Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2017 | Aug. 08, 2017 | |
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 | Jun. 30, 2017 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 5,679,731 | |
Trading Symbol | DGLY | |
Document Fiscal Period Focus | Q2 | |
Document Fiscal Year Focus | 2,017 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) | Jun. 30, 2017 | Dec. 31, 2016 |
Current assets: | ||
Cash and cash equivalents | $ 825,090 | $ 3,883,124 |
Accounts receivable-trade, less allowance for doubtful accounts of $70,000 – 2017 and 2016 | 2,123,677 | 2,519,184 |
Accounts receivable-other | 444,033 | 341,326 |
Inventories, net | 10,315,479 | 9,586,311 |
Restricted cash | 500,000 | |
Prepaid expenses | 646,840 | 402,158 |
Total current assets | 14,855,119 | 16,732,103 |
Furniture, fixtures and equipment, net | 916,560 | 873,902 |
Restricted cash | 500,000 | |
Intangible assets, net | 466,220 | 467,176 |
Other assets | 178,585 | 261,915 |
Total assets | 16,416,484 | 18,835,096 |
Current liabilities: | ||
Accounts payable | 3,319,021 | 2,455,579 |
Accrued expenses | 1,047,240 | 1,542,729 |
Derivative liabilities | 19,357 | 33,076 |
Capital lease obligation-current | 25,121 | 32,792 |
Deferred revenue-current | 1,321,703 | 925,932 |
Subordinated notes payable, net of discount of $288,895-2017 and $0-2016 | 411,105 | |
Secured convertible debentures, at fair value | 3,926,258 | |
Income taxes payable | 7,995 | 7,048 |
Total current liabilities | 10,077,800 | 4,997,156 |
Long-term liabilities: | ||
Secured convertible debentures, at fair value | 4,000,000 | |
Capital lease obligation-less current portion | 8,492 | |
Deferred revenue-long term | 2,150,206 | 2,073,176 |
Total liabilities | 12,228,006 | 11,078,824 |
Stockholder's Equity: | ||
Common stock, $0.001 par value; 25,000,000 shares authorized; shares issued: 5,743,249 - 2017 and 5,552,449 - 2016 | 5,743 | 5,552 |
Additional paid in capital | 60,356,781 | 59,565,288 |
Treasury stock, at cost (63,518 shares) | (2,157,226) | (2,157,226) |
Accumulated deficit | (54,016,820) | (49,657,342) |
Total stockholders' equity | 4,188,478 | 7,756,272 |
Total liabilities and stockholders' equity | $ 16,416,484 | $ 18,835,096 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) | Jun. 30, 2017 | Dec. 31, 2016 |
Statement of Financial Position [Abstract] | ||
Allowance for doubtful accounts receivable | $ 70,000 | $ 70,000 |
Discount on subordinated notes payable, short-term | $ 288,895 | $ 0 |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 25,000,000 | 25,000,000 |
Common stock, shares issued | 5,743,249 | 5,552,449 |
Treasury stock shares | 63,518 | 63,518 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Revenue: | ||||
Product | $ 3,056,810 | $ 4,045,373 | $ 7,742,170 | $ 8,132,287 |
Service and other | 429,692 | 339,038 | 974,192 | 657,067 |
Total revenue | 3,486,502 | 4,384,411 | 8,716,362 | 8,789,354 |
Cost of revenue: | ||||
Product | 1,959,274 | 2,826,213 | 4,733,311 | 5,252,258 |
Service and other | 354,012 | 292,962 | 532,986 | 418,241 |
Total cost of revenue | 2,313,286 | 3,119,175 | 5,266,297 | 5,670,499 |
Gross profit | 1,173,216 | 1,265,236 | 3,450,065 | 3,118,855 |
Selling, general and administrative expenses: | ||||
Research and development expense | 846,460 | 813,150 | 1,664,351 | 1,622,004 |
Selling, advertising and promotional expense | 952,312 | 1,003,507 | 1,987,834 | 1,926,499 |
Stock-based compensation expense | 115,756 | 355,236 | 502,789 | 781,066 |
General and administrative expense | 1,751,285 | 1,986,000 | 3,589,901 | 4,019,838 |
Total selling, general and administrative expenses | 3,665,813 | 4,157,893 | 7,744,875 | 8,349,407 |
Operating loss | (2,492,597) | (2,892,657) | (4,294,810) | (5,230,552) |
Interest income | 3,797 | 7,198 | 8,858 | 16,190 |
Interest expense | (80,436) | (907) | (160,987) | (1,662) |
Change in warrant derivative liabilities | 13,114 | 21,282 | 13,719 | 37,815 |
Change in fair value of secured convertible notes payable | 229,599 | 73,742 | ||
Loss before income tax expense | (2,326,523) | (2,865,084) | (4,359,478) | (5,178,209) |
Income tax (expense) benefit | ||||
Net loss | $ (2,326,523) | $ (2,865,084) | $ (4,359,478) | $ (5,178,209) |
Net loss per share information: | ||||
Basic | $ (0.41) | $ (0.54) | $ (0.77) | $ (0.98) |
Diluted | $ (0.41) | $ (0.54) | $ (0.77) | $ (0.98) |
Weighted average shares outstanding: | ||||
Basic | 5,679,731 | 5,319,259 | 5,654,755 | 5,282,514 |
Diluted | 5,679,731 | 5,319,259 | 5,654,755 | 5,282,514 |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Stockholders' Equity (Unaudited) - 6 months ended Jun. 30, 2017 - USD ($) | Common Stock [Member] | Additional Paid In Capital [Member] | Treasury Stock [Member] | Accumulated Deficit [Member] | Total |
Balance at Dec. 31, 2016 | $ 5,552 | $ 59,565,288 | $ (2,157,226) | $ (49,657,342) | $ 7,756,272 |
Balance, shares at Dec. 31, 2016 | 5,552,449 | ||||
Stock-based compensation | 502,789 | 502,789 | |||
Restricted common stock grant | $ 200 | (200) | |||
Restricted common stock grant, shares | 200,000 | ||||
Restricted common stock forfeitures | $ (9) | 9 | |||
Restricted common stock forfeitures, shares | (9,200) | ||||
Issuance of common stock purchase warrants related to issuance of subordinated notes payable | 288,895 | 288,895 | |||
Net loss | (4,359,478) | (4,359,478) | |||
Balance at Jun. 30, 2017 | $ 5,743 | $ 60,356,781 | $ (2,157,226) | $ (54,016,820) | $ 4,188,478 |
Balance, shares at Jun. 30, 2017 | 5,743,249 |
Condensed Consolidated Stateme6
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 6 Months Ended | |
Jun. 30, 2017 | Jun. 30, 2016 | |
Cash Flows From Operating Activities: | ||
Net loss | $ (4,359,478) | $ (5,178,209) |
Adjustments to reconcile net loss to net cash flows used in operating activities: | ||
Depreciation and amortization | 325,617 | 295,813 |
Stock-based compensation | 502,789 | 781,066 |
Change in derivative liabilities | (13,719) | (37,815) |
Change in fair value of secured convertible debentures | (73,742) | |
Provision for inventory obsolescence | 326,284 | 266,479 |
Provision for doubtful accounts receivable | (7,221) | |
(Increase) decrease in: | ||
Accounts receivable - trade | 395,507 | 542,475 |
Accounts receivable - other | (102,707) | (59,483) |
Inventories | (1,055,452) | 689,105 |
Prepaid expenses | (244,682) | (424,865) |
Other assets | 83,330 | 42,428 |
Increase (decrease) in: | ||
Accounts payable | 863,442 | 58,567 |
Accrued expenses | (495,489) | 98,888 |
Income taxes payable | 947 | (7,095) |
Deferred revenue | 472,801 | 372,915 |
Net cash used in operating activities | (3,374,552) | (2,566,952) |
Cash Flows from Investing Activities: | ||
Purchases of furniture, fixtures and equipment | (304,596) | (134,707) |
Additions to intangible assets | (62,723) | (60,811) |
Net cash used in investing activities | (367,319) | (195,518) |
Cash Flows from Financing Activities: | ||
Proceeds from issuance of subordinated notes payable | 700,000 | |
Principal payments on capital lease obligation | (16,163) | (19,119) |
Net cash provided by (used in) financing activities | 683,837 | (19,119) |
Net decrease in cash and cash equivalents | (3,058,034) | (2,781,589) |
Cash and cash equivalents, beginning of period | 3,883,124 | 6,924,079 |
Cash and cash equivalents, end of period | 825,090 | 4,142,490 |
Supplemental disclosures of cash flow information: | ||
Cash payments for interest | 80,986 | 1,650 |
Cash payments for income taxes | 9,053 | 7,095 |
Supplemental disclosures of non-cash investing and financing activities: | ||
Restricted common stock grant | 200 | 200 |
Restricted common stock forfeitures | $ 9 |
Nature of Business and Summary
Nature of Business and Summary of Significant Accounting Policies | 6 Months Ended |
Jun. 30, 2017 | |
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 and storage products for use in law enforcement, security and commercial applications. Its products are an in-car digital video/audio recorder contained in a rear-view mirror for use in law enforcement and commercial fleets; a system that provides its law enforcement customers with audio/video surveillance from multiple vantage points and hands-free automatic activation of body-worn cameras and in-car video systems; a miniature digital video system designed to be worn on an individual’s body; a weather-resistant mobile digital video recording system for use on motorcycles, ATV’s and boats; a hand-held laser speed detection device that it is offering primarily to law enforcement agencies; and cloud storage solutions. The Company has active research and development programs to adapt its technologies to other applications. It can 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. The Company sells its products to law enforcement agencies and other security organizations and 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. Management’s Liquidity Plan The Company incurred substantial operating losses in the six months ended June 30, 2017 and recent years primarily due to reduced revenues and gross margins caused by specific product quality issues resulting in the significant delays in customer orders and product rework expenditures. In addition, the Company accessed the capital markets to raise approximately $700,000 on June 30, 2017, $4.0 million in December 2016 and $11.0 million in 2015 to fund its operations until it achieves positive cash flows from operations. As of June 30, 2017, the Company had an accumulated deficit of $54.0 million and has financed its recent operations primarily through debt and equity financings. During the six months ended June 30, 2017 and year ended December 31, 2016, the Company incurred net losses of approximately $4.4 and $12.7 million, respectively, and used cash in operating activities of $3.4 million and $5.9 million, respectively. The $700,000 principal amount of subordinated notes payable (the “Notes”) matures on September 30, 2017. Additionally, the $4.0 million principal amount of 8% Secured Convertible Debentures (the “Debentures”) matures in March 2018 unless the Debentures are converted by their holders ($5.00 per share conversion rate) before maturity. The Notes and Debentures represent current liabilities as of June 30, 2017 and will require the Company to raise substantial funds to liquidate if operating results do not improve before the maturity dates of such Notes and Debentures. These conditions indicate that there is substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued. The Company will need to restore positive operating cash flows and profitability over the next twelve months and/or raise additional capital to fund operations, accommodate the potential liquidity needs to retire the Debentures at their maturity, meet its payment obligations and execute its business plan. There can be no assurance that it will be successful in restoring positive cash flows and profitability, or that it can raise additional financing if and when needed, and obtain it on terms acceptable or favorable to the Company. Management has implemented a quality control function which is tasked with the detection and correction of product issues before they result in significant rework expenditures affecting the Company’s gross margins. The Company has introduced a new full high definition in-car video system (DVM-800 HD), which is intended to help it regain market share and improve revenues in its law enforcement division. The Company has increased its addressable market to non-law enforcement customers and has obtained significant new non-law enforcement contracts in 2017, which contracts include recurring revenue over the 2017 to 2019 period. Management believes that its quality control initiative, introduction of the DVM-800 HD for law enforcement and expansion to non-law enforcement sales channels will restore positive operating cash flows and profitability during the next year, although it can offer no assurances in this regard. The Company’s plan also includes raising additional capital, and is currently considering the issuance of debt, equity or a combination of both within the next 90 days. In addition, the Company is considering reducing the exercise price on outstanding common stock purchase warrants in order to induce holders to exercise which would generate working capital. The Company has demonstrated its ability to raise new debt or equity capital in recent years and if necessary, it believes that it could raise additional capital during the next 12 months if required, but again can offer no assurances in this regard. Based on the uncertainties described above, the Company believes its business plan does not alleviate the existence of substantial doubt about its ability to continue as a going concern within one year after the date that the financial statements in this Report. The following is a summary of the Company’s 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., MP Ally, LLC, Medical Devices Ally, LLC and Digitaldeck, LLC. All intercompany balances and transactions have been eliminated during consolidation. The Company 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, MP Ally, LLC was formed in July 2015, and Digitaldeck, LLC was formed in June 2017, all of which have been inactive since formation. Fair Value of Financial Instruments: The carrying amounts of financial instruments, including cash and cash equivalents, accounts receivable and accounts payable approximate fair value because of the short-term nature of these items. The Company accounts for its derivative liabilities and its secured convertible debentures on a 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 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 its 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. Service and other revenue is comprised of revenues from extended warranties, repair services, cloud revenue and software revenue. Revenue is recognized upon shipment of the product and acceptance of the service or materials by the end customer for repair services. Revenue for extended warranty, cloud service or other software-based are treated as deferred revenue and recognized over the term of the contracted warranty or service period on a straight-line method. 