Document_and_Entity_Informatio
Document and Entity Information | 3 Months Ended | |
Mar. 31, 2014 | 14-May-14 | |
Document And Entity Information | ' | ' |
Entity Registrant Name | 'Entia Biosciences, Inc. | ' |
Entity Central Index Key | '0001408299 | ' |
Document Type | '10-Q | ' |
Document Period End Date | 31-Mar-14 | ' |
Amendment Flag | 'false | ' |
Current Fiscal Year End Date | '--12-31 | ' |
Is Entity a Well-known Seasoned Issuer? | 'No | ' |
Is Entity a Voluntary Filer? | 'No | ' |
Is Entity's Reporting Status Current? | 'Yes | ' |
Entity Filer Category | 'Smaller Reporting Company | ' |
Entity Common Stock, Shares Outstanding | ' | 8,437,345 |
Document Fiscal Period Focus | 'Q1 | ' |
Document Fiscal Year Focus | '2014 | ' |
CONSOLIDATED_BALANCE_SHEETS
CONSOLIDATED BALANCE SHEETS (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
Current Assets: | ' | ' |
Cash | $23,144 | $36,886 |
Accounts receivable, net | 36,188 | 11,197 |
Inventory, net | 127,468 | 138,941 |
Interest income receivable | 0 | 3,965 |
Prepaid expenses | 28,602 | 34,462 |
Other current assets | 920 | 0 |
Total Current Assets | 216,322 | 225,451 |
Property and Equipment, net | 56,208 | 62,145 |
Patents and license, net | 343,430 | 343,498 |
Total Assets | 615,960 | 631,094 |
Current Liabilities: | ' | ' |
Accounts payable and accrued expenses | 1,349,677 | 1,157,717 |
Short-term convertible notes payable, net of discount related-party | 0 | 23,427 |
Short-term convertible notes payable, net of discount | 435,798 | 373,644 |
Capital lease payable | 1,403 | 2,105 |
Notes payable | 44,002 | 23,788 |
Total Current Liabilities | 1,830,880 | 1,580,681 |
Long Term Liabilities: | ' | ' |
Capital lease payable | 15,550 | 0 |
Total Long Term Liabilities | 15,550 | 0 |
Total Liabilities | 1,846,430 | 1,580,681 |
Stockholders' Equity (Deficit): | ' | ' |
Preferred stock, $.001 par value, 5,000,000 shares authorized, Series A preferred stock, 350,000 shares designated, 281,969 and 281,969 shares issued and outstanding, resepecively, aggregate liquidation value of $1,409,845 and $1,409,845 respectively | 282 | 282 |
Common stock, $.001 par value, 150,000,000 shares authorized, 8,437,345 and 8,297,645 shares issued and outstanding | 8,438 | 8,298 |
Stock subscription receivable | 0 | -49,000 |
Additional paid-in capital | 8,084,483 | 7,793,760 |
Deferred compensation | -267,934 | -182,576 |
Accumulated deficit | -9,055,739 | -8,520,351 |
Total Stockholders' Equity (Deficit) | -1,230,470 | -949,587 |
Total Liabilities and Stockholders' Equity (Deficit) | $615,960 | $631,094 |
CONSOLIDATED_BALANCE_SHEETS_Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
Preferred Stock | ' | ' |
Preferred stock, par value | $0.00 | $0.00 |
Preferred stock, authorized | 5,000,000 | 5,000,000 |
Preferred stock Series A, designated | 350,000 | 350,000 |
Preferred stock, issued | 281,969 | 281,969 |
Preferred stock, aggregate liquidation value | $1,409,845 | $1,409,845 |
Common Stock | ' | ' |
Common Stock, par value | $0.00 | $0.00 |
Common stock, authorized | 150,000,000 | 150,000,000 |
Common stock, Issued | 8,437,345 | 8,297,645 |
CONSOLIDATED_STATEMENTS_OF_OPE
CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
REVENUES | ' | ' |
REVENUES | $162,568 | $96,256 |
COST OF GOODS SOLD | 59,822 | 28,579 |
GROSS PROFIT | 102,746 | 67,677 |
OPERATING EXPENSES | ' | ' |
Advertising and promotion | 21,950 | 46,396 |
Professional fees | 48,761 | 46,937 |
Consulting fees | 102,529 | 87,338 |
General and administrative | 374,209 | 313,117 |
Total Operating Expenses | 547,449 | 493,788 |
LOSS FROM OPERATIONS | -444,703 | -426,111 |
OTHER INCOME (EXPENSES) | ' | ' |
Interest income | 0 | 2,450 |
Interest expense | -77,718 | -29,811 |
Total Other Income (Expenses) | -12,967 | 0 |
NET LOSS | ($535,388) | ($453,472) |
NET LOSS PER COMMON SHARE | ' | ' |
- BASIC AND DILUTED: | $ (0.06) | ($0.06) |
Weighted common shares outstanding | ' | ' |
- basic and diluted | 8,327,196 | 7,444,591 |
CONSOLIDATED_STATEMENT_OF_STOC
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT) (USD $) | Preferred Stock | Common Stock | Additional Paid In Capital | Deferred Compensation | Stock Subscriptions | Accumulated Deficit | Total |
Beginning Balance, Amount at Dec. 31, 2012 | $110 | $7,444 | $5,115,587 | ($394,510) | ($49,000) | ($5,327,924) | ($648,293) |
Beginning Balance, Shares at Dec. 31, 2012 | 109,900 | 7,444,591 | ' | ' | ' | ' | ' |
Issuance of preferred stock for cash, Shares | 140,175 | ' | ' | ' | ' | ' | ' |
Issuance of preferred stock for cash, Amount | 140 | ' | 700,735 | ' | ' | ' | 700,875 |
Issuance of preferred stock for cancellation of debt, Shares | 3,162 | ' | ' | ' | ' | ' | ' |
Issuance of preferred stock for cancellation of debt, Amount | 3 | ' | 15,747 | ' | ' | ' | 15,750 |
Deemed dividend related to beneficial conversion feature of convertible preferred stock, Shares | ' | ' | 87,600 | ' | ' | ' | -87,600 |
Issuance of preferred stock for conversion of convertible notes payable, Shares | 23,332 | ' | ' | ' | ' | ' | ' |
Issuance of preferred stock for conversion of convertible notes payable, Amount | 23 | ' | 116,629 | ' | ' | ' | 116,652 |
Issuance of preferred stock for conversion of accounts payable, Shares | 30,400 | ' | ' | ' | ' | ' | ' |
Issuance of preferred stock for conversion of accounts payable, Amount | 31 | ' | 151,970 | ' | ' | ' | 152,001 |
Issuance of warrants in connection with convertible notes payable | ' | ' | 16,400 | ' | ' | ' | 16,400 |
Beneficial conversion feature in connection with convertible notes payable | ' | ' | 64,956 | ' | ' | ' | 64,956 |
Issuance of common stock for license agreement, Shares | ' | 200,000 | ' | ' | ' | ' | ' |
Issuance of common stock for license agreement, Amount | ' | 200 | 215,329 | ' | ' | ' | 215,529 |
Issuance of common stock for conversion of preferred stock, Shares | -25,000 | 250,000 | ' | ' | ' | ' | ' |
Issuance of common stock for conversion of preferred stock, Amount | -25 | 250 | -225 | ' | ' | ' | ' |
Issuance of common stock for conversion of accrued compensation, Shares | ' | 273,158 | ' | ' | ' | ' | ' |
Issuance of common stock for conversion of accrued compensation, Amount | ' | 274 | 129,727 | ' | ' | ' | 130,001 |
Issuance of common stock for services, Shares | ' | 129,896 | ' | ' | ' | ' | ' |
Issuance of common stock for services, Amount | ' | 130 | 83,270 | ' | ' | ' | 83,400 |
Issuance of common stock and warrants for cash, Shares | ' | ' | ' | ' | ' | ' | 4,607,050 |
Stock compensation, Amount | ' | ' | 413,921 | ' | ' | ' | 413,921 |
Issuance of warrants for services | ' | ' | 584,108 | -584,108 | ' | ' | ' |
Issuance of warrants for extension on debt | ' | ' | 98,006 | ' | ' | ' | 98,006 |
Amortization of deferred compensation | ' | ' | ' | 796,042 | ' | ' | 796,042 |
Net loss | ' | ' | ' | ' | ' | -3,104,827 | -3,104,827 |
Ending Balance, amount at Dec. 31, 2013 | 282 | 8,298 | 7,793,760 | -182,576 | -49,000 | -8,520,351 | -949,587 |
Ending Balance, shares at Dec. 31, 2013 | 281,969 | 8,297,645 | ' | ' | ' | ' | ' |
Issuance of preferred stock for conversion of accounts payable, Shares | ' | 6,717 | ' | ' | ' | ' | ' |
Issuance of preferred stock for conversion of accounts payable, Amount | ' | 7 | 4,494 | ' | ' | ' | 4,501 |
Issuance of warrants in connection with convertible notes payable | ' | ' | 9,540 | ' | ' | ' | 9,540 |
Beneficial conversion feature in connection with convertible notes payable | ' | ' | 30,414 | ' | ' | ' | 30,414 |
Issuance of common stock for future services, Shares | ' | 68,283 | ' | ' | ' | ' | ' |
Issuance of common stock for future services, Amount | ' | 68 | 44,182 | -44,250 | ' | ' | 44,250 |
Issuance of common stock for services, Shares | ' | 64,700 | ' | ' | ' | ' | ' |
Issuance of common stock for services, Amount | ' | 65 | 39,491 | ' | ' | ' | 39,556 |
Receipt of stock subcription receivable, less write-off of $9,000 | ' | ' | ' | ' | 49,000 | ' | 49,000 |
Issuance of warrants for services | ' | ' | 96,660 | -96,660 | ' | ' | ' |
Amortization of deferred compensation | ' | ' | ' | 55,552 | ' | ' | 55,552 |
Net loss | ' | ' | ' | ' | ' | -535,388 | -535,388 |
Ending Balance, amount at Mar. 31, 2014 | $282 | $8,438 | $8,084,483 | ($267,934) | $0 | ($9,055,739) | ($1,230,470) |
Ending Balance, shares at Mar. 31, 2014 | 281,969 | 8,437,345 | ' | ' | ' | ' | ' |
CONSOLIDATED_STATEMENT_OF_STOC1
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT) (Parenthetical) (USD $) | 3 Months Ended |
Mar. 31, 2014 | |
Statement of Stockholders' Equity [Abstract] | ' |
Write off amount on stock subscription receivable | $9,000 |
CONSOLIDATED_STATEMENTS_OF_CAS
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ' | ' |
Net loss | ($535,388) | ($453,472) |
Adjustments to reconcile net loss to net cash used in operating activities: | ' | ' |
Depreciation/amortization | 9,786 | 6,035 |
Amortization of discount on convertible notes | 67,142 | 23,066 |
Stock-based compensation | 161,140 | 140,904 |
Loss on sale of stock subscription receivable | 12,965 | 0 |
Changes in operating assets and liabilities: | ' | ' |
Accounts receivable | -24,991 | -13,260 |
Inventory | 11,473 | 13,433 |
Prepaid expenses | 10,611 | 2,913 |
Other current assets | -920 | -2,450 |
Accounts payable and accrued expenses | 196,460 | 162,732 |
NET CASH USED IN OPERATING ACTIVITIES | -91,722 | -120,099 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ' | ' |
Purchase of property and equipment | 0 | -30,815 |
Acquisition of patents and patents pending (net) | -3,781 | -10,810 |
NET CASH USED IN INVESTING ACTIVITIES | -3,781 | -41,625 |
CASH FLOWS FROM FINANCING ACTIVITIES: | ' | ' |
Proceeds from issuance of common stock, preferred stock and warrants | 0 | 187,000 |
Proceeds from convertible notes payable short-term | 92,000 | 0 |
Payment on convertible note payable - related party | -40,000 | 0 |
Proceeds from sale of stock subscription receivable | 40,000 | 0 |
Payment on notes payable | -10,239 | -4,948 |
NET CASH PROVIDED BY FINANCING ACTIVITIES | 81,761 | 182,052 |
NET CHANGE IN CASH | -13,742 | 20,328 |
Cash at beginning of period | 36,886 | ' |
Cash at end of period | 23,144 | 33,409 |
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION: | ' | ' |
Interest paid | 758 | 581 |
SUPPLEMENTAL DISCLOSURE OF NONCASH FLOWS FINANCING AND INVESTING ACTIVITIES: | ' | ' |
Stock issued for accounts payable | 4,501 | 0 |
Conversion of notes payable and accrued interest to preferred stock | 0 | 15,750 |
Stock for services | 39,556 | 0 |
Common stock issued for future services | $44,250 | $0 |
NOTE_1_ORGANIZATION_AND_OPERAT
NOTE 1 - ORGANIZATION AND OPERATIONS | 3 Months Ended |
Mar. 31, 2014 | |
Accounting Policies [Abstract] | ' |
NOTE 1 - ORGANIZATION AND OPERATIONS | ' |
NOTE 1 – ORGANIZATION AND OPERATIONS | |
