Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2015 | Aug. 18, 2015 | |
Document and Entity Information [Abstract] | ||
Entity Registrant Name | OxySure Systems Inc | |
Entity Central Index Key | 1,413,797 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2015 | |
Document Fiscal Period Focus | Q2 | |
Document Fiscal Year Focus | 2,015 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 32,003,034 |
Condensed Balance Sheets
Condensed Balance Sheets - USD ($) | Jun. 30, 2015 | Dec. 31, 2014 |
Current assets | ||
Cash and cash equivalents | $ 875,941 | $ 647,093 |
Restricted cash | 2,000,000 | |
Accounts receivable, net | 711,148 | $ 369,575 |
Inventories | 422,551 | 277,346 |
License fee receivable | 448,308 | 463,308 |
Prepaid expenses and other current assets | 91,747 | 53,588 |
Total current assets | 4,549,695 | 1,810,910 |
Property and equipment, net | 88,617 | 91,537 |
Intangible assets, net | 347,650 | 362,764 |
Other assets | 296,605 | 246,237 |
TOTAL ASSETS | 5,282,567 | 2,511,448 |
Current liabilities | ||
Accounts payable and accrued expenses | 810,784 | 558,338 |
Related party payable | $ 200,000 | 154,850 |
Capital leases - current | 149 | |
Notes payable - current, net of discount | $ 43,723 | 40,897 |
Convertible notes payable, net of discount | 981,475 | 606,932 |
Derivative liability | 249,200 | 31,010 |
Total current liabilities | $ 2,285,182 | 1,392,176 |
Long-term liabilities | ||
Notes payable | 44,484 | |
Total long-term liabilities | 44,484 | |
TOTAL LIABILITIES | $ 2,285,182 | $ 1,436,660 |
COMMITMENTS AND CONTINGENCY | ||
STOCKHOLDERS' EQUITY | ||
Common stock, par value $0.0004 per share; 100,000,000 shares authorized;31,224,000 shares of voting common stock issued and outstanding as of June 30, 2015 and 28,438,631 shares issued and outstanding as of December 31, 2014 | $ 12,492 | $ 11,377 |
Stock subscription receivable | (1,231,666) | |
Additional Paid-in Capital | 24,854,869 | $ 19,104,322 |
Accumulated deficit | (20,639,745) | (18,041,208) |
TOTAL STOCKHOLDERS' EQUITY | 2,997,385 | 1,074,788 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | 5,282,567 | 2,511,448 |
Series A convertible preferred shares | ||
STOCKHOLDERS' EQUITY | ||
Preferred stock value | 258 | 296 |
Series B convertible preferred shares | ||
STOCKHOLDERS' EQUITY | ||
Preferred stock value | 1 | $ 1 |
Series C convertible preferred shares | ||
STOCKHOLDERS' EQUITY | ||
Preferred stock value | 385 | |
Series D convertible preferred shares | ||
STOCKHOLDERS' EQUITY | ||
Preferred stock value | 525 | |
Series E convertible preferred shares | ||
STOCKHOLDERS' EQUITY | ||
Preferred stock value | $ 266 |
Condensed Balance Sheets (Paren
Condensed Balance Sheets (Parenthetical) - $ / shares | Jun. 30, 2015 | Dec. 31, 2014 |
Preferred stock, par value | $ 0.0005 | $ 0.0005 |
Preferred stock, shares authorized | 25,000,000 | 25,000,000 |
Common stock, par value | $ 0.0004 | $ 0.0004 |
Common stock, shares authorized | 100,000,000 | 100,000,000 |
Voting common stock, shares issued | 31,224,000 | 28,438,631 |
Voting common stock, shares outstanding | 31,224,000 | 28,438,631 |
Series A convertible preferred shares | ||
Preferred Stock, shares issued | 518,750 | 593,750 |
Preferred stock, shares outstanding | 518,750 | 593,750 |
Series B convertible preferred shares | ||
Preferred Stock, shares issued | 900 | 1,145 |
Preferred stock, shares outstanding | 900 | 1,145 |
Series C convertible preferred shares | ||
Preferred Stock, shares issued | 770,000 | 0 |
Preferred stock, shares outstanding | 770,000 | 0 |
Series D convertible preferred shares | ||
Preferred Stock, shares issued | 1,050,000 | 0 |
Preferred stock, shares outstanding | 1,050,000 | 0 |
Series E convertible preferred shares | ||
Preferred Stock, shares issued | 531,666 | 0 |
Preferred stock, shares outstanding | 531,666 | 0 |
Statements of Operations (Unaud
Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | |
Income Statement [Abstract] | ||||
Revenues, net | $ 1,046,019 | $ 678,111 | $ 1,670,533 | $ 1,034,340 |
Cost of goods sold | 409,183 | 264,856 | 745,039 | 470,446 |
Gross profit | 636,836 | 413,255 | 925,494 | 563,894 |
Operating expenses | ||||
Research and development | 297,456 | 275,974 | 510,801 | 277,515 |
Sales and marketing | 329,393 | 154,044 | 794,139 | 241,993 |
Other general and administrative | 621,066 | 259,230 | 1,243,350 | 604,987 |
Total operating expenses | 1,247,915 | 689,248 | 2,548,290 | 1,124,495 |
Loss from operating expenses | (611,079) | (275,993) | (1,622,796) | (560,600) |
Other income (expenses) | ||||
Interest expense | (561,791) | $ (85,980) | (892,945) | $ (193,587) |
Change in value of derivative liabilities | 119,933 | 122,584 | ||
Derivative expense | (204,272) | (204,272) | ||
Other income (expense) | (1,225) | $ 42,465 | (1,108) | $ 58,360 |
Total other income (expenses) | (647,355) | (43,515) | (975,741) | (135,227) |
Net loss | $ (1,258,434) | $ (319,508) | $ (2,598,537) | $ (695,828) |
Basic and diluted net loss per common share | $ (0.04) | $ (0.01) | $ (0.09) | $ (0.03) |
Weighted average common shares outstanding: | ||||
Basic and diluted | 30,215,788 | 25,996,642 | 29,587,327 | 25,956,948 |
Statements of Cash Flows (Unaud
Statements of Cash Flows (Unaudited) - USD ($) | 6 Months Ended | |
Jun. 30, 2015 | Jun. 30, 2014 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net loss | $ (2,598,537) | $ (695,828) |
Adjustments to reconcile net loss to net cash from operating activities: | ||
Depreciation and amortization expense | 21,934 | 24,853 |
Amortization of debt discount and beneficial conversion features | 803,870 | $ 121,140 |
Gain on forgiveness of debt | $ (37,714) | |
Gain on extinguishment of debt | $ (42,525) | |
Excess derivative over proceeds | $ 204,272 | |
Derivative liability fair value adjustment | (122,584) | |
Expenses paid on behalf of related parties | $ 137,150 | |