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. Multiple element arrangements consisting of product, software, cloud and extended warranties are offered to our customers. Revenue arrangements with multiple deliverables are divided into separate units and revenue is allocated using the relative selling price method based upon vendor-specific objective evidence of selling price or third-party evidence of the selling prices if vendor-specific objective evidence of selling prices does not exist. If neither vendor-specific objective evidence nor third-party evidence exists, management uses its best estimate of selling price. The majority of the Company’s allocations of arrangement consideration under multiple element arrangements are performed using vendor-specific objective evidence by utilizing prices charged to customers for deliverables when sold separately. The Company’s multiple element arrangements may include future in-car or body-worn camera devices to be delivered at defined points within a multi-year contract, and in those arrangements, the Company allocates total arrangement consideration over the life of the multi-year contract to future deliverables using management’s best estimate of selling price. The Company has not utilized third-party evidence of selling price. Sales returns and allowances aggregated $13,736 and $123,703 for the three months ended June 30, 2017 and 2016, respectively, and $(27,585) and $201,990 for the six months ended June 30, 2017 and 2016, respectively. Obligations for estimated 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. A customer paid under a sales transaction in March 2017 that had been accrued to be returned at December 31, 2016, which the caused the negative sales returns for the six months ended June 30, 2017. 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 secured convertible debentures are presented as restricted cash separate from cash and cash equivalents on the accompanying 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 customer’s 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. Secured convertible debentures: The Company has elected to record its Debentures at fair value. Accordingly, the Debentures will be marked-to-market at each reporting date with the change in fair value reported as a gain (loss) in the statement of operations. All issuance costs related to the Debentures were expensed as incurred in the statement of operations. 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. Warranties: The Company’s 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. Shipping and Handling Costs: Shipping and handling costs for outbound sales orders totaled $19,661 and $21,650 for the three months ended June 30, 2017 and 2016, respectively, and $40,091 and $46,219 for the six months ended June 30, 2017 and 2016, 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 $143,053 and $194,944 for the three months ended June 30, 2017 and 2016, respectively, and $270,329 and $321,412 for the six months ended June 30, 2017 and 2016, 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 in which 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 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 Company’s 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 six months ended June 30, 2017 and 2016. There have been no penalties in the six months ended June 30, 2017 and 2016. The Company is subject to taxation in the United States and various states. As of June 30, 2017, the Company’s tax returns filed for 2013, 2014, and 2015 and to be filed for 2016 are subject to examination by the relevant taxing authorities. With few exceptions, as of June 30, 2017, the Company is no longer subject to Federal, state, or local examinations by tax authorities for years before 2013. 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 product’s technological feasibility has been established and ending when a product is available for general release to customers. In most instances, the Company’s 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 six months ended June 30, 2017 and 2016. Common Stock Purchase Warrants: The Company has common stock purchase warrants that are accounted for as liabilities under the caption of derivative liabilities on the consolidated balance sheet and recorded at fair value due to the warrant agreements containing anti-dilution provisions. The change in fair value being recorded in the consolidated statement of operation. The Company has common stock purchase warrants that are accounted for as equity based on their relative fair value and are not subject to remeasurement . 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 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 Company’s plan is measured using the weighted average of historical daily changes in the market price of the Company’s 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 accounted for as they occur. 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 six months ended June 30, 2017 and 2016, sales by geographic area were as follows: Three Months Ended June 30, Six Months Ended June 30, 2017 2016 2017 2016 Sales by geographic area: United States of America $ 3,426,461 $ 4,371,180 $ 8,626,515 $ 8,462,394 Foreign 60,041 13,231 89,847 326,960 $ 3,486,502 $ 4,384,411 $ 8,716,362 $ 8,789,354 Sales to customers outside of the United States are denominated in U.S. dollars. All Company assets are physically located within the United States. Reclassification of Prior Year Presentation: Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations. Recent Accounting Pronouncements: In May 2014, the FASB issued Accounting Standard Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers” In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory In November 2015, the FASB issued ASU 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes In February 2016, the FASB issued ASU No. 2016-02, Leases In March 2016, the FASB issued ASU No. 2016-09, Compensation-Stock Compensation (Topic 718) In August 2016, the FASB issued ASU 2016-15, Clarification on Classification of Certain Cash Receipts and Cash Payments on the Statement of Cash Flows In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows - Restricted Cash (Topic 230), In May 2017, the FASB issued ASU 2017-09, Stock Compensation (Topic 718)-Scope of Modification Accounting |
Basis of Presentation
Basis of Presentation | 6 Months Ended |
Jun. 30, 2017 | |
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 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 six-month period ended June 30, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017. The balance sheet at December 31, 2016 has been derived from the audited financial statements at that date, but does not include all 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 Company’s annual report on Form 10-K for the year ended December 31, 2016. |
Concentration of Credit Risk an
Concentration of Credit Risk and Major Customers | 6 Months Ended |
Jun. 30, 2017 | |
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 while sales to international customers require payment before shipment or backing by an irrevocable letter or credit. 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 $70,000 as of June 30, 2017 and December 31, 2016. The Company uses primarily a network of unaffiliated distributors for international sales and employee-based direct sales force for domestic sales. No distributor individually exceeded 10% of total revenues for the six months ended June 30, 2017 or June 30, 2016. One individual customer receivable balances exceeded 10% of total accounts receivable at June 30, 2017, and totaled $289,499. Two individual customer receivable balances exceeded 10% of total accounts receivable at June 30, 2016, and totaled $660,136. 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, it generally owns all tooling and management has located 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 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. |
Inventories
Inventories | 6 Months Ended |
Jun. 30, 2017 | |
Inventory Disclosure [Abstract] | |
Inventories | NOTE 4. INVENTORIES Inventories consisted of the following at June 30, 2017 and December 31, 2016: June 30, 2017 December 31, 2016 Raw material and component parts $ 4,529,183 $ 4,015,170 Work-in-process 491,504 355,715 Finished goods 7,620,996 7,215,346 Subtotal 12,641,683 11,586,231 Reserve for excess and obsolete inventory (2,326,204 ) (1,999,920 ) Total $ 10,315,479 $ 9,586,311 Finished goods inventory includes units held by potential customers and sales agents for test and evaluation purposes. The cost of such units totaled $692,594 and $634,059 as of June 30, 2017 and December 31, 2016, respectively. |
Furnitures, Fixtures and Equipm
Furnitures, Fixtures and Equipment | 6 Months Ended |
Jun. 30, 2017 | |
Property, Plant and Equipment [Abstract] | |
Furnitures, Fixtures and Equipment | NOTE 5. FURNITURE, FIXTURES AND EQUIPMENT Furniture, fixtures and equipment consisted of the following at June 30, 2017 and December 31, 2016: Estimated Useful Life June 30, 2017 December 31, 2016 Office furniture, fixtures and equipment 3-10 years $ 901,232 $ 1,074,533 Warehouse and production equipment 3-5 years 502,821 643,250 Demonstration and tradeshow equipment 2-5 years 426,582 451,750 Leasehold improvements 2-5 years 160,198 153,828 Rental equipment 1-3 years 68,095 60,354 Total cost 2,058,928 2,383,715 Less: accumulated depreciation and amortization (1,142,368 ) (1,509,813 ) Net furniture, fixtures and equipment $ 916,560 $ 873,902 Depreciation and amortization of furniture, fixtures and equipment aggregated $261,938 and $274,889 for the six months ended June 30, 2017 and 2016, respectively. |
Secured Convertible Debentures,
Secured Convertible Debentures, Subordinated Notes Payable, and Capital Lease Obligations | 6 Months Ended |
Jun. 30, 2017 | |
Debt Disclosure [Abstract] | |