Generic Marketing Services, Inc. was incorporated on July 19, 2007 under the laws of the State of Nevada as a subsidiary of Basic Services, Inc., also a Nevada corporation. On December 31, 2007, Basic Services spun off Generic Marketing Services. On October 8, 2008, Generic Marketing Services changed its name to Total Nutraceutical Solutions, Inc. (TNS, the Company, us, we, or our). We engage in the distribution of organic dietary supplement nutraceutical products in the United States of America. We are also engaged in the discovery, scientific evaluation and marketing of natural formulations that can be used in medical foods, nutraceuticals, cosmetics and other products developed and sold by Entia and by third parties. | |
On January 9, 2012, the amendment to our Articles of Incorporation involving the name change from Total Nutraceutical Solutions, Inc. to Entia Biosciences, Inc. (“Entia”) became effective with the Secretary of State of Nevada. We also filed articles of incorporation for a wholly owned subsidiary of Entia, with such subsidiary to be named Total Nutraceutical Solutions, Inc. in January 2012. | |
We have a history of incurring net losses and net operating cash flow deficits. We are also developing new technologies related to our organic nutraceutical products. At March 31, 2014, we had cash and cash equivalents of $23,144. These conditions raise substantial doubt about our ability to continue as a going concern. As a result, we anticipate that our cash and cash equivalent balances, anticipated cash flows from operations and anticipated operating cash flows will be sufficient to meet our cash requirements through June 2014. | |
In order for us to continue as a going concern beyond this point and ultimately to achieve profitability, we may be required to obtain capital from external sources, increase revenues and reduce operating costs. The issuance of equity securities will also cause dilution to our shareholders. If external financing sources of financing are not available or are inadequate to fund our operations, we will be required to reduce operating costs including personnel costs, which could jeopardize our future strategic initiatives and business plans. The accompanying consolidated financial statements have been prepared assuming that the company continues as a going concern. | |
The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the matters discussed herein. | |
NOTE_2_SUMMARY_OF_SIGNIFICANT_
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended | ||||||
Mar. 31, 2014 | |||||||
Accounting Policies [Abstract] | ' | ||||||
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ' | ||||||
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |||||||
Basis of presentation and principles of consolidation | |||||||
The accompanying consolidated unaudited interim financial statements and related notes have been prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP) for interim financial information, and with the rules and regulations of the United states Securities and Exchange Commission (“SEC”) to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim financial statements furnished reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented. Unaudited interim results are not necessarily indicative of the results for the full year. These unaudited interim financial statements should be read in conjunction with the financial statements of the Company for the year ended December 31, 2013 and notes thereto contained in the Company’s Annual Report on Form 10-K filed with the SEC. | |||||||
All intercompany accounts have been eliminated for the purpose of the consolidated financial statement presentation. | |||||||
Use of estimates | |||||||
The preparation of consolidated financial statements in conformity with U.S. GAAP 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. | |||||||
Cash | |||||||
We consider all highly liquid, short-term investments with original maturities of three months or less when purchased to be cash equivalents. | |||||||
Accounts receivable | |||||||
Accounts receivable are recorded at the invoiced amount, net of allowance for doubtful accounts. The allowance for doubtful accounts is our best estimate of the amount of probable credit losses based on specific identification of accounts in our existing accounts receivable. Outstanding account balances are reviewed individually for collectibility. We determine the allowance based on historical write-off experience, customer specific facts and economic conditions. Bad debt expense is included in general and administrative expenses, if any. We consider all accounts greater than 30 days old to be past due. Account balances are charged off against allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The allowance for doubtful accounts was $2,526 at both March 31, 2014 and December 31, 2013. | |||||||
Inventory | |||||||
Inventory, which consists primarily of raw materials to be used in the production of our dietary supplement products, is stated at the lower of cost or market using the first-in, first-out method. We regularly review our inventory on hand and, when necessary, record a provision for excess or obsolete inventory. | |||||||
Property and equipment | |||||||
Property and equipment are recorded at cost. Additions and improvements that increase the value or extend the life of an asset are capitalized. Maintenance and repairs are expensed as incurred. Upon sale or retirement of property and equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in the consolidated statement of operations. Depreciation is computed on a straight-line basis over the following estimated useful lives of the assets: | |||||||
Office equipment | 3 years | ||||||
Production equipment | 5 to 7 years | ||||||
Equipment under capital lease | 5 to 7 years | ||||||
Leasehold improvements | Lesser of lease term or useful life of improvement | ||||||
Patents | |||||||
Patents, once issued or purchased, are amortized using the straight-line method over their economic remaining useful lives. All internally developed process costs incurred to the point when a patent application is to be filed are expensed as incurred and classified as research and development costs. Patent application costs, generally legal costs, are capitalized pending disposition of the individual patent application, and are subsequently either amortized based on the initial patent life granted, generally 15 to 20 years for domestic patents and 5 to 20 years for foreign patents, or expensed if the patent application is rejected. The costs of defending and maintaining patents are expensed as incurred. Upon becoming fully amortized, the related cost and accumulated amortization are removed from the accounts. | |||||||
Impairment of long-lived assets | |||||||
Our long-lived assets, which include property and equipment, patents and licenses of patents, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. | |||||||
We assess the recoverability of our long-lived assets by comparing the projected undiscounted net cash flows associated with the related long-lived asset or group of long-lived assets over their remaining estimated useful lives against their respective carrying amounts. Impairment, if any, is based on the excess of the carrying amount over the fair value of those assets. Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable. If long-lived assets are determined to be recoverable, but the newly determined remaining estimated useful lives are shorter than originally estimated, the net book values of the long-lived assets are depreciated over the newly determined remaining estimated useful lives. | |||||||
Discount on convertible notes payable | |||||||
We allocate the proceeds received from convertible notes between convertible notes payable and warrants, if applicable. The resulting discount for warrants is amortized using the effective interest method over the life of the debt instrument. After allocating a portion of the proceeds to the warrants, the effective conversion price of the convertible note payable can be determined. If the effective conversion price is lower than the market price at the date of issuance, a beneficial conversion feature is recorded as an additional discount to the convertible note payable. The beneficial conversion feature discount is amortized using the effective interest method over the life of the debt instrument. The amortization is recorded as interest expense on the consolidated statements of operations. | |||||||
Fair value of financial instruments | |||||||
The carrying amounts of our financial assets and liabilities, such as cash, accounts receivable and accounts payable, approximate their fair values (determined based on level 1 inputs in the fair value hierarchy) because of the short maturity of these instruments. Due to conversion features and other terms, it is not practical to estimate the fair value of notes payable and convertible notes. | |||||||
Fair value measurements | |||||||
We measure fair value as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or liability. We utilize a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: | |||||||
Level 1 | Quoted market prices available in active markets for identical assets or liabilities as of the reporting date. | ||||||
Level 2 | Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. | ||||||
Level 3 | Unobservable inputs where there is little or no market data, which require the reporting entity to develop its own assumptions. | ||||||
We do not have any assets or liabilities measured at fair value on a recurring or a non-recurring basis. Consequently, we did not have any fair value adjustments for assets and liabilities measured at fair value at March 31, 2014 or December 31, 2013, nor any gains or losses reported in the consolidated statement of operations that are attributable to the change in unrealized gains or losses relating to those assets and liabilities still held at the reporting date for the periods ended March 31, 2014 and December 31, 2013. | |||||||
Revenue recognition | |||||||
We recognize revenue when (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services have been performed, (iii) amounts are fixed or determinable and (iv) collectibility of amounts is reasonably assured. | |||||||
Revenues from the sale of products, including shipping and handling fees but excluding statutory taxes collected from customers, as applicable, are recognized when shipment has occurred. We sell our products directly to customers. Persuasive evidence of an arrangement is demonstrated via order and invoice, product delivery is evidenced by a bill of lading from the third party carrier and title transfers upon shipment, the sales price to the customer is fixed upon acceptance of the order and there is no separate sales rebate, discount, or volume incentive. | |||||||
