) |
Change in fair value of secured convertible notes payable | (464,030) | (4,434,383) | (466,838) | |
Senior secured convertible note payable issuance expenses | $ (19,495) | $ (341,513) | (93,845) | (565,952) |
Other income (expense) | 1,878 | (3,453) | ||
Interest expense | $ (74,958) | $ (118,468) | (280,972) | (342,721) |
Loss before income tax (benefit) | $ (2,141,163) | $ (6,402,558) | $ (9,344,263) | $ (8,262,146) |
Income tax (benefit) | ||||
Net loss | $ (2,141,163) | $ (6,402,558) | $ (9,344,263) | $ (8,262,146) |
Net loss per share information: | ||||
Basic | $ (0.45) | $ (2.32) | $ (2.29) | $ (3.38) |
Diluted | $ (0.45) | $ (2.32) | $ (2.29) | $ (3.38) |
Weighted average shares outstanding: | ||||
Basic | 4,799,126 | 2,763,726 | 4,076,493 | 2,445,922 |
Diluted | 4,799,126 | 2,763,726 | 4,076,493 | 2,445,922 |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Stockholders' Equity (Unaudited) - 9 months ended Sep. 30, 2015 - USD ($) | Common Stock [Member] | Additional Paid-In Capital [Member] | Treasury Stock [Member] | Accumulated Deficit [Member] | Total |
Balance at Dec. 31, 2014 | $ 3,092 | $ 33,326,908 | $ (2,157,226) | $ (24,908,762) | $ 6,264,012 |
Balance, shares at Dec. 31, 2014 | 3,092,497 | ||||
Stock-based compensation | 1,077,485 | $ 1,077,485 | |||
Restricted common stock grant | $ 139 | (139) | |||
Restricted common stock grant, shares | 138,500 | ||||
Issuance of common stock and warrants, net of issuance costs of $776,723 | $ 880 | 11,222,405 | $ 11,223,285 | ||
Issuance of common stock and warrants, net of issuance costs of $776,723, shares | 879,766 | ||||
Issuance of common stock warrants to extend subordinated note due date | 60,224 | 60,224 | |||
Issuance of common stock warrants to extend subordinated note due date, shares | |||||
Issuance of common stock upon exercise of stock options | $ 40 | 303,153 | $ 303,193 | ||
Issuance of common stock upon exercise of stock options, shares | 39,928 | (39,928) | |||
Issuance of common stock upon exercise of common stock purchase warrants | $ 250 | 3,578,601 | $ 3,578,851 | ||
Issuance of common stock upon exercise of common stock purchase warrants, shares | 250,095 | ||||
Issuance of common stock upon conversion of secured convertible note payable to equity | $ 655 | 7,740,179 | 7,740,834 | ||
Issuance of common stock upon conversion of secured convertible note payable to equity, shares | 655,213 | ||||
Net loss | $ (9,344,263) | (9,344,263) | |||
Balance at Sep. 30, 2015 | $ 5,056 | $ 57,308,816 | $ (2,157,226) | $ (34,253,025) | $ 20,903,621 |
Balance, shares at Sep. 30, 2015 | 5,055,999 |
Condensed Consolidated Stateme6
Condensed Consolidated Statements of Stockholders' Equity (Unaudited) (Parenthetical) | 9 Months Ended |
Sep. 30, 2015USD ($) | |
Statement of Stockholders' Equity [Abstract] | |
Issuance Of Stock And Warrants issuance cost | $ 776,723 |
Condensed Consolidated Stateme7
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 9 Months Ended | |
Sep. 30, 2015 | Sep. 30, 2014 | |
Cash Flows From Operating Activities: | ||
Net loss | $ (9,344,263) | $ (8,262,146) |
Adjustments to reconcile net loss to net cash flows (used in) provided by operating activities: | ||
Depreciation and amortization | 472,785 | 378,954 |
Secured convertible note payable expenses | 93,845 | 565,952 |
Stock-based compensation | 1,077,485 | 576,864 |
Change in derivative liabilities | (371,428) | 4,343,234 |
Change in fair value of secured convertible note payable | 4,434,383 | $ 466,838 |
Interest expense related to stock conversion and note extension | 93,244 | |
Provision for inventory obsolescence | 411,357 | $ 351,460 |
Provision for doubtful accounts receivable | 9,020 | 4,341 |
(Increase) decrease in: | ||
Accounts receivable - trade | (146,007) | (1,377,559) |
Accounts receivable - other | 10,616 | 20,255 |
Inventories | (3,803,303) | (486,894) |
Prepaid expenses | (193,667) | (132,734) |
Other assets | (98,149) | 1,507 |
Increase (decrease) in: | ||
Accounts payable | (602,767) | (113,392) |
Accrued expenses | 66,698 | (238,549) |
Income taxes payable | $ 3 | (346) |
Litigation accrual | $ (530,000) | |
Deposits | $ (1,878) | |
Deferred revenue | 860,070 | $ 731,405 |
Net cash (used in) operating activities | (7,031,956) | (3,700,810) |
Cash Flows from Investing Activities: | ||
Purchases of furniture, fixtures and equipment | (247,335) | (160,586) |
Additions to intangible assets | (147,439) | (20,490) |
Release (restriction) of cash in accordance with the secured convertible note | $ 1,500,000 | (1,500,000) |
Restricted cash for appealed litigation | 662,500 | |
Net cash provided by (used in) investing activities | $ 1,105,226 | $ (1,018,576) |
Cash Flows from Financing Activities: | ||
Proceeds from issuance of common stock and warrants, net of issuance costs | 11,223,285 | |
(Payment) proceeds of notes payable | (2,500,000) | $ 6,000,000 |
Debt issuance expense for secured convertible notes payable | (93,845) | (565,952) |
Proceeds from exercise of stock options and warrants | 2,133,889 | 1,780,327 |
Principal payments on capital lease obligation | (73,554) | (67,719) |
Net cash provided by financing activities | 10,689,775 | 7,146,656 |
Net increase in cash and cash equivalents | 4,763,045 | 2,427,270 |
Cash and cash equivalents, beginning of period | 3,049,716 | 454,978 |
Cash and cash equivalents, end of period | 7,812,761 | 2,882,248 |
Supplemental disclosures of cash flow information: | ||
Cash payments for interest | 176,769 | 190,898 |
Cash payments for income taxes | 8,197 | 10,346 |
Supplemental disclosures of non-cash investing and financing activities: | ||
Restricted common stock grant | $ 139 | 192 |
Restricted common stock forfeitures | $ (6) | |
Capital expenditures financed by capital lease obligations | $ 94,367 | |
Issuance of common stock upon exercise of stock options and warrants | $ 622 | |
Common stock surrendered in cashless exercise of stock options and warrants | 18 | |
Conversion of secured convertible note into common stock | $ 7,740,834 | 2,168,656 |
Issuance of stock purchase warrants with convertible note payable | 2,393,905 | |
Issuance of common stock for accrued interest | $ 2,963 |
Nature of Business and Summary
Nature of Business and Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2015 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Nature of Business and Summary of Significant Accounting Policies | NOTE 1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Business: Digital Ally, Inc. and subsidiaries (collectively, Digital Ally, Digital, the Company, we, ours, and us) produces digital video imaging, audio recording and related storage products for use in law enforcement and security applications. Its current products are an in-car digital video/audio recorder contained in a rear-view mirror for use in law enforcement and commercial fleets, a weather-resistant mobile digital video recording system for use on motorcycles, ATVs and boats, a miniature digital video system designed to be worn on an individuals body referred to as a body-worn camera, a system that provides our law enforcement customers with audio/video surveillance from multiple vantage points, and a hand-held laser speed detection device that it is offering primarily to law enforcement agencies. The Company has active research and development programs to adapt its technologies to other applications. The Company has the ability to integrate electronic, radio, computer, mechanical, and multi-media technologies to create unique solutions to address needs in a variety of other industries and markets, including mass transit, school bus, taxi cab and the military. It sells its products to law enforcement agencies and other security organizations, consumer and commercial fleet operators through direct sales domestically and third-party distributors internationally. The Company was originally incorporated in Nevada on December 13, 2000 as Vegas Petra, Inc. and had no operations until 2004. On November 30, 2004, Vegas Petra, Inc. entered into a Plan of Merger with Digital Ally, Inc., at which time the merged entity was renamed Digital Ally, Inc. The following is a summary of the Companys Significant Accounting Policies: Basis of Consolidation: The accompanying financial statements include the consolidated accounts of Digital Ally and its wholly-owned subsidiaries, Digital Ally International, Inc., and Medical Devices Ally, LLC. All intercompany balances and transactions have been eliminated during consolidation. Digital Ally formed Digital Ally International, Inc. during August 2009 to facilitate the export sales of its products. In addition, Medical Devices Ally, LLC was formed in July 2014 and MP Ally, LLC was formed in July 2015 both of which have been inactive since formation. Fair Value of Financial Instruments: The carrying amounts of financial instruments, including cash and cash equivalents, restricted cash, accounts receivable, accounts payable and subordinated note payable, approximate fair value because of the short-term nature of these items. The Company accounts for its secured convertible notes payable and derivative liabilities on their fair value basis. Revenue Recognition: Revenues from the sale of products are recorded when the product is shipped, title and risk of loss have transferred to the purchaser, payment terms are fixed or determinable and payment is reasonably assured. Customers do not have a right to return the product other than for warranty reasons for which they would only receive repair services or replacement product. The Company sells its products and services to law enforcement and commercial customers in the following manner: ● Sales to domestic customers are made direct to the end customer (typically a law enforcement agency or a commercial customer) through its direct sales force, which is composed of its employees. Revenue is recorded when the product is shipped to the end customer. ● Sales to international customers are made through independent distributors who purchase products from the Company at a wholesale price and sell to the end user (typically law enforcement agencies or a commercial customer) at a retail price. The distributor retains the margin as its compensation for its role in the transaction. The distributor generally maintains product inventory, customer receivables and all related risks and rewards of ownership. Revenue is recorded when the product is shipped to the distributor consistent with the terms of the distribution agreement. ● Repair parts and services for domestic and international customers are generally handled by our inside customer service employees. Revenue is recognized upon shipment of the repair parts and acceptance of the service or materials by the end customer. Sales taxes collected on products sold are excluded from revenues and are reported as an accrued expense in the accompanying balance sheets until payments are remitted. Other revenue is comprised of revenues from repair services and the sale of scrap and excess raw material and component parts. Revenue is recognized upon shipment of the product and acceptance of the service or materials by the end customer. Extended warranties are offered on selected products and when a customer purchases an extended warranty the associated proceeds are treated as deferred revenue and recognized over the term of the extended warranty on a straight line method. Sales returns and allowances aggregated $77,282 and $107,658 for the three months ended September 30, 2015 and 2014, respectively, and $612,341 and $422,969 for the nine months ended September 30, 2015 and 2014, respectively. Obligations for sales returns and allowances are recognized at the time of sales on an accrual basis. The accrual is determined based upon historical return rates adjusted for known changes in key variables affecting these return rates. Use of Estimates: The preparation of the consolidated 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 amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash and cash equivalents: Cash and cash equivalents include funds on hand, in bank and short-term investments with original maturities of ninety (90) days or less. Cash and cash equivalents that are restricted as to withdrawal or use under the terms of the senior secured note payable are presented as restricted cash separate from cash and cash equivalents on our balance sheet. Accounts Receivable: Accounts receivable are carried at original invoice amount less an estimate made for doubtful receivables based on a review of all outstanding amounts on a weekly basis. The Company determines the allowance for doubtful accounts by regularly evaluating individual customer receivables and considering a customers financial condition, credit history, and current economic conditions. Trade receivables are written off when deemed uncollectible. Recoveries of trade receivables previously written off are recorded when received. A trade receivable is considered to be past due if any portion of the receivable balance is outstanding for more than thirty (30) days beyond terms. No interest is charged on overdue trade receivables. Inventories: Inventories consist of electronic parts, circuitry boards, camera parts and ancillary parts (collectively, components), work-in-process and finished goods, and are carried at the lower of cost (First-in, First-out Method) or market value. The Company determines the estimate for the reserve for slow moving or obsolete inventories by regularly evaluating individual inventory levels, projected sales and current economic conditions. Furniture, fixtures and equipment: Furniture, fixtures and equipment is stated at cost net of accumulated depreciation. Additions and improvements are capitalized while ordinary maintenance and repair expenditures are charged to expense as incurred. Depreciation is recorded by the straight-line method over the estimated useful life of the asset, which ranges from three to ten years. Amortization expense on capitalized leases is included with depreciation expense. Intangible assets: Intangible assets include deferred patent costs and license agreements. Legal expenses incurred in preparation of patent application have been deferred and will be amortized over the useful life of granted patents. Costs incurred in preparation of applications that are not granted will be charged to expense at that time. The Company has entered into several sublicense agreements under which it has been assigned the exclusive rights to certain licensed materials used in its products. These sublicense agreements generally require upfront payments to obtain the exclusive rights to such material. The Company capitalizes the upfront payments as intangible assets and amortizes such costs over their estimated useful life on a straight line method. Debt: The Companys debt securities are accounted for at amortized cost, except where the Company has elected to account for its secured convertible notes payable on its fair value basis. Long-Lived Assets: Long-lived assets such as property, plant and equipment and purchased intangible assets subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset or asset group be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by that asset or asset group to its carrying value. If the carrying value of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying value exceeds its fair value. Fair value is determined through various valuation techniques, including discounted cash flow models, quoted market values and third-party appraisals, as considered necessary. As of September 30, 2015 and December 31, 2014, there were no impairment indicators that required the Company to test for impairment in the carrying value of long-lived assets. Warranties: The Companys products carry explicit product warranties that extend up to two years from the date of shipment. The Company records a provision for estimated warranty costs based upon historical warranty loss experience and periodically adjusts these provisions to reflect actual experience. Accrued warranty costs are included in accrued expenses. Extended warranties are offered on selected products and when a customer purchases an extended warranty the associated proceeds are treated as deferred revenue and recognized over the term of the extended warranty. Customer Deposits: The Company requires deposits in advance of shipment for certain customer sales orders, in particular when accepting orders from foreign customers for which the Company does not have a payment history. Customer deposits are reflected as a current liability in the accompanying Condensed Consolidated Balance Sheets. Shipping and Handling Costs: Shipping and handling costs for outbound sales orders totaled $22,480 and $18,625 for the three months ended September 30, 2015 and 2014, respectively, and $69,691 and $48,027 for the nine months ended September 30, 2015 and 2014, respectively. Such costs are included in selling, general and administrative expenses in the Condensed Consolidated Statements of Operations. Advertising Costs: Advertising expense includes costs related to trade shows and conventions, promotional material and supplies, and media costs. Advertising costs are expensed in the period in which they are incurred. The Company incurred total advertising expense of approximately $324,179 and $158,467 for the three months ended September 30, 2015 and 2014, respectively, and $658,558 and $390,461 for the nine months ended September 30, 2015 and 2014, respectively. Such costs are included in selling, general and administrative expenses in the Condensed Consolidated Statements of Operations. Income Taxes: Deferred taxes are provided for by the liability method wherein deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax basis. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. The Company applies the provisions of the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) No. 740 - Income Taxes that provides a framework for accounting for uncertainty in income taxes and provided a comprehensive model to recognize, measure, present, and disclose in its financial statements uncertain tax positions taken or expected to be taken on a tax return. It initially recognizes tax positions in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax positions are initially and subsequently measured as the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and all relevant facts. Application requires numerous estimates based on available information. The Company considers many factors when evaluating and estimating its tax positions and tax benefits, and it recognized tax positions and tax benefits may not accurately anticipate actual outcomes. As it obtains additional information, the Company may need to periodically adjust its recognized tax positions and tax benefits. These periodic adjustments may have a material impact on its consolidated statements of operations. The Companys policy is to record estimated interest and penalties related to the underpayment of income taxes as income tax expense in the consolidated statements of operations. There was no interest expense related to the underpayment of estimated taxes during the nine months ended September 30, 2015 and 2014. There have been no penalties in the nine months ended September 30, 2015 and 2014. Research and Development Expenses: The Company expenses all research and development costs as incurred. Development costs of computer software to be sold, leased, or otherwise marketed are subject to capitalization beginning when a products technological feasibility has been established and ending when a product is available for general release to customers. In most instances, the Companys products are released soon after technological feasibility has been established. Costs incurred subsequent to achievement of technological feasibility were not significant, and software development costs were expensed as incurred during the nine months ended September 30, 2015 and 2014. Stock-Based Compensation: The Company grants stock-based compensation to its employees, board of directors and certain third party contractors. Share-based compensation arrangements may include the issuance of options to purchase common stock in the future or the issuance of restricted stock, which generally are subject to vesting requirements. The Company records stock-based compensation expense for all stock-based compensation granted after January 1, 2006 based on the grant-date fair value. The Company recognizes these compensation costs on a straight-line basis over the requisite service period of the award. The Company estimates the grant-date fair value of stock-based compensation using the Black-Scholes valuation model. Assumptions used to estimate compensation expense are determined as follows: ● Expected term is determined using the contractual term and vesting period of the award; ● Expected volatility of award grants made in the Companys plan is measured using the weighted average of historical daily changes in the market price of the Companys common stock over the period equal to the expected term of the award; ● Expected dividend rate is determined based on expected dividends to be declared; ● Risk-free interest rate is equivalent to the implied yield on zero-coupon U.S. Treasury bonds with a maturity equal to the expected term of the awards; and ● Forfeitures are based on the history of cancellations of awards granted and managements analysis of potential forfeitures. Segments of Business: Management has determined that its operations are comprised of one reportable segment: the sale of digital audio and video recording and speed detection devices. For the three and nine months ended September 30, 2015 and 2014, sales by geographic area were as follows: Three Months Ended September 30, Nine Months Ended September 30, 2015 2014 2015 2014 Sales by geographic area: United States of America $ 5,092,937 $ 4,598,123 $ 14,864,676 $ 11,787,327 Foreign 3,151 68,590 114,413 237,481 $ 5,096,088 $ 4,666,713 $ 14,979,089 $ 12,024,808 Sales to customers outside of the United States are denominated in U.S. dollars. All Company assets are physically located within the United States. Accounting Developments: In May 2014, the FASB issued Accounting Standard Update (ASU) No. 2014-09, Revenue from Contracts with Customers |
Basis of Presentation
Basis of Presentation | 9 Months Ended |
Sep. 30, 2015 | |
Accounting Policies [Abstract] | |
Basis of Presentation | NOTE 2. BASIS OF PRESENTATION The condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine month periods ended September 30, 2015 are not necessarily indicative of the results that may be expected for the year ending December 31, 2015. The condensed balance sheet at December 31, 2014 has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by generally accepted accounting principles in the United States for complete financial statements. For further information, refer to the financial statements and footnotes included in the Companys annual report on Form 10-K for the year ended December 31, 2014. |
Concentration of Credit Risk an
Concentration of Credit Risk and Major Customers | 9 Months Ended |
Sep. 30, 2015 | |
Risks and Uncertainties [Abstract] | |
Concentration of Credit Risk and Major Customers | NOTE 3. CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS Financial instruments that potentially subject the Company to concentrations of credit risk consist of accounts receivable. Sales to domestic customers are typically made on credit and the Company generally does not require collateral. The Company performs ongoing credit evaluations of its customers financial condition and maintains an allowance for estimated losses. Accounts are written off when deemed uncollectible and accounts receivable are presented net of an allowance for doubtful accounts. The allowance for doubtful accounts totaled $74,977 as of September 30, 2015 and $65,977 as of December 31, 2014. The Company sells through a network of unaffiliated distributors for international sales and employee-based sales agents for domestic sales. No distributor/agent individually exceeded 10% of total revenues, for the nine months ended September 30, 2015 or September 30, 2014. One customer receivable balance exceeded 10% of total accounts receivable as of September 30, 2015, which totaled $372,453, or 12% of total accounts receivable. One customer receivable balance exceeded 10% of total accounts receivable as of September 30, 2014, which totaled $1,047,937, or 33% of total accounts receivable. The Company purchases finished circuit boards and other proprietary component parts from suppliers located in the United States and on a limited basis from Asia. Although the Company obtains certain of these components from single source suppliers, management has located or is in process of locating alternative suppliers to reduce the risk in most cases to supplier problems that could result in significant production delays. The Company has not historically experienced any significant supply disruptions from any of its principal vendors and does not anticipate future supply disruptions. The Company acquires most of its components on a purchase order basis and does not have long-term contracts with its suppliers. The Company entered into agreements with two unaffiliated companies (the Manufacturers) to develop, license and manufacture certain products that the Company offers for sale to its customers. Currently, these products represent approximately 53% of the Companys total revenue; and one of the product lines is expected to increase in the future to the extent that it may represent an even more significant portion of the Companys total revenue. These products can only be manufactured by the Manufacturers, except in situations where the Manufacturers are unable for any reason to supply the products. Backup proprietary documentation for each product is required to be maintained offsite by each Manufacturer thereby allowing the Company to continue production in such cases where the Manufacturers are unable to supply the product. The Manufacturers are located in the United States and in Asia. Natural disasters, financial stress, bankruptcy and other factors may cause conditions that would disrupt either Manufacturers ability to supply such products in quantities needed by the Company. It would take time for management to locate and activate alternative suppliers to replace the Manufacturers should it become necessary, which could result in significant production delays. |
Inventories
Inventories | 9 Months Ended |
Sep. 30, 2015 | |
Inventory Disclosure [Abstract] | |
Inventories | NOTE 4. INVENTORIES Inventories consisted of the following at September 30, 2015 and December 31, 2014: September 30, 2015 December 31, 2014 Raw material and component parts $ 4,254,617 $ 2,987,124 Work-in-process 460,161 280,429 Finished goods 8,932,557 6,576,480 Subtotal 13,647,335 9,844,033 Reserve for excess and obsolete inventory (1,011,934 ) (600,578 ) Total $ 12,635,401 $ 9,243,455 Finished goods inventory includes units held by potential customers and sales agents for test and evaluation purposes. The cost of such units totaled $760,399 and $645,300 as of September 30, 2015 and December 31, 2014, respectively. |
Subordinated Notes Payable, Sec
Subordinated Notes Payable, Secured Convertible Note Payable, and Capital Lease Obligations | 9 Months Ended |
Sep. 30, 2015 | |
Debt Disclosure [Abstract] | |
Subordinated Notes Payable, Secured Convertible Note Payable, and Capital Lease Obligations | NOTE 5. SUBORDINATED NOTES PAYABLE, SECURED CONVERTIBLE NOTE PAYABLE, AND CAPITAL LEASE OBLIGATIONS September 30, 2015 December 31, 2014 Subordinated notes payable, at par $ $ 2,500,000 Unamortized discount (55,187 ) Total notes payable 2,444,813 Less: Current maturities of long-term debt 2,444,813 Subordinated notes payable, long-term $ $ During the year ended December 31, 2011, the Company, in two separate transactions, borrowed an aggregate of $2.5 million under two unsecured notes payable to a private, third-party lender. The loans were funded in May and November 2011 and both are represented by promissory notes (the Notes) that bear interest at the rate of 8% per annum and are payable interest only on a monthly basis. The maturity date of the original Note in the principal amount of $1,500,000 was extended from May 30, 2012 to May 30, 2013 in conjunction with the issuance of the second Note during November 2011. Both Notes were due and payable in full on May 30, 2013 and could be prepaid without penalty at any time. The Notes are subordinated to all existing and future senior indebtedness, as such term is defined in the Notes. The Company granted the lender warrants (the Warrants) exercisable to purchase a total of 56,250 shares of its common stock at an exercise price of $8.00 per share (as modified) until November 30, 2013. The exercise price for the Warrants exercisable to purchase 37,500 shares issued with the first Note was reduced from $12.00 per share to $8.00 per share in consideration for the extension of the first Notes maturity date. The Company paid fees totaling $147,500 to an unaffiliated entity and issued warrants exercisable to purchase 13,750 shares of its Common Stock on the same terms and conditions as the Warrants for its services relating to the transactions, including the modification of the Warrants issued pursuant to the first Note. The Company allocated $236,726 of the proceeds of the Notes to additional paid-in-capital, which represented the grant date fair value of the Warrant for 56,250 common shares issued to the lender and the warrant for 13,750 shares issued to the unaffiliated third party who arranged the transactions. In addition, the cash fees paid to the unaffiliated third party totaling $147,500 is included in the discount on the Notes. The modification of the original Note that occurred during November 2011 was treated as an early extinguishment of the debt. On July 24, 2012, the Company entered into an agreement with the third party lender that extended the maturity date of the Notes from May 30, 2013 to May 30, 2014. In connection with the extension, the Company reduced the exercise price for the Warrants exercisable to purchase 56,250 shares previously granted to the lender from $8.00 to $4.00 and extended their expiration date from November 30, 2013 to November 30, 2015. The Company issued an unaffiliated third party a warrant exercisable to purchase 6,250 shares of Common Stock at a price of $4.00 per share through November 30, 2015 for its services in connection with the extension of the maturity dates of the Notes. Additionally, the Company reduced the exercise price of warrants it had issued to such firm in May and November 2011 from $8.00 per share to $4.00 per share and extended their maturity dates to November 30, 2015. Such warrants are exercisable to purchase 13,750 shares of Common Stock. The Company allocated $38,052 to additional paid in capital, which represented the grant date fair value of the new warrants issued to the independent third party in July 2012 and the modification of the warrants for reducing the exercise price from $8.00 to $4.00 associated with extending the maturity date of the Note from May 30, 2013 to May 30, 2014. The restructuring of the Notes that occurred in July 2012 was treated as a modification of the debt and the remaining unamortized discount of the Notes will be amortized to interest expense ratably over the modified terms of the Notes. On December 4, 2013, the Company entered into an agreement with the same third party lender to extend the maturity date of the Notes from May 30, 2014 to May 30, 2015. In connection with the extension, the Company granted the lender warrants exercisable to purchase 40,000 shares of its common stock at $8.50 per share through December 3, 2018. The Company also paid fees totaling $10,000 to an unaffiliated third party and issued a warrant exercisable to purchase 10,000 shares of Common Stock at a price of $8.50 per share through December 3, 2018 for its services in connection with the extension of the maturity dates of the Notes. The Company allocated $205,820 to additional paid in capital, which represented the grant date fair value of the new warrants issued to the lender and the unaffiliated third party who arranged the transaction. In addition, the cash fees paid to the unaffiliated third party totaling $10,000 were included in the discount on the Notes. The restructuring of the Notes that occurred in December 2013 was treated as a modification of the debt and the remaining unamortized discount of the Notes was amortized to interest expense ratably over the modified terms of the Notes. The discount amortized to interest expense totaled $55,187 and $101,571 for the nine months ended September 30, 2015, and 2014, respectively. On May 27, 2015, the Company and the Lender agreed to extend the maturity dates of the Notes to July 15, 2015 with all other terms remaining the same. On July 15, 2015, the maturity dates of the Notes were further extended to August 15, 2015 and, as consideration for the extension, the Company issued warrants exercisable to purchase 5,000 shares of common stock at an exercise price of $16.50 with a term of five years. The grant date fair value of such warrants was $60,224, which was amortized to interest expense over the extended term. On July 24, 2015 the Company paid the outstanding principal and accrued interest on the Notes in full from proceeds of the registered direct offering of common stock and warrants to purchase common stock. (See Note 8.) Secured Convertible Note Payable September 30, 2015 December 31, 2014 Secured convertible note payable at fair value $ $ 3,273,431 Less: Current maturities (2,019,720 ) Secured convertible note payable, long-term $ $ 1,253,711 On August 28, 2014, the Company completed a second private placement to the holder of the Secured Convertible Note of $4.0 million aggregate principal amount of a Secured Convertible Note (the $4.0 million Secured Convertible Note). The $4.0 million Secured Convertible Note bore interest at 6% per annum, payable quarterly, and was secured by all assets of the Company. Principal payments were not required until the sixth month after origination and continued ratably for the remaining 18-month term of the $4.0 million Secured Convertible Note. The principal and interest payments could be made through the payment of cash