Secured Convertible Debentures, Subordinated Notes Payable, and Capital Lease Obligations | NOTE 6. SECURED CONVERTIBLE DEBENTURES, SUBORDINATED NOTES PAYABLE, AND CAPITAL LEASE OBLIGATIONS 2016 Secured Convertible Debentures June 30, 2017 December 31, 2016 Secured convertible debentures, at fair value $ 3,926,258 $ 4,000,000 Less: Current maturities of long-term debt, at fair value (3,926,258 ) — Secured convertible debentures, at fair value-long-term $ — $ 4,000,000 On December 30, 2016, the Company completed a private placement (the “Private Placement”) of $4.0 million in principal amount of the Debentures and common stock warrants (the “Warrants”) to two institutional investors. The Debentures and Warrants were issued pursuant to a Securities Purchase Agreement (the “Purchase Agreement”) between the Company and the purchasers’ signatory thereto (the “Holders”). The Private Placement resulted in gross proceeds of $4.0 million before placement agent fees and other expenses associated with the transaction totaling $281,570, which was expensed as incurred. The Company elected to account for the Debentures on the fair value basis. Therefore, the Company determined the fair value of the Debentures utilizing Monte Carlo simulation models which yielded an estimated fair value of $4.0 million for the Debentures including their embedded derivatives as of the origination date. No value was allocated to the detachable Warrants as of the origination date because of the relative fair value of the convertible note including its embedded derivative features approximated the gross proceeds of the financing transaction. The change in the fair value of the Debentures fair value between December 31, 2016 and June 30, 2017 was $(73,742) and was reflected as a charge in the Condensed Statement of Operations. Prior to the maturity date, the Debentures bear interest at 8% per annum with interest payable in cash quarterly in arrears on the first business day of each calendar quarter following the issuance date. The Debentures rank senior to the Company’s existing and future indebtedness and are secured by substantially all tangible and certain intangible assets of the Company. The Debentures are convertible at any time six months after their date of issue at the option of the holders into shares of the Company’s common stock at $5.00 per share (the “Conversion Price”). The Debentures mature on March 30, 2018. The Warrants are exercisable to purchase up to an aggregate of 800,000 shares of the Company’s common stock commencing on the date of issuance at an exercise price of $5.00 per share (the “Exercise Price”). The Warrants will expire on the fifth anniversary of their date of issuance. The Conversion Price and Exercise Price are subject to adjustment upon stock splits, reverse stock splits, and similar capital changes. The Company has the right, subject to certain limitations, to redeem the Debenture with 30 days advance notice with the redemption amount determined as the sum of (a) 112% of the then outstanding principal amount of the Debenture, (b) accrued but unpaid interest and (c) all liquidated damages and other amounts due in respect of the Debenture, if any. Additionally, if following the six-month anniversary of the Original Issue Date, the VWAP (volume weighted average price), for each of any ten (10) consecutive trading days exceeds $7.50 per share, the Company has the right, subject to certain limitations, to provide written notice to the Holders to cause them to convert all or part of the then outstanding principal amount of the Debenture plus accrued but unpaid interest. Upon the occurrence of an event of default, the Debentures bear interest at 18% per annum and a Holder may require the Company to redeem all or a portion of its Debenture. The Company has agreed to maintain a cash balance of $500,000 while the Debentures are outstanding, which is reflected as restricted cash in the accompanying balance sheet. The Holders have agreed to beneficial conversion limitation that effectively blocks either Holder from converting the Debenture or exercising the Warrant to the extent that such conversion or exercise would result in the Holder being the beneficial owner in excess of 4.99% (or, upon election of purchaser, 9.99%), which beneficial ownership limitation may be increased or decreased up to 9.99% upon notice to the Company, provided that any increase in such limitation will not be effective until 61 days following notice to the Company. Subordinated Notes Payable June 30, 2017 December 31, 2016 Subordinated notes payable, at par $ 700,000 $ — Unamortized discount (288,895 ) — Total notes payable $ 411,105 $ — On June 30, 2017, the Company, in two separate transactions, borrowed an aggregate of $700,000 under two unsecured notes payable to private, third-party lenders. The loans were funded on June 30, 2017 and both are represented by promissory notes (the “Notes”) that bear interest at the rate of 8% per annum with principal and accrued interest payable on or before their maturity date of September 30, 2017. The Notes are unsecured and subordinated to all existing and future senior indebtedness, as such term is defined in the Notes. The Company granted the lenders warrants (the “Warrants”) exercisable to purchase a total of 200,000 shares of its common stock at an exercise price of $3.65 per share until June 29, 2022. The Company allocated $288,895 of the proceeds of the Notes to additional paid-in-capital, which represented the grant date relative fair value of the Warrants for 200,000 common shares issued to the lenders. The discount will be amortized to interest expense ratably over the terms of the Note. Capital Leases Year ending December 31: 2017 (period from July 1, 2017 to December 31, 2017) $ 17,149 2018 8,574 Total future minimum lease payments 25,723 Less amount representing interest 602 Present value of minimum lease payments 25,121 Less current portion 25,121 Capital lease obligations, less current portion $ — Assets under capital leases are included in furniture, fixtures and equipment as follows: June 30, 2017 December 31, 2016 Office furniture, fixtures and equipment $ 250,843 $ 382,928 Less: accumulated amortization (193,172 ) (294,895 ) Net furniture, fixtures and equipment $ 57,671 $ 88,033 |
Fair Value Measurement
Fair Value Measurement | 6 Months Ended |
Jun. 30, 2017 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurement | NOTE 7. 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 Company’s own assumptions in determining the fair value) The following table represents the Company’s hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2017 and December 31, 2016. June 30, 2017 Level 1 Level 2 Level 3 Total Liabilities: Secured convertible debentures $ — $ — $ 3,926,258 $ 3,926,258 Warrant derivative liability $ — $ — $ 19,357 $ 19,357 $ — $ — $ 3,945,615 $ 3,945,615 December 31, 2016 Level 1 Level 2 Level 3 Total Liabilities: Secured convertible debentures $ — $ — $ 4,000,000 $ 4,000,000 Warrant derivative liability $ — $ — $ 33,076 $ 33,076 $ — $ — $ 4,033,076 $ 4,033,076 The following table represents the change in level 3 tier value measurements: Warrant derivative liability Secured convertible debentures Total December 31, 2016 $ 33,076 $ 4,000,000 $ 4,033,076 Change in fair value (13,719 ) (73,742 ) (87,461 ) June 30, 2017 $ 19,357 $ 3,926,258 $ 3,945,615 |
Accrued Expenses
Accrued Expenses | 6 Months Ended |
Jun. 30, 2017 | |
Payables and Accruals [Abstract] | |
Accrued Expenses | NOTE 8. ACCRUED EXPENSES Accrued expenses consisted of the following at June 30, 2017 and December 31, 2016: June 30, 2017 December 31, 2016 Accrued warranty expense $ 180,535 $ 374,597 Accrued senior convertible note issuance costs — 204,000 Accrued sales commissions 32,162 36,389 Accrued payroll and related fringes 344,613 270,781 Accrued insurance 70,140 81,610 Accrued rent 159,025 182,409 Accrued sales returns and allowances 58,810 215,802 Other 201,955 177,141 $ 1,047,240 $ 1,542,729 Accrued warranty expense was comprised of the following for the six months ended June 30, 2017: 2017 Beginning balance $ 374,597 Provision for warranty expense 97,784 Charges applied to warranty reserve (291,847 ) Ending balance $ 180,535 |
Income Taxes
Income Taxes | 6 Months Ended |
Jun. 30, 2017 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | NOTE 9. INCOME TAXES The effective tax rate for the three and six months ended June 30, 2017 and 2016 varied from the expected statutory rate due to the Company continuing to provide a 100% valuation allowance on net deferred tax assets. The Company determined that it was appropriate to continue the full valuation allowance on net deferred tax assets as of June 30, 2017 primarily because of the current year operating losses. The valuation allowance on deferred tax assets totaled $24,130,000 and $22,455,000 as of June 30, 2017 and December 31, 2016, 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.” In accordance with Accounting Standards Codification (ASC) 740, “Income Taxes,” the Company records a valuation allowance to reduce the carrying value of its 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. At June 30, 2017, the Company had available approximately $44,200,000 of net operating loss carryforwards available to offset future taxable income generated. Such tax net operating loss carryforwards expire between 2023 and 2037. In addition, the Company had research and development tax credit carryforwards approximating $2,060,000 available as of June 30, 2017, which expire between 2023 and 2037. The Internal Revenue Code contains provisions under Section 382 which limit a company’s 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 prepared by the Company indicate that due to ownership changes which have occurred, approximately $765,000 of its net operating loss and $175,000 of its 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 2037, 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 Company’s federal and state income tax returns are closed for examination purposes by relevant statute and by examination for 2012 and all prior tax years. |
Commitments and Contingencies
Commitments and Contingencies | 6 Months Ended |
Jun. 30, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | NOTE 10. COMMITMENTS AND CONTINGENCIES Operating Leases. Year ending December 31: 2017 (period from July 1, 2017 to December 31, 2017) $ 223,203 2018 451,248 2019 457,327 2020 154,131 $ 1,285,909 License agreements. 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 statement 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. Axon Enterprise, Inc. – (Formerly Taser International, Inc.) The Company owns U.S. Patent No. 8,781,292 (the “ ‘292 Patent”), which is directed to a system that determines when a recording device, such as a law enforcement officer’s 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 Company’s VuLink product. The Company received notice in April 2015 that Taser International, Inc., now known as Axon Enterprises, Inc. (“Axon”), had commenced an action in the U.S. Patent and Trademark Office (the “USPTO”) for a re-examination of the ‘292 patent. A re-examination is essentially a request that the USPTO 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 Axon was from an unrelated third party and was not the result of any of Axon’s own research and development efforts. On January 14, 2016 the USPTO ultimately rejected Axon’s efforts and confirmed the validity of the ‘292 Patent with 59 claims covering various aspects of the Company’s auto-activation technology. On February 2, 2016 the USPTO issued another patent relating to the Company’s auto-activation technology for law enforcement cameras. U.S. Patent No. 9,253,452 (the “ ‘452 Patent”) generally covers the automatic activation and coordination of multiple recording devices in response to a triggering event, such as a law enforcement officer activating the light bar on the vehicle. The Company filed suit on January 15, 2016 in the U.S. District Court for the District of Kansas (Case No: 2:16-cv-02032) against Axon, alleging willful patent infringement against Axon’s body camera product line. The Company later added the ‘452 patent to the suit and is seeking both monetary damages and a permanent injunction against Axon for infringement of both the ‘452 and ‘292 Patents. In addition to the infringement claims, the Company added a new set of claims to the lawsuit alleging that Axon conspired to keep the Company out of the marketplace by engaging in improper, unethical, and unfair competition. The amended lawsuit alleges Axon bribed officials and otherwise conspired to secure no-bid contracts for its products in violation of both state law and federal antitrust law. The Company’s lawsuit also seeks monetary and injunctive relief, including treble damages, for these alleged violations. Axon filed an answer which denied the patent infringement allegations on April 1, 2016. In addition, Axon filed a motion to dismiss all allegations in the complaint on March 4, 2016 for which the Company filed an amended complaint on March 18, 2016 to address certain technical deficiencies in the pleadings. Axon amended and renewed its motion to seek dismissal of the allegations that it had bribed officials and otherwise conspired to secure no-bid contracts for its products in violation of both state law and federal antitrust law on April 1, 2016. Formal discovery commenced on April 12, 2016 with respect to the patent related claims. In January 2017, the Court granted Axon’s motion to dismiss the portion of the lawsuit regarding claims that it had bribed officials and otherwise conspired to secure no-bid contracts for its products in violation of both state law and federal antitrust law. The Company has appealed this decision to the United States Court of Appeals for the Federal Circuit and is awaiting its decision. In December 2016, Axon announced that it had commenced an action in the USPTO for inter partes review The District Court litigation in Kansas has been stayed since the filing of the petitions for IPR, The Court, however, requested an update on the status of the petitions and the Company has provided such an update after the decision was rendered which denied the final ‘452 Patent petition. Because both of Axon’s petitions for an IPR on the ‘452 Patent that related to the claims in the lawsuit