Shipping and handling costs | |||||||
Amounts charged to customers for shipping products are included in revenues and the related costs are classified in cost of goods sold as incurred. | |||||||
Advertising and promotion costs | |||||||
Costs associated with the advertising and promotion of our products are expensed as incurred. | |||||||
Equity instruments issued to parties other than employees for acquiring goods or services | |||||||
We account for all transactions in which goods or services are the consideration received for the issuance of equity instruments based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. The measurement date used to determine the fair value of the equity instrument issued is the earlier of the date on which the performance is complete or the date on which it is probable that performance will occur. Currently such transactions are primarily awards of warrants to purchase common stock. | |||||||
The fair value of each warrant award is estimated on the date of grant using a Black-Scholes option-pricing valuation model. | |||||||
The assumptions used to determine the fair value of our warrants are as follows: | |||||||
- | The expected life of warrants issued represents the period of time the warrants are expected to be outstanding. | ||||||
- | The expected volatility is generally based on the historical volatility of comparable companies’ stock over the contractual life of the warrant. | ||||||
- | The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods within the contractual life of the warrant. | ||||||
- | The expected dividend yield is based on our current dividend yield as the best estimate of projected dividend yield for periods within the contractual life of the warrant. | ||||||
Income taxes | |||||||
We recognize deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in our consolidated statements of income in the period that includes the enactment date. | |||||||
We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in our consolidated financial statements from such a position should be measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. Should they occur, our policy is to classify interest and penalties related to tax positions as income tax expense. | |||||||
We did not record an income tax provision for the three months ended March 31, 2014 and 2013 as we had a net taxable loss in the periods. | |||||||
Net loss per common share | |||||||
Basic and diluted net loss per share has been computed by dividing our net loss by the weighted average number of common shares issued and outstanding. Convertible preferred stock, options and warrants to purchase our common stock as well as debt which are convertible into common stock are anti-dilutive and therefore are not included in the determination of the diluted net loss per share for three months ended March 31, 2014 and 2013. The following table presents a reconciliation of basic loss per share and excluded dilutive securities: | |||||||
For the Three Months Ended March 31, | |||||||
2014 | 2013 | ||||||
Numerator: | |||||||
Net loss | ($535,388) | ($453,472) | |||||
Denominator: | |||||||
Weighted-average common shares outstanding | 8,327,196 | 7,444,591 | |||||
Basic and diluted net loss per share | ($0.06) | ($0.06) | |||||
Common stock warrants | 4,202,818 | 2,536,726 | |||||
Series A convertible preferred stock | 2,819,690 | 1,504,620 | |||||
Stock options | 2,402,099 | 1,257,099 | |||||
Convertible debt including interest | 885,557 | 938,512 | |||||
Excluded dilutive securities | 10,310,164 | 6,236,957 | |||||
Reclassifications | |||||||
Certain reclassifications have been made to prior period financial statements and footnotes in order to conform to the current period's presentation. | |||||||
Segments | |||||||
We have determined that we operate in one segment for financial reporting purposes. | |||||||
Recently issued accounting pronouncements | |||||||
Management does not believe that any recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying financial statements. | |||||||
NOTE_3_INVENTORY
NOTE 3 - INVENTORY | 3 Months Ended | |||||
Mar. 31, 2014 | ||||||
Inventory Disclosure [Abstract] | ' | |||||
NOTE 3 - INVENTORY | ' | |||||
NOTE 3 – INVENTORY | ||||||
Inventory consists of the following: | ||||||
March 31, | December 31, | |||||
2014 | 2013 | |||||
Raw materials | $ 236,038 | $ 240,750 | ||||
Finished goods | 42,494 | 49,255 | ||||
278,532 | 290,005 | |||||
Less: reserve for excess and obsolete inventory | -151,064 | -151,064 | ||||
$ 127,468 | $ 138,941 | |||||
NOTE_4_PROPERTY_AND_EQUIPMENT
NOTE 4 - PROPERTY AND EQUIPMENT | 3 Months Ended | |||||
Mar. 31, 2014 | ||||||
Property, Plant and Equipment [Abstract] | ' | |||||
NOTE 4 - PROPERTY AND EQUIPMENT | ' | |||||
NOTE 4 – PROPERTY AND EQUIPMENT | ||||||
Property and equipment, stated at cost, consists of the following: | ||||||
March 31, | December 31, | |||||
2014 | 2013 | |||||
Office equipment | $ 26,284 | $ 26,284 | ||||
Production equipment | 83,615 | 83,615 | ||||
Leasehold improvements | 16,328 | 16,328 | ||||
126,227 | 126,227 | |||||
Less: accumulated depreciation | -70,019 | -64,082 | ||||
$ 56,208 | $ 62,145 | |||||
NOTE_5_PATENTS_AND_LICENSES_NE
NOTE 5 - PATENTS AND LICENSES, NET | 3 Months Ended | |||||
Mar. 31, 2014 | ||||||
Notes to Financial Statements | ' | |||||
NOTE 5 - PATENTS AND LICENSES, NET | ' | |||||
NOTE 5 - PATENTS AND LICENSES, NET | ||||||
Our identifiable long-lived intangible assets are patents and prepaid licenses. Patent and license amortization is $3,849 and $790 for the three months ended March 31, 2014 and 2013, respectively. | ||||||
The licenses are being amortized over an economic useful life of 17 years. The gross carrying amounts and accumulated amortization related to these intangible assets consist of the following at: | ||||||
March 31, | December 31, | |||||
2014 | 2013 | |||||
Licenses and amortizable patents | $ 234,324 | $ 234,324 | ||||
Unamortized patents | 129,083 | 125,301 | ||||
Accumulated amortization | -19,977 | -16,127 | ||||
Patents and Licenses, net | $ 343,430 | $ 343,498 | ||||
NOTE_6_ACCRUED_EXPENSES
NOTE 6 - ACCRUED EXPENSES | 3 Months Ended | |||
Mar. 31, 2014 | ||||
Accounting Policies [Abstract] | ' | |||
NOTE 6 - ACCRUED EXPENSES | ' | |||
NOTE 6 – ACCRUED EXPENSES | ||||
Accrued expenses (included with accounts payable) consists of the following at: | ||||
March 31, | December 31, | |||
2014 | 2013 | |||
Executive compensation | $595,535 | $476,368 | ||
Other accruals | 77,939 | 60,671 | ||
$673,474 | $537,039 | |||
NOTE_7_NOTES_PAYABLE
NOTE 7 - NOTES PAYABLE | 3 Months Ended | |||||
Mar. 31, 2014 | ||||||
Debt Disclosure [Abstract] | ' | |||||
NOTE 7 - NOTES PAYABLE | ' | |||||
NOTE 7 – NOTES PAYABLE | ||||||
Notes payable consists of the following: | ||||||
March 31, | December 31, | |||||
2014 | 2013 | |||||
Notes payable - current | ||||||
7.85% unsecured, $781 due monthly | $492 | $1,964 | ||||
7.85% unsecured, $373 due monthly | 4,800 | - | ||||
4.15% unsecured, $2,678 due monthly | 13,710 | 21,824 | ||||
10.00% unsecured, interest only, due December 30, 2014 | 25,000 | - | ||||
$44,002 | $23,788 | |||||
Convertible notes payable, net | March 31, | December 31, | ||||
2014 | 2013 | |||||
8%, unsecured due June 2014 (net of discount related to beneficial conversion feature of $24,502 in 2014 and $49,004 in 2013), convertible into common stock at $0.45 per share. | $287,998 | $263,496 | ||||
8% secured due August 2014 (net of discount related to beneficial conversion feature of $8,200 in 2014 and $12,300 in 2013), convertible into preferred stock at $5.00 per share. | 41,800 | 37,700 | ||||
6% unsecured, convertible into common stock at $2.00 per share, due March 31, 2014 | 50,000 | 50,000 | ||||
8% unsecured due August 2014 (net of discount related to beneficial conversion feature of $25,345 in 2014 and $40,552 in 2013), convertible into common stock at a price to be determined after June 5, 2014. | 37,655 | 22,448 | ||||
8% unsecured due November 2014 (net of discount related to beneficial conversion feature of $23,655 in 2014 and $0 in 2013), convertible into common stock at a price to be determined after September 2, 2014. | 18,345 | - | ||||
$435,798 | $373,644 | |||||
Convertible notes payable, net | March 31, | December 31, | ||||
2014 | 2013 | |||||
0% unsecured due March 30, 2014 (net of discount related to beneficial conversion feature of $0 in 2014 and $16,573 in 2013) convertible into common stock at $0.65 per share. | $ - | $23,427 | ||||
10% unsecured due March 2015 (net of discount related to discount of $9,450 in 2014 and $0 in 2013) convertible price not yet determined | 15,550 | - | ||||
$15,550 | $23,427 | |||||
Entia has debt in the principal amount of $542,500 in the form of convertible notes payable of which, $312,500 is due on June 30, 2014, $113,000 matures on August 31, 2014, $42,000 matures in November 2014 and $25,000 matures in March 2015. Entia also has $50,000 of debt that is due on demand, and as such, all is classified as short-term on the balance sheet and $25,000 that is due on December 30, 2014 that is not convertible and is listed with the notes payable as short-term on the balance sheet. | ||||||
On March 25, 2014, we entered into a line of credit arrangement. The line of credit is $60,000 with an interest rate of prime plus 3.00%. There are no loan covenants applicable to this line of credit and the amount outstanding as of March 31, 2014 is $5,000. | ||||||
NOTE_8_RELATED_PARTY_TRANSACTI
NOTE 8 - RELATED PARTY TRANSACTIONS | 3 Months Ended |
Mar. 31, 2014 | |
Related Party Transactions [Abstract] | ' |
NOTE 8 - RELATED PARTY TRANSACTIONS | ' |
NOTE 8 – RELATED PARTY TRANSACTIONS | |
Debt agreements from board member | |
In December 2013, we entered into a promissory note due on March 31, 2014 at 0% in the principal amount of $40,000. The note was paid off on March 31, 2014. | |
Preferred stock purchase from board member | |
During the first quarter 2013, a board member purchased 1,000 shares of Series A preferred stock for $5,000 cash. There were no purchases during first quarter 2014. | |
NOTE_9_STOCKHOLDERS_EQUITY_DEF
NOTE 9 - STOCKHOLDERS' EQUITY (DEFICIT) | 3 Months Ended | ||||||||||
Mar. 31, 2014 | |||||||||||
Equity [Abstract] | ' | ||||||||||
NOTE 9 - STOCKHOLDERS' EQUITY (DEFICIT) | ' | ||||||||||
NOTE 9 – STOCKHOLDERS’ EQUITY (DEFICIT) | |||||||||||
Preferred Stock | |||||||||||
On May 26, 2011, our board of directors designated 350,000 shares of preferred stock as Series A preferred stock, $0.001 par value. The Series A preferred stock is entitled to a liquidation preference in the amount of $5 per share, votes on an as converted basis with the common stock on all matters as to which holders of common stock shall be entitled to vote, and is currently convertible into common stock on a one-for-ten basis. | |||||||||||
