Document_and_Entity_Informatio
Document and Entity Information (USD $) | 12 Months Ended | ||
Dec. 31, 2013 | Mar. 31, 2014 | Jun. 30, 2013 | |
Document And Entity Information | ' | ' | ' |
Entity Registrant Name | 'EMMAUS LIFE SCIENCES, INC. | ' | ' |
Entity Central Index Key | '0001420031 | ' | ' |
Document Type | '10-K | ' | ' |
Document Period End Date | 31-Dec-13 | ' | ' |
Amendment Flag | 'false | ' | ' |
Current Fiscal Year End Date | '--12-31 | ' | ' |
Is Entity a Well-known Seasoned Issuer? | 'No | ' | ' |
Is Entity a Voluntary Filer? | 'No | ' | ' |
Is Entity's Reporting Status Current? | 'Yes | ' | ' |
Entity Filer Category | 'Smaller Reporting Company | ' | ' |
Entity Public Float | ' | ' | $0 |
Entity Common Stock, Shares Outstanding | ' | 26,724,057 | ' |
Entity Common Stock, Par Value Per Share | $0.00 | ' | ' |
Document Fiscal Period Focus | 'FY | ' | ' |
Document Fiscal Year Focus | '2013 | ' | ' |
CONSOLIDATED_BALANCE_SHEETS
CONSOLIDATED BALANCE SHEETS (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
CURRENT ASSETS | ' | ' |
Cash and cash equivalents | $3,638,600 | $402,823 |
Accounts receivable | 35,237 | 80,279 |
Inventories, net | 239,009 | 203,389 |
Marketable securities | 162,564 | ' |
Prepaid expenses and other current assets | 81,046 | 62,833 |
Total current assets | 4,156,456 | 749,324 |
PROPERTY AND EQUIPMENT, net | 26,120 | 38,769 |
OTHER ASSETS | ' | ' |
Marketable securities, pledged to creditor | 686,090 | 561,521 |
Intangibles, net | 1,107,143 | 1,321,429 |
Notes receivable | ' | 18,000 |
Deposits | 137,900 | 195,197 |
Total other assets | 1,931,133 | 2,096,147 |
Total Assets | 6,113,709 | 2,884,240 |
CURRENT LIABILITIES | ' | ' |
Accounts payable and accrued expenses | 2,283,446 | 2,560,278 |
Due to related party | 394,446 | 394,446 |
Dissenting stockholders payable | 125,000 | 200,000 |
Notes payable, net | 1,765,070 | 867,710 |
Notes payable to related parties, net | 925,641 | 3,071,331 |
Convertible notes payable, net | 4,802,472 | 3,986,828 |
Convertible notes payable to related parties, net | 560,706 | 640,867 |
Total current liabilities | 10,856,781 | 11,721,460 |
LONG-TERM LIABILITIES | ' | ' |
Derivative liabilities | 5,928,000 | ' |
Notes payable | 200,000 | 700,000 |
Convertible notes payable, net | 2,966,588 | 1,106,035 |
Total long-term liabilities | 9,094,588 | 1,806,035 |
Total Liabilities | 19,951,369 | 13,527,495 |
COMMITMENTS AND CONTINGENCIES | ' | ' |
STOCKHOLDERS' EQUITY (DEFICIT) | ' | ' |
Preferred stock - par value $0.001 per share, 20,000,000 shares authorized, none issued and outstanding | ' | ' |
Common stock - par value $0.001 per share, 100,000,000 shares authorized, 29,228,306 and 24,878,436 shares issued and outstanding at December 31, 2013 and December 31, 2012, respectively (both excluding 47,178 shares held by stockholders who exercised dissenters' rights). | 29,228 | 24,878 |
Additional paid-in capital | 35,669,291 | 25,076,813 |
Accumulated other comprehensive income | 262,683 | -12,432 |
Accumulated deficit | -49,798,862 | -35,732,514 |
Total Stockholders' Deficit | -13,837,660 | -10,643,255 |
Total Liabilities & Stockholders' Deficit | $6,113,709 | $2,884,240 |
CONSOLIDATED_BALANCE_SHEETS_Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Consolidated Balance Sheets Parenthetical | ' | ' |
Preferred stock, par (in dollars per share) | $0.00 | $0.00 |
Preferred stock, shares authorized | 20,000,000 | 20,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par (in dollars per share) | $0.00 | $0.00 |
Common stock, shares authorized | 100,000,000 | 100,000,000 |
Common stock, shares issued | 29,228,306 | 24,878,436 |
Common stock, shares outstanding | 29,228,306 | 24,878,436 |
Stockholders who exercised dissenters' rights, shares | 47,178 | 47,178 |
CONSOLIDATED_STATEMENTS_OF_COM
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Consolidated Statements Of Comprehensive Loss | ' | ' |
REVENUES, Net | $390,911 | $543,058 |
COST OF GOODS SOLD | 196,395 | 183,673 |
GROSS PROFIT | 194,516 | 359,385 |
OPERATING EXPENSES | ' | ' |
Research and development | 2,436,585 | 2,966,583 |
Selling | 516,599 | 402,601 |
General and administrative | 10,078,954 | 8,022,326 |
Transaction costs | 1,014,019 | ' |
[OperatingExpenses] | 14,046,157 | 11,391,510 |
LOSS FROM OPERATIONS | -13,851,641 | -11,032,125 |
OTHER INCOME (EXPENSE) | ' | ' |
Gain on debt extinguishment | ' | 300,312 |
Realized gain (loss) on securities available-for-sale | 399,068 | -24,490 |
Gain on derecognition of accounts payable | 341,361 | ' |
Change in fair value of derivative liabilities | 932,000 | ' |
Interest income | 103,987 | 37,649 |
Interest expense | -2,173,561 | -3,422,220 |
Other Nonoperating Income (Expense), Total | -397,145 | -3,108,749 |
INCOME TAXES (BENEFIT) | -14,248,786 | -14,140,874 |
INCOME TAXES | -182,438 | 7,246 |
NET LOSS | -14,066,348 | -14,148,120 |
COMPONENTS OF OTHER COMPREHENSIVE INCOME (LOSS) | ' | ' |
Unrealized holding gain (loss) on securities available-for-sale | 293,774 | -259,725 |
Unrealized foreign translation | -18,660 | -5,119 |
COMPREHENSIVE LOSS | ($13,791,234) | ($14,412,964) |
NET LOSS PER COMMON SHARE (in dollars per share) | ($0.53) | ($0.58) |
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING (in shares) | 26,585,578 | 24,482,759 |
CONSOLIDATED_STATEMENT_OF_CHAN
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT (USD $) | Common stock- par value $0.001 per share,100,000,000 shares authorized | Additional Paid-In Capital | Accumulated Other Comprehensive Income (Loss) | Accumulated Deficit | Total |
Balance, beginning at Dec. 31, 2011 | $24,394 | $18,332,508 | $252,413 | ($21,584,394) | ($2,975,079) |
Balance, beginning, shares at Dec. 31, 2011 | 24,393,461 | ' | ' | ' | ' |
Warrants issued in conjunction with convertible note | ' | 175,961 | ' | ' | 175,961 |
Warrants issued in conjunction with promissory note | ' | 1,485,835 | ' | ' | 1,485,835 |
Beneficial conversion feature relating to convertible and promissory notes payable | ' | 256,761 | ' | ' | 256,761 |
Discount on noninterest bearing convertible note | ' | 25,562 | ' | ' | 25,562 |
Share-based compensation | ' | 3,181,360 | ' | ' | 3,181,360 |
Stock issued as a payment of professional fee | 12 | 46,021 | ' | ' | 46,033 |
Stock issued as a payment of professional fee, shares | 12,787 | ' | ' | ' | ' |
Stock issued for cash | 472 | 1,572,805 | ' | ' | 1,573,277 |
Stock issued for cash, shares | 472,188 | ' | ' | ' | ' |
Realized gains (loss) on marketable securities | ' | ' | 24,490 | ' | 24,490 |
Unrealized gain on marketable securities, net of tax | ' | ' | -284,216 | ' | -284,216 |
Foreign currency translation effect | ' | ' | -5,119 | ' | -5,119 |
Net loss | ' | ' | ' | -14,148,120 | -14,148,120 |
Balance, ending at Dec. 31, 2012 | 24,878 | 25,076,813 | -12,432 | -35,732,514 | -10,643,255 |
Balance, ending, shares at Dec. 31, 2012 | 24,878,436 | ' | ' | ' | ' |
Warrants issued in conjunction with convertible note | ' | 116,831 | ' | ' | 116,831 |
Beneficial conversion feature relating to convertible and promissory notes payable | ' | 396,801 | ' | ' | 396,801 |
Equity components of stock and warrant units issued for cash | 3,021 | 586,053 | ' | ' | 589,074 |
Equity components of stock and warrant units issued for cash, shares | 3,020,501 | ' | ' | ' | ' |
Share-based compensation | ' | 5,108,666 | ' | ' | 5,108,666 |
Stock issued as a payment of professional fee | 33 | 118,191 | ' | ' | 118,224 |
Stock issued as a payment of professional fee, shares | 32,840 | ' | ' | ' | ' |
Stock issued for cash | 527 | 1,889,595 | ' | ' | 1,890,122 |
Stock issued for cash, shares | 527,284 | ' | ' | ' | ' |
Conversion of notes payable to common stock | 769 | 2,626,203 | ' | ' | 2,626,972 |
Conversion of notes payable to common stock, shares | 769,245 | ' | ' | ' | ' |
Loss on extinguishment of debt with related party | ' | -249,862 | ' | ' | -249,862 |
Realized gains (loss) on marketable securities | ' | ' | -399,068 | ' | -399,068 |
Unrealized gain on marketable securities, net of tax | ' | ' | 692,843 | ' | 692,843 |
Foreign currency translation effect | ' | ' | -18,660 | ' | -18,660 |
Net loss | ' | ' | ' | -14,066,348 | -14,066,348 |
Balance, ending at Dec. 31, 2013 | $29,228 | $35,669,291 | $262,683 | ($49,798,862) | ($13,837,660) |
Balance, ending, shares at Dec. 31, 2013 | 29,228,306 | ' | ' | ' | ' |
CONSOLIDATED_STATEMENT_OF_CHAN1
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT (Parenthetical) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Statement of Stockholders' Equity [Abstract] | ' | ' |
Common stock, par (in dollars per share) | $0.00 | $0.00 |
Common stock, shares authorized | 100,000,000 | 100,000,000 |
CONSOLIDATED_STATEMENT_OF_CASH
CONSOLIDATED STATEMENT OF CASH FLOWS (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ' | ' |
Net loss | ($14,066,348) | ($14,148,120) |
Adjustments to reconcile net loss to net cash flows from operating activities | ' | ' |
Depreciation and amortization | 235,260 | 207,598 |
Interest expense accrued from discount of convertible note | 949,103 | 2,570,025 |
Realized gain on marketable securities available-for-sale | -399,068 | 24,490 |
Tax benefit recognized on unrealized gain on marketable securities available-for-sale | -185,713 | ' |
Gain on debt extinguishment | ' | 300,312 |
Gain on derecognition of accounts payable | -341,361 | ' |
Share-based compensation | 5,108,666 | 3,181,360 |
Change in fair value of derivative liabilities | -932,000 | ' |
Transaction costs related to private placement | 1,014,019 | ' |
Net changes in operating assets and liabilities | ' | ' |
Accounts receivable | 43,884 | -62,893 |
Inventory | -50,675 | -11,902 |
Prepaid expenses and other current assets | -50,078 | -1,011 |
Deposits | 55,942 | 231,776 |
Accounts payable and accrued expenses | 229,331 | 1,859,601 |
Net cash flows used in operating activities | -8,389,038 | -6,449,388 |
CASH FLOWS FROM INVESTING ACTIVITIES | ' | ' |
Payment for license | ' | -1,500,000 |
Proceeds from sales of investment securities available-for-sale | 591,422 | ' |
Purchases of property and equipment | -8,508 | -7,385 |
Net cash flows from (used in) investing activities | 582,914 | -1,507,385 |
CASH FLOWS FROM FINANCING ACTIVITIES | ' | ' |
Proceeds from notes payable issued | 1,541,000 | 5,273,660 |
Proceeds from convertible notes payable issued | 3,139,941 | 1,950,470 |
Due to dissenters | -75,000 | ' |
Payments of notes payable | -1,505,696 | -391,667 |
Payment of convertible notes payable | -365,773 | -350,100 |
Proceeds from private placement units, net of transaction costs | 6,435,055 | ' |
Proceeds from issuance of common stock | 1,890,122 | 1,573,277 |
Net cash flows from financing activities | 11,059,649 | 8,055,640 |
Effect of exchange rate changes on cash | -17,748 | -9,728 |
Net increase in cash and cash equivalents | 3,235,777 | 89,139 |
Cash and cash equivalents, beginning of period | 402,823 | 313,684 |
Cash and cash equivalents, end of period | 3,638,600 | 402,823 |
SUPPLEMENTAL DISCLOSURES OF CASH FLOW ACTIVITIES | ' | ' |
Interest paid | 470,525 | 248,880 |
Income taxes paid | 3,275 | 7,246 |
Non-cash Financing Activities: | ' | ' |
Stock issued as a payment of professional fee | 118,224 | 46,033 |
Conversion of notes payable to common stock | 2,606,100 | ' |
Conversion of accrued interest payable to common stock | 20,872 | ' |
Disposal of pledged marketable securities | ' | -565,907 |
Cancellation of secured debt by transfer of collateral | ' | $841,729 |
DESCRIPTION_OF_BUSINESS
DESCRIPTION OF BUSINESS | 12 Months Ended |
Dec. 31, 2013 | |
Description Of Business | ' |
DESCRIPTION OF BUSINESS | ' |
NOTE 1—DESCRIPTION OF BUSINESS | |
Organization—Emmaus Life Sciences, Inc. (the "Company" or "Emmaus"), which is engaged in the discovery, development, and commercialization of treatments and therapies for rare diseases, was incorporated in the state of Delaware on September 24, 2007. Pursuant to an Agreement and Plan of Merger, dated April 21, 2011 (the "Merger Agreement"), by and among the Company, AFH Merger Sub, Inc., a wholly-owned subsidiary of the Company ("AFH Merger Sub"), AFH Holding and Advisory, LLC, and Emmaus Medical, Inc. ("Emmaus Medical"), Emmaus Medical merged with and into AFH Merger Sub with Emmaus Medical continuing as the surviving entity (the "Merger"). Upon the closing of the Merger, the Company changed its name from "AFH Acquisition IV, Inc." to "Emmaus Holdings, Inc." and became the parent company of Emmaus Medical. The Company changed its name from "Emmaus Holdings, Inc." to "Emmaus Life Sciences, Inc." on September 14, 2011. | |
Emmaus Medical is a Delaware corporation originally incorporated on September 12, 2003. Emmaus Medical, LLC was organized on December 20, 2000. In October 2003, Emmaus Medical, LLC conducted a reorganization and merged with Emmaus Medical. As a result of the merger, Emmaus Medical acquired the exclusive patent rights for a treatment for sickle cell disease. | |
In October 2010, the Company established Emmaus Medical Japan, Inc., a Japanese corporation ("EM Japan") by paying 97% of the initial capital. EM Japan is engaged in the business of trading in nutritional supplements and other medical products and drugs. The results of EM Japan have been included in the consolidated financial statements of the Company since the date of formation. The aggregate formation cost was $52,500. Emmaus Medical acquired the additional 3% of the outstanding shares of EM Japan during the three months ended March 31, 2011 and is now the 100% owner of the outstanding share capital. | |
In November 2011, the Company formed Emmaus Medical Europe, Ltd. ("EM Europe"), a wholly owned subsidiary of Emmaus Medical. EM Europe's primary focus is expanding the business of Emmaus Medical in Europe. | |
Emmaus, its wholly-owned subsidiary, Emmaus Medical, and Emmaus Medical's wholly-owned subsidiaries, Newfield Nutrition Corporation, EM Japan and EM Europe, are collectively referred to herein as the "Company." | |
Stage of Business—Prior to the fourth quarter of 2013, the Company had considered itself a Development Stage Entity in accordance with Accounting Standards Codification (ASC) 915, Development Stage Entities, as defined by the Financial Accounting Standards Board (FASB). In the fourth quarter of 2013, the Company reassessed its status as a development stage entity. The Company had substantially completed development of its primary product as well as completing development of an initial business infrastructure in the fourth quarter of 2013. Therefore, the Company has determined that it is no longer a development stage enterprise, commencing principal operations during the fourth quarter of fiscal 2013. As a result of this change in reporting status, the Company has removed from its financial statements all 'cumulative since inception' financial information that is required by ASC 915. | |
Nature of Business—The Company has undertaken the business of developing and commercializing cost-effective treatments and therapies for rare diseases. The Company's primary business purpose is to commercialize its treatment for sickle cell disease ("SCD"). | |
To a lesser extent, the Company is also engaged in the marketing and sale of NutreStore®, which has received FDA approval, as a treatment for Short Bowel Syndrome ("SBS") in patients receiving specialized nutritional support when used in conjunction with a recombinant human growth hormone that is approved for this indication. The Company's indirect wholly-owned subsidiary, Newfield Nutrition Corporation, sells L-glutamine as a nutritional supplement under the brand name AminoPure® through retail stores in multiple states and via importers and distributors in Japan, Taiwan and South Korea. The Company also owns a minority interest in CellSeed, Inc., a Japanese company listed on the Tokyo Stock Exchange, which is engaged in research and development of regenerative medicine products and the manufacture and sale of temperature-responsive cell culture equipment. | |
The Company also has certain rights to regenerative medicine products owned by CellSeed and is involved in research focused on providing innovative solutions for tissue-engineering through the development of novel cell harvest methods and 3-dimensional living tissue replacement products for "cell sheet therapy" and regenerative medicine and the commercialization of such products. |
SUMMARY_OF_SIGNIFICANT_ACCOUNT
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended | ||||||||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||||||||
Summary Of Significant Accounting Policies | ' | ||||||||||||||||||||||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ' | ||||||||||||||||||||||
NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |||||||||||||||||||||||
Basis of presentation —The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. | |||||||||||||||||||||||
Immaterial Corrections of Prior Year Amounts— During the preparation of its consolidated financial statements for the year ended December 31, 2013, the Company identified the following immaterial errors in its consolidated financial statements for the year ended December 31, 2012 which have been corrected in the accompanying consolidated financial statements: | |||||||||||||||||||||||
a) | The Company incorrectly recognized share-based compensation expense prior to the grant date for stock options awarded to certain employees and consultants. This correction resulted in a $0.3 million reduction of share-based compensation expense for the year ended December 31, 2012. A similar error was identified relating to the Company’s consolidated financial statements for the first three quarterly periods of 2013, the effects of which have been addressed in the accompanying consolidated financial statements for the year ended December 31, 2013. | ||||||||||||||||||||||
b) | In June 2012, the Company incorrectly recorded the gain relating to the settlement of a loan as a gain on marketable securities. This has been corrected to show a gain on debt extinguishment of $300,312 and a realized loss on securities available-for-sale of $24,490, with no change in total net loss for the year ended December 31, 2012. | ||||||||||||||||||||||
We also identified the following immaterial errors in our 2013 quarterly financial statements, the effects of which have been addressed in the accompanying consolidated financial statements for the year ended December 31, 2013: | |||||||||||||||||||||||
a) | In the quarter ended June 30, 2013, the Company incorrectly accounted for the May 2013 issuance of shares of its common stock to the Company’s CEO in exchange for the termination of a promissory note held by the CEO and accrued interest thereon. The remaining unamortized loan discount of $249,861 was originally recorded as interest expense. This has been corrected to report the remaining unamortized loan discount of $249,861 as a debt extinguishment loss between related entities which is recorded as a capital transaction. | ||||||||||||||||||||||
b) | In the quarter ended June 30, 2013, the Company incorrectly recorded the cancelation of 2,504,249 shares of its common stock held by AFH Advisory, Griffin and the Foundation, and the cancelation of a payment obligation to AFH Advisory in the amount of $394,446. The cancelations had been ordered by the court in connection with a partial summary judgment in the Company’s favor in the ongoing litigation against AFH Advisory, as further described in Note 11 – Related Party Transactions. While the partial summary judgment in favor of the Company led to the cancelation of 2,504,249 shares of the Company’s common stock by the Company’s transfer agent on June 28, 2013, the cancelation of such shares and payment obligation is subject to appeal until 30 days after the completion of final court proceedings. The Company has made an adjustment to the accompanying consolidated financial statements for the year ended December 31, 2013 to continue to present these shares as outstanding, and has restored $394,446 to the balance sheet as an amount due to related parties until the right of appeal has lapsed and all contingencies have been resolved. | ||||||||||||||||||||||
Adjustments for these items will also be included in the consolidated financial statements contained in the Company’s Quarterly Reports on Form 10-Q for the corresponding periods in 2014. | |||||||||||||||||||||||
Restatement of Financial Statements— In the Company’s Quarterly Report on Form 10-Q/A for the quarterly period ended September 30, 2013 filed on May 8, 2014, the Company restated its condensed consolidated financial statements as of and for the three and nine month periods ended September 30, 2013 for the following errors which were considered material to the Company’s condensed consolidated financial statements, as previously reported in its Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2013. | |||||||||||||||||||||||
On September 11, 2013, the Company issued an aggregate of 3,020,501 units at a price of $2.50 per unit. Each unit consisted of one share of common stock and one common stock purchase warrant. The aggregate gross purchase price for the units was $6,435,055 after transaction costs. When preparing its consolidated financial statements as of and for the period ended September 30, 2013, the Company determined that the warrants should be classified as a liability-classified derivative. However, the Company incorrectly allocated the value of the transaction between the shares of common stock and the warrants based on their relative value, instead of allocating value first to the warrants to the extent of their fair value, as is required by generally accepted accounting principles, and allocating the residual to the common shares. In addition, the costs of the transaction were incorrectly allocated entirely to the common shares instead of between the common shares and the liability-classified derivative. To correct these errors, the Company restated its consolidated financial statements as of and for the three and nine months ended September 30, 2013,which resulted in Derivative Liabilities increasing by $4.1 million and Additional Paid-in Capital decreasing by $3.3 million as of September 30, 2013, and Transaction Costs increasing by $1.0 million and other income related to the Change in Fair Value of Derivative Liabilities increasing by $0.2 million for the three and nine months ended September 30, 2013. These errors did not affect periods prior to the quarter ended September 30, 2013. | |||||||||||||||||||||||