were denied, the Company is seeking to lift the stay and proceed with the lawsuit to a trial where the question of infringement and damages can be addressed. Enforcement Video, LLC d/b/a WatchGuard Video On May 27, 2016 the Company filed suit against Enforcement Video, LLC d/b/a WatchGuard Video (“WatchGuard”), (Case No. 2:16-cv-02349-JTM-JPO) alleging patent infringement based on WatchGuard’s VISTA Wifi and 4RE In-Car product lines. The USPTO has granted multiple patents to the Company with claims covering numerous features, such as automatically activating all deployed cameras in response to the activation of just one camera. Additionally, Digital Ally’s patent claims cover automatic coordination as well as digital synchronization between multiple recording devices. Digital Ally also has patent coverage directed to the coordination between a multi-camera system and an officer’s smartphone, which allows an officer to more readily assess an event on the scene while an event is taking place or immediately after it has occurred. The Company’s lawsuit alleges that WatchGuard incorporated this patented technology into its VISTA Wifi and 4RE In-Car product lines without its permission. Specifically, Digital Ally is accusing WatchGuard of infringing three patents: the ‘292 and ‘452 Patents and U.S. Patent No. 9,325,950 the (“ ‘950 Patent”). The Company is aggressively challenging WatchGuard’s infringing conduct, seeking both monetary damages, as well as seeking a permanent injunction preventing WatchGuard from continuing to sell its VISTA Wifi and 4RE In-Car product lines using Digital Ally’s own technology to compete against it. On May 8, 2017, Watchguard filed a petition seeking IPR of the ‘950 Patent. The Company will vigorously oppose that petition. The Patent Trial and Appeal Board (“PTAB”) will not issue a decision on whether to institute until approximately November 2017. The lawsuit has been stayed pending a decision from the USPTO on whether to institute that petition. Utility Associates, Inc. On October 25, 2013, the Company filed a complaint in the United States District Court for the District of Kansas (2:13-cv-02550-SAC) 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 Company’s 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 its 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 rejected Utility’s assertion and is vigorously defending 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 Court’s decision was not a ruling on the merits of the case. The Company appealed the decision and the Federal Circuit affirmed the District Court’s previous decision. In addition, the Company began proceedings to invalidate the ‘556 Patent through a request for IPR of the ‘556 patent at the USPTO. On July 27, 2015, the USPTO invalidated key claims in Utility’s ‘556 Patent. The Final Decision from the USPTO significantly curtails Utility’s ability to threaten law enforcement agencies, municipalities, and others with infringement of the ‘556 Patent. Utility appealed this decision to the United States Court of Appeals for the Federal Circuit. The United States Court of Appeals for the Federal Circuit denied Utility’s appeal and therefore confirmed the ruling of the USPTO. This denial of Utility’s appeal finalized the USPTO’s ruling in Digital’s favor and the matter is now concluded. On June 6, 2014 the Company filed an Unfair Competition lawsuit against Utility in the United States District Court for the District of Kansas. In the lawsuit it contends that Utility has defamed the Company and illegally interfered with its contracts, customer relationships and business expectancies by falsely asserting to its customers and others that its products violate the ‘556 Patent, of which Utility claims to be the holder. The suit also includes claims against Utility for tortious interference with contracts and violation of the Kansas Uniform Trade Secrets Act (KUSTA), arising out of Utility’s employment of the Company’s employees, in violation of that employee’s 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 Company’s customers. On March 4, 2015, an initial hearing was held upon the Company’s request for injunctive relief. Based upon facts revealed at the March 4, 2015 hearing, on March 16, 2015, the Company sought leave to amend its 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 its complaint, but denied its preliminary injunction. The discovery stage of the lawsuit expired in May 2016. Utility filed a Motion for Summary Judgment and the Company filed a Motion for Partial Summary Judgment. On March 30, 2017, the Court entered its order granting Utility’s motion and denying the Company’s motion for summary judgment in their entireties. The Company believes the District Court made several errors when ruling on the motions for summary judgment in light of the USPTO’s final decision issued on July 27, 2015 and the various facts and admissions already presented to such Court and is filing an appeal to the United States Court of Appeals for the Tenth Circuit. On September 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 on the Company on September 20, 2014. As alleged in the Company’s first filed lawsuit described above, the Company believes that 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 is vigorously defending the claims asserted against the Company. An adverse resolution of the foregoing litigation or patent proceedings could have a material adverse effect on the Company’s 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 and the appellate court. Based on the USPTO’s final decision to invalidate substantially all claims contained in the ‘556 Patent and the United States Court of Appeals for the Federal Circuit full denial of Utility’s appeal, the Company intends to file for summary judgment in its favor if Utility does not request outright dismissal. 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. The Company 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 $6,595 and $-0-, respectively, for the six months ended June 30, 2017 and 2016. 401 (k) Plan. Consulting and Distributor Agreements. |
Stock-Based Compensation
Stock-Based Compensation | 6 Months Ended |
Jun. 30, 2017 | |
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 $115,756 and $355,236, for the three ended June 30, 2017 and 2016, and $502,789 and $781,066 for the six months ended June 30, 2017 and 2016, respectively. As of June 30, 2017, 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”). The 2005 Plan, 2006 Plan, 2007 Plan, 2008 Plan, 2011 Plan, 2013 Plan and 2015 Plan are referred to as the “Plans.” These Plans permit the grant of stock options or restricted stock to its employees, non-employee directors and others for up to a total of 1,925,000 shares of common stock. The 2005 Plan terminated during 2015 with 28 shares not awarded or underlying options, which shares are now unavailable for issuance. Stock options granted under the 2005 Plan that remain unexercised and outstanding as of June 30, 2017 total 26,813. The 2006 Plan terminated during 2016 with 4,505 shares not awarded or underlying options, which shares are now unavailable for issuance. Stock options granted under the 2006 Plan that remain unexercised and outstanding as of June 30, 2017 total 62,080. The 2007 Plan terminated during 2017 with 48,500 shares not awarded or underlying options, which shares are now unavailable for issuance. Stock options granted under the 2007 Plan that remain unexercised and outstanding as of June 30, 2017 total 41,875. The Company believes that such awards better align the interests of our employees with those of its stockholders. Option awards have been granted with an exercise price equal to the market price of its 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 typically provide for accelerated vesting if there is a change in control (as defined in the Plans). The Company has registered all shares of common stock that are issuable under its Plans with the SEC. A total of 8,363 shares remained available for awards under the various Plans as of June 30, 2017. The fair value of each option award is estimated on the date of grant using a Black-Scholes option valuation model. There were no stock options issued during the six months ended June 30, 2017. Activity in the various Plans during the six months ended June 30, 2017 is reflected in the following table: Options Number of Shares Weighted Average Exercise Price Outstanding at January 1, 2017 362,440 $ 18.46 Granted — — Exercised — — Forfeited (52,609 ) (12.02 ) Outstanding at June 30, 2017 309,831 $ 19.37 Exercisable at June 30, 2017 301,031 $ 19.84 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 six months ended June 30, 2017. At June 30, 2017, the aggregate intrinsic value of options outstanding was approximately $-0-, and the aggregate intrinsic value of options exercisable was approximately $-0-. No options were exercised in the six months ended June 30, 2017. As of June 30, 2017, the unrecognized portion of stock compensation expense on all existing stock options was $41,163, which will be recognized over the next 3 months. The following table summarizes the range of exercise prices and weighted average remaining contractual life for outstanding and exercisable options under the Company’s option plans as of June 30, 2017: 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 98,124 7.0 years 89,324 7.0 years $ 4.00 to $6.99 34,125 5.2 years 34,125 5.2 years $ 7.00 to $9.99 18,444 4.2 years 18,444 4.2 years $ 10.00 to $12.99 6,200 1.9 years 6,200 1.9 years $ 13.00 to $15.99 51,438 3.2 years 51,438 3.2 years $ 16.00 to $18.99 — 0.0 years — 0.0 years $ 19.00 to $29.99 6,500 2.1 years 6,500 2.4 years $ 30.00 to $55.00 95,000 0.5 years 95,000 0.5 years 309,831 3.8 years 301,031 3.7 years Restricted stock grants. A summary of all restricted stock activity under the equity compensation plans for the six months ended June 30, 2017 is as follows: Number of Restricted shares Weighted average grant date fair value Nonvested balance, January 1, 2017 495,300 $ 5.75 Granted 200,000 5.10 Vested (136,750 ) (6.47 ) Forfeited (9,200 ) (6.47 ) Nonvested balance, June 30, 2017 549,350 $ 5.78 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 June 30, 2017, there were $1,674,139 of total unrecognized compensation costs related to all remaining non-vested restricted stock grants, which will be amortized over the next 42 months in accordance with the respective vesting scale. The nonvested balance of restricted stock vests as follows: Year ended December 31, Number of shares 2017 (July 1 through December 31) 55,300 2018 183,450 2019 289,100 2020 21,500 |
Common Stock Purchase Warrants
Common Stock Purchase Warrants | 6 Months Ended |
Jun. 30, 2017 | |
Common Stock Purchase Warrants | |
Common Stock Purchase Warrants | NOTE 12. COMMON STOCK PURCHASE WARRANTS The Company has issued common stock purchase warrants (the “Warrants”) in conjunction with various debt and equity issuances. The Warrants are immediately exercisable and allow the holders to purchase up to 2,579,290 shares of common stock at $3.65 to $16.50 per share as of June 30, 2017. The Warrants expire from July 22, 2017 through June 30, 2022 and allow for cashless exercise. Warrants Weighted average exercise price Vested Balance, January 1, 2016 2,379,290 $ 10.47 Granted 200,000 3.65 Exercised — — Cancelled — — Vested Balance, March 31, 2017 2,579,290 $ 9.94 The total intrinsic value of all outstanding Warrants aggregated $-0- as of June 30, 2017 and the weighted average remaining term is 30 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 June 30, 2017: Outstanding and exercisable warrants Exercise price Number of options Weighted average remaining contractual life $ 3.65 200,000 5.0 years $ 3.65 12,200 2.2 years $ 5.00 800,000 4.5 years $ 8.50 42,500 1.4 years $ 13.43 639,824 0.1 years $ 13.43 879,766 3.5 years $ 16.50 5,000 3.0 years 2,379,290 2.5 years |
Net Loss Per Share
Net Loss Per Share | 6 Months Ended |
Jun. 30, 2017 | |
Earnings Per Share [Abstract] | |
Net Loss Per Share | NOTE 13. NET LOSS PER SHARE The calculation of the weighted average number of shares outstanding and loss per share outstanding for the three months ended March 31, 2017 and 2016 are as follows: Three months ended March 31, 2017 2016 Numerator for basic and diluted loss per share – Net loss $ (2,032,955 ) $ (2,313,125 ) Denominator for basic loss per share – weighted average shares outstanding 5,632,077 5,246,148 Dilutive effect of shares issuable under stock options and warrants outstanding — — Denominator for diluted loss per share – adjusted weighted average shares outstanding 5,632,077 5,246,148 Net loss per share: Basic $ (0.36 ) $ (0.44 ) Diluted $ (0.36 ) $ (0.44 ) Basic loss per share is based upon the weighted average number of common shares outstanding during the period. For the three months ended March 31, 2017 and 2016, 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 | 6 Months Ended |