During the first quarter 2013, we issued 36,400 shares of Series A Preferred stock for $182,000 cash and a note holder converted their $15,000 note along with $750 of accrued interest for 3,162 shares of Series A Preferred stock. The note was unsecured, accruing interest at 5% per annum and was due to mature on June 30, 2013. | |||||||||||
There were no preferred stock issuances during first quarter 2014. | |||||||||||
Common stock | |||||||||||
During first quarter 2014, we issued shares of common stock for the following: | |||||||||||
· | 64,700 shares of common stock for a value of $39,556 for services rendered, | ||||||||||
· | 79,293 shares of common stock for a value of $44,250 for services to be performed in the future, and | ||||||||||
· | 6,717 shares of common stock with a value of $4,501 for the settlement of accounts payable. | ||||||||||
There were no transactions related to common stock during the first quarter 2013. | |||||||||||
Stock incentive plan | |||||||||||
On September 17, 2010, our Board of Directors adopted the 2010 Stock Incentive Plan (“Plan”). The Plan provides for the grant of options to purchase shares of our common stock, and stock awards consisting of shares of our common stock, to eligible participants, including directors, executive officers, employees and consultants of the Company. We have reserved 4,650,000 shares of common stock for issuance under the Plan with an annual increase in shares of 50,000 as of January 1 of each year; commencing January 1, 2012. Stock options are granted at or below the closing price of our stock on the date of grant for terms ranging from four to fifteen years and generally vest over a five year period. The fair value of option grants were calculated at the date of the grants using the Black-Scholes option pricing model with the following assumptions: | |||||||||||
Option Assumptions | |||||||||||
31-Mar-14 | 31-Dec-13 | ||||||||||
Expected dividend yield | - | - | |||||||||
Expected stock price volatility | 214.74%-216.96% | 216.96% - 236.55% | |||||||||
Risk-free interest rate | 1.65% - 1.84% | 0.95% - 2.47% | |||||||||
Expected term (in years) | 3 - 7 years | 5 - 10 years | |||||||||
Weighted-average granted date fair value | $0.50 | $0.45 | |||||||||
A summary of option activity under the stock option plan as of March 31, 2014 and changes during the quarter then ended is presented below: | |||||||||||
Weighted | |||||||||||
Average | |||||||||||
Weighted | Remaining | ||||||||||
Number of | Exercise Price | Average Exercise | Contractual | Aggregate Intrinsic | |||||||
Term | |||||||||||
Shares | Range | Price | (Years) | Value | |||||||
Outstanding, December 31, 2012 | 1,202,099 | $ 0.40-$1.00 | $0.56 | 7.74 | - | ||||||
Exercisable, December 31, 2012 | 830,504 | $ 0.40-$1.00 | $0.57 | 8.19 | - | ||||||
Granted | 1,150,000 | $ 0.38-$0.81 | $0.47 | 8.07 | - | ||||||
Exercised | - | - | $ - | - | - | ||||||
Expired | - | - | $ - | - | - | ||||||
Outstanding, December 31, 2013 | 2,352,099 | $ 0.38-$1.00 | $0.51 | 7.9 | 199,505 | ||||||
Exercisable, December 31, 2013 | 1,810,344 | $ 0.38-$1.00 | $0.52 | 7.88 | 138,707 | ||||||
Granted | 50,000 | $ 0.60-$0.65 | $0.64 | 6.2 | |||||||
Exercised | - | - | $ - | - | |||||||
Expired | - | - | $ - | - | |||||||
Outstanding, March 31, 2014 | 2,402,099 | $ 0.38-$1.00 | $0.50 | 7.87 | 330,110 | ||||||
Exercisable, March 31, 2014 | 1,947,675 | $ 0.38-$1.00 | $0.52 | 7.91 | 318,490 | ||||||
The range of exercise prices for options outstanding under the 2010 Stock Incentive Plan at March 31, 2014 are as follows: | |||||||||||
Number of | Exercise | ||||||||||
shares | Price | ||||||||||
55,000 | $0.38 | ||||||||||
135,000 | $0.40 | ||||||||||
20,000 | $0.44 | ||||||||||
540,000 | $0.45 | ||||||||||
247,242 | $0.47 | ||||||||||
247,857 | $0.49 | ||||||||||
10,000 | $0.60 | ||||||||||
15,000 | $0.62 | ||||||||||
40,000 | $0.65 | ||||||||||
854,000 | $0.50 | ||||||||||
200,000 | $0.85 | ||||||||||
38,000 | $1.00 | ||||||||||
2,402,099 | |||||||||||
At March 31, 2014, the Company had 2,227,901 unissued shares available under the Plan. Also, at March 31, 2014, the Company had $169,925 of total unrecognized compensation cost related to unvested stock options, which is expected to be recognized over a weighted average period of 7 years. | |||||||||||
Warrants – Consulting Agreements | |||||||||||
Outstanding warrants to purchase common stock are as follows: | |||||||||||
Date of Issue | 31-Mar-14 | Exercise Price | Expiration | ||||||||
14-Jan | 53,944 | $0.65 - $1.00 | 01/2019 - 01/2021 | ||||||||
As of December | 4,153,874 | $0.36 - $10.00 | 10/2013 - 10/2021 | ||||||||
2013 | |||||||||||
Total | 4,207,818 | ||||||||||
Less: | |||||||||||
Expired | 5,000 | ||||||||||
Exercised | - | ||||||||||
Total | 4,202,818 | ||||||||||
We use the Black-Scholes option-pricing model to determine the fair value of warrants on the date of grant. In determining the fair value of warrants, we employed the following key assumptions: | |||||||||||
31-Mar-14 | 31-Mar-13 | ||||||||||
Risk-Free interest rate | 0.28% | 0.84% - 1.09% | |||||||||
Expected dividend yield | 0% | 0% | |||||||||
Volatility | 212.97%-222.30% | 236.81%-248.63% | |||||||||
Expected life | 3 - 7 years | 5 - 7 years | |||||||||
$0.77 | $0.57 | ||||||||||
At March 31, 2014 and 2013, the weighted-average Black-Scholes value of warrants granted was $0.77 and $0.56, respectively. | |||||||||||
NOTE_10_COMMITMENTS_AND_CONTIN
NOTE 10 - COMMITMENTS AND CONTINGENCIES | 3 Months Ended |
Mar. 31, 2014 | |
Commitments and Contingencies Disclosure [Abstract] | ' |
NOTE 10 - COMMITMENTS AND CONTINGENCIES | ' |
NOTE 10 - COMMITMENTS AND CONTINGENCIES | |
Leases | |
On April 4, 2012, the Company entered into a Commercial Lease agreement with Lanz Properties, LLC for 13,081 square feet of office and warehouse space located at 13565 SW Tualatin-Sherwood Road, Suite 800, Sherwood, OR 97140. The new lease commenced on June 1, 2012 and will terminate on July 31, 2015. No rent was payable until October 2012. The base monthly rental rate started at $3,160, increasing to $3,260 in October 2013, and then $3,343 in June 2014. The Company has straight-lined the full value of the lease agreement over the life of the lease and has recorded this amount monthly. The amount of rent expense that is above the actual rent amount is recorded as deferred rent and is shown on the balance sheet in current liabilities as part of accounts payable and accrued expenses. The amount recorded for 2014 is $5,406 and $6,555 for 2013. | |
NOTE_11_CONCENTRATIONS_AND_CRE
NOTE 11 - CONCENTRATIONS AND CREDIT RISK | 3 Months Ended |
Mar. 31, 2014 | |
Notes to Financial Statements | ' |
NOTE 11 - CONCENTRATIONS AND CREDIT RISK | ' |
NOTE 11 – CONCENTRATIONS AND CREDIT RISK | |
Customers and Credit Concentrations | |
During the first quarter 2014, 45.2% of our net sales were to two customer compared to 21.71% during the first quarter 2013. As of March 31, 2014, accounts receivable for these customers accounted for 58% of total accounts receivable as compared to 87% during first quarter 2013. | |
Vendor Concentrations | |
During the first quarter 2014, 45.7% of our purchases were from one vendor as compared to 33.4% during first quarter 2013. | |
NOTE_12_SUBSEQUENT_EVENTS
NOTE 12 - SUBSEQUENT EVENTS | 3 Months Ended |
Mar. 31, 2014 | |
Subsequent Events [Abstract] | ' |
NOTE 12 - SUBSEQUENT EVENTS | ' |
NOTE 12 – SUBSEQUENT EVENTS | |
During April 2014, we entered into debenture agreements with two investors for $110,000 cash. The debentures accrue interest at 10% per annum and are due after 1 year. In exchange for the debentures, we granted 110,000 warrants for purchase of common stock at $1.00 per share. The warrants are exercisable for 3 years and vest immediately. We calculated the fair value of the warrants and posted it as a discount on the note to be amortized over the life of the debenture. The total value of the discount is $43,330. | |
On May 8, 2014, we negotiated with Penn State Research Foundation an equity settlement to our outstanding license fee and accrued royalties to date. The license fees were incurred in 2013 and were recorded at $140,000 and our outstanding royalties total $3,108. In consideration for the extinguishment of the debt owed, PSRF has agreed to accept 80,000 shares of Entia’s common stock valued at $51,200. During the second quarter, 2014, we will record a gain on extinguishment of accounts payable in the amount of $91,908. | |
NOTE_2_SUMMARY_OF_SIGNIFICANT_1
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 3 Months Ended | ||||||
Mar. 31, 2014 | |||||||
Accounting Policies [Abstract] | ' | ||||||
Basis of presentation and principles of consolidation | ' | ||||||
Basis of presentation and principles of consolidation | |||||||
The accompanying consolidated unaudited interim financial statements and related notes have been prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP) for interim financial information, and with the rules and regulations of the United states Securities and Exchange Commission (“SEC”) to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim financial statements furnished reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented. Unaudited interim results are not necessarily indicative of the results for the full year. These unaudited interim financial statements should be read in conjunction with the financial statements of the Company for the year ended December 31, 2013 and notes thereto contained in the Company’s Annual Report on Form 10-K filed with the SEC. | |||||||
All intercompany accounts have been eliminated for the purpose of the consolidated financial statement presentation. | |||||||
Use of estimates | ' | ||||||
Use of estimates | |||||||
The preparation of consolidated financial statements in conformity with U.S. GAAP 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. | |||||||
Cash | ' | ||||||
Cash | |||||||
We consider all highly liquid, short-term investments with original maturities of three months or less when purchased to be cash equivalents. | |||||||
Accounts receivable | ' | ||||||
Accounts receivable | |||||||
Accounts receivable are recorded at the invoiced amount, net of allowance for doubtful accounts. The allowance for doubtful accounts is our best estimate of the amount of probable credit losses based on specific identification of accounts in our existing accounts receivable. Outstanding account balances are reviewed individually for collectibility. We determine the allowance based on historical write-off experience, customer specific facts and economic conditions. Bad debt expense is included in general and administrative expenses, if any. We consider all accounts greater than 30 days old to be past due. Account balances are charged off against allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The allowance for doubtful accounts was $2,526 at both March 31, 2014 and 2013. | |||||||