Going concern—The accompanying consolidated financial statements have been prepared on the basis that the Company will continue as a going concern. The Company has had recurring net losses of $14.1million and $14.1 million in 2013 and 2012, respectively. In addition, the Company has a significant amount of notes payable and other obligations due within the next year and is projecting that its operating losses and expected capital needs will exceed its existing cash balances and cash expected to be generated from operations for the foreseeable future, including the expected costs relating to the commercialization of the Company's L-glutamine treatment for SCD. In order to meet the Company's expected obligations, management intends to raise additional funds through equity, debt offerings and partnership agreements. However, there can be no assurance that the Company will be able to obtain the additional equity and debt financings or enter into partnership agreements. Therefore, due to the uncertainty of the Company's ability to meet its current operating and capital expenses, there is substantial doubt about the Company's ability to continue as a going concern, as the continuation and expansion of its business is dependent upon obtaining further financing, successful and sufficient market acceptance of its products, and finally, achieving a profitable level of operations. The consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties. | |||||||||||||||||||||||
Recapitalization and change in legal status of entity | |||||||||||||||||||||||
2003 Recapitalization—In October 2003, Emmaus Medical acquired substantially all of the assets of Emmaus Medical, LLC. The stockholders of Emmaus Medical were substantially the same as the members of Emmaus Medical, LLC. As such, the transaction was accounted for as a transfer of assets between entities under common control pursuant to accounting standards codification 805, Business Combinations. | |||||||||||||||||||||||
The effect of the recapitalization was to retroactively present the stockholders' equity of Emmaus Medical, Inc. (the surviving entity) to the earliest period presented in the financial statements. This recapitalization had no effect on results of operations for any period presented. Also, concurrent with the recapitalization, Emmaus Medical changed its legal status from a Limited Liability Company to a "C" Corporation. In connection with this change, deficits accumulated in the Limited Liability Company were transferred to additional paid in capital. | |||||||||||||||||||||||
2011 Merger—Pursuant to the Merger Agreement, Emmaus Medical merged with and into AFH Merger Sub with Emmaus Medical continuing as the surviving entity (the "Merger"). | |||||||||||||||||||||||
Upon consummation of the Merger, (i) each outstanding share of Emmaus Medical common stock was exchanged for 29.48548924976 shares of Company common stock, (ii) each outstanding Emmaus Medical option and warrant, which was exercisable for one share of Emmaus Medical common stock, was exchanged for an option or warrant, as applicable, exercisable for 29.48548924976 shares of Company common stock; and (iii) each outstanding convertible note of Emmaus Medical, which was converted for one share of Emmaus Medical common stock, was exchanged for a convertible note exercisable for 29.48548924976 shares of Company common stock. | |||||||||||||||||||||||
As a result of the Merger, security holders of Emmaus Medical received 20,628,305 shares of Company common stock, options and warrants to purchase an aggregate of 326,507 shares of Company common stock, and convertible notes to purchase an aggregate of 271,305 shares of Company common stock. | |||||||||||||||||||||||
Four stockholders exercised their dissenters' rights in connection with the Merger and returned an aggregate of 47,178 shares for an aggregate of $200,000. The shares were cancelled as of May 3, 2011, the closing date of the Merger and recorded as a current liability as of that date. | |||||||||||||||||||||||
For accounting purposes, the Merger transaction was accounted for as a reverse merger. The transaction has been treated as a recapitalization of Emmaus Medical and its subsidiaries. This resulted in Emmaus Life Sciences, Inc. (the legal acquirer of Emmaus Medical and its subsidiaries) being considered the accounting acquire, and Emmaus Medical, whose management took control of Emmaus Life Sciences, Inc. (the legal acquiree of Emmaus Medical), being considered the accounting acquirer. | |||||||||||||||||||||||
Principles of consolidation—The consolidated financial statements include the accounts of the Company (and its wholly-owned subsidiary, Emmaus Medical, Inc., and Emmaus Medical's wholly-owned subsidiaries, Newfield Nutrition Corporation, EM Japan and EM Europe). All significant intercompany transactions have been eliminated. | |||||||||||||||||||||||
Estimates—Financial statements prepared in accordance with accounting principles generally accepted in the United States require management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Among other things, management has estimated the useful lives of equipment and other assets, along with the variables used to calculate the valuation of stock options and warrants using the Black-Scholes-Merton option valuation model. Actual results could differ from those estimates. | |||||||||||||||||||||||
In addition, the initial value of the derivative liability as of September 11, 2013 and the change in fair value of the derivative liability as of December 31, 2013 were determined using a Binomial Monte-Carlo Cliquet (aka Ratchet) Option Pricing Model. The model is similar to traditional Black-Scholes-type option pricing models except that the exercise price resets at certain dates in the future. | |||||||||||||||||||||||
Cash and cash equivalents—Cash and cash equivalents include short-term securities with original maturities of less than ninety days. The Company maintains its cash and cash equivalents at insured financial institutions, the balances of which may, at times, exceed federally insured limits. Management believes that the risk of loss due to the concentrations is minimal. | |||||||||||||||||||||||
Inventories—Inventories as of December 31, 2013 are valued based on first-in, first-out and at the lesser of cost or market value. Work-in-process inventories consist of raw material L-glutamine for the Company's AminoPure and NutreStore products that has not yet been packaged and labeled for sale. | |||||||||||||||||||||||
All of the inventory purchases during the year ended December 31, 2013 were from two vendors and in 2012 were from one vendor. | |||||||||||||||||||||||
December 31, | |||||||||||||||||||||||
Inventory by category | 2013 | 2012 | |||||||||||||||||||||
Raw materials and components | $ | 20,700 | $ | — | |||||||||||||||||||
Work-in-process | 68,887 | — | |||||||||||||||||||||
Finished goods | 149,422 | 203,389 | |||||||||||||||||||||
| | | | | | | | ||||||||||||||||
Total | $ | 239,009 | $ | 203,389 | |||||||||||||||||||
Deposits—Carrying value of amounts transferred to third parties for security purposes that are expected to be returned or applied towards payment after one year or beyond the operating cycle, if longer, are recorded as deposits. Deposit amounts consist of retainer payments for professional services, amounts paid to the Company's contract research organization for FDA Phase 3 clinical trial activities and security deposits for its offices. | |||||||||||||||||||||||
Revenue recognition—Revenue is recognized when there is persuasive evidence that an arrangement exists, delivery has occurred, the price is fixed and determinable and collection is reasonably assured. | |||||||||||||||||||||||
With prior written approval of the Company, in certain situations, product is returnable only by its direct customers for a returned goods credit, for product that is expired, damaged in transit, or which is discontinued, withdrawn or recalled. | |||||||||||||||||||||||
The Company estimates its sales returns based upon its prior sales and return history and accrues a Sales Return Allowance at the time of sale. Historically, sales returns have been immaterial. The Company pays royalties on an annual basis based on existing license arrangements. These royalties are recognized as cost of goods sold upon sale of the products. | |||||||||||||||||||||||
Allowance for doubtful accounts—The Company provides an allowance for uncollectible accounts based upon prior experience and management's assessment of the collectability of existing specific accounts. | |||||||||||||||||||||||
Advertising cost—Advertising costs are expensed as incurred. Advertising costs for the year ended December 31, 2013 and 2012 were $240,743 and $172,359, respectively. | |||||||||||||||||||||||
Property and equipment—Leaseholds, furniture, and fixtures are recorded at historical cost and depreciated on a straight-line basis over their estimated useful lives of 5 to 7 years. Maintenance and repairs are expensed as incurred, while major additions and improvements are capitalized. Gains and losses on disposition are included in current operations. | |||||||||||||||||||||||
Intangibles—The Company's intangible assets include license issue fees and patent costs relating to a license agreement (Note 4). These intangible assets are amortized over a period of 3 to 7 years, the estimated legal life of the patents and economic life of the license agreements. The intangible assets are assessed by management for potential impairment on an annual basis. No impairment existed as of December 31, 2013 and December 31, 2012. | |||||||||||||||||||||||
Impairment of long-lived assets The Company evaluates the carrying value of its long-lived assets for impairment whenever events or changes in circumstances indicate that such carrying values may not be recoverable. The Company uses its best judgment based on the current facts and circumstances relating to its business when determining whether any significant impairment factors exist. | |||||||||||||||||||||||
If the Company determines that the carrying values of long-lived assets may not be recoverable based upon the existence of one or more indicators of impairment, the Company performs an undiscounted cash flow analysis to determine if impairment exists. If impairment exists, the Company measures the impairment based on the difference between the asset's carrying amount and its fair value, and the impairment is charged to consolidated statement of comprehensive loss in the period in which the long-lived asset impairment is determined to have occurred. | |||||||||||||||||||||||
The Company has determined that no impairment of the carrying value of its long-lived assets existed at December 31, 2013 and 2012. | |||||||||||||||||||||||
There can be no assurance, however, that market conditions will not change or demand for the Company's products will continue or allow the Company to realize the value of its long-lived assets and prevent future impairment. | |||||||||||||||||||||||
Research and development—Research and development consists of expenditures for the research and development of new products and technologies, which primarily involve contract research, payroll-related expenses, and other related supplies. Research and development costs are expensed as incurred. Intangible assets acquired for research and development purposes are capitalized if they have alternative future use. | |||||||||||||||||||||||
Share-based compensation—The Company recognizes compensation cost for share-based compensation awards over the service term of the recipients of the share-based awards. The fair value of share-based compensation is calculated using the Black-Scholes-Merton pricing model. The Black-Scholes-Merton model requires subjective assumptions regarding future stock price volatility and expected time to exercise, which greatly affect the calculated values. The expected term of awards granted is derived from historical data on awards exercised and post-vesting employment termination behavior. The risk-free rate selected to value any particular grant is based on the U.S. Treasury rate on the grant date that corresponds to the expected term of the award. The expected volatility is based on the historical volatility of the common stock of comparable publicly traded companies. These factors could change, affecting the determination of stock-based compensation expense in future periods. | |||||||||||||||||||||||
Income taxes—The Company accounts for income taxes under the asset and liability method, wherein deferred tax assets and liabilities are recognized for the future tax consequences attributable to the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. 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 income in the period the enactment occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through the generation of future taxable income for the related jurisdictions. | |||||||||||||||||||||||
For balance sheet presentation, current deferred tax assets and liabilities within each tax jurisdiction have been offset and presented as a single amount and non-current deferred tax assets and liabilities within each tax jurisdiction have been offset and presented as a single amount. | |||||||||||||||||||||||
When tax returns are filed, it is highly probable that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits along with any associated interest and penalties that would be payable to the taxing authorities upon examination. As of December 31, 2013, the Company had no unrecognized tax benefits, and the Company had no positions which, in the opinion of management, would be reversed if challenged by a taxing authority. In the event the Company is assessed interest and/or penalties, such amounts will be classified as income tax expense in the financial statements. | |||||||||||||||||||||||
As of December 31, 2013, all federal tax returns since 2010 and state tax returns since 2009 are still subject to adjustment upon audit. No tax returns are currently being examined by taxing authorities. | |||||||||||||||||||||||
Comprehensive income (loss)—Comprehensive income (loss) includes net loss and other comprehensive income (loss). The items of other comprehensive income (loss) for the Company are unrealized gains and losses on marketable securities classified as available-for-sale and foreign translation adjustments relating to its subsidiaries. When the Company realizes a gain or loss on securities available-for-sale for which an unrealized gain or loss was previously recognized, a corresponding reclassification adjustment is made to remove the unrealized gain or loss from accumulated other comprehensive income and reflect the realized gain or loss in current operations. | |||||||||||||||||||||||
Marketable securities—Investment securities as of December 31, 2013 and December 31, 2012 are as available-for-sale. Securities available-for-sale are recorded at cost and any increases or decreases in fair market value are recorded as unrealized gain or loss, net of taxes in accumulated other comprehensive income. The Company monitors these investments for impairment and makes appropriate reductions in carrying values when necessary. CellSeed, Inc. securities are the only marketable security the Company currently carries on its books. The Company's marketable securities consist of 48,550 shares of CellSeed stock which are part of 147,100 shares acquired in January 2009 for 100,028,000 Japanese Yen (equivalent to $1,109,819), at 680 Yen per share. CellSeed's IPO (Tokyo Stock Exchange symbol 7776) was completed on March 16, 2010. As of December 31, 2013 and December 31, 2012, the closing price per share was 1,840 Yen and 661 Yen, respectively. | |||||||||||||||||||||||
In July 2013, based on an increase in market value of CellSeed shares, Mitsubishi UFJ Capital III Limited Partnership (Mitsubishi) released to the Company 34,300 shares of CellSeed stock. This was part of the 73,550 shares of CellSeed stock held by Mitsubishi as collateral on a $500,000 convertible note issued to Mitsubishi. The note is now secured by the remaining 39,250 shares of CellSeed stock held by Mitsubishi as collateral. | |||||||||||||||||||||||
During the fourth quarter of 2013, the Company sold 25,000 of the shares released from Mitsubishi in open market transactions for $591,422. As of December 31, 2013, 9,300 shares of CellSeed stock are classified as a current asset, as they are available for sale by the Company. The remaining 39,250 shares of CellSeed stock are pledged against the note, which is due in 2016, and are classified as marketable securities, pledged to creditor. As of December 31, 2012, 100% of the investment in CellSeed is classified as a long term asset in the accompanying balance sheet as the entire investment was assigned as collateral to secure the $500,000 convertible note issued to Mitsubishi. | |||||||||||||||||||||||
Gain on derecognition of accounts payable—The Company derecognizes accounts payable and records gain when the related contractual obligation is discharged, cancelled or expired. During the year ended December 31, 2013, the Company recorded a total of $341,361 as a gain on derecognition of accounts payable due to reaching a settlement with a creditor in regards to the amounts owed relating to services provided to the Company. | |||||||||||||||||||||||
Foreign Currency Translation—The Company's reporting currency is the U.S. dollar. The yen and the euro are the functional currencies of its subsidiaries, EM Japan and EM Europe, respectively, as they are the primary currencies within the economic environments in which EM Japan and EM Europe operate. Assets and liabilities of their operations are translated into U.S. dollars at period-end exchange rates, and revenues and expenses are translated into U.S. dollars at average exchange rates in effect during each reporting period. Adjustments resulting from the translation are reported in other comprehensive income or loss. | |||||||||||||||||||||||
Financial Instruments—Financial instruments included in the financial statements are comprised of cash and cash equivalents, short-term and long-term available-for-sale investments, accounts receivable, derivative financial instruments, accounts payable, certain accrued liabilities, convertible notes, promissory notes, due to related party, dissenting stockholders payable, contingent consideration and other contingent liabilities. The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, due to related party, and dissenting stockholders payable approximate their fair values due to the short-term nature of those instruments. | |||||||||||||||||||||||
Fair value measurements—The Company defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company measures fair value under a framework that provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described as follows: | |||||||||||||||||||||||
Level 1: Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access. | |||||||||||||||||||||||
Level 2: Inputs to the valuation methodology include: | |||||||||||||||||||||||
• Quoted prices for similar assets or liabilities in active markets; | |||||||||||||||||||||||
• Quoted prices for identical or similar assets or liabilities in inactive markets; | |||||||||||||||||||||||
• Inputs other than quoted prices that are observable for the asset or liability; | |||||||||||||||||||||||
• Inputs that are derived principally from or corroborated by observable market data by correlation or other means. | |||||||||||||||||||||||
If the asset or liability has a specified (contractual) term, the Level 2 inputs must be observable for substantially the full term of the asset or liability. | |||||||||||||||||||||||
Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement. | |||||||||||||||||||||||
The asset's or liability's fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value assigned to marketable securities is determined by obtaining quoted prices on nationally recognized securities exchanges, and are classified as Level 1 investments at December 31, 2013. | |||||||||||||||||||||||
The fair value of the Company's debt instruments is not materially different from their carrying values as presented. The fair value of the Company's convertible debt instruments was determined based on Level 2 inputs. The carrying value of the debt was discounted based on allocating proceeds to other financial instruments within the arrangement as discussed in Note 6. | |||||||||||||||||||||||
The Company issued stock purchase warrants in conjunction with its September 2013 private placement (see Note 7) that are accounted for as derivative instruments whose fair market value is determined using Level 3 inputs. These inputs include expected term and expected volatility. | |||||||||||||||||||||||
The Company did not have any Level 3 financial assets or liabilities measured at fair value at December 31, 2012. | |||||||||||||||||||||||
The following table presents the activity for those items measured at fair value on a recurring basis using Level 3 inputs during 2013: | |||||||||||||||||||||||
Derivative Instruments— | |||||||||||||||||||||||
Stock Purchase | |||||||||||||||||||||||
Warrants | |||||||||||||||||||||||
Balance at December 31, 2012 | $ | — | |||||||||||||||||||||
Fair value at issuance date | 6,860,000 | ||||||||||||||||||||||
Change in fair value included in the statement of comprehensive loss | (932,000 | ) | |||||||||||||||||||||