or in-kind by transferring unrestricted and fully registered shares in an amount equivalent to 80% of the volume weighted average trading price for the 20 consecutive trading days preceding the payment date. The $4.0 million Secured Convertible Note was convertible into shares of common stock at the holders option at a conversion price of $6.10 per share at any time it was outstanding. In addition, the Company could force conversion if the market price exceeded $12.20 per share for 20 consecutive trading days. In connection with the second private placement the Company issued a warrant (the August Warrant) exercisable to purchase 262,295 shares of common stock at $7.32 per share. The August Warrant is exercisable immediately and expires August 28, 2019. The $4.0 million Secured Convertible Note and August Warrant contain anti-dilution provisions and restrict the incurrence of additional secured indebtedness. The August Warrant was treated as a derivative liability for accounting purposes. Accordingly, the Company has estimated the fair value of the warrant derivative as of the date the $4.0 million Secured Convertible Note was issued at $992,521. Changes in the fair value of the warrant derivative liabilities totaled $1,193,694 through December 31, 2014, and the derivative liability was $2,186,214 as of December 31, 2014 in the accompanying Consolidated Balance Sheet. On December 4, 2014, the holder of the $4.0 million Secured Convertible Note exercised its right to convert $36,600 of principal into 6,000 shares of common stock of the Company at the conversion price of $6.10 per share. The increase in fair market value of these 6,000 shares over the $36,600 principal retired was $89,400, representing the increase in the Companys stock price over the conversion rate as of the conversion date. Such amount was recognized as a charge to the income statement during the year ended December 31, 2014 and included in change in fair value of secured convertible notes payable. The Company paid a placement agent fee of $240,000 and approximately $101,500 of third party costs for the transaction, which included legal fees. The Company elected to account for the $4.0 million Secured Convertible Note on its fair value basis and, therefore, all related debt issuance expenses which totaled $354,628 were charged to other expenses in the year ended December 31, 2014. The fair market value of the $4.0 million Secured Note was $3,273,431 at December 31, 2014 and the $302,552 change in fair market value of the note was included in change in fair value of secured notes payable in the Condensed Consolidated Statement of Operations. The holder of the $4.0 million Secured Convertible Note had no right to convert the Secured Convertible Notes or exercise the Warrants to the extent that such conversions or exercises would result in the holder being the beneficial owner in excess of 4.99% of the Companys stock. In addition, the holder had no right to convert the $4.0 million Secured Convertible Note or exercise the August Warrant if the issuance of shares of the common stock upon such conversion or exercise would breach the Companys limitation under the applicable Nasdaq listing rules (the Exchange Cap). For these purposes the Exchange Cap limit applicable to such conversions or exercises of the Secured Convertible Note and the $4.0 million Secured Convertible Note and the Warrant and August Warrant was based upon the aggregation of such instruments as one issuance and on the number of shares the Company had issued and outstanding when it issued the Secured Convertible Note and Warrant in March 2014. The Exchange Cap limitation would not apply if the Companys shareholders approve issuances above the Exchange Cap. The Company was required to maintain a minimum cash balance of not less than $1.5 million until such time as the Company satisfied all of the Equity Conditions, as defined in the $4.0 million Secured Convertible Note. Such Equity Conditions included the Companys shareholders approving the issuance of shares above the Exchange Cap. The $1.5 million minimum cash balance was reported as restricted cash separate from cash and cash equivalents in the consolidated balance sheet as of December 31, 2014. The Company called a Special Meeting of Shareholders in which it sought approval from its shareholders for issuances of shares above the Exchange Cap. On February 13, 2015 its shareholders gave such approval. Upon such approval, the Company satisfied all of the Equity Conditions, which released all of the restrictions on cash balances. Between February 13 and 25, 2015 the holder of the $4.0 million Secured Convertible Note exercised its right to convert the remaining principal of $3,963,780 into 655,738 shares of common stock and 5,475 shares for accrued interest at the conversion price of $7.32 per share. The increase in fair market value of these 655,213 shares over the $3,963,780 principal retired was $4,434,383 representing the increase in our stock price over the conversion rate as of the conversion dates. Such amount was recognized as a charge to the Condensed Consolidated Statement of Operations during the nine months ended September 30, 2015 and included in change in fair value of secured convertible notes payable. On March 24, 2015 the holder exercised part of its August Warrant to purchase 212,295 shares of common stock with the change in value of the warrant derivative totaling $340,722 being recognized as income in the Condensed Consolidated Statement of Operations representing the change in our stock price compared to the exercise price at the respective exercise date. The holder also exercised part of its August Warrant to purchase 37,800 shares on April 9, 2015 with the change in value of the warrant derivative totaling $127,951 being recognized as income in the Condensed Consolidated Statement of Operations representing the change in our stock price compared to the exercise price at the respective exercise date. As of September 30, 2015, the holder of the August Warrant holds warrants to purchase 12,200 common shares remaining unexercised. Capital Leases Year ending December 31: 2015 (period from October 1, 2015 to December 31, 2015) $ 10,951 2016 38,258 2017 34,298 2018 8,574 2019 and thereafter Total future minimum lease payments 92,081 Less amount representing interest 6,279 Present value of minimum lease payments 85,802 Less current portion 36,607 Capital lease obligations, less current portion $ 49,195 Assets under capital leases are included in furniture, fixtures and equipment as follows: September 30, 2015 December 31, 2014 Office furniture, fixtures and equipment $ 382,928 $ 280,304 Less: accumulated amortization (205,128 ) (135,115 ) Net furniture, fixtures and equipment $ 177,800 $ 145,189 |
Fair Value Measurement
Fair Value Measurement | 9 Months Ended |
Sep. 30, 2015 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurement | NOTE 6. Fair Value Measurement In accordance with ASC Topic 820 Fair Value Measurements and Disclosures ASC 820 utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels: ● Level 1 Quoted prices in active markets for identical assets and liabilities ● Level 2 Other significant observable inputs (including quoted prices in active markets for similar assets or liabilities) ● Level 3 Significant unobservable inputs (including the Companys own assumptions in determining the fair value) The following table represents the Companys hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2015 and December 31, 2014. September 30, 2015 Level 1 Level 2 Level 3 Total Liabilities Warrant derivative liability $ - $ - $ 66,631 $ 66,631 $ - $ - $ 66,631 $ 66,631 December 31, 2014 Level 1 Level 2 Level 3 Total Liabilities Warrant derivative liability $ 2,186,214 $ 2,186,214 Secured convertible note $ - $ - $ 3,273,431 $ 3,273,431 $ - $ - $ 5,459,645 $ 5,459,645 The following table represents the change in level 3 tier value measurements: Warrant Derivative Liability Secured Convertible Note Total December 31, 2014 $ 2,186,214 $ 3,273,431 $ 5,459,645 Conversion of secured convertible note to common stock - (3,273,431 ) (3,273,431 ) Exercise of common stock purchase warrants (1,748,155 ) - (1,748,155 ) Change in fair value (371,428 ) - (371,428 ) September 30, 2015 $ 66,631 $ - $ 66,631 |
Accrued Expenses
Accrued Expenses | 9 Months Ended |
Sep. 30, 2015 | |
Payables and Accruals [Abstract] | |
Accrued Expenses | NOTE 7. ACCRUED EXPENSES Accrued expenses consisted of the following at September 30, 2015 and December 31, 2014: September 30, 2015 December 31, 2014 Accrued warranty expense $ 302,394 $ 247,082 Accrued sales commissions 55,000 89,600 Accrued payroll and related fringes 350,893 154,851 Accrued insurance 56,636 81,431 Accrued rent 234,171 260,634 Accrued litigation charges 53,666 Other 210,577 255,709 $ 1,209,671 $ 1,142,973 Accrued warranty expense was comprised of the following for the nine months ended September 30, 2015: Beginning balance $ 247,082 Provision for warranty expense 107,772 Charges applied to warranty reserve (52,460 ) Ending balance $ 302,394 |
Common Stock
Common Stock | 9 Months Ended |
Sep. 30, 2015 | |
Equity [Abstract] | |
Common Stock | NOTE 8. COMMON STOCK On June 9, 2015 at the annual shareholders meeting the shareholders approved the increase in the Companys authorized shares of common stock from 9,375,000 to 25,000,000. The Company entered into a Securities Purchase Agreement (the Purchase Agreement) on July 22, 2015 with two investors pursuant to which it issued and sold in an at-the- market registered direct offering (the Offering), an aggregate of 879,766 shares (the Shares) of common stock at an offering price of $13.64 per share, for gross proceeds of $12,000,008 before the deduction of the placement agent fee and other offering expenses. In additional to the common stock purchased, the investors received a registered short-term warrant (the Series A Warrant) exercisable to purchase a total of 437,086 shares of common stock at an exercise price of $13.43 per share. The Series A Warrants are immediately exercisable and expire on July 22, 2017. The Shares and the Series A Warrants were offered by the Company pursuant to a registration statement on Form S-3 (File No. 333-202944), which was declared effective by the Securities and Exchange Commission (the Commission) on May 18, 2015 (the Registration Statement). In a concurrent private placement (the Private Placement), the Company issued two additional warrants to the investors (the Series B Warrants and Series C Warrants), collectively with the Shares and the Series A Warrants the (Securities), at an exercise price of $13.43 per share. The investors received Series B Warrants to purchase a total of 222,738 shares of common stock and Series C Warrants to purchase a total of 879,766 shares of common stock. The Series B Warrants and Series C Warrants are both immediately exercisable and the Series B Warrants expire on July 22, 2017 and the Series C Warrants expire on January 22, 2021. Subject to limited exceptions, the holders of the Warrants do not have the right to exercise any portion of its warrants if the holder, together with its affiliates, would beneficially own in excess of 4.99% or 9.99% of the number of shares of Common Stock outstanding immediately after giving effect to such exercise (the Beneficial Ownership Limitation); provided, however, that upon 61 days prior notice to the Company, the holder may increase or decrease the Beneficial Ownership Limitation, but in no event shall the Beneficial Ownership Limitation exceed 9.99%. The Company was required to file a registration statement on Form S-3 relating to the issuance of the Series B Warrants and Series C Warrants to provide for the resale of the shares of common stock issuable upon the exercise of such Warrants. The Company has filed a registration statement on Form S-3 (File No. 333-206699), which was declared effective by the Securities and Exchange Commission (the Commission) on September 15, 2015 (the Registration Statement). The Purchase Agreement also contained representations, warranties, indemnification and other provisions customary for transactions of this nature. Among other restrictions, the Company is generally prohibited until July 22, 2017 from effecting or entering into an agreement to effect any issuance by the Company of Common Stock or equivalents involving a Variable Rate Transaction. A Variable Rate Transaction generally means a transaction in which the Company (i) issues or sells any debt or equity securities that are convertible into, exchangeable or exercisable for, or include the right to receive additional shares of Common Stock either (A) at a conversion price, exercise price or exchange rate or other price that is based upon and/or varies with the trading prices of or quotations for the shares of Common Stock at any time after the initial issuance of such debt or equity securities, or (B) with a conversion, exercise or exchange price that is subject to being reset at some future date after the initial issuance of such debt or equity security or upon the occurrence of specified or contingent events directly or indirectly related to the business of the Company or the market for the Common Stock or (ii) enters into any agreement, including, but not limited to, an equity line of credit, whereby the Company may issue securities at a future determined price The Company entered into a Placement Agreement (the Placement Agreement) pursuant to which the Company engaged WestPark Capital, Inc. as the sole placement agent in connection with the Offering and the Private Placement. The Company paid the Placement Agent a placement agent fee in cash of $720,000 and reimbursed approximately $30,000 of their out-of-pocket expenses. Other expenses of the offering totaled $26,723, which included accounting, legal, printing and other expenses. Total issuance costs were $776,723, which was deducted from the gross proceeds of the offering resulting in net proceeds of $11,223,285. The Company used the net proceeds to retire $2.5 million principal amount of subordinated notes and for general corporate purposes. |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 30, 2015 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | NOTE 9. INCOME TAXES The effective tax rate for the nine months ended September 30, 2015 and 2014 varied from the expected statutory rate as a result of the Companys decision to provide a 100% valuation allowance on net deferred tax assets. The Company has further determined that it would be appropriate to continue providing a full valuation allowance on net deferred tax assets as of September 30, 2015 because of the overall net operating loss carryforwards available. The valuation allowance on deferred tax assets totaled $17,010,000 and $12,692,000 as of September 30, 2015 and December 31, 2014, respectively. The Company records the benefit it will derive in future accounting periods from tax losses and credits and deductible temporary differences as deferred tax assets, which are included in the caption Deferred income taxes, net on the consolidated balance sheets. In accordance with Accounting Standards Codification (ASC) 740, Income Taxes, the Company records a valuation allowance to reduce the carrying value of the deferred tax assets if, based on all available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The recovery from the economic recession, which adversely impacted state and local governmental budgets in particular, remained weak in 2015 and 2014, and the Company incurred operating losses during this period. Law enforcement agencies are the Companys primary customer and are typically funded through state and local tax rolls. The economy showed improvement in 2015 and 2014, but the establishment of a long-term positive impact on the state and local budgets remains uncertain at best. Despite the improvement in general economic conditions, and the Companys ongoing cost containment efforts, the Company incurred additional losses in the nine months ended September 30, 2015 that placed the Company in a three-year cumulative loss position at September 30, 2015. Accordingly, the Company determined there was not sufficient positive evidence regarding our potential for future profits to outweigh the negative evidence of our three-year cumulative loss position under the guidance provided in ASC 740. Therefore, the Company determined to increase the Companys valuation allowance by $4,318,000 to continue to fully reserve the Companys deferred tax assets at September 30, 2015. The Company expects to continue to maintain a full valuation allowance until the Company determines it can sustain a level of profitability that demonstrates the Companys ability to realize these assets. To the extent the Company determines that the realization of some or all of these benefits is more likely than not based upon expected future taxable income, a portion or all of the valuation allowance will be reversed. Such a reversal would be recorded as an income tax benefit and, for some portion related to deductions for stock option exercises, an increase in shareholders equity. At September 30, 2015, the Company had available approximately $28,985,000 of net operating loss carryforwards available to offset future taxable income generated. Such tax net operating loss carryforwards expire between 2024 and 2035. In addition, the Company had research and development tax credit carryforwards approximating $1,670,000 available as of September 30, 2015, which expire between 2023 and 2035. The Internal Revenue Code contains provisions under Section 382 which limit a companys ability to utilize net operating loss carry-forwards in the event that it has experienced a more than 50% change in ownership over a three-year period. Current estimates the Company prepared indicate that due to ownership changes which have occurred, approximately $765,000 of its net operating loss and $175,000 of the Companys research and development tax credit carryforwards are currently subject to an annual limitation of approximately $1,151,000, but may be further limited by additional ownership changes which may occur in the future. As stated above, the net operating loss and research and development credit carryforwards expire between 2023 and 2035, allowing the Company to potentially utilize all of the limited net operating loss carry-forwards during the carryforward period. As discussed in Note 1, Summary of Significant Accounting Policies, tax positions are evaluated in a two-step process. The Company first determines whether it is more likely than not that a tax position will be sustained upon examination. If a tax position meets the more-likely-than-not recognition threshold, it is then measured to determine the amount of benefit to recognize in the financial statements. The tax position is measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. Management has identified no tax positions taken that would meet or exceed these thresholds and therefore there are no gross interest, penalties and unrecognized tax expense/benefits that are not expected to ultimately result in payment or receipt of cash in the consolidated financial statements. The Companys federal and state income tax returns are closed for examination purposes by relevant statute and by examination for 2011 and all prior tax years. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2015 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | NOTE 10. COMMITMENTS AND CONTINGENCIES Operating Leases. Year ending December 31: 2015 (period from October 1, 2015 to December 31, 2015) $ 109,209 2016 439,707 2017 445,449 2018 451,248 2019 457,327 Thereafter 154,131 $ 2,057,071 License agreements. Supply and distribution agreement. The Company entered into a supply and distribution agreement with Dragoneye Technology, LLC (Dragoneye) on May 1, 2010 under which it was granted the exclusive world-wide right to sell and distribute a proprietary law enforcement speed measurement device and derivatives to its customers. The term of the agreement was 42 months after the date Dragoneye began full scale production of the product which commenced in August 2010 and final certification of the product was obtained. The agreement had minimum purchase requirements of 1,000 units per period over three commitment periods. On January 31, 2012, the agreement was amended to reduce the minimum purchase commitment over the second and third years by 52% of the original commitment. The Company agreed to release its world-wide right to exclusively market the product to the law enforcement community in exchange for the reduction in the purchase commitment. The agreement originally required minimum order quantities that represent a remaining unfulfilled commitment to acquire $634,680 of product as of December 31 2014. Dragoneye is responsible for all warranty, damage or other claims, losses or liabilities related to the product and is obligated to defend and indemnify us against such risks. The Company held approximately $1,350,000 of such products in finished goods inventory as of September 30, 2015 and had sold approximately 1,000 units since the beginning of the agreement through September 30, 2015. The Company filed a lawsuit on June 15, 2013 against Dragoneye for breaching the contract and participated in a mediation of the lawsuit on August 12, 2015 that resulted in a settlement on August 25, 2015. The settlement includes the repair of all LaserAlly units currently held by the Company and future customer returned units exhibiting the same failure. See Litigation below for further details. Litigation. The Company is subject to various legal proceedings arising from normal business operations. Although there can be no assurances, based on the information currently available, management believes that it is probable that the ultimate outcome of each of the actions will not have a material adverse effect on the consolidated financial statements of the Company. However, an adverse outcome in certain of the actions could have a material adverse effect on the financial results of the Company in the period in which it is recorded. On June 5, 2013, the Company filed a lawsuit in the District Court of Johnson County, Kansas against Dragoneye. The Company entered into a supply and distribution agreement with Dragoneye on May 1, 2010 under which the Company was granted the right to sell and distribute a proprietary law enforcement speed measurement device and derivatives to the Companys customers under the trade name LaserAlly. The parties amended the agreement on January 31, 2012. In the Companys complaint the Company alleges that Dragoneye breached the contract because it failed to maintain as confidential information the Companys customer list; it infringed on the Companys trademarks, including LaserAlly and Digital Ally; it tortiously interfered with the Companys existing contracts and business relationships with the Companys dealers, distributors, customers and trading partners; and it engaged in unfair competition and violated the Kansas Uniform Trade Secrets Statutes. The Company amended the complaint to include claims regarding alleged material defects in the products supplied under the agreement. The Company participated in a mediation of the lawsuit on August 12, 2015 and agreed to an omnibus resolution of the matter. The settlement includes the return of and repair free of charge of all LaserAlly units currently held by the Company and future customer returned units exhibiting the same or similar failure. DragonEye will be allowed no more than 120 days from October 1, 2015 under which to repair all units, upgrade all units to current firmware release and to re-certify the units. The Company will remit the unpaid balance of approximately $191,000 currently recorded in accounts payable to DragonEye in five payments concurrent with the repair and return of units by DragonEye. Furthermore, all of the remaining minimum contractual purchase requirements were voided. On August 25, 2015, the judge approved the parties joint stipulation of dismissal with prejudice, which finalized the settlement. On October 25, 2013, the Company filed a complaint in the United States District Court for the District of Kansas to eliminate threats by a competitor, Utility Associates, Inc. (Utility), of alleged patent infringement regarding U.S. Patent No. 6,831,556 (the 556 patent). Specifically, the lawsuit seeks a declaration that the Companys mobile video surveillance systems do not infringe any claim of the 556 patent. The Company became aware that Utility had mailed letters to current and prospective purchasers of the Companys mobile video surveillance systems threatening that the use of such systems purchased from third parties not licensed to the 556 patent would create liability for them for patent infringement. The Company rejects Utilitys assertion and will vigorously defend the right of end-users to purchase such systems from providers other than Utility. The United States District Court for the District of Kansas dismissed the lawsuit because it decided that Kansas was not the proper jurisdictional forum for the dispute. The District Courts decision was not a ruling on the merits of the case. The Company appealed the decision and the Federal Circuit affirmed the District Courts previous decision. In addition, the Company began proceedings to invalidate the 556 patent through a request for inter partes review On June 4, 2014 the Company filed an Unfair Competition lawsuit against Utility Associates, Inc. (Utility) in the United States District Court for the District of Kansas. In the lawsuit the Company contends that Utility has defamed the Company and illegally interfered with the Companys contracts, customer relationships and business expectancies by falsely asserting to the Companys customers and others that the Companys products violate the 556 Patent, of which Utility claims to be the holder. The Companys suit also includes claims against Utility for tortious interference with contract and violation of the Kansas Uniform Trade Secrets Act (KUSTA), arising out of Utilitys employment of one of the Companys employees, in violation of that employees Non-Competition and Confidentiality agreements with the Company. In addition to damages, the Company seeks temporary, preliminary, and permanent injunctive relief, prohibiting Utility from, among other things, continuing to threaten or otherwise interfere with the Companys customers. On March 4, 2015, an initial hearing was held upon the Companys request for injunctive relief. Based upon facts revealed at the March 4, 2015 hearing, on March 16, 2015, the Companys attorneys sought leave to amend the Companys Complaint in the Kansas suit to assert additional claims against Utility. Those new claims include claims of actual or attempted monopolization, in violation of § 2 of the Sherman Act, claims arising under a new Georgia statute that prohibits threats of patent infringement in bad faith, and additional claims of unfair competition/false advertising in violation of § 63(a) of the Lanham Act. As these statutes expressly provide, the Company will seek treble damages, punitive damages and attorneys fees as well as injunctive relief. The Court concluded its hearing on April 22, 2015, and allowed the Company leave to amend the Companys complaint, but denied the Companys preliminary injunction. The case is now in the initial discovery stage. However, the Company believes that the USPTOs final decision issued on July 27, 2015 will provide the Company with substantial basis to pursue the Companys claims either through court trial or by summary judgment motions and the Company intends to pursue recovery from Utility, it insurers and other parties, as appropriate. On June 13, 2014, Utility filed suit in the United States District Court for the Northern District of Georgia against the Company alleging infringement of the 556 patent. The suit was served to the Company on June 20, 2014. As alleged in the Companys first filed lawsuit described above, the Company believes the 556 patent is both invalid and not infringed. Further, the USPTO has issued its final decision invalidating 23 of the 25 claims asserted in the 556 Patent, as noted above. The Company believes that the suit filed by Utility is without merit and the Company will vigorously defend the claims asserted against the Company. An adverse resolution of the foregoing litigation or patent proceedings could have a material adverse effect on the Companys business, prospects, results of operations, financial condition, and liquidity. The Court stayed all proceedings with respect to this lawsuit pending the outcome of the patent review performed by the USPTO. Based on the USPTOs final decision to invalidate substantially all claims contained in the 556 patent, the Company intends to file for summary judgment in our favor if Utility does not request outright dismissal. The Company has received notice in April 2015 that one of the Companys competitors has commenced an action in the United States Patent & Trademark Office (USPTO) for a reexamination of the Companys U.S. Patent No. 8,781,292 (the 292 Patent). A reexamination is essentially a request that the Patent Office review whether the patent should have issued in its present form in view of the prior art, e.g., other patents in the same technology field. The prior art used by the Companys competitor to request the reexamination is a patent application (which never issued into a patent) assigned to Motorola, Inc. The Company owns the 292 Patent, which is directed to a system that determines when a recording device, such as a law enforcement officers body camera or in-car video recorder, begins recording and automatically instructs other recording devices to begin recording. The technology described in the 292 Patent is incorporated in the Companys VuLink product. On August 17, 2015 the Company received further information from the USPTO respecting our292 Patent which is undergoing an ex parte reexamination under which the USPTO issued a first, non-final action rejecting all 20 claims of the 292 Patent. The Company has the opportunity to discuss the merits of the prior art and the scope of the patent claims with the patent Examiner handling the reexamination and to freely amend the patent claims. Accordingly, the USPTO has not made a final determination of unpatentability of the Companys claims. The Company has filed a response that is currently under consideration. Additionally, the Company has a pending patent application related to the 292 Patent that is currently undergoing examination by the USPTO and that also includes claims covering material aspects of the technology. The Company believes that material aspects of the technology disclosed in the 292 Patent will ultimately be found patentable, although the Company can offer no assurances in this regard. If the USPTO ultimately determines that the material aspects of the Companys technology is not patentable (either in the pending reexamination or the pending patent application), the Company will not have the benefits of patent protection for them, which will allow the Companys competitors the opportunity to offer products with similar or the same technology and features as the Companys. This, in turn, may have a material adverse effect on the Companys sales of such products. On or about May 22, 2014, Stephen Gans, a former director and former principal shareholder of the Companys, filed a complaint in the Eighth Judicial District Court, Clark County, Nevada that asserts claims against the Company and Stanton E. Ross, Leroy C. Richie, Daniel F. Hutchins and Elliot M. Kaplan (the Defendant Directors), who are members of its Board of Directors. The Company was served with the complaint on May 28, 2014. Among other things, the complaint alleges (i) that the Defendant Directors breached their fiduciary duties by failing to consider a financing proposal offered by Mr. Gans and his affiliates; and (ii) that the Defendant Directors, acting at the direction of Stanton E. Ross, did not independently and objectively evaluate Mr. Gans protestations about certain alleged transactions between the Company and Infinity Energy Resources, Inc., and by so doing, breached their fiduciary duties. The Company and the Defendant Directors vigorously defended the claims asserted against the Company and them. The Company and the Defendant Directors filed a response denying all of the plaintiffs allegations and have asserted counter-claims that allege that Gans committed improper acts that included: (a) failing to disclose the nature and substance of an SEC investigation of Gans; (b) engaging in potential insider trading; (c) misappropriating the Companys confidential information; (d) attempting to use his position as a director to personally enrich himself; and (e) making unauthorized, misleading, and factually inaccurate filings to the SEC about the Company. On December 11, 2014, the parties agreed in principle to compromise and dismiss with prejudice substantially all of their claims. Within the scope of that settlement are each of the shareholder derivative claims that Gans had asserted against the Company and the Defendant Directors. The settlement to which the parties agreed will result in no monetary recovery by any party. On April 7, 2015 the Court approved the settlement of all shareholder derivative claims and the matter is now closed. The Company is also involved as a plaintiff and defendant in ordinary, routine litigation and administrative proceedings incidental to its business from time to time, including customer collections, vendor and employment-related matters. Management believes the likely outcome of any other pending cases and proceedings will not be material to its business or its financial condition. Sponsorship. Year Sponsorship fee 2015 $ 375,000 2016 $ 475,000 2017 $ 475,000 2018 $ 500,000 2019 $ 500,000 The Company has the right to sell and retain the proceeds from the sale of additional sponsorships including but not limited to a presenting sponsorship, a concert sponsorship and founding partnerships for the Tournament. The Company recorded a net sponsorship expense of $172,623 for 2015 relating to the 2015 Tournament during the three and nine months ended September 30, 2015. Such expense was included in sales and promotional expense in the Condensed Consolidated Statements of Operations. Stock Repurchase Program 401(k) Plan. |