Inventory | ' | ||||||
Inventory | |||||||
Inventory, which consists primarily of raw materials to be used in the production of our dietary supplement products, is stated at the lower of cost or market using the first-in, first-out method. We regularly review our inventory on hand and, when necessary, record a provision for excess or obsolete inventory. | |||||||
Property and equipment | ' | ||||||
Property and equipment | |||||||
Property and equipment are recorded at cost. Additions and improvements that increase the value or extend the life of an asset are capitalized. Maintenance and repairs are expensed as incurred. Upon sale or retirement of property and equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in the consolidated statement of operations. Depreciation is computed on a straight-line basis over the following estimated useful lives of the assets: | |||||||
Office equipment | 3 years | ||||||
Production equipment | 5 to 7 years | ||||||
Equipment under capital lease | 5 to 7 years | ||||||
Leasehold improvements | Lesser of lease term or useful life of improvement | ||||||
Patents | ' | ||||||
Patents | |||||||
Patents, once issued or purchased, are amortized using the straight-line method over their economic remaining useful lives. All internally developed process costs incurred to the point when a patent application is to be filed are expensed as incurred and classified as research and development costs. Patent application costs, generally legal costs, are capitalized pending disposition of the individual patent application, and are subsequently either amortized based on the initial patent life granted, generally 15 to 20 years for domestic patents and 5 to 20 years for foreign patents, or expensed if the patent application is rejected. The costs of defending and maintaining patents are expensed as incurred. Upon becoming fully amortized, the related cost and accumulated amortization are removed from the accounts. | |||||||
Impairment of long-lived assets | ' | ||||||
Impairment of long-lived assets | |||||||
Our long-lived assets, which include property and equipment, patents, and licenses of patents are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. | |||||||
We assess the recoverability of our long-lived assets by comparing the projected undiscounted net cash flows associated with the related long-lived asset or group of long-lived assets over their remaining estimated useful lives against their respective carrying amounts. Impairment, if any, is based on the excess of the carrying amount over the fair value of those assets. Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable. If long-lived assets are determined to be recoverable, but the newly determined remaining estimated useful lives are shorter than originally estimated, the net book values of the long-lived assets are depreciated over the newly determined remaining estimated useful lives. | |||||||
Discount on convertible notes payable | ' | ||||||
Discount on convertible notes payable | |||||||
We allocate the proceeds received from convertible notes between convertible notes payable and warrants, if applicable. The resulting discount for warrants is amortized using the effective interest method over the life of the debt instrument. After allocating a portion of the proceeds to the warrants, the effective conversion price of the convertible note payable can be determined. If the effective conversion price is lower than the market price at the date of issuance, a beneficial conversion feature is recorded as an additional discount to the convertible note payable. The beneficial conversion feature discount is amortized using the effective interest method over the life of the debt instrument. The amortization is recorded as interest expense on the consolidated statements of operations. | |||||||
Fair value of financial instruments | ' | ||||||
Fair value of financial instruments | |||||||
The carrying amounts of our financial assets and liabilities, such as cash, accounts receivable and accounts payable, approximate their fair values (determined based on level 1 inputs in the fair value hierarchy) because of the short maturity of these instruments. Due to conversion features and other terms, it is not practical to estimate the fair value of notes payable and convertible notes. | |||||||
Fair value measurements | ' | ||||||
Fair value measurements | |||||||
We measure fair value as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or liability. We utilize a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: | |||||||
Level 1 | Quoted market prices available in active markets for identical assets or liabilities as of the reporting date. | ||||||
Level 2 | Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. | ||||||
Level 3 | Unobservable inputs where there is little or no market data, which require the reporting entity to develop its own assumptions. | ||||||
We do not have any assets or liabilities measured at fair value on a recurring or a non-recurring basis. Consequently, we did not have any fair value adjustments for assets and liabilities measured at fair value at March 31, 2014 or 2013, nor any gains or losses reported in the consolidated statement of operations that are attributable to the change in unrealized gains or losses relating to those assets and liabilities still held at the reporting date for the periods ended March 31, 2014 and 2013. | |||||||
Revenue recognition | ' | ||||||
Revenue recognition | |||||||
We recognize revenue when (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services have been performed, (iii) amounts are fixed or determinable and (iv) collectibility of amounts is reasonably assured. | |||||||
Revenues from the sale of products, including shipping and handling fees but excluding statutory taxes collected from customers, as applicable, are recognized when shipment has occurred. We sell our products directly to customers. Persuasive evidence of an arrangement is demonstrated via order and invoice, product delivery is evidenced by a bill of lading from the third party carrier and title transfers upon shipment, the sales price to the customer is fixed upon acceptance of the order and there is no separate sales rebate, discount, or volume incentive. | |||||||
Amounts charged to customers for shipping products are included in revenues and the related costs are classified in cost of goods sold as incurred. In 2012 and 2011, we incurred $26,059 and $32,784, respectively, in shipping costs included in cost of goods sold. | |||||||
Shipping and handling costs | ' | ||||||
Shipping and handling costs | |||||||
Amounts charged to customers for shipping products are included in revenues and the related costs are classified in cost of goods sold as incurred. In 2013 and 2012, we incurred $31,996 and $26,059, respectively, in shipping costs included in cost of goods sold. | |||||||
Advertising and promotion costs | ' | ||||||
Advertising and promotion costs | |||||||
Costs associated with the advertising and promotion of our products are expensed as incurred. | |||||||
Equity instruments issued to parties other than employees for acquiring goods or services | ' | ||||||
Equity instruments issued to parties other than employees for acquiring goods or services | |||||||
We account for all transactions in which goods or services are the consideration received for the issuance of equity instruments based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. The measurement date used to determine the fair value of the equity instrument issued is the earlier of the date on which the performance is complete or the date on which it is probable that performance will occur. Currently such transactions are primarily awards of warrants to purchase common stock. | |||||||
The fair value of each warrant award is estimated on the date of grant using a Black-Scholes option-pricing valuation model. | |||||||
The assumptions used to determine the fair value of our warrants are as follows: | |||||||
- | The expected life of warrants issued represents the period of time the warrants are expected to be outstanding. | ||||||
- | The expected volatility is generally based on the historical volatility of comparable companies’ stock over the contractual life of the warrant. | ||||||
- | The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods within the contractual life of the warrant. | ||||||
- | The expected dividend yield is based on our current dividend yield as the best estimate of projected dividend yield for periods within the contractual life of the warrant. | ||||||
Income taxes | ' | ||||||
Income taxes | |||||||
We recognize deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in our consolidated statements of income in the period that includes the enactment date. | |||||||
We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in our consolidated financial statements from such a position should be measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. Should they occur, our policy is to classify interest and penalties related to tax positions as income tax expense. | |||||||
We did not record an income tax provision for the three months ended March 31, 2014 and 2013 as we had a net taxable loss in the periods. | |||||||
Net loss per common share | ' | ||||||
Net loss per common share | |||||||
Basic and diluted net loss per share has been computed by dividing our net loss by the weighted average number of common shares issued and outstanding. Convertible preferred stock, options and warrants to purchase our common stock as well as debt which are convertible into common stock are anti-dilutive and therefore are not included in the determination of the diluted net loss per share for three months ended March 31, 2014 and 2013. The following table presents a reconciliation of basic loss per share and excluded dilutive securities: | |||||||
For the Three Months Ended March 31, | |||||||
2014 | 2013 | ||||||
Numerator: | |||||||
Net loss | ($535,388) | ($453,472) | |||||
Denominator: | |||||||
Weighted-average common shares outstanding | 8,327,196 | 7,444,591 | |||||
Basic and diluted net loss per share | ($0.06) | ($0.06) | |||||
Common stock warrants | 4,202,818 | 2,536,726 | |||||
Series A convertible preferred stock | 2,819,690 | 1,504,620 | |||||
Stock options | 2,402,099 | 1,257,099 | |||||
Convertible debt including interest | 885,557 | 938,512 | |||||