| | | | | |||||||||||||||||||
Balance at December 31, 2013 | $ | 5,928,000 | |||||||||||||||||||||
The initial value of the derivative liability as of September 11, 2013 and the change in fair value of the derivative liability as of December 31, 2013 were determined using a Binomial Monte-Carlo Cliquet (aka Ratchet) Option Pricing Model. The model is similar to traditional Black-Scholes-type option pricing models except that the exercise price resets at certain dates in the future. The values as of September 11, 2013 and December 31, 2013 were calculated based on the following assumptions: | |||||||||||||||||||||||
December 31, 2013 | Initial Value | ||||||||||||||||||||||
Risk-free interest rate | 1.75 | % | 1.72 | % | |||||||||||||||||||
Expected volatility (peer group) | 63.2 | % | 72.4 | % | |||||||||||||||||||
Expected life (in years) | 4.7 | 5 | |||||||||||||||||||||
Expected dividend yield | — | — | |||||||||||||||||||||
Number outstanding | 3,020,501 | 3,020,501 | |||||||||||||||||||||
Fair value at issue date | $ | 6,860,000 | $ | 6,860,000 | |||||||||||||||||||
Debt and Related Party Debt—The Company accounts for the proceeds from the issuance of convertible notes payable with detachable stock purchase warrants and embedded conversion features in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 470-20, Debt with Conversion and Other Options. Under FASB ASC 470-20, the proceeds from the issuance of a debt instrument with detachable stock purchase warrants shall be allocated to the two elements based on the relative fair values of the debt instrument without the warrants and of the warrants themselves at the time of issuance. The portion of the proceeds allocated to the warrants is accounted for as additional paid-in capital and the remaining proceeds are allocated to the debt instrument which resulted in a discount to debt which is amortized and charged as interest expense over the term of the note agreement. Additionally, pursuant to FASB ASC 470-20, the intrinsic value of the embedded conversion feature of the convertible notes payable is included in the discount to debt and amortized and charged to interest expense over the life of the note agreement. | |||||||||||||||||||||||
Type of Loan | Term of Loan | Annual | Original | Conv. | Beneficial | Warrants | Strike Price | Warrant | Effective | ||||||||||||||
Interest | Loan | Rate | Conversion | FMV | Interest | ||||||||||||||||||
Rate | Principal | Discount | Discount | Rate | |||||||||||||||||||
Amount | Amount | Amount | Including | ||||||||||||||||||||
Discounts | |||||||||||||||||||||||
2012 Convertible note payable | Due on demand up to 1 year | 8% to 10% | $ | 2,794,187 | $3.30 to $3.60 | $ | 256,761 | 86,573 | $1.00 to75% of FMV | $ | 175,961 | 15.4% to 101.0% | |||||||||||
2013 Convertible note payable | 1 to 2 years | 10% | 3,079,666 | $3.30 | 396,801 | 50,000 | $3.30 | 116,831 | 19.1% to 61.6% | ||||||||||||||
2012 Notes payable | Due on demand up to 2 years | 1% to 11% | 2,641,768 | NA | — | 1,381,020 | $1.00 to $2.50 | 1,485,835 | 54.6% to 67.8% | ||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | |
Total | $ | 8,515,621 | $ | 653,562 | 1,517,593 | $ | 1,778,627 | ||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Related party notes are disclosed as separate line items in the Company’s balance sheet presentation. | |||||||||||||||||||||||
Net loss per share—In accordance with FASB ASC Topic 260, "Earnings per Share," the basic loss per common share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding. Dilutive loss per share is computed similar to the basic loss per common share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. As of December 31, 2013 and 2012, there were 13,416,768 and 6,403,922 shares of potentially dilutive securities outstanding, respectively. As the Company reported a net loss, none of the potentially dilutive securities were included in the calculation of diluted loss per share since their effect would be anti-dilutive for all periods presented. | |||||||||||||||||||||||
Recent accounting pronouncements | |||||||||||||||||||||||
In February 2013, the FASB issued amendments to the accounting guidance for presentation of comprehensive income to improve the reporting of reclassifications out of accumulated other comprehensive income. The amendments do not change the current requirements for reporting net income or other comprehensive income, but do require an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to present, either on the face of the statement where the net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under GAAP to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures required under GAAP that provide additional detail about these amounts. For public companies, these amendments are effective for reporting periods beginning after December 15, 2012. Other than a change in presentation, the adoption of these amendments to the accounting guidance did not have a material impact on the Company's consolidated financial position or results of operations. | |||||||||||||||||||||||
PROPERTY_AND_EQUIPMENT
PROPERTY AND EQUIPMENT | 12 Months Ended | |||||||
Dec. 31, 2013 | ||||||||
Property And Equipment | ' | |||||||
PROPERTY AND EQUIPMENT | ' | |||||||
NOTE 3—PROPERTY AND EQUIPMENT | ||||||||
Property and equipment consisted of the following at: | ||||||||
December 31, 2013 | December 31, 2012 | |||||||
Equipment | $ | 128,343 | $ | 120,603 | ||||
Leasehold improvements | 23,054 | 23,054 | ||||||
Furniture and fixtures | 52,269 | 52,269 | ||||||
| | | | | | | | |
203,666 | 195,926 | |||||||
Less: accumulated depreciation | (177,546 | ) | (157,157 | ) | ||||
| | | | | | | | |
Total | $ | 26,120 | $ | 38,769 | ||||
| | | | | | | | |
| | | | | | | | |
During the years ended December 31, 2013 and 2012, depreciation expense was $20,974 and $30,197, respectively. |
INTANGIBLE_ASSETS
INTANGIBLE ASSETS | 12 Months Ended | |||||||
Dec. 31, 2013 | ||||||||
Intangible Assets | ' | |||||||
INTANGIBLE ASSETS | ' | |||||||
NOTE 4—INTANGIBLE ASSETS | ||||||||
The Company is licensed to market and sell NutreStore® [L-glutamine powder for oral solution] as a treatment for short bowel syndrome ("SBS"). | ||||||||
In April 2011, the Company entered into the Research Agreement and the Individual Agreement with CellSeed and, in August 2011, an addendum to the Research Agreement. Pursuant to the Individual Agreement, CellSeed granted the Company the exclusive right to manufacture, sell, market and distribute Cultured Autologous Oral Mucosal Epithelial Cell-Sheet ("CAOMECS") for the cornea in the United States and agreed to disclose its accumulated information package for the joint development of CAOMECS to us. Under the Individual Agreement, the Company agreed to pay CellSeed $1.5 million, which it paid in February 2012. The technology acquired under the Individual Agreement is being used to support an ongoing research and development project and management believes the technology has alternative future uses in other future development initiatives. | ||||||||
Pursuant to the Research Agreement, the Company and CellSeed formed a relationship regarding the future research and development of cell sheet engineering regenerative medicine products, and the future commercialization of such products. Under the Research Agreement, as supplemented by the addendum, the Company agreed to pay CellSeed $8.5 million within 30 days of the completion of all of the following: (i) the execution of the Research Agreement; (ii) the execution of the Individual Agreement; and (iii) CellSeed's delivery of the accumulated information package ,as defined in the Research Agreement, to us and our providing written confirmation of its acceptance of the complete package, which has not yet been completed as of December 31, 2013. | ||||||||
The Company has estimated the economic life of the CAOMECS produced in connection with the CellSeed Research and Individual Agreement at seven years. The determination of this life is based in part on the Company's estimate of economic useful life and the time period in which the Company may enjoy an advantage over competing technologies and techniques. Key reasons for a useful life shorter than the life of a patent include: (i) the patents related to this technology are yet to be approved, (ii) potential redundancy with similar medication/device due to changes in market preferences, (iii) uncertainty of regulatory approval and (iv) potential development of new treatments for the same disease. | ||||||||
Intangible assets consisted of the following at: | ||||||||
December 31, 2013 | December 31, 2012 | |||||||
License fees and patent filing costs | $ | 2,250,000 | $ | 2,250,000 | ||||
Less: accumulated amortization | (1,142,857 | ) | (928,571 | ) | ||||
| | | | | | | | |
Total | $ | 1,107,143 | $ | 1,321,429 | ||||
| | | | | | | | |
| | | | | | | | |
During the years ended December 31, 2013 and 2012, amortization expense was $214,286 and $178,571, respectively. | ||||||||
As of December 31, 2013 estimated aggregate amortization expense for the next five years is as follows: | ||||||||
Year ending December 31 | Amount | |||||||
2014 | $ | 214,286 | ||||||
2015 | 214,286 | |||||||
2016 | 214,286 | |||||||
2017 | 214,286 | |||||||
2018 | 214,286 | |||||||
Thereafter | 35,713 | |||||||
| | | | | ||||
Total | $ | 1,107,143 | ||||||
| | | | | ||||
| | | | | ||||
ACCOUNTS_PAYABLE_AND_ACCRUED_E
ACCOUNTS PAYABLE AND ACCRUED EXPENSES | 12 Months Ended | |||||||
Dec. 31, 2013 | ||||||||
Accounts Payable And Accrued Expenses | ' | |||||||
ACCOUNTS PAYABLE AND ACCRUED EXPENSES | ' | |||||||
NOTE 5—ACCOUNTS PAYABLE AND ACCRUED EXPENSES | ||||||||
Accounts payable and accrued expenses consisted of the following at: | ||||||||
December 31, 2013 | December 31, 2012 | |||||||
Accounts payable | ||||||||
Clinical trial management expenses | $ | 270,694 | $ | 527,868 | ||||
Legal expenses | 178,119 | 609,823 | ||||||
Other vendors | 386,847 | 619,886 | ||||||
| | | | | | | | |
Subtotal | 835,660 | 1,757,577 | ||||||
Accrued interest payable, related parties | 195,051 | 64,550 | ||||||
Accrued interest payable | 473,356 | 246,843 | ||||||
Accrued expenses | 294,379 | 89,641 | ||||||
Deferred salary | 485,000 | 401,667 | ||||||
| | | | | | | | |
Total accounts payable and accrued expenses | $ | 2,283,446 | $ | 2,560,278 | ||||
| | | | | | | | |
| | | | | | | | |
NOTES_PAYABLE
NOTES PAYABLE | 12 Months Ended | |||||||||||||||||||||||||||||||
Dec. 31, 2013 | ||||||||||||||||||||||||||||||||
Notes Payable [Abstract] | ' | |||||||||||||||||||||||||||||||
NOTES PAYABLE | ' | |||||||||||||||||||||||||||||||
NOTE 6—NOTES PAYABLE | ||||||||||||||||||||||||||||||||
Notes payable consisted of the following at December 31, 2013: | ||||||||||||||||||||||||||||||||
Year Issued | Interest rate range | Term of Notes | Conv. Price | Principal Outstanding December 31, | Discount Amount December 31, | Carrying Amount December 31, | Shares Underlying Principal as of December 31, | Principal Outstanding December 31, | Discount Amount December 31, | Carrying Amount December 31, | Shares Underlying Principal as of December 31, | |||||||||||||||||||||
2013 | 2013 | 2013 | 2013 | 2012 | 2012 | 2012 | 2012 | |||||||||||||||||||||||||
Convertible notes payable | ||||||||||||||||||||||||||||||||
2009 | 6.50% | 5 years | $3.05 | $ | 254,460 | $ | — | $ | 254,460 | 83,366 | $ | 294,355 | $ | — | $ | 294,355 | 96,436 | |||||||||||||||
2010 | 0 ~ 6.0% | 5 years | $3.05 | 74,000 | 8,308 | 65,692 | 24,248 | 74,000 | 13,420 | 60,580 | 24,248 | |||||||||||||||||||||
2011 | 10% | 5 years | $3.05 | 500,000 | — | 500,000 | 163,809 | 500,000 | — | 500,000 | 163,809 | |||||||||||||||||||||
2012 | 10% | Due on demand ~ 2 years | $3.30 ~$3.60 | 251,100 | — | 251,100 | 71,000 | 4,307,107 | 69,179 | 4,237,928 | 1,241,925 | |||||||||||||||||||||
2013 | 10% | Due on demand ~ 2 years | $3.30 ~$3.60 | 6,913,606 | 215,798 | 6,697,808 | 1,998,215 | — | — | — | — | |||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
$ | 7,993,166 | $ | 224,106 | $ | 7,769,060 | 2,340,638 | $ | 5,175,462 | $ | 82,599 | $ | 5,092,863 | 1,526,418 | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Current | $ | 4,955,868 | $ | 153,396 | $ | 4,802,472 | 1,438,033 | $ | 4,056,007 | $ | 69,179 | $ | 3,986,828 | 1,170,922 | ||||||||||||||||||
Non-current | $ | 3,037,298 | $ | 70,710 | $ | 2,966,588 | 902,605 | $ | 1,119,455 | $ | 13,420 | $ | 1,106,035 | 355,496 | ||||||||||||||||||
Convertible notes payable—related party | ||||||||||||||||||||||||||||||||
2012 | 10% | Due on demand | $3.30 | $ | 373,000 | $ | — | $ | 373,000 | 113,030 | $ | 388,800 | $ | 17,084 | $ | 371,716 | 117,819 | |||||||||||||||
2013 | 10% | 1 year | $3.60 | 187,706 | — | 187,706 | 52,141 | 278,642 | 9,491 | 269,151 | 77,403 | |||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
$ | 560,706 | $ | — | $ | 560,706 | 165,171 | $ | 667,442 | $ | 26,575 | $ | 640,867 | 195,222 | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Current | $ | 560,706 | $ | — | $ | 560,706 | 165,171 | $ | 667,442 | $ | 26,575 | $ | 640,867 | 195,222 | ||||||||||||||||||
Notes payable | ||||||||||||||||||||||||||||||||
2012 | 2% ~ 11% | Due on demand ~ 2 years | NA | $ | 833,335 | $ | 18,265 | $ | 815,070 | — | $ | 1,782,060 | $ | 214,350 | $ | 1,567,710 | — | |||||||||||||||
2013 | 2% ~ 10% | Due on demand ~ 2 years | NA | 1,150,000 | — | 1,150,000 | — | — | — | — | — | |||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
$ | 1,983,335 | $ | 18,265 | $ | 1,965,070 | — | $ | 1,782,060 | $ | 214,350 | $ | 1,567,710 | — | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Current | $ | 1,783,335 | $ | 18,265 | $ | 1,765,070 | — | $ | 1,082,060 | $ | 214,350 | $ | 867,710 | — | ||||||||||||||||||
Non-current | $ | 200,000 | $ | — | $ | 200,000 | — | $ | 700,000 | $ | — | $ | 700,000 | — | ||||||||||||||||||
Notes payable—related party | ||||||||||||||||||||||||||||||||
2009 | 6.50% | Due on demand | NA | $ | — | $ | — | $ | — | — | $ | 272,800 | $ | — | $ | 272,800 | — | |||||||||||||||
2011 | 8% | 2 years | NA | — | — | — | — | 200,000 | — | 200,000 | — | |||||||||||||||||||||
2012 | 1% ~ 11% | Due on demand ~ 2 years | NA | 880,062 | 4,421 | 875,641 | — | 3,207,133 | 608,602 | 2,598,531 | — | |||||||||||||||||||||
2013 | 8% | Due on demand | NA | 50,000 | — | 50,000 | — | — | — | — | — | |||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
$ | 930,062 | $ | 4,421 | $ | 925,641 | — | $ | 3,679,933 | $ | 608,602 | $ | 3,071,331 | — | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Current | $ | 930,062 | $ | 4,421 | $ | 925,641 | — | $ | 3,679,933 | $ | 608,602 | $ | 3,071,331 | — | ||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Grand Total | $ | 11,467,269 | $ | 246,792 | $ | 11,220,477 | 2,505,809 | $ | 11,304,897 | $ | 932,126 | $ | 10,372,771 | 1,721,640 | ||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The average stated interest rate of notes payable as of December 31, 2013 and 2012 was 10% and 8%, respectively. The average effective interest rate of notes payable as of December 31, 2013 and 2012 was 15% and 22%, respectively after giving effect to discounts relating to beneficial conversion features and the fair value of warrants issued in connection with these notes. The notes payable and convertible notes payable do not have restrictive financial covenants or acceleration clauses associated with a material adverse change event. The holders of the convertible notes have the option to convert their notes into the Company's common stock at the stated conversion price at any time during the term of their convertible notes. Conversion prices on the convertible notes payable range from $3.05 to $3.60 per share. All due on demand notes are treated as current liabilities. | ||||||||||||||||||||||||||||||||
Contractual principal payments due on notes payable are as follows: | ||||||||||||||||||||||||||||||||
Year Ending | at December 31, 2013 | |||||||||||||||||||||||||||||||
2014 | $ | 8,229,971 | ||||||||||||||||||||||||||||||
2015 | 2,737,298 | |||||||||||||||||||||||||||||||
2016 | 500,000 | |||||||||||||||||||||||||||||||
| | | | | ||||||||||||||||||||||||||||
Total | $ | 11,467,269 | ||||||||||||||||||||||||||||||
| | | | | ||||||||||||||||||||||||||||
| | | | | ||||||||||||||||||||||||||||
The Company estimated the total fair value of any beneficial conversion feature and accompanying warrants in allocating the debt proceeds. The proceeds allocated to the beneficial conversion feature were determined by taking the estimated fair value of shares issuable under the convertible notes less the fair value of the number of shares that would be issued if the conversion rate equaled the fair value of the Company's common stock as of the date of issuance (see Note 2). The fair value of the warrants was determined using the Black-Scholes-Merton option pricing model with the following inputs: | ||||||||||||||||||||||||||||||||
Stock Price | $3.60 | |||||||||||||||||||||||||||||||
Exercise Price | $1.00 ~ $3.60 | |||||||||||||||||||||||||||||||
Term | 2 ~ 10 years | |||||||||||||||||||||||||||||||
Risk-Free Rate | 0.30% ~ 2.22% | |||||||||||||||||||||||||||||||
Dividend Yield | 0% | |||||||||||||||||||||||||||||||
Volatility | 99.89% ~ 141.70% | |||||||||||||||||||||||||||||||
In situations where the debt included both a beneficial conversion feature and a warrant, the proceeds were allocated to the warrants and beneficial conversion feature based on the pro-rata fair value | ||||||||||||||||||||||||||||||||
STOCKHOLDERS_EQUITY_DEFICIT
STOCKHOLDERS' EQUITY (DEFICIT) | 12 Months Ended | |||||||||||||
Dec. 31, 2013 | ||||||||||||||
Stockholders Equity Deficit | ' | |||||||||||||
STOCKHOLDERS' EQUITY (DEFICIT) | ' | |||||||||||||
NOTE 7—STOCKHOLDERS' DEFICIT | ||||||||||||||
Private Placement—On September 11, 2013, the Company issued an aggregate of 3,020,501 units at a price of $2.50 per unit (the "Private Placement"). Each unit consisted of one share of common stock and one common stock warrant for the purchase of an additional share of common stock. The aggregate purchase price for the units was $7,551,253. | ||||||||||||||
The warrants entitle the holders thereof to purchase, at any time on or prior to September 11, 2018, shares of common stock of the Company at an exercise price of $3.50 per share. These warrants may be exercised on a cashless basis after twelve months from the date of issuance if the shares of common stock underlying the warrant are not registered at the time of exercise. The warrants contain non-standard anti-dilution protection and, consequently, are being accounted for as a liability-classified derivative instrument, were originally recorded at fair value, and will be adjusted to fair market value each reporting period. | ||||||||||||||
Stock warrants—During the year ended December 31, 2012, the Company issued warrants in connection with the issuance of convertible notes to purchase an aggregate of 56,573 shares of common stock at a per share exercise price equal to 75% of the per share fair market value of the Company's common stock on the date prior to exercise. During this period, the Company also issued warrants to purchase a total of 1,911,020 shares of common stock at an exercise price of $1.00 per share and 1,000,000 shares of common stock at an exercise price of $2.50 per share. In September 2012, the Company canceled warrants to purchase 500,000 shares of common stock at an exercise price of $1.00 per share that had previously been issued to a director who advised the Company that he would not be standing for re-election to the board of directors. | ||||||||||||||
In addition to the warrants issued in connection with the Private Placement discussed above, during the year ended December 31, 2013, the Company issued warrants in connection with the issuance of a convertible note to purchase an aggregate of 50,000 shares of common stock at a per share exercise price equal to $3.30 per share. Also, in December 2013, the warrants to purchase 500,000 shares of common stock at an exercise price of $1.00 per share that had previously been issued to a director expired. | ||||||||||||||
A summary of outstanding warrants as of December 31, 2013 is presented below. | ||||||||||||||
Year ended | Year ended | |||||||||||||
December 31, 2013 | December 31, 2012 | |||||||||||||
Warrants outstanding, beginning of period | 3,408,795 | 941,202 | ||||||||||||
Granted | 3,370,501 | 2,967,593 | ||||||||||||
Exercised | — | — | ||||||||||||
Cancelled, forfeited and expired | (500,000 | ) | (500,000 | ) | ||||||||||
| | | | | | | | |||||||
Warrants outstanding, end of period | 6,279,296 | 3,408,795 | ||||||||||||
| | | | | | | | |||||||
| | | | | | | | |||||||
Outstanding | ||||||||||||||
Weighted | Exercisable | |||||||||||||
Average | ||||||||||||||
Remaining | ||||||||||||||
Contractual | ||||||||||||||
Exercise Price | Number of | Life (Years) | Weighted | Total | Weighted | |||||||||
Warrants | Average | Average | ||||||||||||
Issued | Exercise Price | Exercise Price | ||||||||||||
Balance 2011 | ||||||||||||||
$1.00 | 311,038 | 0.68 | $1.00 | 311,038 | $1.00 | |||||||||
75% of FMV | 331,670 | 0.68 | 75% of FMV | 331,670 | 75% of FMV | |||||||||
$3.05 | 298,494 | 1.35 | $3.05 | 298,494 | $3.05 | |||||||||
| | | | | | | | | | | | | | |
2011 total | 941,202 | 941,202 | ||||||||||||
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
During 2012 | ||||||||||||||
$1.00 | 1,411,020 | 1.05 | $1.00 | 411,020 | $1.00 | |||||||||
75% of FMV | 56,573 | 1.24 | 75% of FMV | 56,573 | 75% of FMV | |||||||||
$2.50 | 1,000,000 | 1.66 | $2.50 | 1,000,000 | $2.50 | |||||||||
| | | | | | | | | | | | | | |
2012 total | 2,467,593 | 1,467,593 | ||||||||||||
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
During 2013 | ||||||||||||||
$3.50 | 3,320,501 | 4.7 | $3.50 | 3,320,501 | $3.50 | |||||||||
$3.30 | 50,000 | 4.33 | $3.30 | 50,000 | $3.30 | |||||||||
| | | | | | | | | | | | | | |
2013 total | 3,370,501 | 3,370,501 | ||||||||||||
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