Jun. 30, 2017 | |
Subsequent Events [Abstract] | |
Subsequent Events | NOTE 14. SUBSEQUENT EVENTS On July 6, 2017 and August 3, 2017, the USPTO rendered its final decisions to decline to institute an inter partes reviews In the four IPRs that Axon filed against Digital Ally’s ‘292 and ‘452 Patents, Axon has lost on three of the IPR petitions by failing to persuade the USPTO to even institute a hearing. The result of the fourth IPR, which only challenges certain claims of the ‘292 Patent, has yet to be decided by the USPTO, with a decision expected to be rendered approximately during the first quarter of 2018. For the fourth and only remaining IPR, Digital Ally is vigorously defending Axon’s claims of unpatentability and is looking forward to confirming the uniqueness of its innovation. The Company held a Special Meeting of its shareholders (the “Special Meeting”) on Monday, August 14, 2017. There were sufficient shares of common stock represented in person or by proxy at the Special Meeting to establish a quorum. The matters voted upon at the Special Meeting and the results of such voting were: ● Ratification of an amendment to its Articles of Incorporation to increase the number of authorized shares of its capital stock that it may issue from 9,375,000 to 25,000,000, of which all 25,000,000 shares shall be classified as common stock; and ● An amendment to the 2015 Digital Ally, Inc. Stock Option and Restricted Stock Plan to increase the number of shares reserved for issuance under such Plan by 500,000. Both matters were ratified/approved at the Special Meeting. At the 2016 Annual Meeting, the Company reported that the stockholders had voted to approve the amendment of its Articles of Incorporation to increase the number of authorized shares of its capital stock from 25,000,000 to 35,000,000, of which 10,000,000 shares would be classified as Blank Check Preferred (the “Blank Check Preferred Amendment”). On June 24, 2016, the Company filed the Blank Check Preferred Amendment with the Nevada Secretary of State, and it became effective the same day. A question was recently raised regarding the validity of the vote taken on the Blank Check Preferred Amendment. Upon investigation, the Company determined that there was a problem with the vote taken respecting the Blank Check Preferred Amendment. Accordingly, the Company will make appropriate filings with the Nevada Secretary of State to rescind the Blank Check Preferred Amendment. It is important to note in this connection that the Company has not issued, or committed to issue, any shares of the Blank Check Preferred. |
Nature of Business and Summar21
Nature of Business and Summary of Significant Accounting Policies (Policies) | 6 Months Ended |
Jun. 30, 2017 | |
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 and storage products for use in law enforcement, security and commercial applications. Its products are an in-car digital video/audio recorder contained in a rear-view mirror for use in law enforcement and commercial fleets; a system that provides its law enforcement customers with audio/video surveillance from multiple vantage points and hands-free automatic activation of body-worn cameras and in-car video systems; a miniature digital video system designed to be worn on an individual’s body; a weather-resistant mobile digital video recording system for use on motorcycles, ATV’s and boats; a hand-held laser speed detection device that it is offering primarily to law enforcement agencies; and cloud storage solutions. The Company has active research and development programs to adapt its technologies to other applications. It can 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. The Company sells its products to law enforcement agencies and other security organizations and 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. |
Management's Liquidity Plan | Management’s Liquidity Plan The Company incurred substantial operating losses in the six months ended June 30, 2017 and recent years primarily due to reduced revenues and gross margins caused by specific product quality issues resulting in the significant delays in customer orders and product rework expenditures. In addition, the Company accessed the capital markets to raise approximately $700,000 on June 30, 2017, $4.0 million in December 2016 and $11.0 million in 2015 to fund its operations until it achieves positive cash flows from operations. As of June 30, 2017, the Company had an accumulated deficit of $54.0 million and has financed its recent operations primarily through debt and equity financings. During the six months ended June 30, 2017 and year ended December 31, 2016, the Company incurred net losses of approximately $4.4 and $12.7 million, respectively, and used cash in operating activities of $3.4 million and $5.9 million, respectively. The $700,000 principal amount of subordinated notes payable (the “Notes”) matures on September 30, 2017. Additionally, the $4.0 million principal amount of 8% Secured Convertible Debentures (the “Debentures”) matures in March 2018 unless the Debentures are converted by their holders ($5.00 per share conversion rate) before maturity. The Notes and Debentures represent current liabilities as of June 30, 2017 and will require the Company to raise substantial funds to liquidate if operating results do not improve before the maturity dates of such Notes and Debentures. These conditions indicate that there is substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued. The Company will need to restore positive operating cash flows and profitability over the next twelve months and/or raise additional capital to fund operations, accommodate the potential liquidity needs to retire the Debentures at their maturity, meet its payment obligations and execute its business plan. There can be no assurance that it will be successful in restoring positive cash flows and profitability, or that it can raise additional financing if and when needed, and obtain it on terms acceptable or favorable to the Company. Management has implemented a quality control function which is tasked with the detection and correction of product issues before they result in significant rework expenditures affecting the Company’s gross margins. The Company has introduced a new full high definition in-car video system (DVM-800 HD), which is intended to help it regain market share and improve revenues in its law enforcement division. The Company has increased its addressable market to non-law enforcement customers and has obtained significant new non-law enforcement contracts in 2017, which contracts include recurring revenue over the 2017 to 2019 period. Management believes that its quality control initiative, introduction of the DVM-800 HD for law enforcement and expansion to non-law enforcement sales channels will restore positive operating cash flows and profitability during the next year, although it can offer no assurances in this regard. The Company’s plan also includes raising additional capital, and is currently considering the issuance of debt, equity or a combination of both within the next 90 days. In addition, the Company is considering reducing the exercise price on outstanding common stock purchase warrants in order to induce holders to exercise which would generate working capital. The Company has demonstrated its ability to raise new debt or equity capital in recent years and if necessary, it believes that it could raise additional capital during the next 12 months if required, but again can offer no assurances in this regard. Based on the uncertainties described above, the Company believes its business plan does not alleviate the existence of substantial doubt about its ability to continue as a going concern within one year after the date that the financial statements in this Report. |
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., MP Ally, LLC, Medical Devices Ally, LLC and Digitaldeck, LLC. All intercompany balances and transactions have been eliminated during consolidation. The Company 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, MP Ally, LLC was formed in July 2015, and Digitaldeck, LLC was formed in June 2017, all 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, accounts receivable and accounts payable approximate fair value because of the short-term nature of these items. The Company accounts for its derivative liabilities and its secured convertible debentures on a 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 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 its 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. Service and other revenue is comprised of revenues from extended warranties, repair services, cloud revenue and software revenue. Revenue is recognized upon shipment of the product and acceptance of the service or materials by the end customer for repair services. Revenue for extended warranty, cloud service or other software-based are treated as deferred revenue and recognized over the term of the contracted warranty or service period on a straight-line method. 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. Multiple element arrangements consisting of product, software, cloud and extended warranties are offered to our customers. Revenue arrangements with multiple deliverables are divided into separate units and revenue is allocated using the relative selling price method based upon vendor-specific objective evidence of selling price or third-party evidence of the selling prices if vendor-specific objective evidence of selling prices does not exist. If neither vendor-specific objective evidence nor third-party evidence exists, management uses its best estimate of selling price. The majority of the Company’s allocations of arrangement consideration under multiple element arrangements are performed using vendor-specific objective evidence by utilizing prices charged to customers for deliverables when sold separately. The Company’s multiple element arrangements may include future in-car or body-worn camera devices to be delivered at defined points within a multi-year contract, and in those arrangements, the Company allocates total arrangement consideration over the life of the multi-year contract to future deliverables using management’s best estimate of selling price. The Company has not utilized third-party evidence of selling price. Sales returns and allowances aggregated $13,736 and $123,703 for the three months ended June 30, 2017 and 2016, respectively, and $(27,585) and $201,990 for the six months ended June 30, 2017 and 2016, respectively. Obligations for estimated 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. A customer paid under a sales transaction in March 2017 that had been accrued to be returned at December 31, 2016, which the caused the negative sales returns for the six months ended June 30, 2017. |
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 secured convertible debentures are presented as restricted cash separate from cash and cash equivalents on the accompanying 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 customer’s 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. |
Secured Convertible Debentures | Secured convertible debentures: The Company has elected to record its Debentures at fair value. Accordingly, the Debentures will be marked-to-market at each reporting date with the change in fair value reported as a gain (loss) in the statement of operations. All issuance costs related to the Debentures were expensed as incurred in the statement of operations. |
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. |
Warranties | Warranties: The Company’s 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. |
Shipping and Handling Costs | Shipping and Handling Costs: Shipping and handling costs for outbound sales orders totaled $19,661 and $21,650 for the three months ended June 30, 2017 and 2016, respectively, and $40,091 and $46,219 for the six months ended June 30, 2017 and 2016, 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 $143,053 and $194,944 for the three months ended June 30, 2017 and 2016, respectively, and $270,329 and $321,412 for the six months ended June 30, 2017 and 2016, 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 in which 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 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 Company’s 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 six months ended June 30, 2017 and 2016. There have been no penalties in the six months ended June 30, 2017 and 2016. The Company is subject to taxation in the United States and various states. As of June 30, 2017, the Company’s tax returns filed for 2013, 2014, and 2015 and to be filed for 2016 are subject to examination by the relevant taxing authorities. With few exceptions, as of June 30, 2017, the Company is no longer subject to Federal, state, or local examinations by tax authorities for years before 2013. |