Excluded dilutive securities | 10,310,164 | 6,236,957 | |||||
Reclassifications | ' | ||||||
Reclassifications | |||||||
Certain reclassifications have been made to prior period financial statements and footnotes in order to conform to the current period's presentation. | |||||||
Segments | ' | ||||||
Segments | |||||||
We have determined that we operate in one segment for financial reporting purposes. | |||||||
Recently issued accounting pronouncements | ' | ||||||
Recently issued accounting pronouncements | |||||||
Management does not believe that any recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying financial statements. | |||||||
NOTE_2_SUMMARY_OF_SIGNIFICANT_2
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 3 Months Ended | ||||||
Mar. 31, 2014 | |||||||
Accounting Policies [Abstract] | ' | ||||||
Estimated Useful Lives of the Assets | ' | ||||||
Office equipment | 3 years | ||||||
Production equipment | 5 to 7 years | ||||||
Equipment under capital lease | 5 to 7 years | ||||||
Leasehold improvements | Lesser of lease term or useful life of improvement | ||||||
Net Loss Per Common Share | ' | ||||||
For the Three Months Ended March 31, | |||||||
2014 | 2013 | ||||||
Numerator: | |||||||
Net loss | ($535,388) | ($453,472) | |||||
Denominator: | |||||||
Weighted-average common shares outstanding | 8,327,196 | 7,444,591 | |||||
Basic and diluted net loss per share | ($0.06) | ($0.06) | |||||
Common stock warrants | 4,202,818 | 2,536,726 | |||||
Series A convertible preferred stock | 2,819,690 | 1,504,620 | |||||
Stock options | 2,402,099 | 1,257,099 | |||||
Convertible debt including interest | 885,557 | 938,512 | |||||
Excluded dilutive securities | 10,310,164 | 6,236,957 |
NOTE_3_INVENTORY_Tables
NOTE 3 - INVENTORY (Tables) | 3 Months Ended | |||||
Mar. 31, 2014 | ||||||
Inventory Disclosure [Abstract] | ' | |||||
Inventory | ' | |||||
March 31, | December 31, | |||||
2014 | 2013 | |||||
Raw materials | $ 236,038 | $ 240,750 | ||||
Finished goods | 42,494 | 49,255 | ||||
278,532 | 290,005 | |||||
Less: reserve for excess and obsolete inventory | -151,064 | -151,064 | ||||
$ 127,468 | $ 138,941 |
NOTE_4_PROPERTY_AND_EQUIPMENT_
NOTE 4 - PROPERTY AND EQUIPMENT (Tables) | 3 Months Ended | |||||
Mar. 31, 2014 | ||||||
Property, Plant and Equipment [Abstract] | ' | |||||
Property and Equipment | ' | |||||
March 31, | December 31, | |||||
2014 | 2013 | |||||
Office equipment | $ 26,284 | $ 26,284 | ||||
Production equipment | 83,615 | 83,615 | ||||
Leasehold improvements | 16,328 | 16,328 | ||||
126,227 | 126,227 | |||||
Less: accumulated depreciation | -70,019 | -64,082 | ||||
$ 56,208 | $ 62,145 |
NOTE_5_PATENTS_AND_LICENSES_NE1
NOTE 5 - PATENTS AND LICENSES, NET (Tables) | 3 Months Ended | |||||
Mar. 31, 2014 | ||||||
Notes to Financial Statements | ' | |||||
Patents and Licenses | ' | |||||
March 31, | December 31, | |||||
2014 | 2013 | |||||
Licenses and amortizable patents | $ 234,324 | $ 234,324 | ||||
Unamortized patents | 129,083 | 125,301 | ||||
Accumulated amortization | -19,977 | -16,127 | ||||
Patents and Licenses, net | $ 343,430 | $ 343,498 |
NOTE_6_ACCRUED_EXPENSES_Tables
NOTE 6 - ACCRUED EXPENSES (Tables) | 3 Months Ended | |||
Mar. 31, 2014 | ||||
Accounting Policies [Abstract] | ' | |||
Accrued Expenses | ' | |||
March 31, | December 31, | |||
2014 | 2013 | |||
Executive compensation | $595,535 | $476,368 | ||
Other accruals | 77,939 | 60,671 | ||
$673,474 | $537,039 |
NOTE_7_NOTES_PAYABLE_Tables
NOTE 7 - NOTES PAYABLE (Tables) | 3 Months Ended | |||||
Mar. 31, 2014 | ||||||
Debt Disclosure [Abstract] | ' | |||||
Notes Payable | ' | |||||
March 31, | December 31, | |||||
2014 | 2013 | |||||
Notes payable - current | ||||||
7.85% unsecured, $781 due monthly | $492 | $1,964 | ||||
7.85% unsecured, $373 due monthly | 4,800 | - | ||||
4.15% unsecured, $2,678 due monthly | 13,710 | 21,824 | ||||
10.00% unsecured, interest only, due December 30, 2014 | 25,000 | - | ||||
$44,002 | $23,788 | |||||
Convertible notes payable, net | March 31, | December 31, | ||||
2014 | 2013 | |||||
8%, unsecured due June 2014 (net of discount related to beneficial conversion feature of $24,502 in 2014 and $49,004 in 2013), convertible into common stock at $0.45 per share. | $287,998 | $263,496 | ||||
8% secured due August 2014 (net of discount related to beneficial conversion feature of $8,200 in 2014 and $12,300 in 2013), convertible into preferred stock at $5.00 per share. | 41,800 | 37,700 | ||||
6% unsecured, convertible into common stock at $2.00 per share, due March 31, 2014 | 50,000 | 50,000 | ||||
8% unsecured due August 2014 (net of discount related to beneficial conversion feature of $25,345 in 2014 and $40,552 in 2013), convertible into common stock at a price to be determined after June 5, 2014. | 37,655 | 22,448 | ||||
8% unsecured due November 2014 (net of discount related to beneficial conversion feature of $23,655 in 2014 and $0 in 2013), convertible into common stock at a price to be determined after September 2, 2014. | 18,345 | - | ||||
$435,798 | $373,644 | |||||
Convertible notes payable, net | March 31, | December 31, | ||||
2014 | 2013 | |||||
0% unsecured due March 30, 2014 (net of discount related to beneficial conversion feature of $0 in 2014 and $16,573 in 2013) convertible into common stock at $0.65 per share. | $ - | $23,427 | ||||
10% unsecured due March 2015 (net of discount related to discount of $9,450 in 2014 and $0 in 2013) convertible price not yet determined | 15,550 | - | ||||
$15,550 | $23,427 | |||||
NOTE_9_STOCKHOLDERS_EQUITY_DEF1
NOTE 9 - STOCKHOLDERS' EQUITY (DEFICIT) (Tables) | 3 Months Ended | ||||||||||
Mar. 31, 2014 | |||||||||||
Option Activity | ' | ||||||||||
Weighted | |||||||||||
Average | |||||||||||
Weighted | Remaining | ||||||||||
Number of | Exercise Price | Average Exercise | Contractual | Aggregate Intrinsic | |||||||
Term | |||||||||||
Shares | Range | Price | (Years) | Value | |||||||
Outstanding, December 31, 2012 | 1,202,099 | $ 0.40-$1.00 | $0.56 | 7.74 | - | ||||||
Exercisable, December 31, 2012 | 830,504 | $ 0.40-$1.00 | $0.57 | 8.19 | - | ||||||
Granted | 1,150,000 | $ 0.38-$0.81 | $0.47 | 8.07 | - | ||||||
Exercised | - | - | $ - | - | - | ||||||
Expired | - | - | $ - | - | - | ||||||
Outstanding, December 31, 2013 | 2,352,099 | $ 0.38-$1.00 | $0.51 | 7.9 | 199,505 | ||||||
Exercisable, December 31, 2013 | 1,810,344 | $ 0.38-$1.00 | $0.52 | 7.88 | 138,707 | ||||||
Granted | 50,000 | $ 0.60-$0.65 | $0.64 | 6.2 | |||||||
Exercised | - | - | $ - | - | |||||||
Expired | - | - | $ - | - | |||||||
Outstanding, March 31, 2014 | 2,402,099 | $ 0.38-$1.00 | $0.50 | 7.87 | 330,110 | ||||||
Exercisable, March 31, 2014 | 1,947,675 | $ 0.38-$1.00 | $0.52 | 7.91 | 318,490 | ||||||
Range of Options Exercise Price | ' | ||||||||||
Number of | Exercise | ||||||||||
shares | Price | ||||||||||
55,000 | $0.38 | ||||||||||
135,000 | $0.40 | ||||||||||
20,000 | $0.44 | ||||||||||
540,000 | $0.45 | ||||||||||
247,242 | $0.47 | ||||||||||
247,857 | $0.49 | ||||||||||
10,000 | $0.60 | ||||||||||
15,000 | $0.62 | ||||||||||
40,000 | $0.65 | ||||||||||
854,000 | $0.50 | ||||||||||
200,000 | $0.85 | ||||||||||
38,000 | $1.00 | ||||||||||
2,402,099 | |||||||||||
Outstanding Warrants | ' | ||||||||||
Date of Issue | 31-Mar-14 | Exercise Price | Expiration | ||||||||
14-Jan | 53,944 | $0.65 - $1.00 | 01/2019 - 01/2021 | ||||||||
As of December | 4,153,874 | $0.36 - $10.00 | 10/2013 - 10/2021 | ||||||||
2013 | |||||||||||
Total | 4,207,818 | ||||||||||
Less: | |||||||||||
Expired | 5,000 | ||||||||||
Exercised | - | ||||||||||
Total | 4,202,818 | ||||||||||
Option Member | ' | ||||||||||
Black-Scholes Option-Pricing Model Assumptions | ' | ||||||||||
Option Assumptions | |||||||||||
31-Mar-14 | 31-Dec-13 | ||||||||||
Expected dividend yield | - | - | |||||||||
Expected stock price volatility | 214.74%-216.96% | 216.96% - 236.55% | |||||||||
Risk-free interest rate | 1.65% - 1.84% | 0.95% - 2.47% | |||||||||
Expected term (in years) | 3 - 7 years | 5 - 10 years | |||||||||
Weighted-average granted date fair value | $0.50 | $0.45 | |||||||||
Warrant Member | ' | ||||||||||
Black-Scholes Option-Pricing Model Assumptions | ' | ||||||||||
31-Mar-14 | 31-Mar-13 | ||||||||||
Risk-Free interest rate | 0.28% | 0.84% - 1.09% | |||||||||
Expected dividend yield | 0% | 0% | |||||||||
Volatility | 212.97%-222.30% | 236.81%-248.63% | |||||||||
Expected life | 3 - 7 years | 5 - 7 years | |||||||||
$0.77 | $0.57 |
NOTE_1_ORGANIZATION_AND_OPERAT1
NOTE 1 - ORGANIZATION AND OPERATIONS (Details Narrative) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 | Mar. 31, 2013 |
Notes to Financial Statements | ' | ' | ' |
Cash and cash equivalents | $23,144 | $36,886 | $33,409 |
NOTE_2_ESTIMATED_USEFUL_LIVES_
NOTE 2 - ESTIMATED USEFUL LIVES OF THE ASSETS (Details) | Mar. 31, 2014 |
Notes to Financial Statements | ' |
Estimated useful life of office equipment | '3 years |
Minimum estimated useful life of production equipment | '5 years |
Maximum estimated useful life of production equipment | '7 years |
Minimum estimated useful life of equipment under capital lease | '5 years |
Maximum estimated useful life of equipment under capital lease | '7 years |
Leasehold improvements | 'Lesser of lease term or useful life of improvement |
NOTE_2_SUMMARY_OF_SIGNIFICANT_3
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - NET LOSS PER COMMON SHARE (Details) (USD $) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Reconciliation Of Basic Loss Per Share And Excluded Dilutive Securities | ' | ' |
Numerator: Net loss applicable to common shareholders | ($535,388) | ($453,472) |
Denominator: Weighted-average common shares outstanding | 8,327,196 | 7,444,591 |
Basic and diluted net loss per share | ($0.06) | ($0.06) |
Common stock warrants | 4,202,818 | 2,536,726 |
Series A convertible preferred stock | 2,819,690 | 1,504,620 |
Stock options | 2,402,099 | 1,257,099 |
Convertible debt including interest | 885,557 | 938,512 |
Excluded dilutive securities | 10,310,164 | 6,236,957 |
NOTE_2_SUMMARY_OF_SIGNIFICANT_4
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) (USD $) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Notes to Financial Statements | ' | ' |
Allowance for doubtful accounts | $2,526 | $2,526 |
Accounts receivable past due period | '30 days | ' |
Domestic patent life minimum (in years) | '15 years | ' |
Domestic patent life maximum (in years) | '20 years | ' |
Foreign patent life minimum (in years) | '5 years | ' |
Foreign patent life maximum (in years) | '20 years | ' |
NOTE_3_INVENTORY_Details
NOTE 3 - INVENTORY (Details) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
Inventory | ' | ' |
Raw materials | $236,038 | $240,750 |
Finished goods | 42,494 | 49,255 |