Expenses paid by related parties | $ 4,374 | |
Warrants issued for services | $ 8,883 | |
Stock based compensation | 106,911 | $ 17,588 |
Common stock issued for services | 62,670 | |
Changes in operating assets and liabilities: | ||
Accounts receivable | (341,573) | $ (363,543) |
Inventories | (145,205) | 1,804 |
License fees receivable | 15,000 | 36,692 |
Prepaid expenses and other current assets | (38,159) | $ 62,509 |
Other assets | (50,368) | |
Accounts payable and accrued liabilities | $ 282,345 | $ 304,405 |
Deferred revenue | (2,976) | |
NET CASH USED IN OPERATING ACTIVITIES | $ (1,691,105) | (531,507) |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Purchase of property and equipment | $ (3,900) | (70,651) |
Purchase of intangible assets | (198) | |
NET CASH USED IN INVESTING ACTIVITIES | $ (3,900) | (70,849) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Common stock subscribed and issued for cash | 80,001 | $ 10,672 |
Preferred stock issued for cash and warrants | $ 2,650,001 | |
Cash received from related parties | $ 9,800 | |
Payments made to related parties | $ (92,000) | (108,300) |
Cash received from convertible notes payable | 1,461,000 | 247,500 |
Payments made on convertible notes payable | (175,000) | (192,000) |
Payments on capital leases | (149) | (1,008) |
NET CASH USED IN FINANCING ACTIVITIES | 3,923,853 | (33,336) |
Net change in cash and cash equivalents | 2,228,848 | (635,692) |
Cash and cash equivalents, at beginning of period | 647,093 | 657,673 |
Cash and cash equivalents, at end of period | $ 875,941 | $ 21,981 |
Cash paid during the period for: | ||
Interest | ||
Income taxes | ||
Supplemental non-cash investing and financing activities: | ||
Conversion of preferred stock to common | $ 246 | |
Conversion of convertible notes payable | 804,138 | |
Beneficial conversion feature | 808,532 | |
Initial value of the derivative | $ 165,200 |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 6 Months Ended |
Jun. 30, 2015 | |
Summary of Significant Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Other Assets Capitalization of software Amortization expense for websites and URLs was $9,654 and $9,654 for the three month periods ended June 30, 2015 and 2014, respectively. Amortization expense for websites and URLs was $19,309 and $19,309 for the six month periods ended June 30, 2015 and 2014, respectively. Research and Development Costs – Equity Warrants - Stock-Based Compensation – For the three month periods ended June 30, 2015 and 2014, stock based compensation expense was approximately $58,611 and $0, respectively, which consisted primarily of stock-based compensation expense related to stock options issued to the employees and recognized under GAAP. For the six month periods ended June 30, 2015 and 2014, stock based compensation expense was approximately $106,911 and $17,588, respectively. Shipping and Handling Costs Advertising Costs - Net Income (Loss) Per Share - Recent Accounting Pronouncements We have reviewed recent accounting pronouncements and concluded that they are either not applicable to our business or that no material effect is expected on the financial statements as a result of future adoption. |
Notes Payable
Notes Payable | 6 Months Ended |
Jun. 30, 2015 | |
Notes Payable [Abstract] | |
NOTES PAYABLE | NOTE 2 – NOTES PAYABLE We have issued warrants for the purchase of shares of our restricted common stock in connection with raising equity and debt financing and for other professional services. The fair value of warrants issued is determined in accordance with Codification topic 470-20. Frisco Promissory Note. The Frisco Note requires varying annual principal payments through December 2015. The Frisco Note is non-interest bearing; however, interest has been imputed at 12.34% per annum. The unamortized discount at June 30, 2015 was $8,000, and the net amount of the Frisco Note as at June 30, 2015 was $44,000. Future principal payments of the Frisco Note payable are as follows: 2015 52,000 Total $ 52,000 During the three months ended June 30, 2015 we issued seven convertible notes with a total principal value of $1,147,500 for $966,000 in cash. The notes contained original issuance discounts for a total of $181,000, and interest rates ranging from 10% to 12%. The maturity dates of the notes range from November 25, 2015 to May 4, 2017. The creditors have the option at any time to convert the principal and any accrued interest into common stock of the Company at a weighted average discount rate of approximately thirty percent off the market price of the Company’s common stock, as calculated at June 30, 2015. During the quarter, we issued warrants associated with notes. In accordance with ASC 470-20, Debt with conversions and other options, the proceeds from the notes were allocated based on the relative fair values of the notes without the warrants issued in conjunction with the notes and of the warrants themselves at the time of issuance. As a result of issuing the warrants with subordinated convertible promissory notes, beneficial conversion options were recorded as debt discounts reflecting the incremental conversion option intrinsic value benefits totaling $400,196, at the time of issuance provided to the holders of the notes, which we also amortize as interest expense over the life of the notes. We recorded interest expense in the amounts of $638,190 and $0 for the three months ended June 30, 2015 and 2014, respectively in connection with all the notes issued with warrants that contained beneficial conversion features. |
Shareholders' Equity
Shareholders' Equity | 6 Months Ended |
Jun. 30, 2015 | |
Shareholders' Equity [Abstract] | |