Stock-Based Compensation
Stock-Based Compensation | 9 Months Ended |
Sep. 30, 2015 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock-Based Compensation | NOTE 11. STOCK-BASED COMPENSATION The Company recorded pretax compensation expense related to the grant of stock options and restricted stock issued of $479,084 and $262,598 for the three months ended September 30, 2015 and 2014, respectively, and $1,077,485 and $576,864 for the nine months ended September 30, 2015 and 2014, respectively. As of September 30, 2015, the Company had adopted seven separate stock option and restricted stock plans: (i) the 2005 Stock Option and Restricted Stock Plan (the 2005 Plan), (ii) the 2006 Stock Option and Restricted Stock Plan (the 2006 Plan), (iii) the 2007 Stock Option and Restricted Stock Plan (the 2007 Plan), (iv) the 2008 Stock Option and Restricted Stock Plan (the 2008 Plan), (v) the 2011 Stock Option and Restricted Stock Plan (the 2011 Plan), (vi) the 2013 Stock Option and Restricted Stock Plan (the 2013 Plan) and (vii) the 2015 Stock Option and Restricted Stock Plan (the 2015 Plan). These Plans permit the grant of stock options or restricted stock to its employees, non-employee directors and others totaling 1,475,000 shares of common stock. The Company believes that such awards better align the interests of its employees with those of its shareholders. Option awards have been granted with an exercise price equal to the market price of the Companys stock at the date of grant with such option awards generally vesting based on the completion of continuous service and having ten-year contractual terms. These option awards provide for accelerated vesting if there is a change in control (as defined in the Plans) or the death or disability of the holder. The Company has registered all shares of common stock that are issuable under its Plans with the SEC. A total of 260,530 options remained available for grant under the various Plans as of September 30, 2015. In addition to the Stock Option and Restricted Stock Plans described above, the Company has issued other options outside of these Plans to non-employees for services rendered that are subject to the same general terms as the Plans, of which 1,250 options are fully vested and remain outstanding as of September 30, 2015. The fair value of each option award is estimated on the date of grant using a Black-Scholes option valuation model. The assumptions used for determining the grant-date fair value of options granted during the nine months ended September 30, 2015 are reflected in the following table: Options Shares Weighted Average Exercise Price Outstanding at January 1, 2015 370,743 $ 18.97 Granted Exercised (39,928 ) (7.59 ) Forfeited (1,625 ) (7.82 ) Outstanding at September 30, 2015 329,190 $ 20.41 Exercisable at September 30, 2015 266,689 $ 24.25 Weighted-average fair value for options granted during the period at fair value $ The Plans allow for the cashless exercise of stock options. This provision allows the option holder to surrender/cancel options with an intrinsic value equivalent to the purchase/exercise price of other options exercised. There were no shares surrendered pursuant to cashless exercises during the nine months ended September 30, 2015. At September 30, 2015, the aggregate intrinsic value of options outstanding was approximately $254,264, and the aggregate intrinsic value of options exercisable was approximately $108,395. The aggregate intrinsic value of options exercised during the nine months ended September 30, 2015 was $281,792. As of September 30, 2015, the unamortized portion of stock compensation expense on all existing stock options was $40,466, which will be recognized over the next 23 months. The following table summarizes the range of exercise prices and weighted average remaining contractual life for outstanding and exercisable options under the Companys option plans as of September 30, 2015: Outstanding options Exercisable options Exercise price range Number of options Weighted average remaining contractual life Number of options Weighted average remaining contractual life $0.01 to $3.99 63,124 7.8 years 21,250 6.7 years $4.00 to $6.99 38,125 7.3 years 26,648 6.9 years $7.00 to $9.99 19,069 6.2 years 9,919 5.9 years $10.00 to $12.99 52,808 1.9 years 52,808 1.7 years $13.00 to $15.99 51,439 5.2 years 51,439 4.9 years $16.00 to $18.99 1,250 2.0 years 1,250 1.7 years $19.00 to $29.99 6,500 4.1 years 6,500 3.8 years $30.00 to $55.00 96,875 2.4 years 96,875 2.2 years 329,190 4.6 years 266,689 3.6 years Restricted stock grants. A summary of all restricted stock activity under the equity compensation plans for the nine months ended September 30, 2015 is as follows: Restricted stock Weighted average grant date fair value Nonvested balance, January 1, 2015 188,500 $ 5.32 Granted 138,500 12.10 Vested (158,500 ) (4.73 ) Forfeited Nonvested balance, September 30, 2015 168,500 $ 11.45 The Company estimated the fair market value of these restricted stock grants based on the closing market price on the date of grant. As of September 30, 2015, there were $1,027,475 of total unrecognized compensation costs related to all remaining non-vested restricted stock grants, which will be amortized over the next 29 months in accordance with the vesting scale. The nonvested balance of restricted stock vests as follows: Year ended December 31, Number of shares 2014 (October 1, 2015 to December 31, 2015) 2015 117,300 2016 37,950 2018 13,250 |
Common Stock Purchase Warrants
Common Stock Purchase Warrants | 9 Months Ended |
Sep. 30, 2015 | |
Common Stock Purchase Warrants | |
Common Stock Purchase Warrants | NOTE 12. COMMON STOCK PURCHASE WARRANTS The Company issued common stock purchase warrants (the Warrants) in conjunction with the original issuance and extension of the Subordinated Notes Payable, the $4.0 million Secured Convertible Note (see Note 5) and the July 2015 registered direct offering (See Note 8). The Warrants are immediately exercisable and allow the holders to purchase up to 1,600,976 shares of common stock at $4.00 to $8.50 per share after modification. The Warrants expire from November 30, 2015 through January 22, 2021 and allow for cashless exercise. Warrants Weighted average exercise price Vested Balance, January 1, 2015 306,481 $ 7.47 Granted 1,544,590 13.39 Exercised (250,095 ) (7.32 ) Vested Balance, September 30, 2015 1,600,976 $ 13.25 The total intrinsic value of all outstanding warrants aggregated $3,760 as of September 30, 2015 and the weighted average remaining term is 46 months. The following table summarizes the range of exercise prices and weighted average remaining contractual life for outstanding and exercisable warrants to purchase common shares as of September 30, 2015: Outstanding and exercisable warrants Exercise price Number of options Weighted average remaining contractual life $ 4.00 1,686 0.1 years $ 7.32 12,200 3.9 years $ 8.50 42,500 3.2 years $ 13.43 659,824 1.8 years $ 13.43 879,766 5.3 years $ 16.50 5,000 4.8 years 1,600,976 3.8 years |
Related Party Transactions
Related Party Transactions | 9 Months Ended |
Sep. 30, 2015 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | NOTE 13. RELATED PARTY TRANSACTIONS On June 15, 2015 the Company entered into a consulting agreement with a relative of the Companys President and Chairman to provide product research, development, advertising and marketing for new products in its commercial fleet business. The fee is $10,000 per month plus expenses and continues for the lesser of nine months or a total of $65,000 is paid for such services, exclusive of approved expenses. During the three and nine months ended months ended September 30, 2015, total fees included in research and development for this related party was $25,000 and at September 30, 2015, amounts owed to this related party for consulting fees was $10,000 which was included in accounts payable. |
Net Loss Per Share
Net Loss Per Share | 9 Months Ended |
Sep. 30, 2015 | |
Earnings Per Share [Abstract] | |
Net Loss Per Share | NOTE 14. NET LOSS PER SHARE The calculation of the weighted average number of shares outstanding and loss per share outstanding for the three and nine months ended September 30, 2015 and 2014 are as follows: Three Months Ended September 30, Nine Months Ended September 30, 2015 2014 2015 2014 Numerator for basic and diluted income per share Net loss $ (2,141,163 ) $ (6,402,558 ) $ (9,344,263 ) $ (8,262,146 ) Denominator for basic loss per share weighted average shares outstanding 4,799,126 2,763,726 4,076,493 2,445,922 Dilutive effect of shares issuable under stock options and warrants outstanding Denominator for diluted loss per share adjusted weighted average shares outstanding 4,799,126 2,763,726 4,076,493 2,445,922 Net loss per share: Basic $ (0.45 ) $ (2.32 ) $ (2.29 ) $ (3.38 ) Diluted $ (0.45 ) $ (2.32 ) $ (2.29 ) $ (3.38 ) Basic loss per share is based upon the weighted average number of common shares outstanding during the period. For the three and nine months ended September 30, 2015 and 2014, all outstanding stock options to purchase common stock were antidilutive, and, therefore, not included in the computation of diluted net loss per share. |
Subsequent Events
Subsequent Events | 9 Months Ended |
Sep. 30, 2015 | |
Subsequent Events [Abstract] | |
Subsequent Events | NOTE 15. SUBSEQUENT EVENTS On October 30, 2015, the compensation committee of the Board of Directors approved the grant of a total of 188,000 restricted shares of common stock to employees and board members. Such restricted shares vest over a 4-year graduated schedule of: i) 10% on October 30, 2016, ii) 20% on October 30, 2017, iii) 30% on October 30, 2018 and iv) 40% on October 30, 2019. Vesting is contingent upon the continued employment/service of the grantees at such points in time. |
Nature of Business and Summar23
Nature of Business and Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2015 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Nature of Business | Nature of Business: Digital Ally, Inc. and subsidiaries (collectively, Digital Ally, Digital, the Company, we, ours, and us) produces digital video imaging, audio recording and related storage products for use in law enforcement and security applications. Its current products are an in-car digital video/audio recorder contained in a rear-view mirror for use in law enforcement and commercial fleets, a weather-resistant mobile digital video recording system for use on motorcycles, ATVs and boats, a miniature digital video system designed to be worn on an individuals body referred to as a body-worn camera, a system that provides our law enforcement customers with audio/video surveillance from multiple vantage points, and a hand-held laser speed detection device that it is offering primarily to law enforcement agencies. The Company has active research and development programs to adapt its technologies to other applications. The Company has the ability to integrate electronic, radio, computer, mechanical, and multi-media technologies to create unique solutions to address needs in a variety of other industries and markets, including mass transit, school bus, taxi cab and the military. It sells its products to law enforcement agencies and other security organizations, consumer and commercial fleet operators through direct sales domestically and third-party distributors internationally. The Company was originally incorporated in Nevada on December 13, 2000 as Vegas Petra, Inc. and had no operations until 2004. On November 30, 2004, Vegas Petra, Inc. entered into a Plan of Merger with Digital Ally, Inc., at which time the merged entity was renamed Digital Ally, Inc. |
Basis of Consolidation | Basis of Consolidation: The accompanying financial statements include the consolidated accounts of Digital Ally and its wholly-owned subsidiaries, Digital Ally International, Inc., and Medical Devices Ally, LLC. All intercompany balances and transactions have been eliminated during consolidation. Digital Ally formed Digital Ally International, Inc. during August 2009 to facilitate the export sales of its products. In addition, Medical Devices Ally, LLC was formed in July 2014 and MP Ally, LLC was formed in July 2015 both of which have been inactive since formation. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments: The carrying amounts of financial instruments, including cash and cash equivalents, restricted cash, accounts receivable, accounts payable and subordinated note payable, approximate fair value because of the short-term nature of these items. The Company accounts for its secured convertible notes payable and derivative liabilities on their fair value basis. |
Revenue Recognition | Revenue Recognition: Revenues from the sale of products are recorded when the product is shipped, title and risk of loss have transferred to the purchaser, payment terms are fixed or determinable and payment is reasonably assured. Customers do not have a right to return the product other than for warranty reasons for which they would only receive repair services or replacement product. The Company sells its products and services to law enforcement and commercial customers in the following manner: ● Sales to domestic customers are made direct to the end customer (typically a law enforcement agency or a commercial customer) through its direct sales force, which is composed of its employees. Revenue is recorded when the product is shipped to the end customer. ● Sales to international customers are made through independent distributors who purchase products from the Company at a wholesale price and sell to the end user (typically law enforcement agencies or a commercial customer) at a retail price. The distributor retains the margin as its compensation for its role in the transaction. The distributor generally maintains product inventory, customer receivables and all related risks and rewards of ownership. Revenue is recorded when the product is shipped to the distributor consistent with the terms of the distribution agreement. ● Repair parts and services for domestic and international customers are generally handled by our inside customer service employees. Revenue is recognized upon shipment of the repair parts and acceptance of the service or materials by the end customer. Sales taxes collected on products sold are excluded from revenues and are reported as an accrued expense in the accompanying balance sheets until payments are remitted. Other revenue is comprised of revenues from repair services and the sale of scrap and excess raw material and component parts. Revenue is recognized upon shipment of the product and acceptance of the service or materials by the end customer. Extended warranties are offered on selected products and when a customer purchases an extended warranty the associated proceeds are treated as deferred revenue and recognized over the term of the extended warranty on a straight line method. Sales returns and allowances aggregated $77,282 and $107,658 for the three months ended September 30, 2015 and 2014, respectively, and $612,341 and $422,969 for the nine months ended September 30, 2015 and 2014, respectively. Obligations for sales returns and allowances are recognized at the time of sales on an accrual basis. The accrual is determined based upon historical return rates adjusted for known changes in key variables affecting these return rates. |
Use of Estimates | Use of Estimates: The preparation of the consolidated 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 amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. |
Cash and Cash Equivalents | Cash and cash equivalents: Cash and cash equivalents include funds on hand, in bank and short-term investments with original maturities of ninety (90) days or less. Cash and cash equivalents that are restricted as to withdrawal or use under the terms of the senior secured note payable are presented as restricted cash separate from cash and cash equivalents on our balance sheet. |
Accounts Receivable | Accounts Receivable: Accounts receivable are carried at original invoice amount less an estimate made for doubtful receivables based on a review of all outstanding amounts on a weekly basis. The Company determines the allowance for doubtful accounts by regularly evaluating individual customer receivables and considering a customers financial condition, credit history, and current economic conditions. Trade receivables are written off when deemed uncollectible. Recoveries of trade receivables previously written off are recorded when received. A trade receivable is considered to be past due if any portion of the receivable balance is outstanding for more than thirty (30) days beyond terms. No interest is charged on overdue trade receivables. |
Inventories | Inventories: Inventories consist of electronic parts, circuitry boards, camera parts and ancillary parts (collectively, components), work-in-process and finished goods, and are carried at the lower of cost (First-in, First-out Method) or market value. The Company determines the estimate for the reserve for slow moving or obsolete inventories by regularly evaluating individual inventory levels, projected sales and current economic conditions. |