Inventory gross | 278,532 | 290,005 |
Less: reserve for excess and obsolete inventory | -151,064 | -151,064 |
Inventory net | $127,468 | $138,941 |
NOTE_4_PROPERTY_AND_EQUIPMENT_1
NOTE 4 - PROPERTY AND EQUIPMENT - PROPERTY AND EQUIPMENT (Details) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
Property and Equipment | ' | ' |
Office equipment | $26,284 | $26,284 |
Production equipment | 83,615 | 83,615 |
Leasehold improvements | 16,328 | 16,328 |
Property and Equipment Gross | 126,227 | 126,227 |
Less: accumulated depreciation | -70,019 | -64,082 |
Property and Equipment Net | $56,208 | $62,145 |
NOTE_5_PATENTS_AND_LICENSES_NE2
NOTE 5 - PATENTS AND LICENSES, NET - PATENTS AND LICENSES (Details) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
Long-Lived Intangible Assets | ' | ' |
Licenses and amortizable patents | $234,324 | $234,324 |
Unamortized patents | 129,083 | 125,301 |
Accumulated amortization | -19,977 | -16,127 |
Patents and Licenses, net | $343,430 | $343,498 |
NOTE_5_PATENTS_AND_LICENSES_NE3
NOTE 5 - PATENTS AND LICENSES, NET (Details Narrative) (USD $) | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | Dec. 31, 2013 | |
Notes to Financial Statements | ' | ' | ' |
Patent and license amortization | $3,849 | $790 | ' |
Amortization of licenses over economic useful life, maximum | '17 years | ' | ' |
License acquired for stock, fair value | ' | ' | $215,529 |
NOTE_6_ACCRUED_EXPENSES_Detail
NOTE 6 - ACCRUED EXPENSES (Details) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
Notes to Financial Statements | ' | ' |
Executive compensation | $595,535 | $476,368 |
Other accruals | 77,939 | 60,671 |
Total accrued expenses | $673,474 | $537,039 |
NOTE_7_NOTES_PAYABLE_Details
NOTE 7 - NOTES PAYABLE (Details) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
Notes payable - current, 7.85% unsecured, $781 due monthly | ' | ' |
Notes payable | $492 | $1,964 |
Notes payable - current, 4.15% unsecured, $2,678 due monthly | ' | ' |
Notes payable | 4,800 | 0 |
Notes payable - current, 4.15% unsecured, $2,771 due monthly | ' | ' |
Notes payable | 13,710 | 21,824 |
Notes payable - current, 10.00% unsecured, interest only, due December 30, 2014 | ' | ' |
Notes payable | 25,000 | 0 |
Notes Payable Current Total | ' | ' |
Notes payable | 44,002 | 23,788 |
Convertible Notes payable, net - 8%, unsecured note due June 2014 (net of discount related to beneficial conversion feature of $24,502 in 2014 and $49,004 in 2013), convertible into common stock at $0.45 per share | ' | ' |
Notes payable | 278,998 | 263,496 |
8% secured due August 2014 (net of discount related to beneficial conversion feature of $8,200 in 2014 and $12,300 in 2013), convertible into preferred stock at $5.00 per share | ' | ' |
Notes payable | 41,800 | 37,700 |
6% unsecured, convertible into common stock at $2.00 per share, due March 31, 2014 | ' | ' |
Notes payable | 50,000 | 50,000 |
Convertible Notes Payable Net Total | ' | ' |
Notes payable | 37,655 | ' |
Convertible Notes payable related party, net - 8% unsecured due August 2014 (net of discount related to beneficial conversion feature of $25,345 in 2014 and $40,552 in 2013), convertible into common stock at a price to be determined after June 5, 2014 | ' | ' |
Notes payable | 37,655 | 22,448 |
Notes payable - current, 8% unsecured due November 2014 (net of discount related to beneficial conversion feature of $23,655 in 2014 and $0 in 2013), convertible into common stock at a price to be determined after September 2, 2014. | ' | ' |
Notes payable | 18,345 | 0 |
Convertible Notes Payable Current Total | ' | ' |
Notes payable | 435,798 | 373,644 |
0% unsecured long term due March 30, 2014 (net of discount related to beneficial conversion feature of $0 in 2014 and $16,573 in 2013), convertible into common stock at $0.65 per share | ' | ' |
Notes payable | 0 | 23,427 |
10% unsecured long term due March 2015 (net of discount related to discount of $9,450 in 2014 and $0 in 2013) convertible price not yet determined | ' | ' |
Notes payable | 15,550 | ' |
10% unsecured long term due March 2015 (net of discount related to discount of $9,450 in 2014 and $0 in 2013) convertible price not yet determined | ' | ' |
Notes payable | ' | 0 |
Related Party Long Term Convertible Notes Payable Current Total | ' | ' |
Notes payable | $15,550 | $23,427 |
NOTE_7_NOTES_PAYABLE_Details_P
NOTE 7 - NOTES PAYABLE (Details) (Parenthetical) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
Notes payable - current, 7.85% unsecured, $781 due monthly | ' | ' |
Monthly due on note payable | $781 | $781 |
Interest percent of note payable | 7.85% | 7.85% |
Notes payable - current, 7.85% unsecured, $737 due monthly | ' | ' |
Monthly due on note payable | 373 | 373 |
Interest percent of note payable | 7.85% | 7.85% |
Notes payable - current, 4.15% unsecured, $2,678 due monthly | ' | ' |
Monthly due on note payable | 2,678 | 2,678 |
Interest percent of note payable | 4.15% | 4.15% |
Notes payable - current, 10.00% unsecured, interest only, due December 30, 2014 | ' | ' |
Interest percent of note payable | 10.00% | 10.00% |
Convertible Notes payable, net - 8%, unsecured note due June 2014 (net of discount related to beneficial conversion feature of $24,502 in 2014 and $49,004 in 2013), convertible into common stock at $0.45 per share | ' | ' |
Discount related to beneficial conversion feature | 24,502 | 49,004 |
Convertible to common stock, price per share | $0.45 | $0.45 |
Interest percent of note payable | 8.00% | 8.00% |
8% secured due August 2014 (net of discount related to beneficial conversion feature of $8,200 in 2014 and $12,300 in 2013), convertible into preferred stock at $5.00 per share | ' | ' |
Discount related to beneficial conversion feature | 8,200 | 12,300 |
Convertible to preferred stock, price per share | $5 | $5 |
Interest percent of note payable | 8.00% | 8.00% |
6% unsecured, convertible into common stock at $2.00 per share, due March 31, 2014 | ' | ' |
Convertible to common stock, price per share | $2 | $2 |
Convertible Notes payable related party, net - 8% unsecured due August 2014 (net of discount related to beneficial conversion feature of $25,345 in 2014 and $40,552 in 2013), convertible into common stock at a price to be determined after June 5, 2014 | ' | ' |
Discount related to beneficial conversion feature | 25,345 | 40,552 |
Interest percent of note payable | 8.00% | 8.00% |
Notes payable - current, 8% unsecured due November 2014 (net of discount related to beneficial conversion feature of $23,655 in 2014 and $0 in 2013), convertible into common stock at a price to be determined after September 2, 2014. | ' | ' |
Discount related to beneficial conversion feature | 23,655 | 0 |
Interest percent of note payable | 8.00% | 8.00% |
0% unsecured long term due March 30, 2014 (net of discount related to beneficial conversion feature of $0 in 2014 and $16,573 in 2013), convertible into common stock at $0.65 per share | ' | ' |
Discount related to beneficial conversion feature | 0 | 16,573 |
Convertible to common stock, price per share | $0.65 | $0.65 |
10% unsecured long term due March 2015 (net of discount related to discount of $9,450 in 2014 and $0 in 2013) convertible price not yet determined | ' | ' |
Discount related to beneficial conversion feature | 9,450 | ' |
10% unsecured long term due March 2015 (net of discount related to discount of $9,450 in 2014 and $0 in 2013) convertible price not yet determined | ' | ' |
Discount related to beneficial conversion feature | ' | $0 |
NOTE_7_NOTES_PAYABLE_Details_N
NOTE 7 - NOTES PAYABLE (Details Narrative) (USD $) | Mar. 31, 2014 | Mar. 25, 2014 | Dec. 31, 2013 |
Notes to Financial Statements | ' | ' | ' |
Mature convertible notes payable in aggregate | $542,000 | ' | ' |
Amount of June 30, 2013 note payable | 312,500 | ' | ' |
Amount payable at August 31, 2014 | 113,000 | ' | ' |
Amount payable in November 2014 | 42,000 | ' | ' |
Amount payable in March 2015 | 25,000 | ' | ' |
Mature note payable due on demand | 50,000 | ' | ' |
Amount of note payable due on June 30, 2013 | 312,500 | ' | ' |
Convertible promissory note amount | 435,798 | ' | 373,644 |
Line of credit arrangement amount | ' | 60,000 | ' |
Interest rate of line of credit on top of prime | ' | 3.00% | ' |
Line of credit amount oustanding | $5,000 | ' | ' |
NOTE_8_RELATED_PARTY_TRANSACTI1
NOTE 8 - RELATED PARTY TRANSACTIONS (Details Narrative) (USD $) | 1 Months Ended | 3 Months Ended |
Dec. 31, 2013 | Mar. 31, 2014 | |
Notes to Financial Statements | ' | ' |
Promissory note due to affiliate, amount, duration | $40,000 | ' |
Promissory note due to affiliate, interest percent, duration | 0.00% | ' |
Promissory note due to affiliate, paid in full date | ' | 31-Mar-14 |
Affiliate purchase of Series A Preferred Stock, shares | ' | 1,000 |
Affiliate purchase of Series A Preferred Stock, total price | ' | $5,000 |
NOTE_9_STOCKHOLDERS_EQUITY_DEF2
NOTE 9 - STOCKHOLDERS' EQUITY (DEFICIT) - BLACK-SCHOLES OPTION-PRICING MODEL ASSUMPTIONS (Details) (USD $) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2014 | Dec. 31, 2012 | |
Option Member | ' | ' |
Risk-Free interest rate, minimum | 1.65% | 0.95% |
Risk-Free interest rate, maximum | 1.84% | 2.47% |
Expected dividend yield | 0.00% | 0.00% |
Expected stock price volatility, minimum | 214.74% | 216.96% |
Expected stock price volatility, maximum | 216.96% | 236.55% |
Expected term (in years), minimum | '3 years | '5 years |
Expected term (in years), maximum | '7 years | '10 years |
Weighted-average granted date fair value | $0.50 | $0.45 |
Warrant Member | ' | ' |
Risk-Free interest rate, minimum | 0.28% | 0.84% |
Risk-Free interest rate, maximum | 0.28% | 1.09% |
Expected dividend yield | 0.00% | 0.00% |
Expected stock price volatility, minimum | 212.97% | 236.81% |
Expected stock price volatility, maximum | 222.30% | 248.63% |
Expected term (in years), minimum | '3 years | '5 years |
Expected term (in years), maximum | '7 years | '7 years |
Weighted-average granted date fair value | $0.77 | $0.57 |
NOTE_9_OPTION_ACTIVITY_Details
NOTE 9 - OPTION ACTIVITY (Details) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Mar. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Mar. 31, 2014 | Dec. 31, 2013 | Mar. 31, 2014 | Dec. 31, 2013 | Mar. 31, 2014 | Dec. 31, 2013 |
Exercisable | Exercisable | Exercisable | Outstanding | Outstanding | Outstanding | Granted | Granted | Exercised | Exercised | Expired | Expired | |
Number of Shares, instant | 1,947,675 | 1,810,344 | 830,504 | 2,402,099 | 2,352,099 | 1,202,099 | ' | ' | ' | ' | ' | ' |
Number of Shares, duration | ' | ' | ' | ' | ' | ' | 50,000 | 1,150,000 | 0 | 0 | 0 | 0 |
Exercise Price Range, instant, minimum | $0.38 | $0.38 | $0.40 | $0.38 | $0.38 | $0.40 | ' | ' | ' | ' | ' | ' |