Stock options—Management has valued stock options at their date of grant utilizing the Black-Scholes-Merton Option pricing model. The fair value of the underlying shares was determined based on recent sales of Company shares to third parties. The expected volatility was calculated using the historical volatility of a similar public entity in the industry. | ||||||||||||||
February 28, 2013 | April 2, 2012 | |||||||||||||
Stock price | $3.60 | $3.60 | ||||||||||||
Exercise price | $3.60 | $3.60 | ||||||||||||
Term | 10 years | 10 years | ||||||||||||
Risk-Free Rate | 1.89 | % | 2.22 | % | ||||||||||
Dividend Yield | 0 | % | 0 | % | ||||||||||
Volatility | 119.3 | % | 141.7 | % | ||||||||||
In making this determination and finding another similar company, the Company considered the industry, stage of life cycle, size and financial leverage of such other entities. The Company was able to find one entity that met the industry criterion and as a result has based its expected volatility off of this company's historical stock prices for a period similar to the expected term of the option. | ||||||||||||||
The risk—free interest rate is based on the implied yield available on U.S. Treasury issues with an equivalent term approximating the expected life of the options depending on the date of the grant and expected life of the options. The expected life of options used was based on the contractual life of the option granted. | ||||||||||||||
During the year ended December 31, 2012, the Company issued 1,150,000 options to its directors and officers. The fair value of these options issued is approximately $3.9 million. These options will be vested equally over 3 years, starting April 2, 2013 and are exercisable at $3.60 per share through 2022. During the year ended December 31, 2012, 12,000 options were canceled or forfeited. | ||||||||||||||
During the year ended December 31, 2013, the Company's Board of Directors approved 3,305,000 options to its directors, officers, employees and a consultant. While the terms of these grants were communicated to the individuals receiving the grants at the time of Board of Director approval, the actual option grants were not finalized until February 28, 2014. The fair value of these options issued was approximately $10.5 million. Except for 30,000 options, which will be vested in one year, the options will vest equally over 3 years starting February 28, 2014 and are exercisable at $3.60 per share through 2023. The total outstanding options as of December 31, 2013 are 4,504,000 under the 2011 Stock Incentive Plan and 4,515,795 including options issued prior to the 2011 Stock Incentive Plan. | ||||||||||||||
A summary of outstanding options as of December 31, 2013 is presented below. | ||||||||||||||
2011 Stock Incentive Plan | ||||||||||||||
Prior Plan | December 31, 2013 | December 31, 2012 | ||||||||||||
Options outstanding, beginning of period | 11,795 | 1,199,000 | 61,000 | |||||||||||
Granted | — | 3,305,000 | 1,150,000 | |||||||||||
Exercised | — | — | — | |||||||||||
Cancelled, forfeited and expired | — | — | (12,000 | ) | ||||||||||
| | | | | | | | | | | ||||
Options outstanding, end of period | 11,795 | 4,504,000 | 1,199,000 | |||||||||||
| | | | | | | | | | | ||||
| | | | | | | | | | | ||||
Registration Rights—Pursuant to the September 11, 2013 Private Placement, the Company agreed to use its commercially reasonable best efforts to have on file with the Securities and Exchange Commission, within twelve months of September 11, 2013 and at the Company's sole expense, a registration statement ("Registration Statement") to permit the public resale of all of the shares of common stock and shares of common stock underlying the warrants issued to investors in the Private Placement (collectively, the "Registrable Securities"). In the event such Registration Statement includes securities of the Company to be offered and sold by the Company in a fully underwritten primary public offering pursuant to an effective registration under the Securities Act (a "Public Offering"), and the Company is advised in good faith by any managing underwriter of securities being offered pursuant to such Public Offering that the number of Registrable Securities proposed to be sold in such Public Offering is greater than the number of such securities which can be included in such Public Offering without materially adversely affecting such Public Offering, the Company will include in such registration (i) first, any securities the Company proposes to sell, and (ii) second, the Registrable Securities, with any reductions in the number of Registrable Securities actually included in such registration to be allocated on a pro rata basis among the holders thereof. The registration rights described above shall apply until such date as all such shares of common stock and shares of common stock underlying the warrants have been sold by the investors in the Private Placement pursuant to Rule 144 under the Securities Act or may be sold without registration in reliance on Rule 144 under the Securities Act without limitation as to volume and without the requirement of any notice filing. |
INCOME_TAXES
INCOME TAXES | 12 Months Ended | |||||||||
Dec. 31, 2013 | ||||||||||
Income Tax Disclosure [Abstract] | ' | |||||||||
INCOME TAXES | ' | |||||||||
NOTE 8—INCOME TAXES | ||||||||||
The provision (benefit) for income taxes consists of the following for the year ended December 31: | ||||||||||
2013 | 2012 | |||||||||
Current | U.S. | $ | 2,550 | $ | 3,405 | |||||
International | 725 | 3,841 | ||||||||
Deferred | U.S. | (185,713 | ) | — | ||||||
International | — | — | ||||||||
| | | | | | | | | | |
$ | (182,438 | ) | $ | 7,246 | ||||||
| | | | | | | | | | |
| | | | | | | | | | |
A valuation allowance for the net deferred tax assets has been recorded as it is more likely than not that these benefits will not be realized through future operations. | ||||||||||
Deferred tax assets consist of the following as of December 31, 2013 and 2012: | ||||||||||
2013 | 2012 | |||||||||
Net operating loss carryforward | $ | 11,406,675 | $ | 9,082,282 | ||||||
General business tax credit | 4,737,477 | 3,519,185 | ||||||||
Stock options | 2,966,286 | 1,129,163 | ||||||||
Charitable contribution | 77,659 | 70,077 | ||||||||
Accrued expenses | 236,159 | 34,060 | ||||||||
Deferred compensation | 130,633 | 128,008 | ||||||||
Other | 120,236 | 64,088 | ||||||||
| | | | | | | | |||
Total gross deferred tax assets | 19,675,125 | 14,026,863 | ||||||||
Less valuation allowance | (19,461,748 | ) | (14,026,863 | ) | ||||||
| | | | | | | | |||
Net deferred tax assets | $ | 213,377 | $ | — | ||||||
| | | | | | | | |||
| | | | | | | | |||
Deferred tax liabilities consist of the following as of December 31, 2013 and 2012: | ||||||||||
2013 | 2012 | |||||||||
Unrealized gain on foreign exchange translation and others | $ | (29,154 | ) | $ | — | |||||
Unrealized (gain) loss on securities available-for-sale | (184,223 | ) | — | |||||||
| | | | | | | | |||
Total deferred tax liability | $ | (213,377 | ) | $ | — | |||||
| | | | | | | | |||
| | | | | | | | |||
During 2013 and 2012, the valuation allowance increased by $5,434,885 and $6,115,445, respectively. | ||||||||||
As of December 31, 2013 and 2012, the Company had net operating loss carryforwards ("NOL") for federal reporting purposes of approximately $29,107,000 and $23,256,000 which are available to offset future Federal taxable income, if any, through 2033. In addition, the Company had net operating loss carryforwards for state income tax purposes of approximately $27,602,000 and $21,331,000 respectively, which expire in various years through 2033. The utilization of our net operating losses could be subject to an annual limitation as a result of certain past and future events, such as acquisition or other significant equity events, which may be deemed as a "change in ownership" under the provisions of the Internal Revenue Code of 1986, as amended, and similar state provisions. The annual limitations could result in the expiration of net operating losses and tax credits before utilization. As of December 31, 2013 and 2012, the Company has general business tax credits of $4,737,000 and $3,519,000, respectively, for federal tax purposes. The tax credits are available to offset future tax liabilities, if any, through 2023. | ||||||||||
The income tax provision differs from that computed using the statutory federal tax rate of 34%, due to the following: | ||||||||||
2013 | 2012 | |||||||||
Tax benefit at statutory federal rate | $ | (4,844,588 | ) | $ | (4,807,897 | ) | ||||
State taxes, net of federal tax benefit | (532,099 | ) | (706,261 | ) | ||||||
Increase (decrease) in valuation allowance | 5,434,885 | 6,115,445 | ||||||||
Permanent Items | 997,820 | 1,397,123 | ||||||||
General business tax credit | (1,218,292 | ) | (1,483,292 | ) | ||||||
Other | (20,164 | ) | (507,872 | ) | ||||||
| | | | | | | | |||
$ | (182,438 | ) | $ | 7,246 | ||||||
| | | | | | | | |||
| | | | | | | | |||
As of December 31, 2013 and 2012, the Company had no unrecognized tax benefits, and the Company had no positions which, in the opinion of management, would be reversed if challenged by a taxing authority. In the event the Company is assessed interest and/or penalties, such amounts will be classified as income tax expense in the financial statements. As of December 31, 2013, all federal tax returns since 2010 and state tax returns since 2009 are still subject to adjustment upon audit. No tax returns are currently being examined by taxing authorities. |
COMMITMENTS_AND_CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 12 Months Ended | ||||
Dec. 31, 2013 | |||||
Commitments And Contingencies | ' | ||||
COMMITMENTS AND CONTINGENCIES | ' | ||||
NOTE 9—COMMITMENTS AND CONTINGENCIES | |||||
Distribution contract—Cardinal Health Specialty Pharmacy Services has been contracted to distribute NutreStore to other wholesale distributors and some independent pharmacies since April 2008. For these services, the Company pays a monthly commercialization management fee of $5,000 with discount. | |||||
Operating leases—The Company leases its office space under operating leases with unrelated entities. The rent expense during the years ended December 31, 2013 and 2012 amounted to $137,147 and $139,302, respectively. | |||||
Future minimum lease payments under the agreements are as follows: | |||||
Year | Amount | ||||
2014 | $ | 97,597 | |||
2015 | 17,195 | ||||
| | | | | |
Total | $ | 114,792 | |||
| | | | | |
| | | | | |
Licensing agreement—The Company licensed certain current and future technology from CellSeed (see Note 4 for further discussion). CellSeed may terminate these agreements with the Company if the Company is unable to make timely payments required under the agreements. At the time the Company entered into the agreements with CellSeed, it left for further negotiation provisions covering how the Company and CellSeed will share any financial results of commercializing any cell sheet engineering regenerative medicine products that it is seeking to develop in collaboration with CellSeed. If the Company is not able to successfully negotiate these terms, its current development and commercialization plans with respect to any of these products would be materially adversely affected. | |||||
AMOUNTS_RECLASSIFIED_OUT_OF_AC
AMOUNTS RECLASSIFIED OUT OF ACCUMULATED OTHER COMPREHENSIVE INCOME | 12 Months Ended | ||||||||||
Dec. 31, 2013 | |||||||||||
Notes to Financial Statements | ' | ||||||||||
AMOUNTS RECLASSIFIED OUT OF ACCUMULATED OTHER COMPREHENSIVE INCOME | ' | ||||||||||
NOTE 10—AMOUNTS RECLASSIFIED OUT OF ACCUMULATED OTHER COMPREHENSIVE INCOME | |||||||||||
Unrealized | Unrealized | Total | |||||||||
holding | Foreign | ||||||||||
gain (loss) on | translation | ||||||||||
securities | |||||||||||
available-for-sale | |||||||||||
Balance—December 31, 2011 | $ | 255,340 | $ | (2,927 | ) | $ | 252,413 | ||||
Other comprehensive income before reclassifications | (284,216 | ) | (5,119 | ) | (289,335 | ) | |||||
Amounts reclassified from accumulated other comprehensive income | 24,490 | — | 24,490 | ||||||||
| | | | | | | | | | | |
Net current period other comprehensive income | (259,726 | ) | (5,119 | ) | (264,845 | ) | |||||
| | | | | | | | | | | |
Balance—December 31, 2012 | (4,386 | ) | (8,046 | ) | (12,432 | ) | |||||
Other comprehensive income before reclassifications | 692,843 | (18,660 | ) | 674,183 | |||||||
Amounts reclassified from accumulated other comprehensive income | (399,068 | ) | — | (399,068 | ) | ||||||
| | | | | | | | | | | |
Net current period other comprehensive income | 293,775 | (18,660 | ) | 275,115 | |||||||
| | | | | | | | | | | |
Balance—December 31, 2013 | $ | 289,389 | $ | (26,706 | ) | $ | 262,683 | ||||
| | | | | | | | | | | |
| | | | | | | | | | | |
All amounts are net of tax. | |||||||||||
RELATED_PARTY_TRANSACTIONS
RELATED PARTY TRANSACTIONS | 12 Months Ended | ||||||||||||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||||||||||||
Related Party Transactions [Abstract] | ' | ||||||||||||||||||||||||||
RELATED PARTY TRANSACTIONS | ' | ||||||||||||||||||||||||||
NOTE 11—RELATED PARTY TRANSACTIONS | |||||||||||||||||||||||||||
The following table sets forth information relating to the Company's loans from related persons outstanding as of December 31, 2013. | |||||||||||||||||||||||||||
Lender | Annual | Date of | Term of | Principal | Highest | Amount of | Amount of | Conv. | Shares | ||||||||||||||||||
Interest | Loan | Loan | Amount | Principal | Principal | Interest | Price | Underlying | |||||||||||||||||||
Rate | Outstanding | Outstanding | Repaid | Paid | Principal | ||||||||||||||||||||||
as of | as of | ||||||||||||||||||||||||||
December 31, | December 31, | ||||||||||||||||||||||||||
2013 | 2013 | ||||||||||||||||||||||||||
Hope Int'l Hospice(1) | 8 | % | 1/17/12 | On Demand | $ | 200,000 | $ | 200,000 | $ | — | $ | 20,000 | NA | NA | |||||||||||||
Lan T. Tran(2) | 11 | % | 2/10/12 | 2 years(3) | 80,000 | 205,000 | 125,000 | — | NA | NA | |||||||||||||||||
Hideki & Eiko Uehara(5) | 11 | % | 2/15/12 | 2 years(3) | 133,333 | 133,333 | — | 14,433 | NA | NA | |||||||||||||||||
Hope Int'l Hospice(1) | 8 | % | 6/14/12 | On Demand | 200,000 | 200,000 | — | 20,000 | NA | NA | |||||||||||||||||
Hope Int'l Hospice(1) | 8 | % | 6/21/12 | On Demand | 100,000 | 100,000 | — | 10,000 | NA | NA | |||||||||||||||||
Cuc T. Tran(5) | 11 | % | 6/27/12 | 1 year | 10,000 | 10,000 | — | — | NA | NA | |||||||||||||||||
Yasushi Nagasaki(2) | 10 | % | 6/29/12 | On Demand | 373,000 | 388,800 | 15,800 | — | $ | 3.3 | 113,030 | ||||||||||||||||
Yutaka Niihara(2)(4) | 10 | % | 12/5/12 | On Demand | 156,730 | 1,213,700 | 1,056,970 | — | NA | NA | |||||||||||||||||
Hope Int'l Hospice(1) | 8 | % | 2/11/13 | On Demand | 50,000 | 50,000 | — | 3,000 | NA | NA | |||||||||||||||||
Hideki & Eiko Uehara(5) | 10 | % | 9/7/13 | 1 year | 35,640 | 35,640 | — | — | $ | 3.6 | 9,900 | ||||||||||||||||
MLPF&S Cust. FBO Willis C.Lee(2)(4) | 10 | % | 10/5/13 | 1 year | 152,066 | 152,066 | — | — | $ | 3.6 | 42,240 | ||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Sub total | $ | 1,490,769 | $ | 2,688,539 | $ | 1,197,770 | $ | 67,433 | 165,170 | ||||||||||||||||||
Less discount | (4,422 | ) | |||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | $ | 1,486,347 | |||||||||||||||||||||||||
(1) Dr. Niihara, who is the Company's CEO, is also the CEO of Hope International Hospice, Inc. | |||||||||||||||||||||||||||
(2) Officer | |||||||||||||||||||||||||||
(3) Due on Demand | |||||||||||||||||||||||||||
(4) Director | |||||||||||||||||||||||||||
(5) Family of Officer/Director | |||||||||||||||||||||||||||
The following table sets forth information relating to the Company's loans from related persons outstanding as of December 31, 2012. | |||||||||||||||||||||||||||
Lender | Annual | Date of | Term of | Principal | Highest | Amount of | Amount of | Conversion | Shares | ||||||||||||||||||
Interest | Loan | Loan | Amount | Principal | Principal | Interest | Price | Underlying | |||||||||||||||||||
Rate | Outstanding | Outstanding | Repaid | Paid | Principal | ||||||||||||||||||||||
as of | as of | ||||||||||||||||||||||||||
December 31, | December 31, | ||||||||||||||||||||||||||
2012 | 2012 | ||||||||||||||||||||||||||
Yutaka Niihara(2)(4) | 6.5 | % | 1/12/09 | On Demand | $ | 272,800 | $ | 350,000 | $ | — | $ | 18,763 | NA | NA | |||||||||||||
Hope Int'l Hospice(1) | 8 | % | 1/12/11 | 2 years | 200,000 | 200,000 | — | 12,000 | NA | NA | |||||||||||||||||
Hope Int'l Hospice(1) | 8 | % | 1/17/12 | On Demand | 200,000 | 200,000 | — | 8,000 | NA | NA | |||||||||||||||||
Lan T. Tran(2) | 11 | % | 2/10/12 | 2 years(3) | 80,000 | 205,000 | 125,000 | — | NA | NA | |||||||||||||||||
Tracey & Mark Doi(4) | 8 | % | 2/10/12 | 1 year | 108,000 | 108,000 | — | — | $ | 3.6 | 30,000 | ||||||||||||||||
Hideki & Eiko Uehara(5) | 11 | % | 2/15/12 | 2 years(3) | 133,333 | 133,333 | — | 11,204 | NA | NA | |||||||||||||||||
Hope Int'l Hospice(1) | 8 | % | 6/14/12 | On Demand | 200,000 | 200,000 | — | — | NA | NA | |||||||||||||||||
Hope Int'l Hospice(1) | 8 | % | 6/21/12 | On Demand | 100,000 | 100,000 | — | — | NA | NA | |||||||||||||||||
Cuc T. Tran(5) | 11 | % | 6/27/12 | 1 year | 10,000 | 10,000 | — | — | NA | NA | |||||||||||||||||
Yasushi Nagasaki(2) | 10 | % | 6/29/12 | On Demand | 388,800 | 388,800 | — | — | $ | 3.3 | 117,818 | ||||||||||||||||
Yutaka Niihara(2)(4) | 1 | % | 8/29/12 | 1 year | 1,270,100 | 1,270,100 | — | — | NA | NA | |||||||||||||||||
Hideki & Eiko Uehara(5) | 11 | % | 9/7/12 | 1 year | 32,400 | 32,400 | — | — | $ | 3.6 | 9,000 | ||||||||||||||||
MLPF&S Cust. FBO Willis C. Lee(2)(4) | 10 | % | 10/5/12 | 1 year | 138,242 | 138,242 | — | — | $ | 3.6 | 38,400 | ||||||||||||||||
Yutaka Niihara(2)(4) | 10 | % | 12/5/12 | On Demand | 1,213,700 | 1,213,700 | — | — | NA | NA | |||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Sub total | $ | 4,347,375 | $ | 4,549,575 | $ | 125,000 | $ | 49,967 | — | 195,218 | |||||||||||||||||
Less discount | $ | (635,177 | ) | ||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | $ | 3,712,198 | |||||||||||||||||||||||||
(1) Dr. Niihara, who is the Company's CEO, is also the CEO of Hope International Hospice, Inc. | |||||||||||||||||||||||||||
(2) Officer | |||||||||||||||||||||||||||
(3) Due on Demand | |||||||||||||||||||||||||||
(4) Director | |||||||||||||||||||||||||||
(5) Family of Officer/Director | |||||||||||||||||||||||||||
Since July 2012 the Company had been engaged in litigation with AFH Advisory, which was the sole stockholder of AFH Acquisition IV immediately prior to its combination with Emmaus Medical pursuant to the Merger in May 2011. In September 2012 AFH Advisory and related parties filed a complaint against the Company in the Superior Court of Delaware. In October 2012 the Company filed counterclaims against the plaintiffs and third-party claims against Amir Heshmatpour. Mr. Heshmatpour is a former officer of AFH Acquisition IV, Inc. (prior to the Merger) and former director of the Company and is the Managing Partner of AFH Advisory. On June 27, 2013, the Superior Court of the State of Delaware issued an order implementing a partial summary judgment in favor of the Company in its litigation against AFH Advisory, Griffin Ventures, Ltd. ("Griffin"), The Amir & Kathy Heshmatpour Family Foundation (the "Foundation") and Amir Heshmatpour. The order, among other things, (i) stated that a letter of intent previously entered into between the Company and AFH Advisory (the "Letter of Intent") was properly terminated as of July 19, 2012 by the Company, and (ii) ordered the transfer agent for the Company to effect the cancellation of 2,504,249 shares of the Company's common stock held by AFH Advisory, Griffin and the Foundation. The cancellation of such shares was effected by the Company's transfer agent on June 28, 2013. While no appeal of this ruling has been pursued, if the court's ruling is appealed, it could result in the Company's incurring liabilities and expenses that may have a material adverse effect on its financial condition and cash flows. The cancellation of such shares is subject to appeal until 30 days after the completion of trial court proceedings. While the partial summary judgment in favor of the Company in this litigation noted above led to the cancellation of 2,504,249 shares of the Company by the transfer agent on June 28, 2013, the Company shall continue to present these shares in its financial statements as outstanding until the right of appeal has lapsed and all contingencies have been resolved. The Company’s cause of action for fraud, which was not part of the summary judgement, has not yet been litigated or settled. | |||||||||||||||||||||||||||
GEOGRAPHIC_INFORMATION
GEOGRAPHIC INFORMATION | 12 Months Ended | |||||||||||||
Dec. 31, 2013 | ||||||||||||||
Geographic Information | ' | |||||||||||||
GEOGRAPHIC INFORMATION | ' | |||||||||||||
NOTE 12—GEOGRAPHIC INFORMATION | ||||||||||||||
For the years ended December 31, 2013 and 2012, the Company earned revenue from countries outside of the United States as outlined in the table below. The Company did not have any significant currency translation or foreign transaction adjustments during the years ended December 31, 2013 and 2012. | ||||||||||||||
Country | Sales year ended | % of Total Revenue | Sales year ended | % of Total Revenue | ||||||||||
December 31, 2013 | year ended | December 31, 2012 | year ended | |||||||||||
December 31, 2013 | December 31, 2012 | |||||||||||||
Japan | $ | 171,054 | 44 | % | $ | 265,913 | 49 | % | ||||||
Taiwan | 63,254 | 16 | % | — | 0 | % | ||||||||
South Korea | $ | 12,000 | 3 | % | $ | 92,000 | 17 | % | ||||||
SUBSEQUENT_EVENTS
SUBSEQUENT EVENTS | 12 Months Ended | ||||||||||||
Dec. 31, 2013 | |||||||||||||
Subsequent Events [Abstract] | ' | ||||||||||||
SUBSEQUENT EVENTS | ' | ||||||||||||
NOTE 13—SUBSEQUENT EVENTS | |||||||||||||
Subsequent to the year ended December 31, 2013, the Company issued the following: | |||||||||||||