Furniture, Fixtures and Equipment | Furniture, fixtures and equipment: Furniture, fixtures and equipment is stated at cost net of accumulated depreciation. Additions and improvements are capitalized while ordinary maintenance and repair expenditures are charged to expense as incurred. Depreciation is recorded by the straight-line method over the estimated useful life of the asset, which ranges from three to ten years. Amortization expense on capitalized leases is included with depreciation expense. |
Intangible Assets | Intangible assets: Intangible assets include deferred patent costs and license agreements. Legal expenses incurred in preparation of patent application have been deferred and will be amortized over the useful life of granted patents. Costs incurred in preparation of applications that are not granted will be charged to expense at that time. The Company has entered into several sublicense agreements under which it has been assigned the exclusive rights to certain licensed materials used in its products. These sublicense agreements generally require upfront payments to obtain the exclusive rights to such material. The Company capitalizes the upfront payments as intangible assets and amortizes such costs over their estimated useful life on a straight line method. |
Debt | Debt: The Companys debt securities are accounted for at amortized cost, except where the Company has elected to account for its secured convertible notes payable on its fair value basis. |
Long-Lived Assets | Long-Lived Assets: Long-lived assets such as property, plant and equipment and purchased intangible assets subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset or asset group be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by that asset or asset group to its carrying value. If the carrying value of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying value exceeds its fair value. Fair value is determined through various valuation techniques, including discounted cash flow models, quoted market values and third-party appraisals, as considered necessary. As of September 30, 2015 and December 31, 2014, there were no impairment indicators that required the Company to test for impairment in the carrying value of long-lived assets. |
Warranties | Warranties: The Companys products carry explicit product warranties that extend up to two years from the date of shipment. The Company records a provision for estimated warranty costs based upon historical warranty loss experience and periodically adjusts these provisions to reflect actual experience. Accrued warranty costs are included in accrued expenses. Extended warranties are offered on selected products and when a customer purchases an extended warranty the associated proceeds are treated as deferred revenue and recognized over the term of the extended warranty. |
Customer Deposits | Customer Deposits: The Company requires deposits in advance of shipment for certain customer sales orders, in particular when accepting orders from foreign customers for which the Company does not have a payment history. Customer deposits are reflected as a current liability in the accompanying Condensed Consolidated Balance Sheets. |
Shipping and Handling Costs | Shipping and Handling Costs: Shipping and handling costs for outbound sales orders totaled $22,480 and $18,625 for the three months ended September 30, 2015 and 2014, respectively, and $69,691 and $48,027 for the nine months ended September 30, 2015 and 2014, respectively. Such costs are included in selling, general and administrative expenses in the Condensed Consolidated Statements of Operations. |
Advertising Costs | Advertising Costs: Advertising expense includes costs related to trade shows and conventions, promotional material and supplies, and media costs. Advertising costs are expensed in the period in which they are incurred. The Company incurred total advertising expense of approximately $324,179 and $158,467 for the three months ended September 30, 2015 and 2014, respectively, and $658,558 and $390,461 for the nine months ended September 30, 2015 and 2014, respectively. Such costs are included in selling, general and administrative expenses in the Condensed Consolidated Statements of Operations. |
Income Taxes | Income Taxes: Deferred taxes are provided for by the liability method wherein deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax basis. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. The Company applies the provisions of the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) No. 740 - Income Taxes that provides a framework for accounting for uncertainty in income taxes and provided a comprehensive model to recognize, measure, present, and disclose in its financial statements uncertain tax positions taken or expected to be taken on a tax return. It initially recognizes tax positions in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax positions are initially and subsequently measured as the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and all relevant facts. Application requires numerous estimates based on available information. The Company considers many factors when evaluating and estimating its tax positions and tax benefits, and it recognized tax positions and tax benefits may not accurately anticipate actual outcomes. As it obtains additional information, the Company may need to periodically adjust its recognized tax positions and tax benefits. These periodic adjustments may have a material impact on its consolidated statements of operations. The Companys policy is to record estimated interest and penalties related to the underpayment of income taxes as income tax expense in the consolidated statements of operations. There was no interest expense related to the underpayment of estimated taxes during the nine months ended September 30, 2015 and 2014. There have been no penalties in the nine months ended September 30, 2015 and 2014. |
Research and Development Expenses | Research and Development Expenses: The Company expenses all research and development costs as incurred. Development costs of computer software to be sold, leased, or otherwise marketed are subject to capitalization beginning when a products technological feasibility has been established and ending when a product is available for general release to customers. In most instances, the Companys products are released soon after technological feasibility has been established. Costs incurred subsequent to achievement of technological feasibility were not significant, and software development costs were expensed as incurred during the nine months ended September 30, 2015 and 2014. |
Stock-Based Compensation | Stock-Based Compensation: The Company grants stock-based compensation to its employees, board of directors and certain third party contractors. Share-based compensation arrangements may include the issuance of options to purchase common stock in the future or the issuance of restricted stock, which generally are subject to vesting requirements. The Company records stock-based compensation expense for all stock-based compensation granted after January 1, 2006 based on the grant-date fair value. The Company recognizes these compensation costs on a straight-line basis over the requisite service period of the award. The Company estimates the grant-date fair value of stock-based compensation using the Black-Scholes valuation model. Assumptions used to estimate compensation expense are determined as follows: ● Expected term is determined using the contractual term and vesting period of the award; ● Expected volatility of award grants made in the Companys plan is measured using the weighted average of historical daily changes in the market price of the Companys common stock over the period equal to the expected term of the award; ● Expected dividend rate is determined based on expected dividends to be declared; ● Risk-free interest rate is equivalent to the implied yield on zero-coupon U.S. Treasury bonds with a maturity equal to the expected term of the awards; and ● Forfeitures are based on the history of cancellations of awards granted and managements analysis of potential forfeitures. |
Segments of Business | Segments of Business: Management has determined that its operations are comprised of one reportable segment: the sale of digital audio and video recording and speed detection devices. For the three and nine months ended September 30, 2015 and 2014, sales by geographic area were as follows: Three Months Ended September 30, Nine Months Ended September 30, 2015 2014 2015 2014 Sales by geographic area: United States of America $ 5,092,937 $ 4,598,123 $ 14,864,676 $ 11,787,327 Foreign 3,151 68,590 114,413 237,481 $ 5,096,088 $ 4,666,713 $ 14,979,089 $ 12,024,808 Sales to customers outside of the United States are denominated in U.S. dollars. All Company assets are physically located within the United States. |
Accounting Developments | Accounting Developments: In May 2014, the FASB issued Accounting Standard Update (ASU) No. 2014-09, Revenue from Contracts with Customers |
Nature of Business and Summar24
Nature of Business and Summary of Significant Accounting Policies (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Summary of Sales by Geographic Area | sales by geographic area were as follows: Three Months Ended September 30, Nine Months Ended September 30, 2015 2014 2015 2014 Sales by geographic area: United States of America $ 5,092,937 $ 4,598,123 $ 14,864,676 $ 11,787,327 Foreign 3,151 68,590 114,413 237,481 $ 5,096,088 $ 4,666,713 $ 14,979,089 $ 12,024,808 |
Inventories (Tables)
Inventories (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Inventory Disclosure [Abstract] | |
Schedule of Inventories | Inventories consisted of the following at September 30, 2015 and December 31, 2014: September 30, 2015 December 31, 2014 Raw material and component parts $ 4,254,617 $ 2,987,124 Work-in-process 460,161 280,429 Finished goods 8,932,557 6,576,480 Subtotal 13,647,335 9,844,033 Reserve for excess and obsolete inventory (1,011,934 ) (600,578 ) Total $ 12,635,401 $ 9,243,455 |
Subordinated Notes Payable, S26
Subordinated Notes Payable, Secured Convertible Note Payable, and Capital Lease Obligations (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Summary of Notes Payable | September 30, 2015 December 31, 2014 Subordinated notes payable, at par $ $ 2,500,000 Unamortized discount (55,187 ) Total notes payable 2,444,813 Less: Current maturities of long-term debt 2,444,813 Subordinated notes payable, long-term $ $ |
Summary of Future Minimum Lease Payments | Capital Leases Year ending December 31: 2015 (period from October 1, 2015 to December 31, 2015) $ 10,951 2016 38,258 2017 34,298 2018 8,574 2019 and thereafter Total future minimum lease payments 92,081 Less amount representing interest 6,279 Present value of minimum lease payments 85,802 Less current portion 36,607 Capital lease obligations, less current portion $ 49,195 |
Summary of Assets Under Capital Leases | Assets under capital leases are included in furniture, fixtures and equipment as follows: September 30, 2015 December 31, 2014 Office furniture, fixtures and equipment $ 382,928 $ 280,304 Less: accumulated amortization (205,128 ) (135,115 ) Net furniture, fixtures and equipment $ 177,800 $ 145,189 |
Secured Convertible Note Payable [Member] | |
Summary of Notes Payable | Secured Convertible Note Payable September 30, 2015 December 31, 2014 Secured convertible note payable at fair value $ $ 3,273,431 Less: Current maturities (2,019,720 ) Secured convertible note payable, long-term $ $ 1,253,711 |
Fair Value Measurement (Tables)
Fair Value Measurement (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Fair Value Disclosures [Abstract] | |
Financial Assets and Liabilities Measured at Fair Value on Recurring Basis | September 30, 2015 Level 1 Level 2 Level 3 Total Liabilities Warrant derivative liability $ - $ - $ 66,631 $ 66,631 $ - $ - $ 66,631 $ 66,631 December 31, 2014 Level 1 Level 2 Level 3 Total Liabilities Warrant derivative liability $ 2,186,214 $ 2,186,214 Secured convertible note $ - $ - $ 3,273,431 $ 3,273,431 $ - $ - $ 5,459,645 $ 5,459,645 |
Fair Value Measurements Change in Level Three Inputs | The following table represents the change in level 3 tier value measurements: Warrant Derivative Liability Secured Convertible Note Total December 31, 2014 $ 2,186,214 $ 3,273,431 $ 5,459,645 Conversion of secured convertible note to common stock - (3,273,431 ) (3,273,431 ) Exercise of common stock purchase warrants (1,748,155 ) - (1,748,155 ) Change in fair value (371,428 ) - (371,428 ) September 30, 2015 $ 66,631 $ - $ 66,631 |
Accrued Expenses (Tables)
Accrued Expenses (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Payables and Accruals [Abstract] | |
Schedule of Accrued Expenses | Accrued expenses consisted of the following at September 30, 2015 and December 31, 2014: September 30, 2015 December 31, 2014 Accrued warranty expense $ 302,394 $ 247,082 Accrued sales commissions 55,000 89,600 Accrued payroll and related fringes 350,893 154,851 Accrued insurance 56,636 81,431 Accrued rent 234,171 260,634 Accrued litigation charges 53,666 Other 210,577 255,709 $ 1,209,671 $ 1,142,973 |
Schedule of Accrued Warranty Expense | Accrued warranty expense was comprised of the following for the nine months ended September 30, 2015: Beginning balance $ 247,082 Provision for warranty expense 107,772 Charges applied to warranty reserve (52,460 ) Ending balance $ 302,394 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of Future Minimum Lease Payments | Year ending December 31: 2015 (period from October 1, 2015 to December 31, 2015) $ 109,209 2016 439,707 2017 445,449 2018 451,248 2019 457,327 Thereafter 154,131 $ 2,057,071 |
Schedule of Future Sponsorship Fee | The Agreement provides the Company with naming rights and other benefits for the 2015 through 2019 annual Tournament in exchange for the following sponsorship fee: Year Sponsorship fee 2015 $ 375,000 2016 $ 475,000 2017 $ 475,000 2018 $ 500,000 2019 $ 500,000 |
Stock-Based Compensation (Table
Stock-Based Compensation (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Summary of Stock Options Outstanding | The assumptions used for determining the grant-date fair value of options granted during the nine months ended September 30, 2015 are reflected in the following table: Options Shares Weighted Average Exercise Price Outstanding at January 1, 2015 370,743 $ 18.97 Granted Exercised (39,928 ) (7.59 ) Forfeited (1,625 ) (7.82 ) Outstanding at September 30, 2015 329,190 $ 20.41 Exercisable at September 30, 2015 266,689 $ 24.25 Weighted-average fair value for options granted during the period at fair value $ |
Shares Authorized under Stock Option Plans by Exercise Price Range | The following table summarizes the range of exercise prices and weighted average remaining contractual life for outstanding and exercisable options under the Companys option plans as of September 30, 2015: Outstanding options Exercisable options Exercise price range Number of options Weighted average remaining contractual life Number of options Weighted average remaining contractual life $0.01 to $3.99 63,124 7.8 years 21,250 6.7 years $4.00 to $6.99 38,125 7.3 years 26,648 6.9 years $7.00 to $9.99 19,069 6.2 years 9,919 5.9 years $10.00 to $12.99 52,808 1.9 years 52,808 1.7 years $13.00 to $15.99 51,439 5.2 years 51,439 4.9 years $16.00 to $18.99 1,250 2.0 years 1,250 1.7 years $19.00 to $29.99 6,500 4.1 years 6,500 3.8 years $30.00 to $55.00 96,875 2.4 years 96,875 2.2 years 329,190 4.6 years 266,689 3.6 years |
Summary of Restricted Stock Activity | A summary of all restricted stock activity under the equity compensation plans for the nine months ended September 30, 2015 is as follows: Restricted stock Weighted average grant date fair value Nonvested balance, January 1, 2015 188,500 $ 5.32 Granted 138,500 12.10 Vested (158,500 ) (4.73 ) Forfeited Nonvested balance, September 30, 2015 168,500 $ 11.45 |
Nonvested Balance of Restricted Stock | The nonvested balance of restricted stock vests as follows: Year ended December 31, Number of shares 2014 (October 1, 2015 to December 31, 2015) 2015 117,300 2016 37,950 2018 13,250 |
Common Stock Purchase Warrants
Common Stock Purchase Warrants (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Common Stock Purchase Warrants | |
Summary of Warrant Activity | Warrants Weighted average exercise price Vested Balance, January 1, 2015 306,481 $ 7.47 Granted 1,544,590 13.39 Exercised (250,095 ) (7.32 ) Vested Balance, September 30, 2015 1,600,976 $ 13.25 |
Summary of Range of Exercise Prices and Wighted Average Remaining Contractual Life of Warrants | The following table summarizes the range of exercise prices and weighted average remaining contractual life for outstanding and exercisable warrants to purchase common shares as of September 30, 2015: Outstanding and exercisable warrants Exercise price Number of options Weighted average remaining contractual life $ 4.00 1,686 0.1 years $ 7.32 12,200 3.9 years $ 8.50 42,500 3.2 years $ 13.43 659,824 1.8 years $ 13.43 879,766 5.3 years $ 16.50 5,000 4.8 years 1,600,976 3.8 years |
Net Loss Per Share (Tables)