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 product’s technological feasibility has been established and ending when a product is available for general release to customers. In most instances, the Company’s 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 six months ended June 30, 2017 and 2016. |
Common Stock Purchase Warrants | Common Stock Purchase Warrants: The Company has common stock purchase warrants that are accounted for as liabilities under the caption of derivative liabilities on the consolidated balance sheet and recorded at fair value due to the warrant agreements containing anti-dilution provisions. The change in fair value being recorded in the consolidated statement of operation. The Company has common stock purchase warrants that are accounted for as equity based on their relative fair value and are not subject to remeasurement . |
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 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 Company’s plan is measured using the weighted average of historical daily changes in the market price of the Company’s 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 accounted for as they occur. |
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 six months ended June 30, 2017 and 2016, sales by geographic area were as follows: Three Months Ended June 30, Six Months Ended June 30, 2017 2016 2017 2016 Sales by geographic area: United States of America $ 3,426,461 $ 4,371,180 $ 8,626,515 $ 8,462,394 Foreign 60,041 13,231 89,847 326,960 $ 3,486,502 $ 4,384,411 $ 8,716,362 $ 8,789,354 Sales to customers outside of the United States are denominated in U.S. dollars. All Company assets are physically located within the United States. |
Reclassification of Prior Year Presentation | Reclassification of Prior Year Presentation: Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements: In May 2014, the FASB issued Accounting Standard Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers” In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory In November 2015, the FASB issued ASU 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes In February 2016, the FASB issued ASU No. 2016-02, Leases In March 2016, the FASB issued ASU No. 2016-09, Compensation-Stock Compensation (Topic 718) In August 2016, the FASB issued ASU 2016-15, Clarification on Classification of Certain Cash Receipts and Cash Payments on the Statement of Cash Flows In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows - Restricted Cash (Topic 230), In May 2017, the FASB issued ASU 2017-09, Stock Compensation (Topic 718)-Scope of Modification Accounting |
Nature of Business and Summar22
Nature of Business and Summary of Significant Accounting Policies (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Summary of Sales by Geographic Area | For the three and six months ended June 30, 2017 and 2016, sales by geographic area were as follows: Three Months Ended June 30, Six Months Ended June 30, 2017 2016 2017 2016 Sales by geographic area: United States of America $ 3,426,461 $ 4,371,180 $ 8,626,515 $ 8,462,394 Foreign 60,041 13,231 89,847 326,960 $ 3,486,502 $ 4,384,411 $ 8,716,362 $ 8,789,354 |
Inventories (Tables)
Inventories (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Inventory Disclosure [Abstract] | |
Schedule of Inventories | Inventories consisted of the following at June 30, 2017 and December 31, 2016: June 30, 2017 December 31, 2016 Raw material and component parts $ 4,529,183 $ 4,015,170 Work-in-process 491,504 355,715 Finished goods 7,620,996 7,215,346 Subtotal 12,641,683 11,586,231 Reserve for excess and obsolete inventory (2,326,204 ) (1,999,920 ) Total $ 10,315,479 $ 9,586,311 |
Furniture, Fixtures and Equipme
Furniture, Fixtures and Equipment (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Property, Plant and Equipment [Abstract] | |
Schedule of Furniture, Fixtures and Equipment | Furniture, fixtures and equipment consisted of the following at March 31, 2017 and December 31, 2016: Estimated Useful Life March 31, 2017 December 31, 2016 Office furniture, fixtures and equipment 3-10 years $ 1,074,533 $ 1,074,533 Warehouse and production equipment 3-5 years 675,875 643,250 Demonstration and tradeshow equipment 2-5 years 451,750 451,750 Leasehold improvements 2-5 years 153,828 153,828 Rental equipment 1-3 years 60,354 60,354 Total cost 2,416,340 2,383,715 Less: accumulated depreciation and amortization (1,636,609 ) (1,509,813 ) Net furniture, fixtures and equipment $ 779,731 $ 873,902 |
Secured Convertible Debenture25
Secured Convertible Debentures, Subordinated Notes Payable, and Capital Lease Obligations (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Debt Disclosure [Abstract] | |
Summary of Secured Convertible Debentures | Secured Convertible Debentures is comprised of the following: June 30, 2017 December 31, 2016 Secured convertible debentures, at fair value $ 3,926,258 $ 4,000,000 Less: Current maturities of long-term debt, at fair value (3,926,258 ) — Secured convertible debentures, at fair value-long-term $ — $ 4,000,000 |
Summary of Subordinated notes Payable | Subordinated notes payable is comprised of the following: June 30, 2017 December 31, 2016 Subordinated notes payable, at par $ 700,000 $ — Unamortized discount (288,895 ) — Total notes payable $ 411,105 $ — |
Summary of Future Minimum Lease Payments Under Non-cancelable Capital Leases | . Future minimum lease payments under non-cancelable capital leases having terms in excess of one year are as follows: Year ending December 31: 2017 (period from July 1, 2017 to December 31, 2017) $ 17,149 2018 8,574 Total future minimum lease payments 25,723 Less amount representing interest 602 Present value of minimum lease payments 25,121 Less current portion 25,121 Capital lease obligations, less current portion $ — |
Summary of Assets Under Capital Leases | Assets under capital leases are included in furniture, fixtures and equipment as follows: June 30, 2017 December 31, 2016 Office furniture, fixtures and equipment $ 250,843 $ 382,928 Less: accumulated amortization (193,172 ) (294,895 ) |
Fair Value Measurement (Tables)
Fair Value Measurement (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Fair Value Disclosures [Abstract] | |
Financial Assets and Liabilities Measured at Fair Value on Recurring Basis | The following table represents the Company’s hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2017 and December 31, 2016. June 30, 2017 Level 1 Level 2 Level 3 Total Liabilities: Secured convertible debentures $ — $ — $ 3,926,258 $ 3,926,258 Warrant derivative liability $ — $ — $ 19,357 $ 19,357 $ — $ — $ 3,945,615 $ 3,945,615 December 31, 2016 Level 1 Level 2 Level 3 Total Liabilities: Secured convertible debentures $ — $ — $ 4,000,000 $ 4,000,000 Warrant derivative liability $ — $ — $ 33,076 $ 33,076 $ — $ — $ 4,033,076 $ 4,033,076 |
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 debentures Total December 31, 2016 $ 33,076 $ 4,000,000 $ 4,033,076 Change in fair value (13,719 ) (73,742 ) (87,461 ) June 30, 2017 $ 19,357 $ 3,926,258 $ 3,945,615 |
Accrued Expenses (Tables)
Accrued Expenses (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Payables and Accruals [Abstract] | |
Schedule of Accrued Expenses | Accrued expenses consisted of the following at June 30, 2017 and December 31, 2016: June 30, 2017 December 31, 2016 Accrued warranty expense $ 180,535 $ 374,597 Accrued senior convertible note issuance costs — 204,000 Accrued sales commissions 32,162 36,389 Accrued payroll and related fringes 344,613 270,781 Accrued insurance 70,140 81,610 Accrued rent 159,025 182,409 Accrued sales returns and allowances 58,810 215,802 Other 201,955 177,141 $ 1,047,240 $ 1,542,729 |
Schedule of Accrued Warranty Expense | Accrued warranty expense was comprised of the following for the six months ended June 30, 2017: 2017 Beginning balance $ 374,597 Provision for warranty expense 97,784 Charges applied to warranty reserve (291,847 ) Ending balance $ 180,535 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of Future Minimum Lease Payments | Following are the minimum lease payments for each year and in total. Year ending December 31: 2017 (period from July 1, 2017 to December 31, 2017) $ 223,203 2018 451,248 2019 457,327 2020 154,131 $ 1,285,909 |
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) | 6 Months Ended |
Jun. 30, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Summary of Stock Options Outstanding | Activity in the various Plans during the six months ended June 30, 2017 is reflected in the following table: Options Number of Shares Weighted Average Exercise Price Outstanding at January 1, 2017 362,440 $ 18.46 Granted — — Exercised — — Forfeited (52,609 ) (12.02 ) Outstanding at June 30, 2017 309,831 $ 19.37 Exercisable at June 30, 2017 301,031 $ 19.84 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 Company’s option plans as of June 30, 2017: 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 98,124 7.0 years 89,324 7.0 years $ 4.00 to $6.99 34,125 5.2 years 34,125 5.2 years $ 7.00 to $9.99 18,444 4.2 years 18,444 4.2 years $ 10.00 to $12.99 6,200 1.9 years 6,200 1.9 years $ 13.00 to $15.99 51,438 3.2 years 51,438 3.2 years $ 16.00 to $18.99 — 0.0 years — 0.0 years $ 19.00 to $29.99 6,500 2.1 years 6,500 2.4 years $ 30.00 to $55.00 95,000 0.5 years 95,000 0.5 years 309,831 3.8 years 301,031 3.7 years |
Summary of Restricted Stock Activity | A summary of all restricted stock activity under the equity compensation plans for the six months ended June 30, 2017 is as follows: Number of Restricted shares Weighted average grant date fair value Nonvested balance, January 1, 2017 495,300 $ 5.75 Granted 200,000 5.10 Vested (136,750 ) (6.47 ) Forfeited (9,200 ) (6.47 ) Nonvested balance, June 30, 2017 549,350 $ 5.78 |
Schedule of Non-vested Balance of Restricted Stock | The nonvested balance of restricted stock vests as follows: Year ended December 31, Number of shares 2017 (July 1 through December 31) 55,300 2018 183,450 2019 289,100 2020 21,500 |
Common Stock Purchase Warrants
Common Stock Purchase Warrants (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Common Stock Purchase Warrants | |
Summary of Warrant Activity | The Warrants expire from July 22, 2017 through June 30, 2022 and allow for cashless exercise. Warrants Weighted average exercise price Vested Balance, January 1, 2016 2,379,290 $ 10.47 Granted 200,000 3.65 Exercised — — Cancelled — — Vested Balance, March 31, 2017 2,579,290 $ 9.94 |
Summary of Range of Exercise Prices and Weighted 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 June 30, 2017: Outstanding and exercisable warrants Exercise price Number of options Weighted average remaining contractual life $ 3.65 200,000 5.0 years $ 3.65 12,200 2.2 years $ 5.00 800,000 4.5 years $ 8.50 42,500 1.4 years $ 13.43 639,824 0.1 years $ 13.43 879,766 3.5 years $ 16.50 5,000 3.0 years 2,379,290 2.5 years |
Net Loss Per Share (Tables)
Net Loss Per Share (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Earnings Per Share [Abstract] | |
Calculation of Weighted Average Number of Shares Outstanding and Loss per Share Outstanding | The calculations of the weighted average number of shares outstanding and loss per share outstanding for the three and six months ended June 30, 2017 and 2016 are as follows: Three Months Ended June 30, Six Months Ended June 30, 2017 2016 2017 2016 Numerator for basic and diluted income per share – Net loss $ (2,326,523 ) $ (2,865,084 ) $ (4,359,478 ) $ (5,178,209 ) Denominator for basic loss per share – weighted average shares outstanding 5,679,731 5,319,259 5,654,755 5,282,514 Dilutive effect of shares issuable under stock options and warrants outstanding — — — — Denominator for diluted loss per share – adjusted weighted average shares outstanding 5,679,731 5,319,259 5,654,755 5,282,514 Net income (loss) per share: Basic $ (0.41 ) $ (0.54 ) $ (0.77 ) $ (0.98 ) Diluted $ (0.41 ) $ (0.54 ) $ (0.77 ) $ (0.98 ) |
Nature of Business and Summar32
Nature of Business and Summary of Significant Accounting Policies (Details Narrative) | 2 Months Ended | 3 Months Ended | 6 Months Ended | 12 Months Ended | |||
Mar. 12, 2017 | Jun. 30, 2017USD ($)$ / shares | Jun. 30, 2016USD ($) | Jun. 30, 2017USD ($)Segment$ / shares | Jun. 30, 2016USD ($) | Dec. 31, 2016USD ($) | Dec. 31, 2015USD ($) | |
Raise in capital markets | $ 700,000 | $ 4,000,000 | $ 11,000,000 | ||||
Accumulated deficit | $ 54,016,820 | 54,016,820 | 49,657,342 | ||||
Net losses | 2,326,523 | $ 2,865,084 | 4,359,478 | $ 5,178,209 | (12,700,000) | ||
Cash used in operating activities | 3,374,552 | 2,566,952 | $ (6,200,000) | ||||