Notes issued after December 31, 2013 | Principal | Annual | Term of Notes | Conversion | |||||||||
Amounts | Interest | Price | |||||||||||
Rate | |||||||||||||
Convertible note | $ | 254,320 | 10 | % | 2 years | $ | 3.05 | ||||||
Convertible notes | 336,606 | 10 | % | On Demand up to 1 year | $ | 3.6 | |||||||
Promissory notes | 833,335 | 11 | % | 2 years | NA | ||||||||
Promissory notes—related party | 252,165 | 11 | % | On Demand up to 2 years | NA | ||||||||
| | | | | | | | | | | | | |
Total | $ | 1,676,426 | |||||||||||
SUMMARY_OF_SIGNIFICANT_ACCOUNT1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended | ||||||||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||||||||
Summary Of Significant Accounting Policies Policies | ' | ||||||||||||||||||||||
Basis of presentation | ' | ||||||||||||||||||||||
Basis of presentation—The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. | |||||||||||||||||||||||
Immaterial Corrections of Prior Year Amounts and Restatement of Financial Statements | ' | ||||||||||||||||||||||
Immaterial Corrections of Prior Year Amounts— During the preparation of its consolidated financial statements for the year ended December 31, 2013, the Company identified the following immaterial errors in its consolidated financial statements for the year ended December 31, 2012 which have been corrected in the accompanying consolidated financial statements: | |||||||||||||||||||||||
a) | The Company incorrectly recognized share-based compensation expense prior to the grant date for stock options awarded to certain employees and consultants. This correction resulted in a $0.3 million reduction of share-based compensation expense for the year ended December 31, 2012. A similar error was identified relating to the Company’s consolidated financial statements for the first three quarterly periods of 2013, the effects of which have been addressed in the accompanying consolidated financial statements for the year ended December 31, 2013. | ||||||||||||||||||||||
b) | In June 2012, the Company incorrectly recorded the gain relating to the settlement of a loan as a gain on marketable securities. This has been corrected to show a gain on debt extinguishment of $300,312 and a realized loss on securities available-for-sale of $24,490, with no change in total net loss for the year ended December 31, 2012. | ||||||||||||||||||||||
We also identified the following immaterial errors in our 2013 quarterly financial statements, the effects of which have been addressed in the accompanying consolidated financial statements for the year ended December 31, 2013: | |||||||||||||||||||||||
a) | In the quarter ended June 30, 2013, the Company incorrectly accounted for the May 2013 issuance of shares of its common stock to the Company’s CEO in exchange for the termination of a promissory note held by the CEO and accrued interest thereon. The remaining unamortized loan discount of $249,861 was originally recorded as interest expense. This has been corrected to report the remaining unamortized loan discount of $249,861 as a debt extinguishment loss between related entities which is recorded as a capital transaction. | ||||||||||||||||||||||
b) | In the quarter ended June 30, 2013, the Company incorrectly recorded the cancelation of 2,504,249 shares of its common stock held by AFH Advisory, Griffin and the Foundation, and the cancelation of a payment obligation to AFH Advisory in the amount of $394,446. The cancelations had been ordered by the court in connection with a partial summary judgment in the Company’s favor in the ongoing litigation against AFH Advisory, as further described in Note 11 – Related Party Transactions. While the partial summary judgment in favor of the Company led to the cancelation of 2,504,249 shares of the Company’s common stock by the Company’s transfer agent on June 28, 2013, the cancelation of such shares and payment obligation is subject to appeal until 30 days after the completion of final court proceedings. The Company has made an adjustment to the accompanying consolidated financial statements for the year ended December 31, 2013 to continue to present these shares as outstanding, and has restored $394,446 to the balance sheet as an amount due to related parties until the right of appeal has lapsed and all contingencies have been resolved. | ||||||||||||||||||||||
Adjustments for these items will also be included in the consolidated financial statements contained in the Company’s Quarterly Reports on Form 10-Q for the corresponding periods in 2014. | |||||||||||||||||||||||
Restatement of Financial Statements— In the Company’s Quarterly Report on Form 10-Q/A for the quarterly period ended September 30, 2013 filed on May 8, 2014, the Company restated its condensed consolidated financial statements as of and for the three and nine month periods ended September 30, 2013 for the following errors which were considered material to the Company’s condensed consolidated financial statements, as previously reported in its Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2013. | |||||||||||||||||||||||
On September 11, 2013, the Company issued an aggregate of 3,020,501 units at a price of $2.50 per unit. Each unit consisted of one share of common stock and one common stock purchase warrant. The aggregate gross purchase price for the units was $6,435,055 after transaction costs. When preparing its consolidated financial statements as of and for the period ended September 30, 2013, the Company determined that the warrants should be classified as a liability-classified derivative. However, the Company incorrectly allocated the value of the transaction between the shares of common stock and the warrants based on their relative value, instead of allocating value first to the warrants to the extent of their fair value, as is required by generally accepted accounting principles, and allocating the residual to the common shares. In addition, the costs of the transaction were incorrectly allocated entirely to the common shares instead of between the common shares and the liability-classified derivative. To correct these errors, the Company restated its consolidated financial statements as of and for the three and nine months ended September 30, 2013,which resulted in Derivative Liabilities increasing by $4.1 million and Additional Paid-in Capital decreasing by $3.3 million as of September 30, 2013, and Transaction Costs increasing by $1.0 million and other income related to the Change in Fair Value of Derivative Liabilities increasing by $0.2 million for the three and nine months ended September 30, 2013. These errors did not affect periods prior to the quarter ended September 30, 2013. | |||||||||||||||||||||||
Going concern | ' | ||||||||||||||||||||||
Going concern—The accompanying consolidated financial statements have been prepared on the basis that the Company will continue as a going concern. The Company has had recurring net losses of $14.1million and $14.1 million in 2013 and 2012, respectively. In addition, the Company has a significant amount of notes payable and other obligations due within the next year and is projecting that its operating losses and expected capital needs will exceed its existing cash balances and cash expected to be generated from operations for the foreseeable future, including the expected costs relating to the commercialization of the Company's L-glutamine treatment for SCD. In order to meet the Company's expected obligations, management intends to raise additional funds through equity, debt offerings and partnership agreements. However, there can be no assurance that the Company will be able to obtain the additional equity and debt financings or enter into partnership agreements. Therefore, due to the uncertainty of the Company's ability to meet its current operating and capital expenses, there is substantial doubt about the Company's ability to continue as a going concern, as the continuation and expansion of its business is dependent upon obtaining further financing, successful and sufficient market acceptance of its products, and finally, achieving a profitable level of operations. The consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties. | |||||||||||||||||||||||
Recapitalization and change in legal status of entity | ' | ||||||||||||||||||||||
Recapitalization and change in legal status of entity | |||||||||||||||||||||||
2003 Recapitalization—In October 2003, Emmaus Medical acquired substantially all of the assets of Emmaus Medical, LLC. The stockholders of Emmaus Medical were substantially the same as the members of Emmaus Medical, LLC. As such, the transaction was accounted for as a transfer of assets between entities under common control pursuant to accounting standards codification 805, Business Combinations. | |||||||||||||||||||||||
The effect of the recapitalization was to retroactively present the stockholders' equity of Emmaus Medical, Inc. (the surviving entity) to the earliest period presented in the financial statements. This recapitalization had no effect on results of operations for any period presented. Also, concurrent with the recapitalization, Emmaus Medical changed its legal status from a Limited Liability Company to a "C" Corporation. In connection with this change, deficits accumulated in the Limited Liability Company were transferred to additional paid in capital. | |||||||||||||||||||||||
2011 Merger—Pursuant to the Merger Agreement, Emmaus Medical merged with and into AFH Merger Sub with Emmaus Medical continuing as the surviving entity (the "Merger"). | |||||||||||||||||||||||
Upon consummation of the Merger, (i) each outstanding share of Emmaus Medical common stock was exchanged for 29.48548924976 shares of Company common stock, (ii) each outstanding Emmaus Medical option and warrant, which was exercisable for one share of Emmaus Medical common stock, was exchanged for an option or warrant, as applicable, exercisable for 29.48548924976 shares of Company common stock; and (iii) each outstanding convertible note of Emmaus Medical, which was converted for one share of Emmaus Medical common stock, was exchanged for a convertible note exercisable for 29.48548924976 shares of Company common stock. | |||||||||||||||||||||||
As a result of the Merger, security holders of Emmaus Medical received 20,628,305 shares of Company common stock, options and warrants to purchase an aggregate of 326,507 shares of Company common stock, and convertible notes to purchase an aggregate of 271,305 shares of Company common stock. | |||||||||||||||||||||||
Four stockholders exercised their dissenters' rights in connection with the Merger and returned an aggregate of 47,178 shares for an aggregate of $200,000. The shares were cancelled as of May 3, 2011, the closing date of the Merger and recorded as a current liability as of that date. | |||||||||||||||||||||||
For accounting purposes, the Merger transaction was accounted for as a reverse merger. The transaction has been treated as a recapitalization of Emmaus Medical and its subsidiaries. This resulted in Emmaus Life Sciences, Inc. (the legal acquirer of Emmaus Medical and its subsidiaries) being considered the accounting acquire, and Emmaus Medical, whose management took control of Emmaus Life Sciences, Inc. (the legal acquiree of Emmaus Medical), being considered the accounting acquirer. | |||||||||||||||||||||||
Principles of consolidation | ' | ||||||||||||||||||||||
Principles of consolidation—The consolidated financial statements include the accounts of the Company (and its wholly-owned subsidiary, Emmaus Medical, Inc., and Emmaus Medical's wholly-owned subsidiaries, Newfield Nutrition Corporation, EM Japan and EM Europe). All significant intercompany transactions have been eliminated. | |||||||||||||||||||||||
Estimates | ' | ||||||||||||||||||||||
Estimates—Financial statements prepared in accordance with accounting principles generally accepted in the United States require management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Among other things, management has estimated the useful lives of equipment and other assets, along with the variables used to calculate the valuation of stock options and warrants using the Black-Scholes-Merton option valuation model. Actual results could differ from those estimates. | |||||||||||||||||||||||
In addition, the initial value of the derivative liability as of September 11, 2013 and the change in fair value of the derivative liability as of December 31, 2013 were determined using a Binomial Monte-Carlo Cliquet (aka Ratchet) Option Pricing Model. The model is similar to traditional Black-Scholes-type option pricing models except that the exercise price resets at certain dates in the future. | |||||||||||||||||||||||
Cash and cash equivalents | ' | ||||||||||||||||||||||
Cash and cash equivalents—Cash and cash equivalents include short-term securities with original maturities of less than ninety days. The Company maintains its cash and cash equivalents at insured financial institutions, the balances of which may, at times, exceed federally insured limits. Management believes that the risk of loss due to the concentrations is minimal. | |||||||||||||||||||||||
Inventories | ' | ||||||||||||||||||||||
Inventories—Inventories as of December 31, 2013 are valued based on first-in, first-out and at the lesser of cost or market value. Work-in-process inventories consist of raw material L-glutamine for the Company's AminoPure and NutreStore products that has not yet been packaged and labeled for sale. | |||||||||||||||||||||||
All of the inventory purchases during the year ended December 31, 2013 were from two vendors and in 2012 were from one vendor. | |||||||||||||||||||||||
December 31, | |||||||||||||||||||||||
Inventory by category | 2013 | 2012 | |||||||||||||||||||||
Raw materials and components | $ | 20,700 | $ | — | |||||||||||||||||||
Work-in-process | 68,887 | — | |||||||||||||||||||||
Finished goods | 149,422 | 203,389 | |||||||||||||||||||||
| | | | | | | | ||||||||||||||||
Total | $ | 239,009 | $ | 203,389 | |||||||||||||||||||
Deposits | ' | ||||||||||||||||||||||
Deposits—Carrying value of amounts transferred to third parties for security purposes that are expected to be returned or applied towards payment after one year or beyond the operating cycle, if longer, are recorded as deposits. Deposit amounts consist of retainer payments for professional services, amounts paid to the Company's contract research organization for FDA Phase 3 clinical trial activities and security deposits for its offices. | |||||||||||||||||||||||
Revenue recognition | ' | ||||||||||||||||||||||
Revenue recognition—Revenue is recognized when there is persuasive evidence that an arrangement exists, delivery has occurred, the price is fixed and determinable and collection is reasonably assured. | |||||||||||||||||||||||
With prior written approval of the Company, in certain situations, product is returnable only by its direct customers for a returned goods credit, for product that is expired, damaged in transit, or which is discontinued, withdrawn or recalled. | |||||||||||||||||||||||
The Company estimates its sales returns based upon its prior sales and return history and accrues a Sales Return Allowance at the time of sale. Historically, sales returns have been immaterial. The Company pays royalties on an annual basis based on existing license arrangements. These royalties are recognized as cost of goods sold upon sale of the products. | |||||||||||||||||||||||
Allowance for doubtful accounts | ' | ||||||||||||||||||||||
Allowance for doubtful accounts—The Company provides an allowance for uncollectible accounts based upon prior experience and management's assessment of the collectability of existing specific accounts. | |||||||||||||||||||||||
Advertising cost | ' | ||||||||||||||||||||||
Advertising cost—Advertising costs are expensed as incurred. Advertising costs for the year ended December 31, 2013 and 2012 were $240,743 and $172,359, respectively. | |||||||||||||||||||||||
Property and equipment | ' | ||||||||||||||||||||||
Property and equipment—Leaseholds, furniture, and fixtures are recorded at historical cost and depreciated on a straight-line basis over their estimated useful lives of 5 to 7 years. Maintenance and repairs are expensed as incurred, while major additions and improvements are capitalized. Gains and losses on disposition are included in current operations. | |||||||||||||||||||||||
Intangibles | ' | ||||||||||||||||||||||
Intangibles—The Company's intangible assets include license issue fees and patent costs relating to a license agreement (Note 4). These intangible assets are amortized over a period of 3 to 7 years, the estimated legal life of the patents and economic life of the license agreements. The intangible assets are assessed by management for potential impairment on an annual basis. No impairment existed as of December 31, 2013 and December 31, 2012. | |||||||||||||||||||||||
Impairment of long-lived assets | ' | ||||||||||||||||||||||
Impairment of long-lived assets The Company evaluates the carrying value of its long-lived assets for impairment whenever events or changes in circumstances indicate that such carrying values may not be recoverable. The Company uses its best judgment based on the current facts and circumstances relating to its business when determining whether any significant impairment factors exist. | |||||||||||||||||||||||
If the Company determines that the carrying values of long-lived assets may not be recoverable based upon the existence of one or more indicators of impairment, the Company performs an undiscounted cash flow analysis to determine if impairment exists. If impairment exists, the Company measures the impairment based on the difference between the asset's carrying amount and its fair value, and the impairment is charged to consolidated statement of comprehensive loss in the period in which the long-lived asset impairment is determined to have occurred. | |||||||||||||||||||||||
The Company has determined that no impairment of the carrying value of its long-lived assets existed at December 31, 2013 and 2012. | |||||||||||||||||||||||
There can be no assurance, however, that market conditions will not change or demand for the Company's products will continue or allow the Company to realize the value of its long-lived assets and prevent future impairment. | |||||||||||||||||||||||
Research and development | ' | ||||||||||||||||||||||
Research and development—Research and development consists of expenditures for the research and development of new products and technologies, which primarily involve contract research, payroll-related expenses, and other related supplies. Research and development costs are expensed as incurred. Intangible assets acquired for research and development purposes are capitalized if they have alternative future use. | |||||||||||||||||||||||
Share-based compensation | ' | ||||||||||||||||||||||
Share-based compensation—The Company recognizes compensation cost for share-based compensation awards over the service term of the recipients of the share-based awards. The fair value of share-based compensation is calculated using the Black-Scholes-Merton pricing model. The Black-Scholes-Merton model requires subjective assumptions regarding future stock price volatility and expected time to exercise, which greatly affect the calculated values. The expected term of awards granted is derived from historical data on awards exercised and post-vesting employment termination behavior. The risk-free rate selected to value any particular grant is based on the U.S. Treasury rate on the grant date that corresponds to the expected term of the award. The expected volatility is based on the historical volatility of the common stock of comparable publicly traded companies. These factors could change, affecting the determination of stock-based compensation expense in future periods. | |||||||||||||||||||||||
Income taxes | ' | ||||||||||||||||||||||
Income taxes—The Company accounts for income taxes under the asset and liability method, wherein deferred tax assets and liabilities are recognized for the future tax consequences attributable to the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. 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 income in the period the enactment occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through the generation of future taxable income for the related jurisdictions. | |||||||||||||||||||||||
For balance sheet presentation, current deferred tax assets and liabilities within each tax jurisdiction have been offset and presented as a single amount and non-current deferred tax assets and liabilities within each tax jurisdiction have been offset and presented as a single amount. | |||||||||||||||||||||||
When tax returns are filed, it is highly probable that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits along with any associated interest and penalties that would be payable to the taxing authorities upon examination. As of December 31, 2013, the Company had no unrecognized tax benefits, and the Company had no positions which, in the opinion of management, would be reversed if challenged by a taxing authority. In the event the Company is assessed interest and/or penalties, such amounts will be classified as income tax expense in the financial statements. | |||||||||||||||||||||||
As of December 31, 2013, all federal tax returns since 2010 and state tax returns since 2009 are still subject to adjustment upon audit. No tax returns are currently being examined by taxing authorities. | |||||||||||||||||||||||
Comprehensive income (loss) | ' | ||||||||||||||||||||||