Net Loss Per Share (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Earnings Per Share [Abstract] | |
Calculation of Weighted Average Number of Shares Outstanding and Loss per Share Outstanding | The calculation of the weighted average number of shares outstanding and loss per share outstanding for the three and nine months ended September 30, 2015 and 2014 are as follows: Three Months Ended September 30, Nine Months Ended September 30, 2015 2014 2015 2014 Numerator for basic and diluted income per share Net loss $ (2,141,163 ) $ (6,402,558 ) $ (9,344,263 ) $ (8,262,146 ) Denominator for basic loss per share weighted average shares outstanding 4,799,126 2,763,726 4,076,493 2,445,922 Dilutive effect of shares issuable under stock options and warrants outstanding Denominator for diluted loss per share adjusted weighted average shares outstanding 4,799,126 2,763,726 4,076,493 2,445,922 Net loss per share: Basic $ (0.45 ) $ (2.32 ) $ (2.29 ) $ (3.38 ) Diluted $ (0.45 ) $ (2.32 ) $ (2.29 ) $ (3.38 ) |
Nature of Business and Summar33
Nature of Business and Summary of Significant Accounting Policies (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | Dec. 31, 2014 | |
Sales returns and allowances | $ 77,282 | $ 107,658 | $ 612,341 | $ 422,969 | |
Long lived assets | |||||
Shipping and handling costs | $ 22,480 | 18,625 | $ 69,691 | 48,027 | |
Advertising expense | $ 324,179 | $ 158,467 | $ 658,558 | $ 390,461 | |
Percentage of income tax benefit likely of being realized upon settlement with tax authority | greater than 50% | ||||
Interest expense related to underpayment of estimated taxes | |||||
Penalties | |||||
Software development cost | |||||
Minimum [Member] | |||||
Estimated useful life of furniture, fixtures and equipment | 3 years | ||||
Maximum [Member] | |||||
Estimated useful life of furniture, fixtures and equipment | 10 years |
Nature of Business and Summar34
Nature of Business and Summary of Significant Accounting Policies - Summary of Sales by Geographic Area (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Sales by geographic area | $ 5,096,088 | $ 4,666,713 | $ 14,979,089 | $ 12,024,808 |
United States of America [Member] | ||||
Sales by geographic area | 5,092,937 | 4,598,123 | 14,864,676 | 11,787,327 |
Foreign [Member] | ||||
Sales by geographic area | $ 3,151 | $ 68,590 | $ 114,413 | $ 237,481 |
Concentration of Credit Risk 35
Concentration of Credit Risk and Major Customers (Details Narrative) - USD ($) | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Dec. 31, 2014 | |
Allowance for doubtful accounts | $ 74,977 | $ 65,977 | |
Percentage of concentration risk | 53.00% | ||
Accounts Receivable [Member] | |||
Percentage of concentration risk | 33.00% | ||
International Distributor [Member] | Revenue [Member] | |||
Percentage of concentration risk | 10.00% | 10.00% | |
International Distributor [Member] | Accounts Receivable [Member] | |||
Percentage of concentration risk | 10.00% | 10.00% | |
International Distributor [Member] | Accounts Receivable One [Member] | |||
Percentage of concentration risk | 12.00% | 10.00% | |
Accounts receivable | $ 372,453 | $ 1,047,937 |
Inventories (Details Narrative)
Inventories (Details Narrative) - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 |
Inventory Disclosure [Abstract] | ||
Finished goods inventory | $ 760,399 | $ 645,300 |
Inventories - Schedule of Inve
Inventories - Schedule of Inventories (Details) - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 |
Inventory Disclosure [Abstract] | ||
Raw material and component parts | $ 4,254,617 | $ 2,987,124 |
Work-in-process | 460,161 | 280,429 |
Finished goods | 8,932,557 | 6,576,480 |
Subtotal | 13,647,335 | 9,844,033 |
Reserve for excess and obsolete inventory | (1,011,934) | (600,578) |
Total | $ 12,635,401 | $ 9,243,455 |
Subordinated Notes Payable, S38
Subordinated Notes Payable, Secured Convertible Note Payable, and Capital Lease Obligations (Details Narrative) | May. 27, 2015USD ($)$ / sharesshares | Apr. 09, 2015USD ($)shares | Mar. 24, 2015USD ($)shares | Dec. 04, 2014USD ($)$ / sharesshares | Aug. 28, 2014USD ($)$ / sharesshares | Dec. 04, 2013USD ($)$ / sharesshares | Jul. 24, 2012$ / sharesshares | Feb. 25, 2015USD ($)$ / sharesshares | Dec. 31, 2013USD ($) | Jul. 31, 2012USD ($)$ / sharesshares | Sep. 30, 2015USD ($)$ / shares | Sep. 30, 2014USD ($) | Sep. 30, 2015USD ($)$ / sharesshares | Sep. 30, 2014USD ($) | Dec. 31, 2014USD ($) | Dec. 31, 2011USD ($)Segment |
Unsecured notes payable | $ 2,500,000 | |||||||||||||||
Number of unsecured notes payable | Segment | 2 | |||||||||||||||
Promissory notes, interest rate | 8.00% | |||||||||||||||
Principal amount of note payable | $ 1,500,000 | |||||||||||||||
Notes payable maturity date description | May 30, 2014 to May 30, 2015 | May 30, 2013 to May 30, 2014 | May 30, 2012 to May 30, 2013 | |||||||||||||
Debt instrument, maturity date | Dec. 3, 2018 | May 30, 2013 | ||||||||||||||
Warrants granted to purchase number of common stock | shares | 40,000 | 13,750 | 56,250 | |||||||||||||
Warrants exercise price per share | $ / shares | $ 8.50 | |||||||||||||||
Debt allocated to additional paid in capital | $ 38,052 | |||||||||||||||
Discount amortized to interest expense | $ 55,187 | $ 101,571 | ||||||||||||||
Conversion of convertible debt into common stock | 7,740,834 | $ 2,168,656 | ||||||||||||||
change in fair value of warrant derivative valuation | ||||||||||||||||
Debt issuance costs | $ 19,495 | $ 341,513 | $ 93,845 | $ 565,952 | ||||||||||||
Warrants to purchase common shares remaining unexercised | shares | 12,200 | |||||||||||||||
August Warrant [Member] | ||||||||||||||||
Warrants granted to purchase number of common stock | shares | 37,800 | 212,295 | ||||||||||||||
change in fair value of warrant derivative valuation | $ 127,951 | $ 340,722 | ||||||||||||||
May and November 2011[Member] | ||||||||||||||||
Debt instrument, maturity date | Nov. 30, 2015 | |||||||||||||||
Lender [Member] | ||||||||||||||||
Notes payable maturity date description | On May 27, 2015, the Company and the Lender agreed to extend the maturity dates of the Notes to July 15, 2015 with all other terms remaining the same. On July 15, 2015, the maturity date of the Notes were further extended to August 15, 2015 and, as consideration for the extension | |||||||||||||||
Warrants granted to purchase number of common stock | shares | 5,000 | 56,250 | ||||||||||||||
Warrants exercise price per share | $ / shares | $ 16.50 | |||||||||||||||
Debt allocated to additional paid in capital | $ 236,726 | |||||||||||||||
Discount amortized to interest expense | $ 60,224 | |||||||||||||||
Warrants term | 5 years | |||||||||||||||
Unaffiliated Third Party [Member] | ||||||||||||||||
Debt instrument, maturity date | Nov. 30, 2015 | |||||||||||||||
Warrants granted to purchase number of common stock | shares | 6,250 | 13,750 | ||||||||||||||
Warrants exercise price per share | $ / shares | $ 4 | |||||||||||||||
Discount amortized to interest expense | $ 147,500 | |||||||||||||||
Third Party Lender [Member] | ||||||||||||||||
Notes payable maturity date description | May 30, 2013 to May 30, 2014 | |||||||||||||||
Warrants granted to purchase number of common stock | shares | 56,250 | |||||||||||||||
Warrant expiration term | November 30, 2013 to November 30, 2015 | |||||||||||||||
Unaffiliated Entity [Member] | ||||||||||||||||
Debt instrument, maturity date | Dec. 3, 2018 | |||||||||||||||
Warrants granted to purchase number of common stock | shares | 10,000 | 13,750 | ||||||||||||||
Warrants exercise price per share | $ / shares | $ 8.50 | |||||||||||||||
Fees paid by the company to an unaffiliated entity | $ 10,000 | $ 10,000 | $ 147,500 | |||||||||||||
Debt allocated to additional paid in capital | $ 205,820 | |||||||||||||||
Maximum [Member] | ||||||||||||||||
Warrants exercise price per share | $ / shares | $ 8 | |||||||||||||||
Maximum [Member] | May and November 2011[Member] | ||||||||||||||||
Warrants exercise price per share | $ / shares | $ 8 | $ 8 | ||||||||||||||
Maximum [Member] | Third Party Lender [Member] | ||||||||||||||||
Warrants exercise price per share | $ / shares | $ 8 | |||||||||||||||
Minimum [Member] | ||||||||||||||||
Warrants exercise price per share | $ / shares | $ 4 | |||||||||||||||
Minimum [Member] | May and November 2011[Member] | ||||||||||||||||
Warrants exercise price per share | $ / shares | 4 | $ 4 | ||||||||||||||
Minimum [Member] | Third Party Lender [Member] | ||||||||||||||||
Warrants exercise price per share | $ / shares | $ 4 | |||||||||||||||
First Note [Member] | ||||||||||||||||
Warrants granted to purchase number of common stock | shares | 37,500 | |||||||||||||||
Warrants exercise price per share | $ / shares | 8 | $ 8 | ||||||||||||||
First Note [Member] | Maximum [Member] | ||||||||||||||||
Warrants exercise price per share | $ / shares | 12 | 12 | ||||||||||||||
First Note [Member] | Minimum [Member] | ||||||||||||||||
Warrants exercise price per share | $ / shares | $ 8 | $ 8 | ||||||||||||||
4.0 million Secured Convertible Note [Member] | ||||||||||||||||
Promissory notes, interest rate | 6.00% | |||||||||||||||
Principal amount of note payable | $ 4,000,000 | $ 4,000,000 | $ 4,000,000 | |||||||||||||
Warrants granted to purchase number of common stock | shares | 262,295 | 5,475 | ||||||||||||||
Percentage of volume weighted average trading price | 80.00% | |||||||||||||||
Secured Convertible Note, conversion price | $ / shares | $ 6.10 | $ 6.10 | $ 7.32 | |||||||||||||
Terms of conversion feature | Principal payments were not required until the sixth month after origination and continued ratably for the remaining 18-month term of the $4.0 million Secured Convertible Note. | |||||||||||||||
Debt conversation market price per share | $ / shares | $ 12.20 | |||||||||||||||
Conversion of convertible debt into common stock | $ 36,600 | $ 3,963,780 | ||||||||||||||
Conversion of note into common stock | shares | 6,000 | 655,738 | ||||||||||||||
Value of shares retired | $ 89,400 | $ 4,434,383 | ||||||||||||||
Fair value of warrant derivative liability | $ 992,521 | |||||||||||||||
change in fair value of warrant derivative valuation | 1,193,694 | |||||||||||||||
Secured convertible note | 4,000,000 | 4,000,000 | 4,000,000 | |||||||||||||
Debt issuance costs | 354,628 | |||||||||||||||
Derivative liabilities | 2,186,214 | |||||||||||||||
Placement agent fee | 240,000 | |||||||||||||||
Third party costs for transaction | $ 101,500 | |||||||||||||||
Change in fair market value | $ 3,963,780 | 302,552 | ||||||||||||||
Fair value of secured debt | $ 3,273,431 | |||||||||||||||
Number of shares market value increased | shares | 655,213 | |||||||||||||||
Percentage of beneficial owner in excess | 4.99% | |||||||||||||||
Minimum cash balance maintain | $ 1,500,000 | |||||||||||||||
4.0 million Secured Convertible Note [Member] | Maximum [Member] | ||||||||||||||||
Warrants exercise price per share | $ / shares | $ 8.50 | $ 8.50 | ||||||||||||||
4.0 million Secured Convertible Note [Member] | Minimum [Member] | ||||||||||||||||
Warrants exercise price per share | $ / shares | $ 4 | $ 4 | ||||||||||||||
Second Private Placement [Member] | ||||||||||||||||
Warrants granted to purchase number of common stock | shares | 262,295 | |||||||||||||||
Warrants exercise price per share | $ / shares | $ 7.32 | |||||||||||||||
Warrants, expiration date | Aug. 28, 2019 |
Subordinated Notes Payable, S39
Subordinated Notes Payable, Secured Convertible Note Payable, and Capital Lease Obligations - Summary of Notes Payable (Details) - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 |
Debt Disclosure [Abstract] | ||
Subordinated notes payable, at par | $ 2,500,000 | |
Unamortized discount | $ 0 | (55,187) |
Total notes payable | 2,444,813 | |
Less: Current maturities of long-term debt | $ 2,444,813 | |
Subordinated notes payable, long-term |
Subordinated Notes Payable, S40
Subordinated Notes Payable, Secured Convertible Note Payable, and Capital Lease Obligations - Summary of Secured Convertible Note Payable (Details) - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 |
Less: Current maturities | $ 2,019,720 | |
Secured convertible note payable, long-term | 1,253,711 | |
Senior Secured Convertible Note Payable [Member] | ||
Secured convertible note payable at fair value | 3,273,431 | |
Less: Current maturities | (2,019,720) | |
Secured convertible note payable, long-term | $ 1,253,711 |
Subordinated Notes Payable, S41
Subordinated Notes Payable, Secured Convertible Note Payable, and Capital Lease Obligations - Summary of Future Minimum Lease Payments (Details) - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 |
Debt Disclosure [Abstract] | ||
2015 (period from October 1, 2015 to December 31, 2015) | $ 10,951 | |
2,016 | 38,258 | |
2,017 | 34,298 | |
2,018 | $ 8,574 | |
2019 and thereafter | ||
Total future minimum lease payments | $ 92,081 | |
Less amount representing interest | 6,279 | |
Present value of minimum lease payments | 85,802 | |
Less current portion | 36,607 | $ 61,140 |
Capital lease obligations, less current portion | $ 49,195 | $ 3,849 |
Subordinated Notes Payable, S42
Subordinated Notes Payable, Secured Convertible Note Payable, and Capital Lease Obligations - Summary of Assets Under Capital Leases (Details) - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 |
Debt Disclosure [Abstract] | ||
Office furniture, fixtures and equipment | $ 382,928 | $ 280,304 |
Less: accumulated amortization | (205,128) | (135,115) |
Net furniture, fixtures and equipment | $ 177,800 | $ 145,189 |
Fair Value Measurement - Financ
Fair Value Measurement - Financial Assets and Liabilities Measured at Fair Value on Recurring Basis (Details) - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 |
Warrant derivative liability | $ 66,631 | $ 2,186,214 |
Secured convertible note | 3,273,431 | |
Liabilities | $ 66,631 | $ 5,459,645 |
Level 1 [Member] | ||
Warrant derivative liability | ||
Secured convertible note | ||
Liabilities | ||
Level 2 [Member] | ||
Warrant derivative liability | ||
Secured convertible note | ||
Liabilities | ||
Level 3 [Member] | ||
Warrant derivative liability | $ 66,631 | $ 2,186,214 |
Secured convertible note | 3,273,431 | |
Liabilities | $ 66,631 | $ 5,459,645 |
Fair Value Measurement - Fair V
Fair Value Measurement - Fair Value Measurements Change in Level Three Inputs (Details) | 9 Months Ended |
Sep. 30, 2015USD ($) | |
Balance | $ 5,459,645 |
Conversion of secured convertible note to common stock | (3,273,431) |
Exercise of stock warrants | (1,748,155) |
Change in fair value | (371,428) |
Balance | 66,631 |
Warrant Derivative Liability [Member] | |
Balance | $ 2,186,214 |
Conversion of secured convertible note to common stock | |
Exercise of stock warrants | $ (1,748,155) |
Change in fair value | (371,428) |
Balance | 66,631 |
Secured Convertible Note [Member] | |
Balance | 3,273,431 |
Conversion of secured convertible note to common stock | $ (3,273,431) |
Exercise of stock warrants | |
Change in fair value | |
Balance |
Accrued Expenses - Schedule of
Accrued Expenses - Schedule of Accrued Expenses (Details) - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 |
Payables and Accruals [Abstract] | ||
Accrued warranty expense | $ 302,394 | $ 247,082 |
Accrued sales commissions | 55,000 | 89,600 |
Accrued payroll and related fringes | 350,893 | 154,851 |
Accrued insurance | 56,636 | 81,431 |
Accrued rent | $ 234,171 | 260,634 |
Accrued litigation charges | 53,666 | |
Other | $ 210,577 | 255,709 |
Total accrued expenses | $ 1,209,671 | $ 1,142,973 |
Accrued Expenses - Accrued Warr
Accrued Expenses - Accrued Warranty Expense (Details) | 9 Months Ended |
Sep. 30, 2015USD ($) | |
Payables and Accruals [Abstract] | |
Beginning balance | $ 247,082 |
Provision for warranty expense | 107,772 |
Charges applied to warranty reserve | (52,460) |
Ending balance | $ 302,394 |
Common Stock (Details Narrative
Common Stock (Details Narrative) - USD ($) | Jul. 22, 2015 | Sep. 30, 2015 | Sep. 30, 2014 | Jun. 09, 2015 | Dec. 31, 2014 | Dec. 04, 2013 | Jul. 31, 2012 |
Common stock, shares authorized | 25,000,000 | 25,000,000 | |||||
Warrant exercise price per share | $ 8.50 | ||||||
Proceeds from exercise of warrants | $ 2,133,889 | $ 1,780,327 | |||||
Percentage of beneficial ownership limitation exceed | 9.99% | ||||||
Purchase Agreement [Member] | |||||||
Issuance of warrant exercisable to purchase of common stock shares | 879,766 | ||||||
Warrant exercise price per share | $ 13.64 | ||||||
Proceeds from exercise of warrants | $ 12,000,008 | ||||||
Purchase Agreement [Member] | Series A Warrant [Member] | |||||||
Issuance of warrant exercisable to purchase of common stock shares | 437,086 | ||||||
Warrant exercise price per share | $ 13.43 | ||||||
Warrants expiration date | Jul. 22, 2017 | ||||||
Purchase Agreement [Member] | Series B Warrant [Member] | |||||||
Issuance of warrant exercisable to purchase of common stock shares | 222,738 | ||||||
Warrant exercise price per share | $ 13.43 | ||||||
Warrants expiration date | Jul. 22, 2017 | ||||||
Purchase Agreement [Member] | Series C Warrant [Member] | |||||||
Issuance of warrant exercisable to purchase of common stock shares | 879,766 | ||||||
Warrant exercise price per share | $ 13.43 | ||||||
Warrants expiration date | Jan. 22, 2021 | ||||||