Sales returns and allowances | 13,736 | 123,703 | (27,585) | 201,990 | |||
Shipping and handling costs | 19,661 | 21,650 | 40,091 | 46,219 | |||
Advertising expense | 143,053 | 194,944 | $ 270,329 | 321,412 | |||
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 | |||||||
Number of reportable segments | Segment | 1 | ||||||
Stock based compensation | 115,756 | $ 355,236 | $ 502,789 | $ 781,066 | |||
Accounting Standards Update 2016-09 [Member] | |||||||
Stock based compensation | $ 256,167 | ||||||
Minimum [Member] | |||||||
Estimated useful life of furniture, fixtures and equipment | 3 years | ||||||
Maximum [Member] | |||||||
Estimated useful life of furniture, fixtures and equipment | 10 years | ||||||
8% Secured Convertible Debentures [Member] | |||||||
Principal amount | $ 4,000,000 | $ 4,000,000 | |||||
Debt instrument interest rate | 8.00% | 8.00% | |||||
Maturity Date, Outstanding | Mar. 31, 2018 | ||||||
Conversion rate per share | $ / shares | $ 5 | $ 5 | |||||
Subordinated Notes Payable [Member] | |||||||
Principal amount | $ 700,000 | $ 700,000 | |||||
Maturity Date, Outstanding | Sep. 30, 2017 |
Nature of Business and Summar33
Nature of Business and Summary of Significant Accounting Policies - Summary of Sales by Geographic Area (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Sales by geographic area | $ 3,486,502 | $ 4,384,411 | $ 8,716,362 | $ 8,789,354 |
United States of America [Member] | ||||
Sales by geographic area | 3,426,461 | 4,371,180 | 8,626,515 | 8,462,394 |
Foreign [Member] | ||||
Sales by geographic area | $ 60,041 | $ 13,231 | $ 89,847 | $ 326,960 |
Concentration of Credit Risk 34
Concentration of Credit Risk and Major Customers (Details Narrative) - USD ($) | 6 Months Ended | 18 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Dec. 31, 2016 | |
Allowance for doubtful accounts | $ 70,000 | $ 70,000 | $ 70,000 | |
NoDistributor [Member] | Accounts Receivable [Member] | ||||
Percentage of concentration risk | 10.00% | 10.00% | ||
One Individual Customer [Member] | Accounts Receivable [Member] | ||||
Percentage of concentration risk | 10.00% | |||
Accounts receivable | $ 289,499 | $ 289,499 | ||
Two Individual Customer [Member] | Accounts Receivable [Member] | ||||
Percentage of concentration risk | 10.00% | |||
Accounts receivable | $ 660,136 |
Inventories (Details Narrative)
Inventories (Details Narrative) - USD ($) | Jun. 30, 2017 | Dec. 31, 2016 |
Inventory Disclosure [Abstract] | ||
Finished goods inventory | $ 692,594 | $ 634,059 |
Inventories - Schedule of Inven
Inventories - Schedule of Inventories (Details) - USD ($) | Jun. 30, 2017 | Dec. 31, 2016 |
Inventory Disclosure [Abstract] | ||
Raw material and component parts | $ 4,529,183 | $ 4,015,170 |
Work-in-process | 491,504 | 355,715 |
Finished goods | 7,620,996 | 7,215,346 |
Subtotal | 12,641,683 | 11,586,231 |
Reserve for excess and obsolete inventory | 2,326,204 | (1,999,920) |
Total | $ 10,315,479 | $ 9,586,311 |
Furniture, Fixtures and Equip37
Furniture, Fixtures and Equipment (Details Narrative) - USD ($) | 6 Months Ended | |
Jun. 30, 2017 | Jun. 30, 2016 | |
Property, Plant and Equipment [Abstract] | ||
Depreciation and amortization of furniture fixtures and equipment | $ 261,938 | $ 274,889 |
Furniture, Fixtures and Equip38
Furniture, Fixtures and Equipment - Schedule of Furniture, Fixtures and Equipment (Details) - USD ($) | 6 Months Ended | |
Jun. 30, 2017 | Dec. 31, 2016 | |
Office furniture, fixtures and equipment | $ 901,232 | $ 1,074,533 |
Warehouse and production equipment | 502,821 | 643,250 |
Demonstration and tradeshow equipment | 426,582 | 451,750 |
Leasehold improvements | 160,198 | 153,828 |
Rental equipment | 68,095 | 60,354 |
Total cost | 2,058,928 | 2,383,715 |
Less: accumulated depreciation and amortization | 1,142,368 | (1,509,813) |
Net furniture, fixtures and equipment | $ 916,560 | $ 873,902 |
Minimum [Member] | ||
Estimated Useful Life | 3 years | |
Maximum [Member] | ||
Estimated Useful Life | 10 years | |
Office Furniture, Fixtures And Equipment [Member] | Minimum [Member] | ||
Estimated Useful Life | 3 years | |
Office Furniture, Fixtures And Equipment [Member] | Maximum [Member] | ||
Estimated Useful Life | 10 years | |
Warehouse And Production Equipment [Member] | Minimum [Member] | ||
Estimated Useful Life | 3 years | |
Warehouse And Production Equipment [Member] | Maximum [Member] | ||
Estimated Useful Life | 5 years | |
Demonstration And Tradeshow Equipment [Member] | Minimum [Member] | ||
Estimated Useful Life | 2 years | |
Demonstration And Tradeshow Equipment [Member] | Maximum [Member] | ||
Estimated Useful Life | 5 years | |
Leasehold Improvements [Member] | Minimum [Member] | ||
Estimated Useful Life | 2 years | |
Leasehold Improvements [Member] | Maximum [Member] | ||
Estimated Useful Life | 5 years | |
Rental Equipment [Member] | Minimum [Member] | ||
Estimated Useful Life | 1 year | |
Rental Equipment [Member] | Maximum [Member] | ||
Estimated Useful Life | 3 years |
Secured Convertible Debenture39
Secured Convertible Debentures, Subordinated Notes Payable and Capital Lease Obligations (Details Narrative) - USD ($) | Dec. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 |
Change in fair value of secured convertible debentures | $ (229,599) | $ (73,742) | |||
Private, Third-party Lenders [Member] | |||||
Debentures bear interest rate | 8.00% | 8.00% | |||
Debt maturity date | Sep. 30, 2017 | ||||
Unsecured notes payable | $ 700,000 | $ 700,000 | |||
Lenders Warrants [Member] | |||||
Warrants exercise price per share | $ 3.65 | $ 3.65 | |||
Warrant to purchase of common stock shares | 200,000 | 200,000 | |||
Warrant exercisable date | Jun. 29, 2022 | ||||
Proceeds from warrants | $ 288,895 | ||||
Common shares issued to lenders | 200,000 | ||||
8% Secured Convertible Debentures [Member] | Two Institutional Investors [Member] | Private Placement [Member] | |||||
Principal amount of note payable | $ 4,000,000 | ||||
Gross proceeds from private placement | 4,000,000 | ||||
Placement agent fees and other expenses | 281,570 | ||||
Secured convertible debentures, at fair value | $ 4,000,000 | ||||
Debentures bear interest rate | 8.00% | ||||
Warrants exercise price per share | $ 5 | ||||
Debt maturity date | Mar. 30, 2018 | ||||
Warrant to purchase of common stock shares | 800,000 | ||||
Secured convertible note, conversion price | $ 5 | ||||
Percentage of outstanding principal amount of debenture | 112.00% | ||||
Debt convertible stock price per share | $ 7.50 | ||||
Debt default interest rate | 18.00% | ||||
Minimum cash balance maintain | $ 500,000 | ||||
8% Secured Convertible Debentures [Member] | Two Institutional Investors [Member] | Private Placement [Member] | Minimum [Member] | |||||
Percentage of beneficial ownership limitation | 4.99% | ||||
8% Secured Convertible Debentures [Member] | Two Institutional Investors [Member] | Private Placement [Member] | Maximum [Member] | |||||
Percentage of beneficial ownership limitation | 9.99% |
Secured Convertible Debenture40
Secured Convertible Debentures, Subordinated Notes Payable, and Capital Lease Obligations - Summary of Secured Convertible Debentures (Details) - Secured Convertible Note Payable [Member] - USD ($) | Jun. 30, 2017 | Dec. 31, 2016 |
Secured convertible debentures, at fair value | $ 3,926,258 | $ 4,000,000 |
Less: Current maturities of long-term debt, at fair value | (3,926,258) | |
Secured convertible debentures, at fair value-long-term | $ 4,000,000 |
Secured Convertible Debentures
Secured Convertible Debentures and Capital Lease Obligations - Summary of Subordinated notes Payable (Details) - USD ($) | Jun. 30, 2017 | Dec. 31, 2016 |
Debt Disclosure [Abstract] | ||
Subordinated notes payable, at par | $ 700,000 | |
Unamortized discount | 288,895 | 0 |
Total notes payable | $ 411,105 |
Secured Convertible Debenture42
Secured Convertible Debentures, Subordinated Notes Payable, and Capital Lease Obligations - Summary of Future Minimum Lease Payments Under Non-cancelable Capital Leases (Details) - USD ($) | Jun. 30, 2017 | Dec. 31, 2016 |
Debt Disclosure [Abstract] | ||
2,017 | $ 17,149 | |
2,018 | 8,574 | |
Total future minimum lease payments | 25,723 | |
Less amount representing interest | 602 | |
Present value of minimum lease payments | 25,121 | |
Less current portion | 25,121 | $ 32,792 |
Capital lease obligations, less current portion | $ 8,492 |
Secured Convertible Debenture43
Secured Convertible Debentures, Subordinated Notes Payable, and Capital Lease Obligations - Summary of Assets Under Capital Leases (Details) - USD ($) | Jun. 30, 2017 | Dec. 31, 2016 |
Debt Disclosure [Abstract] | ||
Office furniture, fixtures and equipment | $ 250,843 | $ 382,928 |
Less: accumulated amortization | (193,172) | (294,895) |
Net furniture, fixtures and equipment | $ 57,671 | $ 88,033 |
Fair Value Measurement - Financ
Fair Value Measurement - Financial Assets and Liabilities Measured at Fair Value on Recurring Basis (Details) - USD ($) | Jun. 30, 2017 | Dec. 31, 2016 |
Secured convertible debentures | $ 3,926,258 | $ 4,000,000 |
Warrant derivative liability | 19,357 | 33,076 |
Liabilities | 3,945,615 | 4,033,076 |
Level 1 [Member] | ||
Secured convertible debentures | ||
Warrant derivative liability | ||
Liabilities | ||
Level 2 [Member] | ||
Secured convertible debentures | ||
Warrant derivative liability | ||
Liabilities | ||
Level 3 [Member] | ||
Secured convertible debentures | 3,926,258 | 4,000,000 |
Warrant derivative liability | 19,357 | 33,076 |
Liabilities | $ 3,945,615 | $ 4,033,076 |
Fair Value Measurement - Fair V
Fair Value Measurement - Fair Value Measurements Change in Level Three Inputs (Details) | 6 Months Ended |
Jun. 30, 2017USD ($) | |
Balance | $ 4,033,076 |
Change in fair value | (87,461) |
Balance | 3,945,615 |
Warrant Derivative Liability [Member] | |
Balance | 33,076 |
Change in fair value | (13,719) |
Balance | 19,357 |
Secured Convertible Debentures [Member] | |
Balance | 4,000,000 |
Change in fair value | (73,742) |
Balance | $ 3,926,258 |
Accrued Expenses - Schedule of
Accrued Expenses - Schedule of Accrued Expenses (Details) - USD ($) | Jun. 30, 2017 | Dec. 31, 2016 |
Payables and Accruals [Abstract] | ||
Accrued warranty expense | $ 180,535 | $ 374,597 |
Accrued senior convertible note issuance costs | 204,000 | |
Accrued sales commissions | 32,162 | 36,389 |
Accrued payroll and related fringes | 344,613 | 270,781 |
Accrued insurance | 70,140 | 81,610 |
Accrued rent | 159,025 | 182,409 |
Accrued sales returns and allowances | 58,810 | 215,802 |
Other | 201,955 | 177,141 |
Total accrued expenses | $ 1,047,240 | $ 1,542,729 |
Accrued Expenses - Schedule o47
Accrued Expenses - Schedule of Accrued Warranty Expense (Details) | 6 Months Ended |
Jun. 30, 2017USD ($) | |
Payables and Accruals [Abstract] | |
Beginning balance | $ 374,597 |
Provision for warranty expense | 97,784 |
Charges applied to warranty reserve | (291,847) |
Ending balance | $ 180,535 |
Income Taxes (Details Narrative
Income Taxes (Details Narrative) - USD ($) | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Dec. 31, 2016 | |
Effective tax rate expected statutory valuation allowance on net deferred tax assets | 100.00% | 100.00% | |
Valuation allowance on deferred tax assets | $ 24,130,000 | $ 22,455,000 | |
Net operating loss carry-forwards | $ 41,715,000 | ||
Operating loss carry-forwards expiration years | expire between 2023 and 2037 | ||
Research and development tax credit carry-forwards | $ 44,200,000 | ||
Operating loss, research and development tax credit forwards expiration year | expire between 2023 and 2037 | ||
Duration for changes in ownership | 3 years | ||
Net operating loss due to ownership changes | $ 765,000 | ||
Tax credit carry-forwards | 2,060,000 | ||
Annual limitation due to ownership changes | $ 1,151,000 | ||
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 | $ 175,000 | ||
Tax credit carry-forwards, expiration date | between 2023 and 2037 |
Commitments and Contingencies49
Commitments and Contingencies (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | Dec. 31, 2016 | |
Non-cancelable operating lease | Apr. 30, 2020 | ||||
Rent expense | $ 99,431 | $ 99,431 | $ 198,862 | $ 198,862 | |
Royalty expense | 6,250 | 6,250 | 8,688 | 12,661 | |
Sponsorship expenses | $ 6,595 | 0 | |||
Percentage of employer matching contribution | 100.00% | ||||
Matching contributions to 401 (k) Plan | $ 47,055 | 47,453 | $ 94,326 | 88,711 | |
Limited Liability Company [Member] | Consulting and Distributor Agreements [Member] | |||||
Future commissions advanced | $ 289,315 | $ 289,315 | |||
Limited Liability Company [Member] | Consulting and Distributor Agreements [Member] | Minimum [Member] | |||||
Payments for commissions | $ 5,000 | ||||
Limited Liability Company [Member] | Consulting and Distributor Agreements [Member] | Maximum [Member] | |||||
Payments for commissions | $ 6,000 | ||||