SHAREHOLDERS' EQUITY | NOTE 3 - SHAREHOLDERS’ EQUITY Preferred Shares Rights We have 25,000,000 shares of preferred stock authorized, par value $0.0005 per share. Series A Convertible Preferred Stock: As of June 30, 2015, the Company had authorized the issuance of 3,143,237 shares of preferred stock designated as Series A Convertible Preferred Stock (“Series A Preferred”). The original issue price of the Series A Preferred is $1.00 per share. There were 518,750 and 593,750 Series A Preferred shares issued and outstanding as of June 30, 2015 and December 31, 2014, respectively. During the three months ended June 30, 2015 the Company did not issue any shares of the Series A Preferred, and no shares of the Series A Preferred have been converted into common stock. Series B Convertible Preferred Stock: As of June 30, 2015, we had 3,500 shares of preferred stock designated as Series B Convertible Preferred Stock (“Series B Preferred”). The original issue price of the Series B Preferred is $1,000 per share. There were 900 and 1,145 Series B Preferred shares issued and outstanding as of June 30, 2015 and December 31, 2014, respectively. During the three months ended June 30, 2015 the Company did not issue any shares of the Series B Preferred and 75 shares of Series B Preferred were converted into 204,188 shares of our common stock. Series C Convertible Preferred Stock: As of June 30, 2015, we had 770,000 shares of preferred stock designated as Series C Convertible Preferred Stock (“Series C Preferred”). The original issue price of the Series C Preferred is $2.00 per share. There were 770,000 and 0 Series C Preferred shares issued and outstanding as of June 30, 2015 and December 31, 2014, respectively. During the three months ended June 30, 2015 the Company issued 770,000 shares of the Series C Preferred and no shares of Series C Preferred were converted into common stock. Series D Convertible Preferred Stock: As of June 30, 2015, we had 1,050,000 shares of preferred stock designated as Series D Convertible Preferred Stock (“Series D Preferred”). The original issue price of the Series D Preferred is $2.00 per share. There were 1,050,000 and 0 shares of the Series D Preferred issued and outstanding as of June 30, 2015 and December 31, 2014, respectively. During the three months ended June 30, 2015 the Company issued 1,050,000 shares of the Series D Preferred and no shares of Series D Preferred were converted into common stock. Series E Convertible Preferred Stock: As of June 30, 2015, we had 531,666 shares of preferred stock designated as Series E Convertible Preferred Stock (“Series E Preferred”). The original issue price of the Series E Preferred is $1.00 per share. There were 531,666 and 0 shares of the Series E Preferred issued and outstanding as of June 30, 2015 and December 31, 2014, respectively. During the three months ended June 30, 2015 the Company issued 531,666 shares of the Series E Preferred and no shares of Series E Preferred were converted into common stock. Common Stock The Company has authorized 100,000,000 shares of $0.0004 par value common stock. During the three months ended June 30, 2015: (1) We issued 133,333 shares of common stock for $80,000 in cash. (2) We issued 204,188 shares of common stock pursuant to the cashless conversion of 75 shares of Series B Preferred; (3) We issued 1,256,453 shares of common stock pursuant to the conversion of convertible notes; (4) We issued 770,000 shares of the Series C Preferred for for which we received $700,000 in cash and recorded a stock subscription receivable for the remaining $700,000; (5) We issued 1,050,000 shares of the Series D Preferred for $2,000,000 in cash held in escrow, to be released upon our uplisting to a national exchange; (6) We recorded $58,611 for the computed fair value of options issued to employees, non-employee directors, and consultants, net of cancellations and forfeitures; and (7) We recorded $400,196 in connection with beneficial conversion features. As of June 30, 2015 we had approximately 31,244,000 shares of common stock issued and outstanding. |
Stock Options and Warrants
Stock Options and Warrants | 6 Months Ended |
Jun. 30, 2015 | |
Stock Options and Warrants [Abstract] | |
STOCK OPTIONS AND WARRANTS | NOTE 4 - STOCK OPTIONS AND WARRANTS Equity Incentive Plans In April 2004, our Board of Directors and the stockholders at that time approved the adoption of a Voting Stock Option Plan (“the Plan”), which provides for the issuance of stock options to eligible employees, consultants, Board members and Advisory Board members of the Company to acquire up to a maximum of 5,000,000 shares of common stock. Our Board of Directors, which determines the number of options that will be granted, the effective dates of the grants, the option process and the vesting schedules, administers the Plan. In the absence of an established market for the common stock of the Company, the Board of Directors determines the fair market value of our common stock. Options generally expire between five and ten years from the date of grant and automatically terminate 90 days after such optionee ceases to be an eligible individual under the Plan other than by reason of death or disability. The portion of options granted that is not exercisable on the date the optionee ceases to be an eligible individual under the Plan by reason other than death, shall terminate and be forfeited to the Company on the date of such cessation. An optionee has no right as a stockholder with respect to any shares covered by the options granted to him until a certificate representing such shares is issued to them. Stock Options The following table summarizes information about the number and weighted average of the options that were forfeited or expired under the Plan as at June 30, 2015: Employee Non-Employee Weighted Weighted Number Average Number Average Combined Of Exercise Of Exercise Total Outstanding at March 31, 2015 2,513,838 $ 0.41 - $ - 2,513,838 Granted - $ - - $ - - Exercised - $ - - $ - - Forfeited/Cancelled - $ - - $ - - Outstanding at June 30, 2015 2,513,838 $ 0.41 - $ - 2,513,838 The number of stock options exercisable at June 30, 2015 was 1,627,296. We used the following assumptions to estimate the fair value of options granted under the Plan for the three and six months ended June 30, 2015 and 2014: Equity Incentive Plans Equity Incentive Plans for the Three Months Ended June 30, for the Six Months Ended June 30, 2015 2014 2015 2014 Expected terms (in years) 5-10 5-10 5-10 5-10 Volatility (weighted ave.) 83.79 % 40.45 % 83.79 % 40.45 % Risk-free interest rate .85% - 1.74% 1.50% - 1.80% .85% - 1.74% 1.44% - 1.80% Expected dividend rate 0 % 0 % 0 % 0 % The expected term of stock options represents the weighted average period the stock options are expected to remain outstanding. The expected term is based on the observed and expected time to exercise and post-vesting cancellations of options by optionees. We use historical volatility in deriving our expected volatility assumption because it believes that future volatility over the expected term of the stock options is not likely to differ from the past. The expected dividend assumption is based on our history and expectation of dividend payouts. The fair value of the shares of common stock underlying the stock options has historically been determined by the board of directors. On or before February 2012, when our common stock commenced trading on the over the counter bulletin board (OTCQB), there has been no public market for our common stock. Consequently, the board of directors has historically determined the fair value of the common stock at the time of grant of the option by considering a number of objective and subjective factors including valuation of comparable companies, operating and financial performance, the lack of liquidity of capital stock and general and industry specific economic outlook, amongst other factors. FASB ASC 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The Company only records stock-based compensation expense for awards that are expected to vest. While we generally consider historical forfeitures in its estimates, judgment is also required in estimating the amount of stock-based awards that are expected to be forfeited. The Company’s estimates for forfeitures may differ from actual forfeitures. If actual results differ significantly from these estimates, stock-based compensation expense and its results of operations could be materially impacted when the Company records a true-up for the difference in the period that the awards vest. We adjust stock-based compensation expense based on our actual forfeitures on an annual basis, if necessary. Stock compensation cost, using the graded vesting attribute method in accordance with Codification topic 718, is recognized over the requisite service period, generally 5 years, during which each tranche of shares is earned (zero, one, two, three, and four years). The value of each tranche is generally amortized on a straight-line basis. For the three months ended June 30, 2015 and 2014, stock based compensation expense was approximately $58,611 and $0, respectively, which consisted primarily of stock-based compensation expense related to stock options recognized under GAAP issued to employees. For each of the three months ended June 30, 2015 and 2014, the number of options exercised was 0. Compensation expense is recognized only for the portion of stock options that are expected to vest, assuming an expected forfeiture rate in determining stock-based compensation expense, which could affect the stock-based compensation expense recorded if there is a significant difference between actual and estimated forfeiture rates. As of June 30, 2015, total unrecognized compensation cost related to stock-based awards granted to employees and non-employee directors was $323,715. Warrants. The following table summarizes our warrant activities for the three months ended June 30, 2015: Weighted Number Average Of Exercise Warrants Price Outstanding at March 31, 2015 3,304,260 $ 1.28 Granted 1,659,696 $ 1.11 Exercised - $ - Forfeited/Cancelled - $ - Outstanding at June 30, 2015 4,963,956 $ 1.22 The number of warrants exercisable at June 30, 2015 was 4,963,956. |
Related Party Transactions
Related Party Transactions | 6 Months Ended |
Jun. 30, 2015 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | NOTE 5 – RELATED PARTY TRANSACTIONS A summary of the related party financings and notes as at June 30, 2015 is as follows: Related party Julian Ross (1) Amount $ 200,000 Stated interest rate 0 % Maturity n/a (1) Our CEO, Mr. Ross provides us shareholder cash advances and other consideration from time to time to fund working capital. |
Off Balance Sheet Arrangements
Off Balance Sheet Arrangements and Contractual Obligations | 6 Months Ended |
Jun. 30, 2015 | |
Off Balance Sheet Arrangements and Contractual Obligations [Abstract] | |
OFF BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL OBLIGATIONS | NOTE 6 – OFF BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL OBLIGATIONS We have not entered into any transactions with unconsolidated entities whereby we have financial guarantees, subordinated retained interests, or other contingent arrangements that expose us to material continuing risks, contingent liabilities, or any other obligation under a variable interest in an unconsolidated entity that provides financing, liquidity, market risk or credit risk support to us. |
Fair Value Measurements
Fair Value Measurements | 6 Months Ended |
Jun. 30, 2015 | |
Fair Value Measurements [Abstract] | |