Exercise Price Range, instant, maximum | $1 | $1 | $1 | $1 | $1 | $1 | ' | ' | ' | ' | ' | ' |
Exercise Price Range, duration, minimum | ' | ' | ' | ' | ' | ' | $0.60 | $0.38 | $0 | $0 | $0 | $0 |
Exercise Price Range, duration, maximum | ' | ' | ' | ' | ' | ' | $0.65 | $0.81 | $0 | $0 | $0 | $0 |
Weighted Average Exercise Price, instant | $0.52 | $0.52 | $0.57 | $0.50 | $0.51 | $0.56 | ' | ' | ' | ' | ' | ' |
Weighted Average Exercise Price, duration | ' | ' | ' | ' | ' | ' | $0.64 | $0.47 | $0 | $0 | $0 | $0 |
Weighted Average Remaining Contractual Life (in years), instant | '7 years 11 months | '7 years 10 months | '8 years 2 months | '7 years 11 months | '7 years 10 months | '7 years 9 months | ' | ' | ' | ' | ' | ' |
Weighted Average Remaining Contractual Life (in years), duration | ' | ' | ' | ' | ' | ' | '6 years 3 months | '8 years 1 month | '0 years | '0 years | '0 years | '0 years |
Aggregate Intrinsic Value, instant | $330,110 | $138,707 | $0 | $318,490 | $199,505 | $0 | ' | ' | ' | ' | ' | ' |
Aggregate Intrinsic Value, duration | ' | ' | ' | ' | ' | ' | $0 | $0 | $0 | $0 | $0 | $0 |
NOTE_9_RANGE_OF_OPTIONS_EXERCI
NOTE 9 - RANGE OF OPTIONS EXERCISE PRICE (Details) | Mar. 31, 2014 |
Total number of option shares outstanding | 2,404,099 |
Options $0.38 | ' |
Number of Shares underlying options | 55,000 |
Options $0.40 | ' |
Number of Shares underlying options | 135,000 |
Options $0.44 | ' |
Number of Shares underlying options | 20,000 |
Options $0.45 | ' |
Number of Shares underlying options | 540,000 |
Options $0.47 | ' |
Number of Shares underlying options | 247,242 |
Options $0.49 | ' |
Number of Shares underlying options | 247,857 |
Options $0.60 | ' |
Number of Shares underlying options | 10,000 |
Options $0.62 | ' |
Number of Shares underlying options | 15,000 |
Options $0.65 | ' |
Number of Shares underlying options | 40,000 |
Options $0.50 | ' |
Number of Shares underlying options | 634,000 |
Options $0.85 | ' |
Number of Shares underlying options | 200,000 |
Options $1.00 | ' |
Number of Shares underlying options | 38,000 |
NOTE_9_OUTSTANDING_WARRANTS_De
NOTE 9 - OUTSTANDING WARRANTS (Details) (USD $) | 3 Months Ended | ||
Mar. 31, 2014 | Dec. 31, 2013 | Jan. 14, 2014 | |
Issued Warrants | |||
Exercise price, per share, minimum, instant | ' | $0.36 | $0.65 |
Exercise price, per share, maximum, instant | ' | $10 | $1 |
Expiration date, earliest, instant | ' | '2013-10 | '2019-01 |
Expiration date, latest, instant | ' | '2021-10 | '2021-01 |
Warrants outstanding | 4,207,818 | 4,153,874 | ' |
Warrants issued | ' | ' | 53,944 |
Expired warrants | 5,000 | ' | ' |
NOTE_9_STOCKHOLDERS_EQUITY_DEF3
NOTE 9 - STOCKHOLDERS' EQUITY (DEFICIT) (Details Narrative) (USD $) | 3 Months Ended | 12 Months Ended | |||||||||
Mar. 31, 2014 | Dec. 31, 2013 | Mar. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2012 | Oct. 02, 2013 | Aug. 01, 2013 | Apr. 29, 2013 | Sep. 30, 2012 | Mar. 31, 2012 | 26-May-11 | |
Units | |||||||||||
Preferred Stock | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Shares of preferred stock designated as Series A preferred stock | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 350,000 |
Series A preferred stock par value | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $0.00 |
Liquidation preference per Series A preferred share | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $5 |
Basis that Series A Preferred stock is convertible into common stock | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | '1:10 |
Series A preferred stock issued for cash | 0 | 19,500 | 36,400 | ' | ' | ' | ' | ' | ' | ' | ' |
Cash proceeds from issuance of Series A preferred stock | ' | $97,500 | $182,000 | ' | ' | ' | ' | ' | ' | ' | ' |
Note converted to Series A preferred stock | 0 | ' | 15,000 | ' | ' | ' | ' | ' | ' | ' | ' |
Note interest converted to Series A preferred stock | ' | ' | 750 | ' | ' | ' | ' | ' | ' | ' | ' |
Total Series A preferred stock shares issued for conversion of note and related interest | ' | ' | 3,162 | ' | ' | ' | ' | ' | ' | ' | ' |
Series A preferred shares converted to common stock | ' | 10,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Common stock issued for conversion of Series A preferred shares | ' | 100,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Number of investors that bought Series A preferred stock for cash | ' | 4 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Series A preferred shares converted to common stock | ' | 10,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Common stock issued for conversion of Series A preferred shares | ' | 100,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Common stock issued for consulting agreement | ' | 12,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Common stock issued for consulting agreement, instant | ' | ' | ' | ' | ' | 10,000 | 2,000 | ' | ' | ' | ' |
Warrants issued for a common share per share of Series A preferred stock owned related to anti-dilution feature of the Series A Preferred Stock | ' | '1:2 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Warrants issued for anti-dilution feature of Series A Preferred Stock | ' | 137,985 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Warrant term | ' | '3 years | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Common Stock | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Common stock issued | ' | ' | 0 | ' | ' | ' | ' | ' | ' | ' | ' |
Common stock issued for conversion of Series A Preferred Shares | ' | 100,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Common stock issued for consulting agreement | ' | 12,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Stock issued for services, value | 39,556 | ' | 0 | 83,400 | ' | ' | ' | ' | ' | ' | ' |
Stock issued for services, shares | 64,700 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Common stock issued for future services, value | 44,250 | ' | 0 | ' | ' | ' | ' | ' | ' | ' | ' |
Common stock issued for future services, shares | 79,293 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Stock issued for accounts payable, value | 4,501 | ' | 0 | ' | ' | ' | ' | ' | ' | ' | ' |
Stock issued for accounts payable, shares | 6,717 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Stock incentive plan | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Common shares reserved for the 2010 Stock Incentive Plan | 4,650,000 | ' | ' | ' | ' | ' | ' | 3,100,000 | ' | ' | ' |
2010 Stock Incentive Plan increase in shares reserved | ' | ' | ' | ' | ' | ' | ' | 1,500,000 | ' | ' | ' |
Annual increase in reserved shares of the 2010 Stock Incentive Plan | ' | ' | ' | ' | 50,000 | ' | ' | ' | ' | ' | ' |
Unissued option shares available under the Plan | 2,227,901 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Total unrecognized compensation cost related to unvested stock options | $169,925 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Weighted average period to recognize compensation cost related to unvested stock options (in years) | '7 years | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Warrants - Consulting Agreements | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Weighted-average Black-Scholes value of warrants granted | ' | $1.52 | ' | $1.52 | ' | ' | ' | ' | $0.56 | $0.89 | ' |
NOTE_10_COMMITMENTS_AND_CONTIN1
NOTE 10 - COMMITMENTS AND CONTINGENCIES (Details Narrative) (USD $) | 8 Months Ended | 12 Months Ended | 14 Months Ended | |||
31-May-14 | Sep. 30, 2013 | Jul. 31, 2015 | Mar. 31, 2014 | Dec. 31, 2013 | Jun. 01, 2012 | |
sqft | ||||||
Notes to Financial Statements | ' | ' | ' | ' | ' | ' |
Square feet of leased office and warehouse space | ' | ' | ' | ' | ' | 13,081 |
Monthly rental rate of office space | $3,260 | $3,160 | $3,343 | ' | ' | ' |
Period of office lease | ' | ' | ' | ' | ' | '3 years |
Deferred rent accrual | ' | ' | ' | $5,406 | $6,555 | ' |
NOTE_11_CONCENTRATIONS_AND_CRE1
NOTE 11 - CONCENTRATIONS AND CREDIT RISK (Details Narrative) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Notes to Financial Statements | ' | ' |
Net sales to four customers | 45.20% | 21.71% |
Number of customers that made up customer concentration | 2 | 2 |
Accounts receivable percentage of two specific customers | 58.00% | 87.00% |
Percent of purchases from one vendor | 45.70% | 33.40% |
Number of vendors that made up vendor concentration | 1 | 1 |
NOTE_12_SUBSEQUENT_EVENTS_Deta
NOTE 12 - SUBSEQUENT EVENTS (Details Narrative) (USD $) | 1 Months Ended | 3 Months Ended | |||||
Apr. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | Dec. 31, 2013 | Mar. 31, 2013 | Oct. 02, 2013 | Aug. 01, 2013 | |
Units | |||||||
Subsequent Events [Abstract] | ' | ' | ' | ' | ' | ' | ' |
Series A preferred stock issued for cash | ' | ' | 0 | 19,500 | 36,400 | ' | ' |
Cash proceeds from issuance of Series A preferred shares | ' | ' | ' | $97,500 | $182,000 | ' | ' |
Number of investors that bought Series A preferred stock for cash | ' | ' | ' | 4 | ' | ' | ' |
Series A preferred shares converted to common stock | ' | ' | ' | 10,000 | ' | ' | ' |
Common stock issued for conversion of Series A preferred shares | ' | ' | ' | 100,000 | ' | ' | ' |
Common stock issued for consulting agreement | ' | ' | ' | 12,000 | ' | ' | ' |
Common stock issued for consulting agreement, instant | ' | ' | ' | ' | ' | 10,000 | 2,000 |
Warrants issued for a common share per share of Series A preferred stock owned related to anti-dilution feature of the Series A Preferred Stock | ' | ' | ' | '1:2 | ' | ' | ' |
Warrants issued for anti-dilution feature of Series A Preferred Stock | ' | ' | ' | 137,985 | ' | ' | ' |
Warrant term | ' | ' | ' | '3 years | ' | ' | ' |
License fee incurred | ' | ' | ' | 140,000 | ' | ' | ' |
Outstanding royalties owed on license fee | ' | ' | ' | 3,108 | ' | ' | ' |
Common stock issued in exchange for license fee debt | ' | ' | ' | 80,000 | ' | ' | ' |
Common stock issued in exchange for license fee debt, value | ' | ' | ' | 51,200 | ' | ' | ' |
Gain on extinguishment of accounts payable | ' | 91,908 | ' | ' | ' | ' | ' |
Convertible promissory note amount, instant | ' | ' | 435,798 | 373,644 | ' | ' | ' |
Convertible promissory note amount, duration | 110,000 | ' | ' | ' | ' | ' | ' |
Convertible promissory note term in months, duration | '12 months | ' | ' | ' | ' | ' | ' |
Interest rate of convertible promissory note, duration | 10.00% | ' | ' | ' | ' | ' | ' |
Convertible price, per share, duration | $1 | ' | ' | ' | ' | ' | ' |
Discount for the beneficial conversion feature of the convertible promisorry note, duration | $43,330 | ' | ' | ' | ' | ' | ' |
Warrants granted for promissory note issuance | 110,000 | ' | ' | ' | ' | ' | ' |
Warrant term, in years | '3 years | ' | ' | ' | ' | ' | ' |
Warrant exercise price per share | $1 | ' | ' | ' | ' | ' | ' |