Placement Agreement [Member] | WestPark Capital, Inc [Member] | |||||||
Placement agent fee paid in cash | $ 720,000 | ||||||
Placement agent fee reimbursed | 30,000 | ||||||
Other expenses of the offering stock | 26,723 | ||||||
Total issuance costs | 776,723 | ||||||
Proceeds from offering | 11,223,285 | ||||||
Subordinated Notes and General Corporate Purposes [Member] | |||||||
Proceeds from offering | $ 2,500,000 | ||||||
Minimum [Member] | |||||||
Common stock, shares authorized | 9,375,000 | ||||||
Warrant exercise price per share | $ 4 | ||||||
Percentage of beneficial ownership limitation | 4.99% | ||||||
Maximum [Member] | |||||||
Common stock, shares authorized | 25,000,000 | ||||||
Warrant exercise price per share | $ 8 | ||||||
Percentage of beneficial ownership limitation | 9.99% |
Income Taxes (Details Narrative
Income Taxes (Details Narrative) - USD ($) | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Dec. 31, 2014 | |
Effective tax rate of expected statutory rate | 100.00% | 100.00% | |
Valuation allowance on deferred tax assets | $ 17,010,000 | $ 12,692,000 | |
Increase valuation allowance on deferred tax assets | 4,318,000 | ||
Net operating loss carry-forwards | $ 28,985,000 | ||
Operating loss carry-forwards expiration years | between 2024 and 2035 | ||
Percentage of changes in ownership | 50.00% | ||
Duration for changes in ownership | 3 years | ||
Net operating loss due to ownership changes | $ 765,000 | ||
Research and development tax credit carry-forwards due to ownership changes | 175,000 | ||
Annual limitation due to ownership changes | $ 1,151,000 | ||
Operating loss, research and development tax credit forwards expiration year | between 2023 and 2035 | ||
Percentage of income tax benefit likely of being realized upon settlement with tax authority | greater than 50% | ||
Research And Development [Member] | |||
Tax credit carry-forwards | $ 1,670,000 | ||
Tax credit carry-forwards, expiration date | between 2023 and 2035 |
Commitments and Contingencies49
Commitments and Contingencies (Details Narrative) | 1 Months Ended | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Aug. 31, 2010Units | Sep. 30, 2015USD ($) | Sep. 30, 2014USD ($) | Sep. 30, 2015USD ($)Segment | Sep. 30, 2014USD ($) | Dec. 31, 2014USD ($) | Aug. 25, 2015USD ($) | |
Non-cancelable operating lease | Apr. 30, 2020 | ||||||
Rent expense | $ 99,431 | $ 99,431 | $ 302,414 | $ 298,293 | |||
Royalty expense | 6,641 | 6,522 | 19,957 | 20,518 | |||
Purchase agreement term | 42 months | ||||||
Minimum purchase requirement of the agreement, units | Units | 1,000 | ||||||
Percentage of reduction in minimum purchase commitment over the second and third years | 52.00% | ||||||
Minimum order quantities requires to acquire the product | $ 634,680 | ||||||
Products in finished goods inventory | 1,350,000 | $ 1,350,000 | |||||
Sale of finished goods inventory, units | Segment | 1,000 | ||||||
Accounts payable | 191,000 | $ 191,000 | |||||
Description of matching contributions to employees | In July 2008, the Company amended and restated its 401(k) retirement savings plan. The amended plan requires the Company to provide 100% matching contributions for employees who elect to contribute up to 3% of their compensation to the plan and 50% matching contributions for employees elective deferrals on the next 2% of their contributions. | ||||||
Matching contributions to 401 (k) Plan | 47,220 | $ 37,518 | $ 121,920 | $ 116,252 | |||
Percentage of employer matching contribution | 100.00% | ||||||
3% Of Employee Contribution [Member] | |||||||
Percentage of employer matching contribution | 100.00% | ||||||
2% Of Employee Contribution [Member] | |||||||
Percentage of employer matching contribution | 50.00% | ||||||
Board of Directors [Member] | |||||||
Common stock repurchase authorizes | $ 2,500,000 | ||||||
2015 Tournament [Member] | |||||||
Net sponsorship expense | $ 172,623 | $ 172,623 |
Commitments and Contingencies -
Commitments and Contingencies - Future Minimum Lease Payments (Details) | Sep. 30, 2015USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
2015(period from October 1, 2015 to December 31, 2015) | $ 109,209 |
2,016 | 439,707 |
2,017 | 445,449 |
2,018 | 451,248 |
2,019 | 457,327 |
Thereafter | 154,131 |
Net lease commitments | $ 2,057,071 |
Commitments and Contingencies51
Commitments and Contingencies - Schedule of Future Sponsorship Fee (Details) | 9 Months Ended |
Sep. 30, 2015USD ($) | |
Commitments and Contingencies Disclosure [Abstract] | |
2,015 | $ 375,000 |
2,016 | 475,000 |
2,017 | 475,000 |
2,018 | 500,000 |
2,019 | $ 500,000 |
Stock-Based Compensation (Detai
Stock-Based Compensation (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Stock based compensation | $ 479,084 | $ 262,598 | $ 1,077,485 | $ 576,864 |
Contractual terms | 10 years | |||
Number of common stock authorized to grant | 1,475,000 | 1,475,000 | ||
Options, available for grant | 260,530 | 260,530 | ||
Options that are fully vested and remain outstanding | 1,250 | 1,250 | ||
Aggregate intrinsic value of options outstanding | $ 254,264 | $ 254,264 | ||
Intrinsic value of options exercisable | 108,395 | 108,395 | ||
Intrinsic value of options exercised | 281,792 | |||
Unamortized portion of stock compensation expense | 40,466 | $ 40,466 | ||
Stock options recognized over period | 23 months | |||
Award vesting period | 29 months | |||
Restricted Stock [Member] | ||||
Unrecognized compensation costs | $ 1,027,475 | $ 1,027,475 |
Stock-Based Compensation - Summ
Stock-Based Compensation - Summary of Stock Options (Details) | 9 Months Ended |
Sep. 30, 2015$ / sharesshares | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Options Outstanding, Beginning balance | shares | 370,743 |
Options Granted | shares | |
Options Exercised | shares | (39,928) |
Options Forfeited | shares | (1,625) |
Options Outstanding, Ending balance | shares | 329,190 |
Options Exercisable, Ending balance | shares | 266,689 |
Weighted-average fair value for options granted during the period at fair value | shares | |
Weighted Average Exercise Price, Outstanding, Beginning balance | $ 18.97 |
Weighted Average Exercise Price, Granted | |
Weighted Average Exercise Price, Exercised | $ (7.59) |
Weighted Average Exercise Price, Forfeited | (7.82) |
Weighted Average Exercise Price, Outstanding, Ending balance | 20.41 |
Weighted Average Exercise Price, Exercisable, Ending balance | $ 24.25 |
Weighted-average fair value for options granted during the period at fair value |
Stock-Based Compensation - Shar
Stock-Based Compensation - Shares Authorized Under Stock Option Plans by Exercise Price Range (Details) | 9 Months Ended |
Sep. 30, 2015$ / sharesshares | |
Number of options, Outstanding | 329,190 |
Weighted average remaining contractual life, Outstanding options | 4 years 7 months 6 days |
Number of options, Exercisable | 266,689 |
Weighted average remaining contractual life, Exercisable options | 3 years 7 months 6 days |
Exercise Price Range One [Member] | |
Exercise price range, lower limit | $ / shares | $ 0.01 |
Exercise price range, upper limit | $ / shares | $ 3.99 |
Number of options, Outstanding | 63,124 |
Weighted average remaining contractual life, Outstanding options | 7 years 9 months 18 days |
Number of options, Exercisable | 21,250 |
Weighted average remaining contractual life, Exercisable options | 6 years 8 months 12 days |
Exercise Price Range Two [Member] | |
Exercise price range, lower limit | $ / shares | $ 4 |
Exercise price range, upper limit | $ / shares | $ 6.99 |
Number of options, Outstanding | 38,125 |
Weighted average remaining contractual life, Outstanding options | 7 years 3 months 18 days |
Number of options, Exercisable | 26,648 |
Weighted average remaining contractual life, Exercisable options | 6 years 10 months 24 days |
Exercise Price Range Three [Member] | |
Exercise price range, lower limit | $ / shares | $ 7 |
Exercise price range, upper limit | $ / shares | $ 9.99 |
Number of options, Outstanding | 19,069 |
Weighted average remaining contractual life, Outstanding options | 6 years 2 months 12 days |
Number of options, Exercisable | 9,919 |
Weighted average remaining contractual life, Exercisable options | 5 years 10 months 24 days |
Exercise Price Range Four [Member] | |
Exercise price range, lower limit | $ / shares | $ 10 |
Exercise price range, upper limit | $ / shares | $ 12.99 |
Number of options, Outstanding | 52,808 |
Weighted average remaining contractual life, Outstanding options | 1 year 10 months 24 days |
Number of options, Exercisable | 52,808 |
Weighted average remaining contractual life, Exercisable options | 1 year 8 months 12 days |
Exercise Price Range Five [Member] | |
Exercise price range, lower limit | $ / shares | $ 13 |
Exercise price range, upper limit | $ / shares | $ 15.99 |
Number of options, Outstanding | 51,439 |
Weighted average remaining contractual life, Outstanding options | 5 years 2 months 12 days |
Number of options, Exercisable | 51,439 |
Weighted average remaining contractual life, Exercisable options | 4 years 10 months 24 days |
Exercise Price Range Six [Member] | |
Exercise price range, lower limit | $ / shares | $ 16 |
Exercise price range, upper limit | $ / shares | $ 18.99 |
Number of options, Outstanding | 1,250 |
Weighted average remaining contractual life, Outstanding options | 2 years |
Number of options, Exercisable | 1,250 |
Weighted average remaining contractual life, Exercisable options | 1 year 8 months 12 days |
Exercise Price Range Seven [Member] | |
Exercise price range, lower limit | $ / shares | $ 19 |
Exercise price range, upper limit | $ / shares | $ 29.99 |
Number of options, Outstanding | 6,500 |
Weighted average remaining contractual life, Outstanding options | 4 years 1 month 6 days |
Number of options, Exercisable | 6,500 |
Weighted average remaining contractual life, Exercisable options | 3 years 9 months 18 days |
Exercise Price Range Eight [Member] | |
Exercise price range, lower limit | $ / shares | $ 30 |
Exercise price range, upper limit | $ / shares | $ 55 |
Number of options, Outstanding | 96,875 |
Weighted average remaining contractual life, Outstanding options | 2 years 4 months 24 days |
Number of options, Exercisable | 96,875 |
Weighted average remaining contractual life, Exercisable options | 2 years 2 months 12 days |
Stock-Based Compensation - Su55
Stock-Based Compensation - Summary of Restricted Stock Activity (Details) - Restricted Stock [Member] | 9 Months Ended |
Sep. 30, 2015$ / sharesshares | |
Restricted stock, Non-vested Beginning Balance | shares | 188,500 |
Restricted stock, Granted | shares | 138,500 |
Restricted stock, Vested | shares | (158,500) |
Restricted stock, Forfeited | shares | |
Restricted stock, Non-vested Ending Balance | shares | 168,500 |
Weighted average grant date fair value, Non-vested Beginning Balance | $ 5.32 |
Weighted average grant date fair value, Granted | 12.10 |
Weighted average grant date fair value, Vested | $ (4.73) |
Weighted average grant date fair value, Forfeited | |
Weighted average grant date fair value, Non-vested Ending Balance | $ 11.45 |
Stock-Based Compensation - Non-
Stock-Based Compensation - Non-vested Balance of Restricted Stock (Details) - Restricted Stock [Member] | Sep. 30, 2015shares |
2014 (October 1, 2015 to December 31, 2015) | |
2,015 | 117,300 |
2,016 | 37,950 |
2,018 | 13,250 |
Common Stock Purchase Warrant57
Common Stock Purchase Warrants (Details Narrative) - USD ($) | 9 Months Ended | ||||
Sep. 30, 2015 | Aug. 28, 2014 | Dec. 04, 2013 | Jul. 31, 2012 | Dec. 31, 2011 | |
Principal amount of note payable | $ 1,500,000 | ||||
Warrant, exercise per share | $ 8.50 | ||||
Warrant [Member] | |||||
Warrants outstanding intrinsic value | $ 3,760 | ||||
Warrants, weighted average remaining term | 46 months | ||||
Minimum [Member] | |||||
Warrant, exercise per share | $ 4 | ||||
Maximum [Member] | |||||
Warrant, exercise per share | $ 8 | ||||
4.0 million Secured Convertible Note [Member] | |||||
Principal amount of note payable | $ 4,000,000 | $ 4,000,000 | |||
Exercisable warrants issued to purchase number of common stock | 1,600,976 | ||||
4.0 million Secured Convertible Note [Member] | Minimum [Member] | |||||
Warrant, exercise per share | $ 4 | ||||
4.0 million Secured Convertible Note [Member] | Maximum [Member] | |||||
Warrant, exercise per share | $ 8.50 |
Common Stock Purchase Warrant58
Common Stock Purchase Warrants - Summary of Warrant Activity (Details) - Warrant [Member] | 9 Months Ended |
Sep. 30, 2015$ / sharesshares | |
Warrants, Vested, Beginning balance | shares | 306,481 |
Warrants, Granted | shares | 1,544,590 |
Warrants, Exercised | shares | (250,095) |
Warrants, Vested, Ending balance | shares | 1,600,976 |
Weighted average exercise price, Vested, Beginning balance | $ 7.47 |
Weighted average exercise price, Granted | 13.39 |
Weighted average exercise price, Exercised | (7.32) |
Weighted average exercise price, Vested, Ending balance | $ 13.25 |
Net Loss Per Share - Summary of
Net Loss Per Share - Summary of Range of Exercise Prices and Wighted Average Remaining Contractual Life of Warrants (Details) - $ / shares | 9 Months Ended | |
Sep. 30, 2015 | Dec. 31, 2014 | |
Outstanding and exercisable warrants, Exercise price | $ (7.59) | |
Warrant [Member] | ||
Outstanding and exercisable warrants, Number of options | 1,600,976 | 306,481 |
Outstanding and exercisable warrants, Weighted average remaining contractual life | 46 months | |
Exercise Price Range One [Member] | ||
Outstanding and exercisable warrants, Exercise price | $ 4 | |
Outstanding and exercisable warrants, Number of options | 1,686 | |
Outstanding and exercisable warrants, Weighted average remaining contractual life | 1 month 6 days | |
Exercise Price Range Two [Member] | ||
Outstanding and exercisable warrants, Exercise price | $ 7.32 | |
Outstanding and exercisable warrants, Number of options | 12,200 | |
Outstanding and exercisable warrants, Weighted average remaining contractual life | 3 years 10 months 24 days | |
Exercise Price Range Three [Member] | ||
Outstanding and exercisable warrants, Exercise price | $ 8.50 | |
Outstanding and exercisable warrants, Number of options | 42,500 | |
Outstanding and exercisable warrants, Weighted average remaining contractual life | 3 years 2 months 12 days | |
Exercise Price Range Four [Member] | ||
Outstanding and exercisable warrants, Exercise price | $ 13.43 | |
Outstanding and exercisable warrants, Number of options | 659,824 | |
Outstanding and exercisable warrants, Weighted average remaining contractual life | 1 year 9 months 18 days | |
Exercise Price Range Five [Member] | ||
Outstanding and exercisable warrants, Exercise price | $ 13.43 | |
Outstanding and exercisable warrants, Number of options | 879,766 | |
Outstanding and exercisable warrants, Weighted average remaining contractual life | 5 years 3 months 18 days | |
Exercise Price Range Six [Member] | ||
Outstanding and exercisable warrants, Exercise price | $ 16.50 | |
Outstanding and exercisable warrants, Number of options | 5,000 | |
Outstanding and exercisable warrants, Weighted average remaining contractual life | 4 years 9 months 18 days |
Related Party Transactions (Det
Related Party Transactions (Details Narrative) - Research and Development Expense [Member] - President and Chairman [Member] - USD ($) | Jun. 15, 2015 | Sep. 30, 2015 | Sep. 30, 2015 |
New product development fee and expences | $ 10,000 | $ 25,000 | $ 25,000 |
Consulting fees included in accounts payable | $ 10,000 | 10,000 | |
Lesser [Member] | |||
New product development fee and expences | $ 65,000 |
Net Loss Per Share - Calculatio
Net Loss Per Share - Calculation of Weighted Average Number of Shares Outstanding and Loss per Share Outstanding (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Earnings Per Share [Abstract] | ||||
Numerator for basic and diluted income per share - Net loss | $ (2,141,163) | $ (6,402,558) | $ (9,344,263) | $ (8,262,146) |
Denominator for basic loss per share - weighted average shares outstanding | 4,799,126 | 2,763,726 | 4,076,493 | 2,445,922 |
Dilutive effect of shares issuable under stock options and warrants outstanding | ||||
Denominator for diluted loss per share - adjusted weighted average shares outstanding | 4,799,126 | 2,763,726 | 4,076,493 | 2,445,922 |
Basic | $ (0.45) | $ (2.32) | $ (2.29) | $ (3.38) |
Diluted | $ (0.45) | $ (2.32) | $ (2.29) | $ (3.38) |
Subsequent Events (Details Narr
Subsequent Events (Details Narrative) - shares | Oct. 30, 2015 | Sep. 30, 2015 |
Number of shares approved for grant | 1,475,000 | |
Vesting period | 29 months | |
Restricted Stock [Member] | Subsequent Event [Member] | ||
Number of shares approved for grant | 188,000 | |
Vesting period | 4 years | |
Restricted Stock [Member] | Subsequent Event [Member] | October 30, 2016 [Member] | ||
Common stock vesting percentage | 10.00% | |
Restricted Stock [Member] | Subsequent Event [Member] | October 30, 2017 [Member] | ||
Common stock vesting percentage | 20.00% | |
Restricted Stock [Member] | Subsequent Event [Member] | October 30, 2018 [Member] | ||
Common stock vesting percentage | 30.00% | |
Restricted Stock [Member] | Subsequent Event [Member] | October 30, 2019 [Member] | ||
Common stock vesting percentage | 40.00% |