FAIR VALUE MEASUREMENTS | NOTE 7 – FAIR VALUE MEASUREMENTS Changes related to derivatives for the six months ended June 30, 2015 are as follows: Balance as of December 31, 2014 $ 31,010 Additions related to embedded derivative of convertible notes issued 369,472 Gain on decrease in value of derivative liabilities (122,584 ) Conversions (28,698 ) Balance as of June 30, 2015 $ 249,200 During the six month period the Company recorded derivatives related to convertible notes of $369,472 of which $204,272 exceed the proceeds of the convertible notes and was recorded as a derivative expense. The Company also converted $28,698 and recorded a gain on the change in the fair value of the derivative of $122,584. |
Segment Information
Segment Information | 6 Months Ended |
Jun. 30, 2015 | |
Segment Information [Abstract] | |
SEGMENT INFORMATION | NOTE 8 – SEGMENT INFORMATION We are organized as, and operate in, one reportable segment: the development, distribution and sale of specialty respiratory products and related medical products, accessories, and services. Our chief operating decision-maker is our Chief Executive Officer. Our Chief Executive Officer reviews financial information presented for purposes of evaluating financial performance and allocating resources, accompanied by information about revenue by geographic regions. Our assets are primarily located in the United States of America and not allocated to any specific region and we do not measure the performance of our geographic regions based upon asset-based metrics. Therefore, geographic information is presented only for revenue. Revenue by geographic region is based on the ship to address on our customer orders. The following presents total revenue by geographic region for the three month periods ended June 30, 2015 and 2014: Three Months Ended June 30, Six Months Ended June 30, 2015 2014 2015 2014 United States - product sales $ 1,044,066 $ 677,508 $ 1,668,580 $ 979,110 ROW - product sales 1,953 603 1,953 37,730 ROW - license fees/service revenue - - - 17,500 Totals $ 1,046,019 $ 678,111 $ 1,670,533 $ 1,034,340 |
Going Concern
Going Concern | 6 Months Ended |
Jun. 30, 2015 | |
Going Concern [Abstract] | |
GOING CONCERN | NOTE 9 – GOING CONCERN Our financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. Historically we have been suffering from recurring loss from operations. We have an accumulated deficit of $20,639,745 and $18,041,208 at June 30, 2015 and December 31, 2014, respectively, and stockholders’ equity of $2,997,385 and $1,074,787 as of June 30, 2015 and December 31, 2014, respectively. We require substantial additional funds to manufacture and commercialize our products. Our management is actively seeking additional sources of equity and/or debt financing; however, there is no assurance that any additional funding will be available. In view of the matters described above, recoverability of a major portion of the recorded asset amounts shown in the accompanying June 30, 2015 balance sheet is dependent upon continued operations of the Company, which in turn is dependent upon the Company’s ability to meet its financing requirements on a continuing basis, to maintain present financing, and to generate cash from future operations. These factors, among others, raise substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should we be unable to continue in existence. |
Summary of Significant Accoun15
Summary of Significant Accounting Policies (Policies) | 6 Months Ended |
Jun. 30, 2015 | |
Summary of Significant Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying Condensed Financial Statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X promulgated by the Securities and Exchange Commission (“SEC”) and therefore do not contain all of the information and footnotes required by GAAP and the SEC for annual financial statements. The Company's Condensed Financial Statements reflect all adjustments that management believes are necessary for the fair presentation of their financial position, results of operations, comprehensive loss and cash flows for the periods presented. The information at December 31, 2014 in the Company's Condensed Balance Sheet included in this quarterly report was derived from the audited Balance Sheet included in the Company's Annual Report on Form 10-K for the year ended December 31, 2014 filed with the SEC on March 31, 2015. Where applicable, the Company's 2014 Annual Report on Form 10-K is referred to in this quarterly report as the “2014 Annual Report.” This quarterly report should be read in conjunction with the 2014 Annual Report. |
Deferred Revenue and Income | Deferred Revenue and Income - |
Inventory | Inventory Inventories as at June 30, 2015 and December 31, 2014 consisted of the following: June 30, December 31, 2015 2014 Parts inventory $ 181,863 $ 133,477 Work in process 41,994 41,114 Finished goods 198,694 102,755 Total inventories $ 422,551 $ 277,346 |
Cash and Cash Equivalents | Cash and Cash Equivalents - |
Fair Value of Financial Instruments | Fair Value of Financial Instruments - Level 1 Level 2 Level 3 The fair value of the majority of our cash equivalents was determined based on “Level 1” inputs. We do not have any marketable securities in the “Level 2” and “Level 3” category. We believe that the recorded values of all our other financial instruments approximate their current fair values because of their nature and respective relatively short maturity dates or durations. |
Property and Equipment | Property and Equipment |
Other Long-Lived Assets | Other Long-Lived Assets Intangible assets with definite useful lives and other long-lived assets are tested for impairment if certain impairment indicators are identified . 5-Year amortization expense for patents and trademarks is as follows: 2015 $ 30,232 2016 30,232 2017 30,232 2018 30,232 Thereafter 226,723 $ 347,650 |
Other assets | Other Assets Capitalization of software Amortization expense for websites and URLs was $9,654 and $9,654 for the three month periods ended June 30, 2015 and 2014, respectively. Amortization expense for websites and URLs was $19,309 and $19,309 for the six month periods ended June 30, 2015 and 2014, respectively. |