Comprehensive income (loss)—Comprehensive income (loss) includes net loss and other comprehensive income (loss). The items of other comprehensive income (loss) for the Company are unrealized gains and losses on marketable securities classified as available-for-sale and foreign translation adjustments relating to its subsidiaries. When the Company realizes a gain or loss on securities available-for-sale for which an unrealized gain or loss was previously recognized, a corresponding reclassification adjustment is made to remove the unrealized gain or loss from accumulated other comprehensive income and reflect the realized gain or loss in current operations. | |||||||||||||||||||||||
Marketable securities | ' | ||||||||||||||||||||||
Marketable securities—Investment securities as of December 31, 2013 and December 31, 2012 are as available-for-sale. Securities available-for-sale are recorded at cost and any increases or decreases in fair market value are recorded as unrealized gain or loss, net of taxes in accumulated other comprehensive income. The Company monitors these investments for impairment and makes appropriate reductions in carrying values when necessary. CellSeed, Inc. securities are the only marketable security the Company currently carries on its books. The Company's marketable securities consist of 48,550 shares of CellSeed stock which are part of 147,100 shares acquired in January 2009 for 100,028,000 Japanese Yen (equivalent to $1,109,819), at 680 Yen per share. CellSeed's IPO (Tokyo Stock Exchange symbol 7776) was completed on March 16, 2010. As of December 31, 2013 and December 31, 2012, the closing price per share was 1,840 Yen and 661 Yen, respectively. | |||||||||||||||||||||||
In July 2013, based on an increase in market value of CellSeed shares, Mitsubishi UFJ Capital III Limited Partnership (Mitsubishi) released to the Company 34,300 shares of CellSeed stock. This was part of the 73,550 shares of CellSeed stock held by Mitsubishi as collateral on a $500,000 convertible note issued to Mitsubishi. The note is now secured by the remaining 39,250 shares of CellSeed stock held by Mitsubishi as collateral. | |||||||||||||||||||||||
During the fourth quarter of 2013, the Company sold 25,000 of the shares released from Mitsubishi in open market transactions for $591,422. As of December 31, 2013, 9,300 shares of CellSeed stock are classified as a current asset, as they are available for sale by the Company. The remaining 39,250 shares of CellSeed stock are pledged against the note, which is due in 2016, and are classified as marketable securities, pledged to creditor. As of December 31, 2012, 100% of the investment in CellSeed is classified as a long term asset in the accompanying balance sheet as the entire investment was assigned as collateral to secure the $500,000 convertible note issued to Mitsubishi. | |||||||||||||||||||||||
Gain on derecognition of accounts payable | ' | ||||||||||||||||||||||
Gain on derecognition of accounts payable—The Company derecognizes accounts payable and records gain when the related contractual obligation is discharged, cancelled or expired. During the year ended December 31, 2013, the Company recorded a total of $341,361 as a gain on derecognition of accounts payable due to reaching a settlement with a creditor in regards to the amounts owed relating to services provided to the Company. | |||||||||||||||||||||||
Foreign Currency Translation | ' | ||||||||||||||||||||||
Foreign Currency Translation—The Company's reporting currency is the U.S. dollar. The yen and the euro are the functional currencies of its subsidiaries, EM Japan and EM Europe, respectively, as they are the primary currencies within the economic environments in which EM Japan and EM Europe operate. Assets and liabilities of their operations are translated into U.S. dollars at period-end exchange rates, and revenues and expenses are translated into U.S. dollars at average exchange rates in effect during each reporting period. Adjustments resulting from the translation are reported in other comprehensive income or loss. | |||||||||||||||||||||||
Financial Instruments | ' | ||||||||||||||||||||||
Financial Instruments—Financial instruments included in the financial statements are comprised of cash and cash equivalents, short-term and long-term available-for-sale investments, accounts receivable, derivative financial instruments, accounts payable, certain accrued liabilities, convertible notes, promissory notes, due to related party, dissenting stockholders payable, contingent consideration and other contingent liabilities. The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, due to related party, and dissenting stockholders payable approximate their fair values due to the short-term nature of those instruments. | |||||||||||||||||||||||
Fair value measurements | ' | ||||||||||||||||||||||
Fair value measurements—The Company defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company measures fair value under a framework that provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described as follows: | |||||||||||||||||||||||
Level 1: Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access. | |||||||||||||||||||||||
Level 2: Inputs to the valuation methodology include: | |||||||||||||||||||||||
• Quoted prices for similar assets or liabilities in active markets; | |||||||||||||||||||||||
• Quoted prices for identical or similar assets or liabilities in inactive markets; | |||||||||||||||||||||||
• Inputs other than quoted prices that are observable for the asset or liability; | |||||||||||||||||||||||
• Inputs that are derived principally from or corroborated by observable market data by correlation or other means. | |||||||||||||||||||||||
If the asset or liability has a specified (contractual) term, the Level 2 inputs must be observable for substantially the full term of the asset or liability. | |||||||||||||||||||||||
Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement. | |||||||||||||||||||||||
The asset's or liability's fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value assigned to marketable securities is determined by obtaining quoted prices on nationally recognized securities exchanges, and are classified as Level 1 investments at December 31, 2013. | |||||||||||||||||||||||
The fair value of the Company's debt instruments is not materially different from their carrying values as presented. The fair value of the Company's convertible debt instruments was determined based on Level 2 inputs. The carrying value of the debt was discounted based on allocating proceeds to other financial instruments within the arrangement as discussed in Note 6. | |||||||||||||||||||||||
The Company issued stock purchase warrants in conjunction with its September 2013 private placement (see Note 7) that are accounted for as derivative instruments whose fair market value is determined using Level 3 inputs. These inputs include expected term and expected volatility. | |||||||||||||||||||||||
The Company did not have any Level 3 financial assets or liabilities measured at fair value at December 31, 2012. | |||||||||||||||||||||||
The following table presents the activity for those items measured at fair value on a recurring basis using Level 3 inputs during 2013: | |||||||||||||||||||||||
Derivative Instruments— | |||||||||||||||||||||||
Stock Purchase | |||||||||||||||||||||||
Warrants | |||||||||||||||||||||||
Balance at December 31, 2012 | $ | — | |||||||||||||||||||||
Fair value at issuance date | 6,860,000 | ||||||||||||||||||||||
Change in fair value included in the statement of comprehensive loss | (932,000 | ) | |||||||||||||||||||||
| | | | | |||||||||||||||||||
Balance at December 31, 2013 | $ | 5,928,000 | |||||||||||||||||||||
The initial value of the derivative liability as of September 11, 2013 and the change in fair value of the derivative liability as of December 31, 2013 were determined using a Binomial Monte-Carlo Cliquet (aka Ratchet) Option Pricing Model. The model is similar to traditional Black-Scholes-type option pricing models except that the exercise price resets at certain dates in the future. The values as of September 11, 2013 and December 31, 2013 were calculated based on the following assumptions: | |||||||||||||||||||||||
December 31, 2013 | Initial Value | ||||||||||||||||||||||
Risk-free interest rate | 1.75 | % | 1.72 | % | |||||||||||||||||||
Expected volatility (peer group) | 63.2 | % | 72.4 | % | |||||||||||||||||||
Expected life (in years) | 4.7 | 5 | |||||||||||||||||||||
Expected dividend yield | — | — | |||||||||||||||||||||
Number outstanding | 3,020,501 | 3,020,501 | |||||||||||||||||||||
Fair value at issue date | $ | 6,860,000 | $ | 6,860,000 | |||||||||||||||||||
Debt and Related Party Debt | ' | ||||||||||||||||||||||
Debt and Related Party Debt—The Company accounts for the proceeds from the issuance of convertible notes payable with detachable stock purchase warrants and embedded conversion features in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 470-20, Debt with Conversion and Other Options. Under FASB ASC 470-20, the proceeds from the issuance of a debt instrument with detachable stock purchase warrants shall be allocated to the two elements based on the relative fair values of the debt instrument without the warrants and of the warrants themselves at the time of issuance. The portion of the proceeds allocated to the warrants is accounted for as additional paid-in capital and the remaining proceeds are allocated to the debt instrument which resulted in a discount to debt which is amortized and charged as interest expense over the term of the note agreement. Additionally, pursuant to FASB ASC 470-20, the intrinsic value of the embedded conversion feature of the convertible notes payable is included in the discount to debt and amortized and charged to interest expense over the life of the note agreement. | |||||||||||||||||||||||
Type of Loan | Term of Loan | Annual | Original | Conv. | Beneficial | Warrants | Strike Price | Warrant | Effective | ||||||||||||||
Interest | Loan | Rate | Conversion | FMV | Interest | ||||||||||||||||||
Rate | Principal | Discount | Discount | Rate | |||||||||||||||||||
Amount | Amount | Amount | Including | ||||||||||||||||||||
Discounts | |||||||||||||||||||||||
2012 Convertible note payable | Due on demand up to 1 year | 8% to 10% | $ | 2,794,187 | $3.30 to $3.60 | $ | 256,761 | 86,573 | $1.00 to75% of FMV | $ | 175,961 | 15.4% to 101.0% | |||||||||||
2013 Convertible note payable | 1 to 2 years | 10% | 3,079,666 | $3.30 | 396,801 | 50,000 | $3.30 | 116,831 | 19.1% to 61.6% | ||||||||||||||
2012 Notes payable | Due on demand up to 2 years | 1% to 11% | 2,641,768 | NA | — | 1,381,020 | $1.00 to $2.50 | 1,485,835 | 54.6% to 67.8% | ||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | |
Total | $ | 8,515,621 | $ | 653,562 | 1,517,593 | $ | 1,778,627 | ||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Related party notes are disclosed as separate line items in the Company’s balance sheet presentation. | |||||||||||||||||||||||
Net loss per share | ' | ||||||||||||||||||||||
Net loss per share—In accordance with FASB ASC Topic 260, "Earnings per Share," the basic loss per common share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding. Dilutive loss per share is computed similar to the basic loss per common share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. As of December 31, 2013 and 2012, there were 13,416,768 and 6,403,922 shares of potentially dilutive securities outstanding, respectively. As the Company reported a net loss, none of the potentially dilutive securities were included in the calculation of diluted loss per share since their effect would be anti-dilutive for all periods presented. | |||||||||||||||||||||||
Recent accounting pronouncements | ' | ||||||||||||||||||||||
Recent accounting pronouncements | |||||||||||||||||||||||
In February 2013, the FASB issued amendments to the accounting guidance for presentation of comprehensive income to improve the reporting of reclassifications out of accumulated other comprehensive income. The amendments do not change the current requirements for reporting net income or other comprehensive income, but do require an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to present, either on the face of the statement where the net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under GAAP to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures required under GAAP that provide additional detail about these amounts. For public companies, these amendments are effective for reporting periods beginning after December 15, 2012. Other than a change in presentation, the adoption of these amendments to the accounting guidance did not have a material impact on the Company's consolidated financial position or results of operations. |
SUMMARY_OF_SIGNIFICANT_ACCOUNT2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended | ||||||||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||||||||
Summary Of Significant Accounting Policies Tables | ' | ||||||||||||||||||||||
Schedule of inventory purchases | ' | ||||||||||||||||||||||
All of the inventory purchases during the year ended December 31, 2013 were from two vendors and in 2012 were from one vendor. | |||||||||||||||||||||||
December 31, | |||||||||||||||||||||||
Inventory by category | 2013 | 2012 | |||||||||||||||||||||
Raw materials and components | $ | 20,700 | $ | — | |||||||||||||||||||
Work-in-process | 68,887 | — | |||||||||||||||||||||
Finished goods | 149,422 | 203,389 | |||||||||||||||||||||
| | | | | | | | ||||||||||||||||
Total | $ | 239,009 | $ | 203,389 | |||||||||||||||||||
Schedule of changes in fair value of derivative liabilities | ' | ||||||||||||||||||||||
The following table presents the activity for those items measured at fair value on a recurring basis using Level 3 inputs during 2013: | |||||||||||||||||||||||
Derivative Instruments— | |||||||||||||||||||||||
Stock Purchase | |||||||||||||||||||||||
Warrants | |||||||||||||||||||||||
Balance at December 31, 2012 | $ | — | |||||||||||||||||||||
Fair value at issuance date | 6,860,000 | ||||||||||||||||||||||
Change in fair value included in the statement of comprehensive loss | (932,000 | ) | |||||||||||||||||||||
| | | | | |||||||||||||||||||
Balance at December 31, 2013 | $ | 5,928,000 | |||||||||||||||||||||
Schedule of valuation assumptions | ' | ||||||||||||||||||||||
The values as of September 11, 2013 and December 31, 2013 were calculated based on the following assumptions: | |||||||||||||||||||||||
December 31, 2013 | Initial Value | ||||||||||||||||||||||
Risk-free interest rate | 1.75 | % | 1.72 | % | |||||||||||||||||||
Expected volatility (peer group) | 63.2 | % | 72.4 | % | |||||||||||||||||||
Expected life (in years) | 4.7 | 5 | |||||||||||||||||||||
Expected dividend yield | — | — | |||||||||||||||||||||
Number outstanding | 3,020,501 | 3,020,501 | |||||||||||||||||||||
Fair value at issue date | $ | 6,860,000 | $ | 6,860,000 | |||||||||||||||||||
Schedule of convertible notes payable | ' | ||||||||||||||||||||||
Type of Loan | Term of Loan | Annual | Original | Conv. | Beneficial | Warrants | Strike Price | Warrant | Effective | ||||||||||||||
Interest | Loan | Rate | Conversion | FMV | Interest | ||||||||||||||||||
Rate | Principal | Discount | Discount | Rate | |||||||||||||||||||
Amount | Amount | Amount | Including | ||||||||||||||||||||
Discounts | |||||||||||||||||||||||
2012 Convertible note payable | Due on demand up to 1 year | 8% to 10% | $ | 2,794,187 | $3.30 to $3.60 | $ | 256,761 | 86,573 | $1.00 to75% of FMV | $ | 175,961 | 15.4% to 101.0% | |||||||||||
2013 Convertible note payable | 1 to 2 years | 10% | 3,079,666 | $3.30 | 396,801 | 50,000 | $3.30 | 116,831 | 19.1% to 61.6% | ||||||||||||||
2012 Notes payable | Due on demand up to 2 years | 1% to 11% | 2,641,768 | NA | — | 1,381,020 | $1.00 to $2.50 | 1,485,835 | 54.6% to 67.8% | ||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | |
Total | $ | 8,515,621 | $ | 653,562 | 1,517,593 | $ | 1,778,627 | ||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
PROPERTY_AND_EQUIPMENT_Tables
PROPERTY AND EQUIPMENT (Tables) | 12 Months Ended | |||||||
Dec. 31, 2013 | ||||||||
Property And Equipment Tables | ' | |||||||
Schedule of property and equipment | ' | |||||||
Property and equipment consisted of the following at: | ||||||||
December 31, 2013 | December 31, 2012 | |||||||
Equipment | $ | 128,343 | $ | 120,603 | ||||
Leasehold improvements | 23,054 | 23,054 | ||||||
Furniture and fixtures | 52,269 | 52,269 | ||||||
| | | | | | | | |
203,666 | 195,926 | |||||||
Less: accumulated depreciation | (177,546 | ) | (157,157 | ) | ||||
| | | | | | | | |
Total | $ | 26,120 | $ | 38,769 | ||||
| | | | | | | | |
| | | | | | | | |
INTANGIBLE_ASSETS_Tables
INTANGIBLE ASSETS (Tables) | 12 Months Ended | |||||||
Dec. 31, 2013 | ||||||||
Intangible Assets Tables | ' | |||||||
Schedule of Intangible Assets | ' | |||||||
Intangible assets consisted of the following at: | ||||||||
December 31, 2013 | December 31, 2012 | |||||||
License fees and patent filing costs | $ | 2,250,000 | $ | 2,250,000 | ||||
Less: accumulated amortization | (1,142,857 | ) | (928,571 | ) | ||||
| | | | | | | | |
Total | $ | 1,107,143 | $ | 1,321,429 | ||||
| | | | | | | | |
| | | | | | | | |
During the | ||||||||
Schedule of estimated aggregate amortization expense for the next five years | ' | |||||||
As of December 31, 2013 estimated aggregate amortization expense for the next five years is as follows: | ||||||||
Year ending December 31 | Amount | |||||||
2014 | $ | 214,286 | ||||||
2015 | 214,286 | |||||||
2016 | 214,286 | |||||||
2017 | 214,286 | |||||||
2018 | 214,286 | |||||||
Thereafter | 35,713 | |||||||
| | | | | ||||
Total | $ | 1,107,143 |
ACCOUNTS_PAYABLE_AND_ACCRUED_E1
ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Tables) | 12 Months Ended | |||||||
Dec. 31, 2013 | ||||||||
Accounts Payable And Accrued Expenses Tables | ' | |||||||
Schedule of accounts payable and accrued expenses | ' | |||||||
Accounts payable and accrued expenses consisted of the following at: | ||||||||
December 31, 2013 | December 31, 2012 | |||||||
Accounts payable | ||||||||
Clinical trial management expenses | $ | 270,694 | $ | 527,868 | ||||
Legal expenses | 178,119 | 609,823 | ||||||
Other vendors | 386,847 | 619,886 | ||||||
| | | | | | | | |
Subtotal | 835,660 | 1,757,577 | ||||||
Accrued interest payable, related parties | 195,051 | 64,550 | ||||||
Accrued interest payable | 473,356 | 246,843 | ||||||
Accrued expenses | 294,379 | 89,641 | ||||||
Deferred salary | 485,000 | 401,667 | ||||||
| | | | | | | | |
Total accounts payable and accrued expenses | $ | 2,283,446 | $ | 2,560,278 | ||||
| | | | | | | | |
| | | | | | | | |
NOTES_PAYABLE_Tables
NOTES PAYABLE (Tables) | 12 Months Ended | |||||||||||||||||||||||||||||||
Dec. 31, 2013 | ||||||||||||||||||||||||||||||||
Notes Payable Tables | ' | |||||||||||||||||||||||||||||||
Schedule of Notes Payable | ' | |||||||||||||||||||||||||||||||
Notes payable consisted of the following at December 31, 2013: | ||||||||||||||||||||||||||||||||
Year Issued | Interest rate range | Term of Notes | Conv. Price | Principal Outstanding December 31, | Discount Amount December 31, | Carrying Amount December 31, | Shares Underlying Principal as of December 31, | Principal Outstanding December 31, | Discount Amount December 31, | Carrying Amount December 31, | Shares Underlying Principal as of December 31, | |||||||||||||||||||||
2013 | 2013 | 2013 | 2013 | 2012 | 2012 | 2012 | 2012 | |||||||||||||||||||||||||
Convertible notes payable | ||||||||||||||||||||||||||||||||
2009 | 6.50% | 5 years | $3.05 | $ | 254,460 | $ | — | $ | 254,460 | 83,366 | $ | 294,355 | $ | — | $ | 294,355 | 96,436 | |||||||||||||||
2010 | 0 ~ 6.0% | 5 years | $3.05 | 74,000 | 8,308 | 65,692 | 24,248 | 74,000 | 13,420 | 60,580 | 24,248 | |||||||||||||||||||||
2011 | 10% | 5 years | $3.05 | 500,000 | — | 500,000 | 163,809 | 500,000 | — | 500,000 | 163,809 | |||||||||||||||||||||
2012 | 10% | Due on demand ~ 2 years | $3.30 ~$3.60 | 251,100 | — | 251,100 | 71,000 | 4,307,107 | 69,179 | 4,237,928 | 1,241,925 | |||||||||||||||||||||
2013 | 10% | Due on demand ~ 2 years | $3.30 ~$3.60 | 6,913,606 | 215,798 | 6,697,808 | 1,998,215 | — | — | — | — | |||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
$ | 7,993,166 | $ | 224,106 | $ | 7,769,060 | 2,340,638 | $ | 5,175,462 | $ | 82,599 | $ | 5,092,863 | 1,526,418 | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Current | $ | 4,955,868 | $ | 153,396 | $ | 4,802,472 | 1,438,033 | $ | 4,056,007 | $ | 69,179 | $ | 3,986,828 | 1,170,922 | ||||||||||||||||||
Non-current | $ | 3,037,298 | $ | 70,710 | $ | 2,966,588 | 902,605 | $ | 1,119,455 | $ | 13,420 | $ | 1,106,035 | 355,496 | ||||||||||||||||||
Convertible notes payable—related party | ||||||||||||||||||||||||||||||||
2012 | 10% | Due on demand | $3.30 | $ | 373,000 | $ | — | $ | 373,000 | 113,030 | $ | 388,800 | $ | 17,084 | $ | 371,716 | 117,819 | |||||||||||||||
2013 | 10% | 1 year | $3.60 | 187,706 | — | 187,706 | 52,141 | 278,642 | 9,491 | 269,151 | 77,403 | |||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
$ | 560,706 | $ | — | $ | 560,706 | 165,171 | $ | 667,442 | $ | 26,575 | $ | 640,867 | 195,222 | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Current | $ | 560,706 | $ | — | $ | 560,706 | 165,171 | $ | 667,442 | $ | 26,575 | $ | 640,867 | 195,222 | ||||||||||||||||||
Notes payable | ||||||||||||||||||||||||||||||||
2012 | 2% ~ 11% | Due on demand ~ 2 years | NA | $ | 833,335 | $ | 18,265 | $ | 815,070 | — | $ | 1,782,060 | $ | 214,350 | $ | 1,567,710 | — | |||||||||||||||
2013 | 2% ~ 10% | Due on demand ~ 2 years | NA | 1,150,000 | — | 1,150,000 | — | — | — | — | — | |||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
$ | 1,983,335 | $ | 18,265 | $ | 1,965,070 | — | $ | 1,782,060 | $ | 214,350 | $ | 1,567,710 | — | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Current | $ | 1,783,335 | $ | 18,265 | $ | 1,765,070 | — | $ | 1,082,060 | $ | 214,350 | $ | 867,710 | — | ||||||||||||||||||
Non-current | $ | 200,000 | $ | — | $ | 200,000 | — | $ | 700,000 | $ | — | $ | 700,000 | — | ||||||||||||||||||
Notes payable—related party | ||||||||||||||||||||||||||||||||