3% Of Employee Contribution [Member] | |||||
Percentage of employer matching contribution | 100.00% | ||||
2% Of Employee Contribution [Member] | |||||
Percentage of employer matching contribution | 50.00% | ||||
Employee Retirement Plan [Member] | |||||
Description of matching contributions to employees | 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. |
Commitments and Contingencies -
Commitments and Contingencies - Schedule of Future Minimum Lease Payments (Details) | Jun. 30, 2017USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
2017(period from July 1, 2017 to December 31, 2017) | $ 223,203 |
2,018 | 451,248 |
2,019 | 457,327 |
2,020 | 154,131 |
Net lease commitments | $ 1,285,909 |
Commitments and Contingencies51
Commitments and Contingencies - Schedule of Future Sponsorship Fee (Details) | 6 Months Ended |
Jun. 30, 2017USD ($) | |
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 | 6 Months Ended | ||||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | Dec. 31, 2016 | Dec. 31, 2015 | |
Stock based compensation | $ 115,756 | $ 355,236 | $ 502,789 | $ 781,066 | ||
Number of common stock authorized to grant | 1,925,000 | 1,925,000 | ||||
Contractual terms | 10 years | |||||
Options, available for grant | 8,363 | 8,363 | ||||
Aggregate intrinsic value of options outstanding | $ 0 | $ 0 | ||||
Intrinsic value of options exercisable | $ 0 | 0 | ||||
Intrinsic value of options exercised | ||||||
Unrecognized stock compensation expense | 41,163 | |||||
Non Vested Restricted Stock Option [Member] | ||||||
Unrecognized stock compensation expense | $ 1,674,139 | |||||
2005 Stock Option and Restricted Stock Plan [Member] | ||||||
Number of common stock shares reserved for awards which unavailable for issuance | 28 | |||||
2005 Stock Option Plan [Member] | ||||||
Unexercised and outstanding stock options | 26,813 | |||||
2006 Stock Option and Restricted Stock Plan [Member] | ||||||
Number of common stock shares reserved for awards which unavailable for issuance | 4,505 | |||||
2007 Stock Option Plan [Member] | ||||||
Number of common stock shares reserved for awards which unavailable for issuance | 62,080 | 62,080 | ||||
2007 Stock Option Plan [Member] | During 2017 [Member] | ||||||
Number of common stock shares reserved for awards which unavailable for issuance | 48,500 | 48,500 | ||||
Unexercised and outstanding stock options | 41,875 | 41,875 |
Stock-Based Compensation - Summ
Stock-Based Compensation - Summary of Stock Options Outstanding (Details) | 6 Months Ended |
Jun. 30, 2017$ / sharesshares | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Options Outstanding, Beginning balance | shares | 362,440 |
Options Granted | shares | |
Options Exercised | shares | |
Options Forfeited | shares | (52,609) |
Options Outstanding, Ending balance | shares | 309,831 |
Options Exercisable, Ending balance | shares | 301,031 |
Weighted-average fair value for options granted during the period at fair value | shares | |
Weighted Average Exercise Price, Outstanding, Beginning balance | $ / shares | $ 18.46 |
Weighted Average Exercise Price, Granted | $ / shares | |
Weighted Average Exercise Price, Exercised | $ / shares | |
Weighted Average Exercise Price, Forfeited | $ / shares | (12.02) |
Weighted Average Exercise Price, Outstanding, Ending balance | $ / shares | 19.37 |
Weighted Average Exercise Price, Exercisable, Ending balance | $ / shares | 19.84 |
Weighted-average fair value for options granted during the period at fair value | $ / shares |
Stock-Based Compensation - Shar
Stock-Based Compensation - Shares Authorized Under Stock Option Plans by Exercise Price Range (Details) | 6 Months Ended |
Jun. 30, 2017$ / sharesshares | |
Number of options, Outstanding | 309,831 |
Weighted average remaining contractual life, Outstanding options | 3 years 9 months 18 days |
Number of options, Exercisable | 301,031 |
Weighted average remaining contractual life, Exercisable options | 3 years 9 months 18 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 | 98,124 |
Weighted average remaining contractual life, Outstanding options | 7 years |
Number of options, Exercisable | 89,324 |
Weighted average remaining contractual life, Exercisable options | 7 years |
Exercise Price Range Two [Member] | |
Exercise price range, lower limit | $ / shares | $ 4 |
Exercise price range, upper limit | $ / shares | $ 6.99 |
Number of options, Outstanding | 34,125 |
Weighted average remaining contractual life, Outstanding options | 5 years 2 months 12 days |
Number of options, Exercisable | 34,125 |
Weighted average remaining contractual life, Exercisable options | 5 years 2 months 12 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 | 18,444 |
Weighted average remaining contractual life, Outstanding options | 4 years 2 months 12 days |
Number of options, Exercisable | 18,444 |
Weighted average remaining contractual life, Exercisable options | 4 years 2 months 12 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 | 6,200 |
Weighted average remaining contractual life, Outstanding options | 1 year 10 months 25 days |
Number of options, Exercisable | 6,200 |
Weighted average remaining contractual life, Exercisable options | 1 year 10 months 25 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 | 51,438 |
Weighted average remaining contractual life, Outstanding options | 3 years 2 months 12 days |
Number of options, Exercisable | 51,438 |
Weighted average remaining contractual life, Exercisable options | 3 years 2 months 12 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 | |
Weighted average remaining contractual life, Outstanding options | 0 years |
Number of options, Exercisable | |
Weighted average remaining contractual life, Exercisable options | 0 years |
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 | 2 years 1 month 6 days |
Number of options, Exercisable | 6,500 |
Weighted average remaining contractual life, Exercisable options | 2 years 4 months 24 days |
Exercise Price Range Eight [Member] | |
Exercise price range, lower limit | $ / shares | $ 30 |
Exercise price range, upper limit | $ / shares | $ 55 |
Number of options, Outstanding | 95,000 |
Weighted average remaining contractual life, Outstanding options | 6 months |
Number of options, Exercisable | 95,000 |
Weighted average remaining contractual life, Exercisable options | 6 months |
Stock-Based Compensation - Su55
Stock-Based Compensation - Summary of Restricted Stock Activity (Details) - Restricted Stock [Member] | 6 Months Ended |
Jun. 30, 2017$ / sharesshares | |
Restricted stock, Non-vested Beginning Balance | shares | 495,300 |
Restricted stock, Granted | shares | 200,000 |
Restricted stock, Vested | shares | (136,750) |
Restricted stock, Forfeited | shares | (9,200) |
Restricted stock, Non-vested Ending Balance | shares | 549,350 |
Weighted average grant date fair value, Non-vested Beginning Balance | $ / shares | $ 5.75 |
Weighted average grant date fair value, Granted | $ / shares | 5.10 |
Weighted average grant date fair value, Vested | $ / shares | (6.47) |
Weighted average grant date fair value, Forfeited | $ / shares | (6.47) |
Weighted average grant date fair value, Non-vested Ending Balance | $ / shares | $ 5.78 |
Stock-Based Compensation - Sche
Stock-Based Compensation - Schedule of Non-vested Balance of Restricted Stock (Details) - Restricted Stock [Member] | Jun. 30, 2017shares |
2017 (July 1 through December 31) | 55,300 |
2,018 | 183,450 |
2,019 | 289,100 |
2,020 | 21,500 |
Common Stock Purchase Warrant57
Common Stock Purchase Warrants (Details Narrative) | 6 Months Ended |
Jun. 30, 2017USD ($)$ / sharesshares | |
Warrant [Member] | |
Warrants outstanding intrinsic value | $ | $ 0 |
Warrant [Member] | |
Warrants, weighted average remaining term | 30 months |
Common Stock Purchase Warrants [Member] | |
Exercisable warrants issued to purchase number of common stock | shares | 2,579,290 |
Warrant expiration term | July 22, 2017 through June 30, 2022 |
Common Stock Purchase Warrants [Member] | Minimum [Member] | |
Warrant, exercise per share | $ 3.65 |
Common Stock Purchase Warrants [Member] | Maximum [Member] | |
Warrant, exercise per share | $ 16.50 |
Common Stock Purchase Warrant58
Common Stock Purchase Warrants - Summary of Warrant Activity (Details) - Warrant [Member] | 6 Months Ended |
Jun. 30, 2017$ / sharesshares | |
Warrants, Vested, Beginning balance | shares | 2,379,290 |
Warrants, Granted | shares | |
Warrants, Exercised | shares | |
Warrants, Cancelled | shares | |
Weighted average exercise price, Vested, Beginning balance | $ 10.47 |
Weighted average exercise price, Granted | 3.65 |
Weighted average exercise price, Exercised | |
Weighted average exercise price, Cancelled | |
Weighted average exercise price, Vested, Ending balance | $ 9.94 |
Common Stock Purchase Warrant59
Common Stock Purchase Warrants - Summary of Range of Exercise Prices and Weighted Average Remaining Contractual Life of Warrants (Details) - $ / shares | 6 Months Ended | |
Jun. 30, 2017 | Dec. 31, 2016 | |
Outstanding and exercisable warrants, Exercise price | ||
Warrant [Member] | ||
Outstanding and exercisable warrants, Number of options | 2,379,290 | |
Outstanding and exercisable warrants, Weighted average remaining contractual life | 2 years 6 months | |
Warrant [Member] | Exercise Price Range One [Member] | ||
Outstanding and exercisable warrants, Exercise price | $ 3.65 | |
Outstanding and exercisable warrants, Number of options | 200,000 | |
Outstanding and exercisable warrants, Weighted average remaining contractual life | 5 years | |
Warrant [Member] | Exercise Price Range Two [Member] | ||
Outstanding and exercisable warrants, Exercise price | $ 3.65 | |
Outstanding and exercisable warrants, Number of options | 12,200 | |
Outstanding and exercisable warrants, Weighted average remaining contractual life | 2 years 2 months 12 days | |
Warrant [Member] | Exercise Price Range Three [Member] | ||
Outstanding and exercisable warrants, Exercise price | $ 5 | |
Outstanding and exercisable warrants, Number of options | 800,000 | |
Outstanding and exercisable warrants, Weighted average remaining contractual life | 4 years 6 months | |
Warrant [Member] | Exercise Price Range Four [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 | 1 year 4 months 24 days | |
Warrant [Member] | Exercise Price Range Five [Member] | ||
Outstanding and exercisable warrants, Exercise price | $ 13.43 | |
Outstanding and exercisable warrants, Number of options | 639,824 | |
Outstanding and exercisable warrants, Weighted average remaining contractual life | 1 month 6 days | |
Warrant [Member] | Exercise Price Range Six [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 | 3 years 6 months | |
Warrant [Member] | Exercise Price Range Seven [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 | 3 years | |
Warrant [Member] | ||
Outstanding and exercisable warrants, Number of options | 2,379,290 |
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 | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | Dec. 31, 2016 | |
Earnings Per Share [Abstract] | |||||
Numerator for basic and diluted income per share - Net loss | $ (2,326,523) | $ (2,865,084) | $ (4,359,478) | $ (5,178,209) | $ 12,700,000 |
Denominator for basic loss per share - weighted average shares outstanding | 5,679,731 | 5,319,259 | 5,654,755 | 5,282,514 | |
Dilutive effect of shares issuable under stock options and warrants outstanding | |||||
Denominator for diluted loss per share - adjusted weighted average shares outstanding | 5,679,731 | 5,319,259 | 5,654,755 | 5,282,514 | |
Net loss per share: Basic | $ (0.41) | $ (0.54) | $ (0.77) | $ (0.98) | |
Net loss per share: Diluted | $ (0.41) | $ (0.54) | $ (0.77) | $ (0.98) |
Subsequent Events (Details Narr
Subsequent Events (Details Narrative) - shares | Aug. 14, 2017 | Jun. 30, 2017 | Dec. 31, 2016 |
Capital stock stock shares authorized classified as common stock | 25,000,000 | 25,000,000 | |
Subsequent Event [Member] | |||
Number of shares reserved for issuance under plan | 25,000,000 | ||
Subsequent Event [Member] | 2016 Annual Meeting [Member] | |||
Number of shares reserved for issuance under plan | 10,000,000 | ||
Subsequent Event [Member] | Stock Option and Restricted Stock Plan [Member] | |||
Number of shares reserved for issuance under plan | 500,000 | ||
Subsequent Event [Member] | Minimum [Member] | |||
Capital stock stock shares authorized classified as common stock | 9,375,000 | ||
Subsequent Event [Member] | Minimum [Member] | 2016 Annual Meeting [Member] | |||
Number of shares reserved for issuance under plan | 25,000,000 | ||
Subsequent Event [Member] | Maximum [Member] | |||
Capital stock stock shares authorized classified as common stock | 25,000,000 | ||
Subsequent Event [Member] | Maximum [Member] | 2016 Annual Meeting [Member] | |||
Number of shares reserved for issuance under plan | 35,000,000 |