Research and Development Costs | Research and Development Costs – |
Equity Warrants | Equity Warrants - |
Stock-Based Compensation | Stock-Based Compensation – For the three month periods ended June 30, 2015 and 2014, stock based compensation expense was approximately $58,611 and $0, respectively, which consisted primarily of stock-based compensation expense related to stock options issued to the employees and recognized under GAAP. For the six month periods ended June 30, 2015 and 2014, stock based compensation expense was approximately $106,911 and $17,588, respectively. |
Shipping and Handling Costs | Shipping and Handling Costs |
Advertising Costs | Advertising Costs - |
Net Income (Loss) Per Share | Net Income (Loss) Per Share - |
Recent Accounting Pronouncements | Recent Accounting Pronouncements We have reviewed recent accounting pronouncements and concluded that they are either not applicable to our business or that no material effect is expected on the financial statements as a result of future adoption. |
Summary of Significant Accoun16
Summary of Significant Accounting Policies (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Summary of Significant Accounting Policies [Abstract] | |
Schedule of inventories | June 30, December 31, 2015 2014 Parts inventory $ 181,863 $ 133,477 Work in process 41,994 41,114 Finished goods 198,694 102,755 Total inventories $ 422,551 $ 277,346 |
Schedule of finite-lived intangible assets amortization expense | 2015 $ 30,232 2016 30,232 2017 30,232 2018 30,232 Thereafter 226,723 $ 347,650 |
Notes Payable (Tables)
Notes Payable (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Frisco EDC [Member] | |
Debt Instrument [Line Items] | |
Future principal payments of Frisco note payable | 2015 52,000 Total $ 52,000 |
Stock Options and Warrants (Tab
Stock Options and Warrants (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Stock Options and Warrants [Abstract] | |
Summary of option activity | Employee Non-Employee Weighted Weighted Number Average Number Average Combined Of Exercise Of Exercise Total Outstanding at March 31, 2015 2,513,838 $ 0.41 - $ - 2,513,838 Granted - $ - - $ - - Exercised - $ - - $ - - Forfeited/Cancelled - $ - - $ - - Outstanding at June 30, 2015 2,513,838 $ 0.41 - $ - 2,513,838 |
Summary of assumptions to estimate the fair value of options granted | Equity Incentive Plans Equity Incentive Plans for the Three Months Ended June 30, for the Six Months Ended June 30, 2015 2014 2015 2014 Expected terms (in years) 5-10 5-10 5-10 5-10 Volatility (weighted ave.) 83.79 % 40.45 % 83.79 % 40.45 % Risk-free interest rate .85% - 1.74% 1.50% - 1.80% .85% - 1.74% 1.44% - 1.80% Expected dividend rate 0 % 0 % 0 % 0 % |
Summary of warrant activity | Weighted Number Average Of Exercise Warrants Price Outstanding at March 31, 2015 3,304,260 $ 1.28 Granted 1,659,696 $ 1.11 Exercised - $ - Forfeited/Cancelled - $ - Outstanding at June 30, 2015 4,963,956 $ 1.22 |
Related Party Transactions (Tab
Related Party Transactions (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Related Party Transactions [Abstract] | |
Summary of the related party financings and notes payable | Related party Julian Ross (1) Amount $ 200,000 Stated interest rate 0 % Maturity n/a |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Fair Value Measurements [Abstract] | |
Schedule of changes related to derivatives | Balance as of December 31, 2014 $ 31,010 Additions related to embedded derivative of convertible notes issued 369,472 Gain on decrease in value of derivative liabilities (122,584 ) Conversions (28,698 ) Balance as of June 30, 2015 $ 249,200 |
Segment Information (Tables)
Segment Information (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Segment Information [Abstract] | |
Components of revenue by geographic region | Three Months Ended June 30, Six Months Ended June 30, 2015 2014 2015 2014 United States - product sales $ 1,044,066 $ 677,508 $ 1,668,580 $ 979,110 ROW - product sales 1,953 603 1,953 37,730 ROW - license fees/service revenue - - - 17,500 Totals $ 1,046,019 $ 678,111 $ 1,670,533 $ 1,034,340 |
Summary of Significant Accoun22
Summary of Significant Accounting Policies (Details) - USD ($) | Jun. 30, 2015 | Dec. 31, 2014 |
Summary of Inventories | ||
Parts inventory | $ 181,863 | $ 133,477 |
Work in process | 41,994 | 41,114 |
Finished goods | 198,694 | 102,755 |
Total inventories | $ 422,551 | $ 277,346 |
Summary of Significant Accoun23
Summary of Significant Accounting Policies (Details 1) | Jun. 30, 2015USD ($) |
Summary of Significant Accounting Policies [Abstract] | |
2,015 | $ 30,232 |
2,016 | 30,232 |
2,017 | 30,232 |
2,018 | 30,232 |
Thereafter | 226,723 |
Total | $ 347,650 |
Summary of Significant Accoun24
Summary of Significant Accounting Policies (Details Textual) - USD ($) | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | Dec. 31, 2014 | |
Summary of Significant Accounting Policies (Textual) | |||||
Deferred revenue | $ 0 | $ 0 | $ 0 | ||
Depreciation expense | 3,478 | $ 5,155 | 6,820 | $ 9,786 | |
Impairment charges for patents | 0 | 0 | |||
Amortization of intangible assets | 7,557 | 7,558 | 15,114 | 15,066 | |
Amortization expense of other assets | 42,034 | 37,562 | |||
Research and development | 297,456 | 275,974 | 510,801 | 277,515 | |
Stock-based compensation expense related to stock options issued to the employees | 58,611 | 0 | 106,911 | 17,588 | |
Advertising and promotion costs | 329,393 | 154,044 | $ 794,139 | 241,993 | |
Effect of dilutive securities | 18,268,932 | ||||
Furniture and Fixtures [Member] | |||||
Summary of Significant Accounting Policies (Textual) | |||||
Property and equipment, useful life | 5 years | ||||
Computer Software, Intangible Asset [Member] | |||||
Summary of Significant Accounting Policies (Textual) | |||||
Amortization of intangible assets | $ 9,654 | $ 9,654 | $ 19,309 | $ 19,309 | |