2009 | 6.50% | Due on demand | NA | $ | — | $ | — | $ | — | — | $ | 272,800 | $ | — | $ | 272,800 | — | |||||||||||||||
2011 | 8% | 2 years | NA | — | — | — | — | 200,000 | — | 200,000 | — | |||||||||||||||||||||
2012 | 1% ~ 11% | Due on demand ~ 2 years | NA | 880,062 | 4,421 | 875,641 | — | 3,207,133 | 608,602 | 2,598,531 | — | |||||||||||||||||||||
2013 | 8% | Due on demand | NA | 50,000 | — | 50,000 | — | — | — | — | — | |||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
$ | 930,062 | $ | 4,421 | $ | 925,641 | — | $ | 3,679,933 | $ | 608,602 | $ | 3,071,331 | — | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Current | $ | 930,062 | $ | 4,421 | $ | 925,641 | — | $ | 3,679,933 | $ | 608,602 | $ | 3,071,331 | — | ||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Grand Total | $ | 11,467,269 | $ | 246,792 | $ | 11,220,477 | 2,505,809 | $ | 11,304,897 | $ | 932,126 | $ | 10,372,771 | 1,721,640 | ||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Schedule of contractual principal payments of loans and notes payable | ' | |||||||||||||||||||||||||||||||
Contractual principal payments due on notes payable are as follows: | ||||||||||||||||||||||||||||||||
Year Ending | at December 31, 2013 | |||||||||||||||||||||||||||||||
2014 | $ | 8,229,971 | ||||||||||||||||||||||||||||||
2015 | 2,737,298 | |||||||||||||||||||||||||||||||
2016 | 500,000 | |||||||||||||||||||||||||||||||
| | | | | ||||||||||||||||||||||||||||
Total | $ | 11,467,269 | ||||||||||||||||||||||||||||||
| | | | | ||||||||||||||||||||||||||||
| | | | | ||||||||||||||||||||||||||||
Schedule of fair value assumptions for warrants issued in conjunction with notes | ' | |||||||||||||||||||||||||||||||
The fair value of the warrants was determined using the Black-Scholes-Merton option pricing model with the following inputs: | ||||||||||||||||||||||||||||||||
Stock Price | $3.60 | |||||||||||||||||||||||||||||||
Exercise Price | $1.00 ~ $3.60 | |||||||||||||||||||||||||||||||
Term | 2 ~ 10 years | |||||||||||||||||||||||||||||||
Risk-Free Rate | 0.30% ~ 2.22% | |||||||||||||||||||||||||||||||
Dividend Yield | 0% | |||||||||||||||||||||||||||||||
Volatility | 99.89% ~ 141.70% |
STOCKHOLDERS_EQUITY_DEFICIT_Ta
STOCKHOLDERS' EQUITY (DEFICIT) (Tables) | 12 Months Ended | |||||||||||||
Dec. 31, 2013 | ||||||||||||||
Stockholders Equity Deficit Tables | ' | |||||||||||||
Schedule of outstanding warrants | ' | |||||||||||||
A summary of outstanding warrants as of December 31, 2013 is presented below. | ||||||||||||||
Year ended | Year ended | |||||||||||||
December 31, 2013 | December 31, 2012 | |||||||||||||
Warrants outstanding, beginning of period | 3,408,795 | 941,202 | ||||||||||||
Granted | 3,370,501 | 2,967,593 | ||||||||||||
Exercised | — | — | ||||||||||||
Cancelled, forfeited and expired | (500,000 | ) | (500,000 | ) | ||||||||||
| | | | | | | | |||||||
Warrants outstanding, end of period | 6,279,296 | 3,408,795 | ||||||||||||
| | | | | | | | |||||||
| | | | | | | | |||||||
Outstanding | ||||||||||||||
Weighted | Exercisable | |||||||||||||
Average | ||||||||||||||
Remaining | ||||||||||||||
Contractual | ||||||||||||||
Exercise Price | Number of | Life (Years) | Weighted | Total | Weighted | |||||||||
Warrants | Average | Average | ||||||||||||
Issued | Exercise Price | Exercise Price | ||||||||||||
Balance 2011 | ||||||||||||||
$1.00 | 311,038 | 0.68 | $1.00 | 311,038 | $1.00 | |||||||||
75% of FMV | 331,670 | 0.68 | 75% of FMV | 331,670 | 75% of FMV | |||||||||
$3.05 | 298,494 | 1.35 | $3.05 | 298,494 | $3.05 | |||||||||
| | | | | | | | | | | | | | |
2011 total | 941,202 | 941,202 | ||||||||||||
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
During 2012 | ||||||||||||||
$1.00 | 1,411,020 | 1.05 | $1.00 | 411,020 | $1.00 | |||||||||
75% of FMV | 56,573 | 1.24 | 75% of FMV | 56,573 | 75% of FMV | |||||||||
$2.50 | 1,000,000 | 1.66 | $2.50 | 1,000,000 | $2.50 | |||||||||
| | | | | | | | | | | | | | |
2012 total | 2,467,593 | 1,467,593 | ||||||||||||
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
During 2013 | ||||||||||||||
$3.50 | 3,320,501 | 4.7 | $3.50 | 3,320,501 | $3.50 | |||||||||
$3.30 | 50,000 | 4.33 | $3.30 | 50,000 | $3.30 | |||||||||
| | | | | | | | | | | | | | |
2013 total | 3,370,501 | 3,370,501 | ||||||||||||
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
Schedule of stock option valuation assumptions | ' | |||||||||||||
February 28, 2013 | April 2, 2012 | |||||||||||||
Stock price | $3.60 | $3.60 | ||||||||||||
Exercise price | $3.60 | $3.60 | ||||||||||||
Term | 10 years | 10 years | ||||||||||||
Risk-Free Rate | 1.89 | % | 2.22 | % | ||||||||||
Dividend Yield | 0 | % | 0 | % | ||||||||||
Volatility | 119.3 | % | 141.7 | % | ||||||||||
Schedule of outstanding options | ' | |||||||||||||
A summary of outstanding options as of December 31, 2013 is presented below. | ||||||||||||||
2011 Stock Incentive Plan | ||||||||||||||
Prior Plan | December 31, 2013 | December 31, 2012 | ||||||||||||
Options outstanding, beginning of period | 11,795 | 1,199,000 | 61,000 | |||||||||||
Granted | — | 3,305,000 | 1,150,000 | |||||||||||
Exercised | — | — | — | |||||||||||
Cancelled, forfeited and expired | — | — | (12,000 | ) | ||||||||||
| | | | | | | | | | | ||||
Options outstanding, end of period | 11,795 | 4,504,000 | 1,199,000 | |||||||||||
| | | | | | | | | | | ||||
| | | | | | | | | | | ||||
INCOME_TAXES_Tables
INCOME TAXES (Tables) | 12 Months Ended | |||||||||
Dec. 31, 2013 | ||||||||||
Income Tax Disclosure [Abstract] | ' | |||||||||
Schedule of provision (benefit) for income taxes | ' | |||||||||
The provision (benefit) for income taxes consists of the following for the year ended December 31: | ||||||||||
2013 | 2012 | |||||||||
Current | U.S. | $ | 2,550 | $ | 3,405 | |||||
International | 725 | 3,841 | ||||||||
Deferred | U.S. | (185,713 | ) | — | ||||||
International | — | — | ||||||||
| | | | | | | | | | |
$ | (182,438 | ) | $ | 7,246 | ||||||
| | | | | | | | | | |
| | | | | | | | | | |
Schedule of deferred tax assets and liabilities | ' | |||||||||
Deferred tax assets consist of the following as of December 31, 2013 and 2012: | ||||||||||
2013 | 2012 | |||||||||
Net operating loss carryforward | $ | 11,406,675 | $ | 9,082,282 | ||||||
General business tax credit | 4,737,477 | 3,519,185 | ||||||||
Stock options | 2,966,286 | 1,129,163 | ||||||||
Charitable contribution | 77,659 | 70,077 | ||||||||
Accrued expenses | 236,159 | 34,060 | ||||||||
Deferred compensation | 130,633 | 128,008 | ||||||||
Other | 120,236 | 64,088 | ||||||||
| | | | | | | | |||
Total gross deferred tax assets | 19,675,125 | 14,026,863 | ||||||||
Less valuation allowance | (19,461,748 | ) | (14,026,863 | ) | ||||||
| | | | | | | | |||
Net deferred tax assets | $ | 213,377 | $ | — | ||||||
| | | | | | | | |||
| | | | | | | | |||
Deferred tax liabilities consist of the following as of December 31, 2013 and 2012: | ||||||||||
2013 | 2012 | |||||||||
Unrealized gain on foreign exchange translation and others | $ | (29,154 | ) | $ | — | |||||
Unrealized (gain) loss on securities available-for-sale | (184,223 | ) | — | |||||||
| | | | | | | | |||
Total deferred tax liability | $ | (213,377 | ) | $ | — | |||||
Schedule of income tax provision | ' | |||||||||
The income tax provision differs from that computed using the statutory federal tax rate of 34%, due to the following: | ||||||||||
2013 | 2012 | |||||||||
Tax benefit at statutory federal rate | $ | (4,844,588 | ) | $ | (4,807,897 | ) | ||||
State taxes, net of federal tax benefit | (532,099 | ) | (706,261 | ) | ||||||
Increase (decrease) in valuation allowance | 5,434,885 | 6,115,445 | ||||||||
Permanent Items | 997,820 | 1,397,123 | ||||||||
General business tax credit | (1,218,292 | ) | (1,483,292 | ) | ||||||
Other | (20,164 | ) | (507,872 | ) | ||||||
| | | | | | | | |||
$ | (182,438 | ) | $ | 7,246 |
COMMITMENTS_AND_CONTINGENCIES_
COMMITMENTS AND CONTINGENCIES (Tables) | 12 Months Ended | ||||
Dec. 31, 2013 | |||||
Commitments And Contingencies Tables | ' | ||||
Schedule of future minimum lease payments | ' | ||||
Future minimum lease payments under the agreements are as follows: | |||||
Year | Amount | ||||
2014 | $ | 97,597 | |||
2015 | 17,195 | ||||
| | | | | |
Total | $ | 114,792 | |||
| | | | | |
| | | | | |
AMOUNTS_RECLASSIFIED_OUT_OF_AC1
AMOUNTS RECLASSIFIED OUT OF ACCUMULATED OTHER COMPREHENSIVE INCOME (Tables) | 12 Months Ended | ||||||||||
Dec. 31, 2013 | |||||||||||
Notes to Financial Statements | ' | ||||||||||
Schedule of accumulated other comprehensive income (loss) | ' | ||||||||||
Unrealized | Unrealized | Total | |||||||||
holding | Foreign | ||||||||||
gain (loss) on | translation | ||||||||||
securities | |||||||||||
available-for-sale | |||||||||||
Balance—December 31, 2011 | $ | 255,340 | $ | (2,927 | ) | $ | 252,413 | ||||
Other comprehensive income before reclassifications | (284,216 | ) | (5,119 | ) | (289,335 | ) | |||||
Amounts reclassified from accumulated other comprehensive income | 24,490 | — | 24,490 | ||||||||
| | | | | | | | | | | |
Net current period other comprehensive income | (259,726 | ) | (5,119 | ) | (264,845 | ) | |||||
| | | | | | | | | | | |
Balance—December 31, 2012 | (4,386 | ) | (8,046 | ) | (12,432 | ) | |||||
Other comprehensive income before reclassifications | 692,843 | (18,660 | ) | 674,183 | |||||||
Amounts reclassified from accumulated other comprehensive income | (399,068 | ) | — | (399,068 | ) | ||||||
| | | | | | | | | | | |
Net current period other comprehensive income | 293,775 | (18,660 | ) | 275,115 | |||||||
| | | | | | | | | | | |
Balance—December 31, 2013 | $ | 289,389 | $ | (26,706 | ) | $ | 262,683 | ||||
| | | | | | | | | | | |
| | | | | | | | | | | |
All amounts are net of tax. | |||||||||||
RELATED_PARTY_TRANSACTIONS_Tab
RELATED PARTY TRANSACTIONS (Tables) | 12 Months Ended | ||||||||||||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||||||||||||
Related Party Transactions Tables | ' | ||||||||||||||||||||||||||
Schedule of related parties outstanding loans | ' | ||||||||||||||||||||||||||
The following table sets forth information relating to the Company's loans from related persons outstanding as of December 31, 2013. | |||||||||||||||||||||||||||
Lender | Annual | Date of | Term of | Principal | Highest | Amount of | Amount of | Conv. | Shares | ||||||||||||||||||
Interest | Loan | Loan | Amount | Principal | Principal | Interest | Price | Underlying | |||||||||||||||||||
Rate | Outstanding | Outstanding | Repaid | Paid | Principal | ||||||||||||||||||||||
as of | as of | ||||||||||||||||||||||||||
December 31, | December 31, | ||||||||||||||||||||||||||
2013 | 2013 | ||||||||||||||||||||||||||
Hope Int'l Hospice(1) | 8 | % | 1/17/12 | On Demand | $ | 200,000 | $ | 200,000 | $ | — | $ | 20,000 | NA | NA | |||||||||||||
Lan T. Tran(2) | 11 | % | 2/10/12 | 2 years(3) | 80,000 | 205,000 | 125,000 | — | NA | NA | |||||||||||||||||
Hideki & Eiko Uehara(5) | 11 | % | 2/15/12 | 2 years(3) | 133,333 | 133,333 | — | 14,433 | NA | NA | |||||||||||||||||
Hope Int'l Hospice(1) | 8 | % | 6/14/12 | On Demand | 200,000 | 200,000 | — | 20,000 | NA | NA | |||||||||||||||||
Hope Int'l Hospice(1) | 8 | % | 6/21/12 | On Demand | 100,000 | 100,000 | — | 10,000 | NA | NA | |||||||||||||||||
Cuc T. Tran(5) | 11 | % | 6/27/12 | 1 year | 10,000 | 10,000 | — | — | NA | NA | |||||||||||||||||
Yasushi Nagasaki(2) | 10 | % | 6/29/12 | On Demand | 373,000 | 388,800 | 15,800 | — | $ | 3.3 | 113,030 | ||||||||||||||||
Yutaka Niihara(2)(4) | 10 | % | 12/5/12 | On Demand | 156,730 | 1,213,700 | 1,056,970 | — | NA | NA | |||||||||||||||||
Hope Int'l Hospice(1) | 8 | % | 2/11/13 | On Demand | 50,000 | 50,000 | — | 3,000 | NA | NA | |||||||||||||||||
Hideki & Eiko Uehara(5) | 10 | % | 9/7/13 | 1 year | 35,640 | 35,640 | — | — | $ | 3.6 | 9,900 | ||||||||||||||||
MLPF&S Cust. FBO Willis C.Lee(2)(4) | 10 | % | 10/5/13 | 1 year | 152,066 | 152,066 | — | — | $ | 3.6 | 42,240 | ||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Sub total | $ | 1,490,769 | $ | 2,688,539 | $ | 1,197,770 | $ | 67,433 | 165,170 | ||||||||||||||||||
Less discount | (4,422 | ) | |||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | $ | 1,486,347 | |||||||||||||||||||||||||
(1) Dr. Niihara, who is the Company's CEO, is also the CEO of Hope International Hospice, Inc. | |||||||||||||||||||||||||||
(2) Officer | |||||||||||||||||||||||||||
(3) Due on Demand | |||||||||||||||||||||||||||
(4) Director | |||||||||||||||||||||||||||
(5) Family of Officer/Director | |||||||||||||||||||||||||||
The following table sets forth information relating to the Company's loans from related persons outstanding as of December 31, 2012. | |||||||||||||||||||||||||||
Lender | Annual | Date of | Term of | Principal | Highest | Amount of | Amount of | Conversion | Shares | ||||||||||||||||||
Interest | Loan | Loan | Amount | Principal | Principal | Interest | Price | Underlying | |||||||||||||||||||
Rate | Outstanding | Outstanding | Repaid | Paid | Principal | ||||||||||||||||||||||
as of | as of | ||||||||||||||||||||||||||
December 31, | December 31, | ||||||||||||||||||||||||||
2012 | 2012 | ||||||||||||||||||||||||||
Yutaka Niihara(2)(4) | 6.5 | % | 1/12/09 | On Demand | $ | 272,800 | $ | 350,000 | $ | — | $ | 18,763 | NA | NA | |||||||||||||
Hope Int'l Hospice(1) | 8 | % | 1/12/11 | 2 years | 200,000 | 200,000 | — | 12,000 | NA | NA | |||||||||||||||||
Hope Int'l Hospice(1) | 8 | % | 1/17/12 | On Demand | 200,000 | 200,000 | — | 8,000 | NA | NA | |||||||||||||||||
Lan T. Tran(2) | 11 | % | 2/10/12 | 2 years(3) | 80,000 | 205,000 | 125,000 | — | NA | NA | |||||||||||||||||
Tracey & Mark Doi(4) | 8 | % | 2/10/12 | 1 year | 108,000 | 108,000 | — | — | $ | 3.6 | 30,000 | ||||||||||||||||
Hideki & Eiko Uehara(5) | 11 | % | 2/15/12 | 2 years(3) | 133,333 | 133,333 | — | 11,204 | NA | NA | |||||||||||||||||
Hope Int'l Hospice(1) | 8 | % | 6/14/12 | On Demand | 200,000 | 200,000 | — | — | NA | NA | |||||||||||||||||
Hope Int'l Hospice(1) | 8 | % | 6/21/12 | On Demand | 100,000 | 100,000 | — | — | NA | NA | |||||||||||||||||
Cuc T. Tran(5) | 11 | % | 6/27/12 | 1 year | 10,000 | 10,000 | — | — | NA | NA | |||||||||||||||||
Yasushi Nagasaki(2) | 10 | % | 6/29/12 | On Demand | 388,800 | 388,800 | — | — | $ | 3.3 | 117,818 | ||||||||||||||||
Yutaka Niihara(2)(4) | 1 | % | 8/29/12 | 1 year | 1,270,100 | 1,270,100 | — | — | NA | NA | |||||||||||||||||
Hideki & Eiko Uehara(5) | 11 | % | 9/7/12 | 1 year | 32,400 | 32,400 | — | — | $ | 3.6 | 9,000 | ||||||||||||||||
MLPF&S Cust. FBO Willis C. Lee(2)(4) | 10 | % | 10/5/12 | 1 year | 138,242 | 138,242 | — | — | $ | 3.6 | 38,400 | ||||||||||||||||
Yutaka Niihara(2)(4) | 10 | % | 12/5/12 | On Demand | 1,213,700 | 1,213,700 | — | — | NA | NA | |||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Sub total | $ | 4,347,375 | $ | 4,549,575 | $ | 125,000 | $ | 49,967 | — | 195,218 | |||||||||||||||||
Less discount | $ | (635,177 | ) | ||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | $ | 3,712,198 | |||||||||||||||||||||||||
(1) Dr. Niihara, who is the Company's CEO, is also the CEO of Hope International Hospice, Inc. | |||||||||||||||||||||||||||
(2) Officer | |||||||||||||||||||||||||||
(3) Due on Demand | |||||||||||||||||||||||||||
(4) Director | |||||||||||||||||||||||||||
(5) Family of Officer/Director |
GEOGRAPHIC_INFORMATION_Tables
GEOGRAPHIC INFORMATION (Tables) | 12 Months Ended | |||||||||||||
Dec. 31, 2013 | ||||||||||||||
Geographic Information Tables | ' | |||||||||||||
Schedule of revenue earned from countries outside of the United States | ' | |||||||||||||
For the years ended December 31, 2013 and 2012, the Company earned revenue from countries outside of the United States as outlined in the table below. | ||||||||||||||
Country | Sales year ended | % of Total Revenue | Sales year ended | % of Total Revenue | ||||||||||
December 31, 2013 | year ended | December 31, 2012 | year ended | |||||||||||
December 31, 2013 | December 31, 2012 | |||||||||||||
Japan | $ | 171,054 | 44 | % | $ | 265,913 | 49 | % | ||||||
Taiwan | 63,254 | 16 | % | — | 0 | % | ||||||||
South Korea | $ | 12,000 | 3 | % | $ | 92,000 | 17 | % |
SUBSEQUENT_EVENTS_Tables
SUBSEQUENT EVENTS (Tables) | 12 Months Ended | ||||||||||||
Dec. 31, 2013 | |||||||||||||
Subsequent Events Tables | ' | ||||||||||||
Schedule of subsequent events notes payable | ' | ||||||||||||
Subsequent to the year ended December 31, 2013, the Company issued the following: | |||||||||||||
Notes issued after December 31, 2013 | Principal | Annual | Term of Notes | Conversion | |||||||||
Amounts | Interest | Price | |||||||||||
Rate | |||||||||||||
Convertible note | $ | 254,320 | 10 | % | 2 years | $ | 3.05 | ||||||
Convertible notes | 336,606 | 10 | % | On Demand up to 1 year | $ | 3.6 | |||||||
Promissory notes | 833,335 | 11 | % | 2 years | NA | ||||||||
Promissory notes—related party | 252,165 | 11 | % | On Demand up to 2 years | NA | ||||||||
| | | | | | | | | | | | | |
Total | $ | 1,676,426 | |||||||||||
DESCRIPTION_OF_BUSINESS_Detail
DESCRIPTION OF BUSINESS (Details Narrative) (USD $) | 3 Months Ended | ||
Mar. 31, 2011 | Dec. 31, 2013 | Oct. 31, 2010 | |
Description Of Business Details Narrative | ' | ' | ' |
Emmaus Medical Japan, Inc., percentage ownership | ' | 100.00% | 97.00% |
Aggregate formation cost of Emmaus Medical Japan, Inc | ' | ' | $52,500 |
Additional percentage of Emmaus Medical Japan, Inc. acquired | 3.00% | ' | ' |
SUMMARY_OF_SIGNIFICANT_ACCOUNT3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) | 0 Months Ended | 1 Months Ended | 3 Months Ended | 12 Months Ended | 3 Months Ended | 9 Months Ended | 12 Months Ended | 0 Months Ended | |||||||||
Jun. 27, 2013 | 3-May-11 | Jul. 30, 2013 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2009 | Dec. 31, 2009 | 31-May-13 | Sep. 30, 2013 | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 11, 2013 | 3-May-11 | 3-May-11 | Dec. 31, 2013 | 3-May-11 | |
USD ($) | USD ($) | USD ($) | USD ($) | JPY (¥) | USD ($) | Adjustment | Adjustment | Adjustment | As Previously Reported | Convertible Note Payable | Warrants Issued in 2012 - Exercise Price $1.00 | Warrants Issued in 2012 - Exercise Price $1.00 | Common stock- par value $0.001 per share,100,000,000 shares authorized | ||||
USD ($) | USD ($) | USD ($) | USD ($) | USD ($) | |||||||||||||
Reduction in share based compensation | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $300,000 | ' | ' | ' | ' | ' |
Gain on termination of secured debt | ' | ' | ' | ' | ' | -300,312 | ' | ' | ' | ' | ' | -300,312 | ' | ' | ' | ' | ' |
Realized loss on securities available-for-sale | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 24,490 | ' | ' | ' | ' | ' |
Unamortized discount of debt converted | ' | ' | ' | ' | ' | ' | ' | ' | 249,861 | ' | ' | ' | ' | ' | ' | ' | ' |
Shares owned by other entties cancelled due to summary judgement | 2,504,249 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Due to related party | ' | ' | ' | 394,446 | 394,446 | 394,446 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Number of Warrants | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 3,020,501 | ' | ' | 1,411,020 | ' |
Warrant exercise price | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 2.5 | ' | ' | 1 | ' |
Warrants outstanding (in shares) | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 6,435,055 | ' | ' | ' | ' |
Derivative liabilities | ' | ' | ' | 5,928,000 | 5,928,000 | ' | ' | ' | ' | 4,100,000 | 4,100,000 | ' | ' | ' | ' | ' | ' |
Transaction costs | ' | ' | ' | ' | 1,014,019 | ' | ' | ' | ' | 1,100,000 | 1,100,000 | ' | ' | ' | ' | ' | ' |
Change in fair value of derivative liabilities | ' | ' | ' | ' | 932,000 | ' | ' | ' | ' | 200,000 | 200,000 | ' | ' | ' | ' | ' | ' |
Net loss | ' | ' | ' | ' | 14,066,348 | 14,148,120 | ' | ' | ' | ' | ' | -285,050 | ' | ' | ' | ' | ' |
Exchange for Shares in Merger, shares per unit (in shares) | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 29.48548925 | 29.48548925 | ' | 29.48548925 |
Shares issued to the former stockholders of Emmaus Medical pursuant to the Merger Agreement (in shares) | ' | 20,628,305 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 271,305 | 326,507 | ' | ' |
Shares held by stockholders who exercised dissenter's right in connection with the Merger, repurchased and cancelled (in shares) | ' | 47,178 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Number of Shareholders exercising dissenters rights | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 4 |
Value of dissenters rights shares | ' | ' | ' | 125,000 | 125,000 | 200,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 200,000 |
Advertising Costs | ' | ' | ' | ' | 240,743 | 172,359 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Leaseholders, furniture and fixtures estimated useful life | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
5 to 7 years | |||||||||||||||||
Intangible Assets Amortization Period | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
3 to 7 years | |||||||||||||||||
Shares of CellSeed held as marketable securities | ' | ' | ' | 48,550 | 48,550 | 73,550 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
CellSeed, shares originally purchased (in shares) | ' | ' | ' | 147,100 | 147,100 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
CellSeed Investment, in Yen | ' | ' | ' | ' | ' | ' | ' | 100,028,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
CellSeed Investment, in Dollars | ' | ' | ' | ' | ' | ' | 1,109,819 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
CellSeed Investment, in Yen per share | ' | ' | ' | ' | ' | ' | $680 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
CellSeed Investment, closing price in Yen | ' | ' | ' | $1,840 | $1,840 | $661 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Cellseed shares released from Mitsubishi Capital collateral | ' | ' | 34,300 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Shares of Cellseed sold | ' | ' | 73,550 | 25,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Proceeds from sales of Cellseed shares | ' | ' | ' | ' | 591,422 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Available for sale securities, CellSeed stock (in shares) | ' | ' | ' | 9,300 | 9,300 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