Property and equipment, useful life | 3 years | ||||
Computer Software, Intangible Asset [Member] | Minimum [Member] | |||||
Summary of Significant Accounting Policies (Textual) | |||||
Property and equipment, useful life | 3 years | ||||
Computer Software, Intangible Asset [Member] | Maximum [Member] | |||||
Summary of Significant Accounting Policies (Textual) | |||||
Property and equipment, useful life | 5 years | ||||
Machinery and Equipment [Member] | Minimum [Member] | |||||
Summary of Significant Accounting Policies (Textual) | |||||
Property and equipment, useful life | 5 years | ||||
Machinery and Equipment [Member] | Maximum [Member] | |||||
Summary of Significant Accounting Policies (Textual) | |||||
Property and equipment, useful life | 7 years | ||||
Leasehold Improvements [Member] | Minimum [Member] | |||||
Summary of Significant Accounting Policies (Textual) | |||||
Property and equipment, useful life | 3 years | ||||
Leasehold Improvements [Member] | Maximum [Member] | |||||
Summary of Significant Accounting Policies (Textual) | |||||
Property and equipment, useful life | 7 years |
Notes Payable (Details)
Notes Payable (Details) - Frisco Note payable [Member] | Jun. 30, 2015USD ($) |
Summary of future principal payments of Frisco note payable | |
2,015 | $ 52,000 |
Note payable, Total | $ 52,000 |
Notes Payable (Details Textual)
Notes Payable (Details Textual) - USD ($) | Mar. 22, 2011 | Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 |
Notes Payable (Textual) | |||||
Unamortized discount, new notes | $ 181,000 | $ 181,000 | |||
Note payable, net (new notes) | 1,147,500 | 1,147,500 | |||
Convertible notes, cash value | 966,000 | 966,000 | |||
Interest expense | 561,791 | $ 85,980 | 892,945 | $ 193,587 | |
Convertible Notes Payable [Member] | |||||
Notes Payable (Textual) | |||||
Exercise price | 0.01 | 0.01 | |||
Conversion option intrinsic value | 400,196 | ||||
Interest expense | 638,190 | $ 0 | |||
Promissory Note [Member] | |||||
Notes Payable (Textual) | |||||
Amount of renewal and extension forgivable loan | $ 213,000 | ||||
Debt instrument, payment terms | (i) the full payment of the economic incentives; or (ii) March 31, 2016. | ||||
Period of performance for debt | 5 years | ||||
New debt instrument interest rate | 12.34% | ||||
Unamortized discount, new notes | 8,000 | 8,000 | |||
Note payable, net (new notes) | $ 44,000 | $ 44,000 | |||
Promissory Note [Member] | Maximum [Member] | |||||
Notes Payable (Textual) | |||||
New debt instrument interest rate | 12.00% | 12.00% | |||
Promissory Note [Member] | Minimum [Member] | |||||
Notes Payable (Textual) | |||||
New debt instrument interest rate | 10.00% | 10.00% |
Shareholders' Equity (Details)
Shareholders' Equity (Details) - USD ($) | 3 Months Ended | 6 Months Ended | |
Jun. 30, 2015 | Jun. 30, 2015 | Dec. 31, 2014 | |
Shareholders' Equity (Textual) | |||
Preferred stock, shares authorized | 25,000,000 | 25,000,000 | 25,000,000 |
Preferred stock, par value | $ 0.0005 | $ 0.0005 | $ 0.0005 |
Common stock, shares authorized | 100,000,000 | 100,000,000 | 100,000,000 |
Common stock, par value | $ 0.0004 | $ 0.0004 | $ 0.0004 |
Beneficial conversion features | $ 400,196 | ||
Common stock issued upon conversion of convertible notes, Shares | 1,256,453 | ||
Fair value of options issued to employees | $ 58,611 | ||
Common stock, Shares issued | 31,224,000 | 31,224,000 | 28,438,631 |
Common stock, Shares outstanding | 31,224,000 | 31,224,000 | 28,438,631 |
Number of stock issued for cash | 133,333 | ||
Number of stock issued for cash, value | $ 80,000 | ||
Series A Preferred Stock [Member] | |||
Shareholders' Equity (Textual) | |||
Preferred Stock, shares issued | 518,750 | 518,750 | 593,750 |
Preferred stock, shares outstanding | 518,750 | 518,750 | 593,750 |
Series B Preferred Stock [Member] | |||
Shareholders' Equity (Textual) | |||
Preferred Stock, shares issued | 900 | 900 | 1,145 |
Preferred stock converted into common stock | 75 | ||
Series B preferred authorized | 3,500 | ||
Common stock issued upon conversion of convertible preferred stock, Shares | 204,188 | ||
Preferred stock converted to common stock, Shares | 75 | ||
Preferred stock, shares outstanding | 900 | 900 | 1,145 |
Series C Preferred Stock [Member] | |||
Shareholders' Equity (Textual) | |||
Preferred Stock, shares issued | 770,000 | 770,000 | 0 |
Preferred stock converted to common stock, Shares | 770,000 | ||
Preferred stock, value | $ 700,000 | $ 700,000 | |
Preferred stock shares issued for notes receivable | $ 700,000 | $ 700,000 | |
Preferred stock, shares outstanding | 770,000 | 770,000 | 0 |
Series D Preferred Stock [Member] | |||
Shareholders' Equity (Textual) | |||
Preferred Stock, shares issued | 1,050,000 | 1,050,000 | 0 |
Preferred stock converted to common stock, Shares | 1,050,000 | ||
Preferred stock, value | $ 2,000,000 | $ 2,000,000 | |
Preferred stock, shares outstanding | 1,050,000 | 1,050,000 | 0 |
Series E Preferred Stock [Member] | |||
Shareholders' Equity (Textual) | |||
Preferred Stock, shares issued | 531,666 | 531,666 | 0 |
Preferred stock converted to common stock, Shares | 531,666 | ||
Preferred stock, shares outstanding | 531,666 | 531,666 | 0 |
Common stock [Member] | Series A Preferred Stock [Member] | |||
Shareholders' Equity (Textual) | |||
Preferred stock, shares authorized | 3,143,237 | 3,143,237 | |
Preferred stock, par value | $ 1 | $ 1 | |
Common stock [Member] | Series B Preferred Stock [Member] | |||
Shareholders' Equity (Textual) | |||
Preferred stock, par value | $ 1,000 | $ 1,000 |
Stock Options and Warrants (Det
Stock Options and Warrants (Details) - 6 months ended Jun. 30, 2015 - Stock Options [Member] - $ / shares | Total |
Summary of option activity | |
Outstanding Options/Warrants, beginning balance | 2,513,838 |
Granted | |
Granted, Weighted Average Exercise Price | |
Exercised | |
Exercised, Weighted Average Exercise Price | |
Forfeited/Cancelled | |
Forfeited/Cancelled, Weighted Average Exercise Price | |
Outstanding Options/Warrants, ending balance | 2,513,838 |
Employee [Member] | |
Summary of option activity | |
Outstanding Options/Warrants, beginning balance | 2,513,838 |
Outstanding Options/Warrants, Weighted Average Exercise Price, beginning balance | $ 0.41 |
Granted | |
Granted, Weighted Average Exercise Price | |
Exercised | |
Exercised, Weighted Average Exercise Price | |
Forfeited/Cancelled | |
Forfeited/Cancelled, Weighted Average Exercise Price | |
Outstanding Options/Warrants, ending balance | 2,513,838 |
Outstanding Options/Warrants, Weighted Average Exercise Price, ending balance | $ 0.41 |
Non-Employee [Member] | |
Summary of option activity | |
Outstanding Options/Warrants, beginning balance | |
Outstanding Options/Warrants, Weighted Average Exercise Price, beginning balance | |
Granted | |
Granted, Weighted Average Exercise Price | |
Exercised | |
Exercised, Weighted Average Exercise Price | |
Forfeited/Cancelled | |
Forfeited/Cancelled, Weighted Average Exercise Price | |
Outstanding Options/Warrants, ending balance | |
Outstanding Options/Warrants, Weighted Average Exercise Price, ending balance |
Stock Options and Warrants (D29
Stock Options and Warrants (Details 1) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | |
Summary of fair value of options granted were estimated at the date of grant using the Black-Scholes model | ||||
Volatility (weighted ave.) | 83.79% | 40.45% | 83.79% | 40.45% |
Expected dividend rate | 0.00% | 0.00% | 0.00% | 0.00% |
Minimum [Member] | ||||
Summary of fair value of options granted were estimated at the date of grant using the Black-Scholes model | ||||
Expected terms (in years) | 5 years | 5 years | 5 years | 5 years |
Risk-free interest rate | 0.85% | 1.50% | 0.85% | 1.44% |
Maximum [Member] | ||||
Summary of fair value of options granted were estimated at the date of grant using the Black-Scholes model | ||||
Expected terms (in years) | 10 years | 10 years | 10 years | 10 years |
Risk-free interest rate | 1.74% | 1.80% | 1.74% | 1.80% |
Stock Options and Warrants (D30
Stock Options and Warrants (Details 2) - 6 months ended Jun. 30, 2015 - Warrant [Member] - $ / shares | Total |
Summary of warrants activity | |
Outstanding Options/Warrants, beginning balance | 3,304,260 |
Outstanding Options/Warrants, Weighted Average Exercise Price, beginning balance | $ 1.28 |
Granted | 1,659,696 |
Granted, Weighted Average Exercise Price | $ 1.11 |
Exercised | |
Exercised, Weighted Average Exercise Price | |
Forfeited/Cancelled | |
Forfeited/Cancelled, Weighted Average Exercise Price | |
Outstanding Options/Warrants, ending balance | 4,963,956 |
Outstanding Options/Warrants, Weighted Average Exercise Price, ending balance | $ 1.22 |
Stock Options and Warrants (D31
Stock Options and Warrants (Details Textual) - USD ($) | 1 Months Ended | 3 Months Ended | 6 Months Ended | ||
Apr. 30, 2004 | Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | |
Stock option and warrants (Textual) | |||||
Maximum number of shares acquired under voting stock option plan | 5,000,000 | ||||
Expiration period of option, Maximum | 10 years | ||||
Expiration period of option, Minimum | 5 years | ||||
Termination period of option for ineligible individual | 90 days | ||||
Stock compensation expense recognition requisite service period | 5 years | ||||
Stock based compensation expense | $ 58,611 | $ 0 | $ 106,911 | $ 17,588 | |
Number of stock options exercisable | 1,627,296 | 1,627,296 | |||
Number of warrants exercisable | 4,963,956 | 4,963,956 | |||
Stock Options [Member] | |||||
Stock option and warrants (Textual) | |||||
Unrecognized compensation costs related to non-vested stock option | $ 323,175 | $ 323,175 |
Related Party Transactions (Det
Related Party Transactions (Details) - Jun. 30, 2015 - Julian Ross [Member] - USD ($) | Total | |
Summary of related party financings and notes | ||
Amount | [1] | $ 200,000 |
Stated interest rate | [1] | 0.00% |
Maturity | [1] | n/a |
[1] | (1) Our CEO, Mr. Ross provides us shareholder cash advances and other consideration from time to time to fund working capital. |
Fair Value Measurements (Detail
Fair Value Measurements (Details) | 6 Months Ended |
Jun. 30, 2015USD ($) | |
Fair Value Measurements [Abstract] | |
Balance as of December 31, 2014 | $ 31,010 |
Additions related to embedded derivative of convertible notes issued | 369,472 |
Gain on decrease in value of derivative liabilities | (122,584) |
Conversions | (28,698) |
Balance as of June 30, 2015 | $ 249,200 |
Fair Value Measurements (Deta34
Fair Value Measurements (Details Textual) | 6 Months Ended |
Jun. 30, 2015USD ($) | |
Fair Value Measurements (Textual) | |
Additions related to embedded derivative of convertible notes issued | $ 369,472 |
Excess derivative over proceeds | 204,272 |
Conversions | 28,698 |
Gain on decrease in value of derivative liabilities | $ 122,584 |
Segment Information (Details)
Segment Information (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | |
Components of revenue by geographic region | ||||
Total revenues | $ 1,046,019 | $ 678,111 | $ 1,670,533 | $ 1,034,340 |
United States revenues [Member] | ||||
Components of revenue by geographic region | ||||
Total revenues | 1,044,066 | 677,508 | 1,668,580 | 979,110 |
Row Product Sales [Member] | ||||
Components of revenue by geographic region | ||||
Total revenues | $ 1,953 | $ 603 | $ 1,953 | 37,730 |
ROW - license fees/service revenue [Member] | ||||
Components of revenue by geographic region | ||||
Total revenues | $ 17,500 |
Going Concern (Details)
Going Concern (Details) - USD ($) | Jun. 30, 2015 | Dec. 31, 2014 |
Going Concern (Textual) | ||
Accumulated deficit | $ (20,639,745) | $ (18,041,208) |
Stockholders' deficit | $ 2,997,385 | $ 1,074,788 |