CellSeed stock pledged against note | ' | ' | ' | 39,250 | 39,250 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Gain on derecognition of accounts payable | ' | ' | ' | ' | $341,361 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Potentially Antidilutive Shares (in shares) | ' | ' | ' | ' | 13,416,768 | 6,403,922 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
SUMMARY_OF_SIGNIFICANT_ACCOUNT4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Summary Of Significant Accounting Policies Details | ' | ' |
Raw materials and components | $20,700 | ' |
Work-in-process | 68,887 | ' |
Finished goods | 149,422 | 203,389 |
Total | $239,009 | $203,389 |
SUMMARY_OF_SIGNIFICANT_ACCOUNT5
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 1) (USD $) | 12 Months Ended |
Dec. 31, 2013 | |
Change in fair value inclued in the statement of operations | ($932,000) |
Warrants | ' |
Derivative Instruments - Stock Purchase Warrants | ' |
Fair value at issuance date | 6,860,000 |
Change in fair value inclued in the statement of operations | -932,000 |
Derivative Instruments - Stock Purchase Warrants | $5,928,000 |
SUMMARY_OF_SIGNIFICANT_ACCOUNT6
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 2) (USD $) | 0 Months Ended | 12 Months Ended | ||
Sep. 11, 2013 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | |
Expected dividend yield | ' | 0.00% | ' | ' |
Warrants | ' | ' | ' | ' |
Risk Free Interest Rate | 1.72% | 1.75% | ' | ' |
Expected volatility (peer group) | 72.40% | 63.20% | ' | ' |
Expected life | '5 years | '4 years 8 months 12 days | ' | ' |
Number outstanding | 3,020,501 | 3,020,501 | 3,408,795 | 941,202 |
Fair value at issuance | $6,860,000 | $6,860,000 | ' | ' |
SUMMARY_OF_SIGNIFICANT_ACCOUNT7
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 3) (USD $) | 12 Months Ended |
Dec. 31, 2013 | |
Lower Range | ' |
Conversion rate (in dollars per share) | $3.05 |
Upper Range | ' |
Conversion rate (in dollars per share) | $3.60 |
2012 Convertible notes payable - related party | ' |
Term of Loans | ' |
Due on demand up to 1 year | |
Interest rate range, Minimum | 8.00% |
Interest rate range, Maximum | 10.00% |
Original Loan Principal Amount | $2,794,187 |
Conversion rate (in dollars per share) | $3.30 |
Beneficial Conversion Discount Amount | 256,761 |
Warrants | 86,573 |
Description of strike price | ' |
$1.00 to 75% of FMV | |
Warrant FMV Discount Amount | 175,961 |
2012 Convertible notes payable - related party | Lower Range | ' |
Conversion rate (in dollars per share) | $3.30 |
Effective Interest Rate Including Discounts | 15.40% |
2012 Convertible notes payable - related party | Upper Range | ' |
Conversion rate (in dollars per share) | $3.60 |
Effective Interest Rate Including Discounts | 101.00% |
2013 Convertible notes payable - related party | ' |
Term of Loans | ' |
1 to 2 years | |
Interest rate range | 10.00% |
Original Loan Principal Amount | 3,079,666 |
Conversion rate (in dollars per share) | $3.30 |
Beneficial Conversion Discount Amount | 396,801 |
Warrants | 50,000 |
Description of strike price | '$3.30 |
Warrant FMV Discount Amount | 116,831 |
2013 Convertible notes payable - related party | Lower Range | ' |
Effective Interest Rate Including Discounts | 19.10% |
2013 Convertible notes payable - related party | Upper Range | ' |
Effective Interest Rate Including Discounts | 61.60% |
2012 Notes payable - related party | ' |
Term of Loans | ' |
Due on demand up to 2 years | |
Interest rate range, Minimum | 1.00% |
Interest rate range, Maximum | 11.00% |
Original Loan Principal Amount | 2,641,768 |
Beneficial Conversion Discount Amount | ' |
Warrants | 1,381,020 |
Description of strike price | '$1.00 to $2.50 |
Warrant FMV Discount Amount | 1,485,835 |
2012 Notes payable - related party | Lower Range | ' |
Effective Interest Rate Including Discounts | 54.60% |
2012 Notes payable - related party | Upper Range | ' |
Effective Interest Rate Including Discounts | 67.80% |
Notes payable and convertible notes payable - related party | ' |
Original Loan Principal Amount | 8,515,621 |
Beneficial Conversion Discount Amount | 653,562 |
Warrants | 1,517,593 |
Warrant FMV Discount Amount | $1,778,627 |
PROPERTY_AND_EQUIPMENT_Details
PROPERTY AND EQUIPMENT (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Property And Equipment Details Narrative | ' | ' |
Depreciation Expense | $20,974 | $30,197 |
PROPERTY_AND_EQUIPMENT_Details1
PROPERTY AND EQUIPMENT (Details) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Property and equipment | ' | ' |
Property and equipment, gross | $203,666 | $195,926 |
Less: accumulated depreciation | -177,546 | -157,157 |
Property and equipment, net | 26,120 | 38,769 |
Equipment | ' | ' |
Property and equipment | ' | ' |
Property and equipment, gross | 128,343 | 120,603 |
Leasehold Improvements | ' | ' |
Property and equipment | ' | ' |
Property and equipment, gross | 23,054 | 23,054 |
Furniture and Fixtures | ' | ' |
Property and equipment | ' | ' |
Property and equipment, gross | $52,269 | $52,269 |
INTANGIBLE_ASSETS_Details_Narr
INTANGIBLE ASSETS (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Intangible Assets Details Narrative | ' | ' |
Research Agreement with CellSeed | $8,500,000 | ' |
Individual Agreement with CellSeed | 1,500,000 | ' |
Amortization expense | $214,286 | $178,571 |
INTANGIBLE_ASSETS_Details
INTANGIBLE ASSETS (Details) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Intangible Assets Details | ' | ' |
License fees and patent filing costs | $2,250,000 | $2,250,000 |
Less: accumulated amortization | -1,142,857 | -928,571 |
Intangibles, net | $1,107,143 | $1,321,429 |
INTANGIBLE_ASSETS_Details_1
INTANGIBLE ASSETS (Details 1) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Year ending December 31 | ' | ' |
2014 | $214,286 | ' |
2015 | 214,286 | ' |
2016 | 214,286 | ' |
2017 | 214,286 | ' |
2018 | 214,286 | ' |
Thereafter | 35,713 | ' |
Intangibles, net | $1,107,143 | $1,321,429 |
ACCOUNTS_PAYABLE_AND_ACCRUED_E2
ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Details) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Accounts payable and accrued expenses | ' | ' |
Clinical trial management expenses | $270,694 | $527,868 |
Legal Expenses | 178,119 | 609,823 |
Other vendors | 386,847 | 619,886 |
Subtotal | 835,660 | 1,757,577 |
Accrued interest payable, related parties | 195,051 | 64,550 |
Accrued interest payable | 473,356 | 246,843 |
Accrued expenses | 294,379 | 89,641 |
Deferred salary | 485,000 | 401,667 |
Total accounts payable and accrued expenses | $2,283,446 | $2,560,278 |
NOTES_PAYABLE_Details_Narrativ
NOTES PAYABLE (Details Narrative) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2013 |
Warrants | Lower Range | Upper Range | |||
Average stated interest rate | 10.00% | 8.00% | ' | ' | ' |
Average effective interest rate | 15.00% | 22.00% | ' | ' | ' |
Conversion price | ' | ' | ' | $3.05 | $3.60 |
Simplified method | ' | ' | ' | ' | ' |
Black-Scholes-Merton option pricing model |
NOTES_PAYABLE_Details
NOTES PAYABLE (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Principal Outstanding | $11,467,269 | $11,304,897 |
Discount Amount | 246,792 | 932,126 |
Total Carrying Amount | 11,220,477 | 10,372,771 |
Shares Underlying Principal | 2,505,809 | 1,721,640 |
Convertible notes payable, Current | 4,802,472 | 3,986,828 |
Convertible notes payable, Non Current | 2,966,588 | 1,106,035 |
Notes payable, Current | 1,765,070 | 867,710 |
Notes payable, Non Current | 200,000 | 700,000 |
Notes payable related parties, Current | 925,641 | 3,071,331 |
Lower Range | ' | ' |
Conversion price | $3.05 | ' |
Upper Range | ' | ' |
Conversion price | $3.60 | ' |
2009 Convertible notes payable | ' | ' |
Interest rate | 6.50% | ' |
Term of Notes | ' | ' |
5 years | ||
Conversion price | $3.05 | ' |
Principal Outstanding | 254,460 | 294,355 |
Convertible notes payable, Carrying Amount | 254,460 | 294,355 |
Shares Underlying Principal | 83,366 | 96,436 |
2010 Convertible notes payable | ' | ' |
Interest rate range, Minimum | 0.00% | ' |
Interest rate range, Maximum | 6.00% | ' |
Term of Notes | ' | ' |
5 years | ||
Conversion price | $3.05 | ' |
Principal Outstanding | 74,000 | 74,000 |
Discount Amount | 8,308 | 13,420 |
Convertible notes payable, Carrying Amount | 65,692 | 60,580 |
Shares Underlying Principal | 24,248 | 24,248 |
2011 Convertible notes payable | ' | ' |
Interest rate | 10.00% | ' |
Term of Notes | ' | ' |
5 years | ||
Conversion price | $3.05 | ' |
Principal Outstanding | 500,000 | 500,000 |
Convertible notes payable, Carrying Amount | 500,000 | 500,000 |
Shares Underlying Principal | 163,809 | 163,809 |
2012 Convertible notes payable | ' | ' |
Interest rate | 10.00% | ' |
Term of Notes | ' | ' |
Due on demand ~ 2 years | ||
Principal Outstanding | 251,100 | 4,307,107 |
Discount Amount | ' | 69,179 |
Convertible notes payable, Carrying Amount | 251,100 | 4,237,928 |
Shares Underlying Principal | 71,000 | 1,241,925 |
2012 Convertible notes payable | Lower Range | ' | ' |
Conversion price | $3.30 | ' |
2012 Convertible notes payable | Upper Range | ' | ' |
Conversion price | $3.60 | ' |
2013 Convertible notes payable | ' | ' |
Interest rate | 10.00% | ' |
Term of Notes | ' | ' |
Due on demand ~ 2 years | ||
Principal Outstanding | 6,913,606 | ' |
Discount Amount | 215,798 | ' |
Convertible notes payable, Carrying Amount | 6,697,808 | ' |
Shares Underlying Principal | 1,998,215 | ' |
2013 Convertible notes payable | Lower Range | ' | ' |
Conversion price | $3.30 | ' |
2013 Convertible notes payable | Upper Range | ' | ' |
Conversion price | $3.60 | ' |
Convertible notes payable | ' | ' |
Principal Outstanding | 7,993,166 | 5,175,462 |
Discount Amount | 224,106 | 82,599 |
Convertible notes payable, Carrying Amount | 7,769,060 | 5,092,863 |
Shares Underlying Principal | 2,340,638 | 1,526,418 |
Principal Outstanding, Current | 4,955,868 | 4,056,007 |
Principal Outstanding, Non Current | 3,037,298 | 1,119,455 |
Discount Amount Current | 153,396 | 69,179 |
Discount Amount Non Current | 70,710 | 13,420 |
Convertible notes payable, Current | 4,802,472 | 3,986,828 |
Convertible notes payable, Non Current | 2,966,588 | 1,106,035 |
Shares Underlying Principal Current | 1,438,033 | 1,170,922 |
Shares Underlying Principal Non Current | 902,605 | 355,496 |
2012 Convertible notes payable - related party | ' | ' |
Interest rate | 10.00% | ' |
Term of Notes | ' | ' |
Due on demand | ||
Principal Outstanding | 373,000 | 388,800 |
Discount Amount | ' | 17,084 |
Convertible notes payable related parties, Carrying Amount | 373,000 | 371,716 |
Shares Underlying Principal | 113,030 | 117,819 |
2013 Convertible notes payable - related party | ' | ' |
Interest rate | 10.00% | ' |
Term of Notes | ' | ' |
1 years | ||
Principal Outstanding | 187,706 | 278,642 |
Discount Amount | ' | 9,491 |
Convertible notes payable related parties, Carrying Amount | 187,706 | 269,151 |
Shares Underlying Principal | 52,141 | 77,403 |
Convertible notes payable - related party | ' | ' |
Principal Outstanding | 560,706 | 667,442 |
Discount Amount | ' | 26,575 |
Convertible notes payable related parties, Carrying Amount | 560,706 | 640,867 |
Shares Underlying Principal | 165,171 | 195,222 |
Principal Outstanding, Current | 560,706 | 667,442 |
Discount Amount Current | ' | 26,575 |
Convertible notes payable related parties, Current | 560,706 | 640,867 |
Shares Underlying Principal Current | 165,171 | 195,222 |
2012 Notes payable | ' | ' |
Interest rate range, Minimum | 2.00% | ' |
Interest rate range, Maximum | 11.00% | ' |
Term of Notes | ' | ' |
Due on demand ~ 2 years | ||
Principal Outstanding | 833,335 | 1,782,060 |
Discount Amount | 18,265 | 214,350 |
Notes payable, Carrying Amount | 815,070 | 1,567,710 |
2013 Notes payable | ' | ' |
Interest rate range, Minimum | 2.00% | ' |
Interest rate range, Maximum | 10.00% | ' |
Term of Notes | ' | ' |
Due on demand ~ 2 years | ||
Principal Outstanding | 1,150,000 | ' |
Notes payable, Carrying Amount | 1,150,000 | ' |
Notes Payable | ' | ' |
Principal Outstanding | 1,983,335 | 1,782,060 |
Discount Amount | 18,265 | 214,350 |
Notes payable, Carrying Amount | 1,965,070 | 1,567,710 |
Principal Outstanding, Current | 1,783,335 | 1,082,060 |
Principal Outstanding, Non Current | 200,000 | 700,000 |
Discount Amount Current | 18,265 | 214,350 |
Notes payable, Current | 1,765,070 | 867,710 |
Notes payable, Non Current | 200,000 | 700,000 |
2009 Notes payable - related party | ' | ' |
Interest rate | 6.50% | ' |
Term of Notes | ' | ' |
Due on demand | ||
Principal Outstanding | ' | 272,800 |
Notes payable related parties, Carrying Amount | ' | 272,800 |
2011 Notes payable - related party | ' | ' |
Interest rate | 8.00% | ' |
Term of Notes | ' | ' |
2 years | ||
Principal Outstanding | ' | 200,000 |
Notes payable related parties, Carrying Amount | ' | 200,000 |
2012 Notes payable - related party | ' | ' |
Interest rate range, Minimum | 1.00% | ' |
Interest rate range, Maximum | 11.00% | ' |
Term of Notes | ' | ' |
Due on demand up to 2 years | ||
Principal Outstanding | 880,062 | 3,207,133 |
Discount Amount | 4,421 | 608,602 |
Notes payable related parties, Carrying Amount | 875,641 | 2,598,531 |
2013 Notes payable - related party | ' | ' |
Interest rate | 8.00% | ' |
Term of Notes | ' | ' |
Due on demand | ||
Principal Outstanding | 50,000 | ' |
Notes payable related parties, Carrying Amount | 50,000 | ' |
Notes payable - related party | ' | ' |
Principal Outstanding | 930,062 | 3,679,933 |
Discount Amount | 4,421 | 608,602 |
Notes payable related parties, Carrying Amount | 925,641 | 3,071,331 |
Principal Outstanding, Current | 930,062 | 3,679,933 |
Discount Amount Current | 4,421 | 608,602 |
Notes payable related parties, Current | $925,641 | $3,071,331 |
NOTES_PAYABLE_Details_1
NOTES PAYABLE (Details 1) (USD $) | Dec. 31, 2013 |
Contractual principal payments due on loans and notes payable for the year ending | ' |
2014 | $8,229,971 |
2015 | 2,737,298 |
2016 | 500,000 |
Total | $11,467,269 |
NOTES_PAYABLE_Details_2
NOTES PAYABLE (Details 2) (USD $) | 12 Months Ended | ||
Dec. 31, 2013 | Feb. 28, 2013 | Apr. 02, 2012 | |
Stock Price | $3.60 | $3.60 | $3.60 |
Dividend Yield | 0.00% | ' | ' |
Lower Range | ' | ' | ' |
Exercise Price | $1 | ' | ' |
Term | '2 years | ' | ' |
Risk-Free Rate | 0.30% | ' | ' |
Volatility | 99.89% | ' | ' |
Upper Range | ' | ' | ' |
Exercise Price | $3.60 | ' | ' |
Term | '10 years | ' | ' |
Risk-Free Rate | 2.22% | ' | ' |
Volatility | 141.70% | ' | ' |
STOCKHOLDERS_EQUITY_DEFICIT_De
STOCKHOLDERS' EQUITY (DEFICIT) (Details Narrative) (USD $) | 0 Months Ended | 12 Months Ended | 12 Months Ended | 12 Months Ended | |||||||||||||
Feb. 28, 2013 | Apr. 02, 2012 | 3-May-11 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | Dec. 31, 2013 | |
Warrants | Warrants | Warrants | Warrants | Stock Options | Stock Options | Stock Options | Stock Options | Stock Options | Stock Options | Stock Options | Private Placement | ||||||
Director | Director | Prior Plan | Prior Plan | 2011 Stock Incentive Option Plan | 2011 Stock Incentive Option Plan | 2011 Stock Incentive Option Plan | |||||||||||
Common stock, shares issued | ' | ' | ' | 29,228,306 | 24,878,436 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Shares cancelled during period | ' | ' | -47,178 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Granted | ' | ' | ' | ' | ' | 3,370,501 | 2,967,593 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Options outstanding | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 4,505,795 | ' | 4,494,000 | ' | ' | ' |
Options vested | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 11,795 | 11,795 | 4,504,000 | 1,199,000 | 61,000 | ' |
Options granted | ' | ' | ' | ' | ' | ' | ' | ' | ' | 3,305,000 | 1,150,000 | ' | ' | 3,305,000 | 1,150,000 | ' | ' |
Options cancelled, forfeited and expired | ' | ' | ' | ' | ' | ' | ' | ' | ' | -10,000 | -12,000 | ' | ' | ' | -12,000 | ' | ' |
Fair value of options granted | ' | ' | ' | ' | ' | ' | ' | ' | ' | $10,500,000 | $3,900,000 | ' | ' | ' | ' | ' | ' |
Vesting term of options | '10 years | '10 years | ' | ' | ' | ' | ' | ' | ' | '3 years | '3 years | ' | ' | ' | ' | ' | ' |
Exercise price per share (in dollars per share) | ' | ' | ' | ' | ' | ' | ' | ' | ' | $3.60 | $3.60 | ' | ' | ' | ' | ' | ' |
Numbers of units issued | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 3,020,501 |
Share price (in dollars per share) | $3.60 | $3.60 | ' | $3.60 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $2.50 |
Description of private placement units | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Each unit consisted of one share of common stock and one common stock warrant for the purchase of an additional share of common stock. | |||||||||||||||||
Purchase price of units | ' | ' | ' | $1,890,122 | $1,573,277 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $7,551,253 |
Common stock exercise price | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $3.50 |
Numbers of securities purchased | ' | ' | ' | ' | ' | 50,000 | 56,573 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Percentage of exercise price | ' | ' | ' | ' | ' | ' | 75.00% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Numbers of securities purchased | ' | ' | ' | ' | ' | ' | 1,911,020 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Excrcise price (in dollars per share) | ' | ' | ' | ' | ' | 3.3 | 1 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Numbers of securities purchased | ' | ' | ' | ' | ' | ' | 1,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Excrcise price (in dollars per share) | ' | ' | ' | ' | ' | ' | 2.5 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Numbers of securities Cancelled, forfeited and expired | ' | ' | ' | ' | ' | -500,000 | -500,000 | -500,000 | -500,000 | ' | ' | ' | ' | ' | ' | ' | ' |
Excrcise price (in dollars per share) | ' | ' | ' | ' | ' | ' | ' | 1 | 1 | ' | ' | ' | ' | ' | ' | ' | ' |
Method used | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Black-Scholes-Merton Option pricing model. |
STOCKHOLDERS_EQUITY_DEFICIT_De1
STOCKHOLDERS' EQUITY (DEFICIT) (Details) (Warrants) | 12 Months Ended | ||
Dec. 31, 2013 | Dec. 31, 2012 | Sep. 11, 2013 | |
Warrants | ' | ' | ' |
Warrants outstanding, beginning of period | 3,408,795 | 941,202 | 3,020,501 |
Granted | 3,370,501 | 2,967,593 | ' |
Cancelled, forfeited and expired | -500,000 | -500,000 | ' |
Warrants outstanding, end of period | 3,020,501 | 3,408,795 | 3,020,501 |
STOCKHOLDERS_EQUITY_DEFICIT_De2
STOCKHOLDERS' EQUITY (DEFICIT) (Details 1) | Dec. 31, 2013 |
Warrants Issued in 2013 - Exercise Price $3.50 | ' |
Year Issued | '2013 |
Weighted Average Exercise Price | 3.5 |
Outstanding | ' |
Number of Warrants | 3,320,501 |
Weighted Average Remaining Contractual Life (Years) | '4 years 8 months 12 days |
Exercisable | ' |
Total | 3,320,501 |
Warrants Issued in 2013 - Exercise Price $3.30 | ' |
Year Issued | '2013 |
Weighted Average Exercise Price | 3.3 |
Outstanding | ' |
Number of Warrants | 50,000 |
Weighted Average Remaining Contractual Life (Years) | '4 years 3 months 29 days |
Exercisable | ' |
Total | 50,000 |
Warrants Issued in 2012 - Exercise Price $1.00 | ' |
Year Issued | '2012 |
Weighted Average Exercise Price | 1 |
Outstanding | ' |
Number of Warrants | 1,411,020 |
Weighted Average Remaining Contractual Life (Years) | '1 year 18 days |
Exercisable | ' |
Total | 411,020 |
Warrants Issued in 2012 - Exercise Price 75% of FMV | ' |
Year Issued | '2012 |
Weighted Average Exercise Price, textual reference | '75% of FMV |
Outstanding | ' |
Number of Warrants | 56,573 |
Weighted Average Remaining Contractual Life (Years) | '1 year 2 months 27 days |
Exercisable | ' |
Total | 56,573 |
Warrants Issued in 2012 - Exercise Price $2.50 | ' |
Year Issued | '2012 |
Weighted Average Exercise Price | 2.5 |
Outstanding | ' |
Number of Warrants | 1,000,000 |
Weighted Average Remaining Contractual Life (Years) | '1 year 7 months 28 days |
Exercisable | ' |
Total | 1,000,000 |
Warrants Issued in 2011 - Exercise Price $1.00 | ' |
Year Issued | '2011 |
Weighted Average Exercise Price | 1 |
Outstanding | ' |
Number of Warrants | 311,038 |
Weighted Average Remaining Contractual Life (Years) | '8 months 6 days |
Exercisable | ' |
Total | 311,038 |
Warrants Issued in 2011 - Exercise Price 75% of FMV | ' |
Year Issued | '2011 |
Weighted Average Exercise Price, textual reference | '75% of FMV |
Outstanding | ' |
Number of Warrants | 331,670 |
Weighted Average Remaining Contractual Life (Years) | '8 months 6 days |
Exercisable | ' |
Total | 331,670 |
Warrants Issued in 2011 - Exercise Price $3.05 | ' |
Year Issued | '2011 |
Weighted Average Exercise Price | 3.05 |
Outstanding | ' |
Number of Warrants | 298,494 |
Weighted Average Remaining Contractual Life (Years) | '1 year 4 months 6 days |
Exercisable | ' |
Total | 298,494 |
Warrants Issued in 2011 | ' |
Outstanding | ' |
Number of Warrants | 941,202 |
Exercisable | ' |
Total | 941,202 |
Warrants Issued in 2012 | ' |
Outstanding | ' |
Number of Warrants | 2,467,593 |
Exercisable | ' |
Total | 1,467,593 |
Warrants Issued in 2013 | ' |
Outstanding | ' |
Number of Warrants | 3,370,501 |
Exercisable | ' |
Total | 3,370,501 |
STOCKHOLDERS_EQUITY_DEFICIT_De3
STOCKHOLDERS' EQUITY (DEFICIT) (Details 2) (USD $) | 0 Months Ended | ||
Feb. 28, 2013 | Apr. 02, 2012 | Dec. 31, 2013 | |
Stockholders Equity Deficit Details 2 | ' | ' | ' |
Stock price | $3.60 | $3.60 | $3.60 |
Exercise price | $3.60 | $3.60 | ' |
Term | '10 years | '10 years | ' |
Risk-Free Rate | 1.89% | 2.22% | ' |
Dividend Yield | 0.00% | 0.00% | ' |
Volatility | 119.30% | 141.70% | ' |
STOCKHOLDERS_EQUITY_DEFICIT_De4
STOCKHOLDERS' EQUITY (DEFICIT) (Details 3) (Stock Options) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Stock options outstanding | ' | ' |
Options Granted | 3,305,000 | 1,150,000 |
Options cancelled, forfeited and expired | -10,000 | -12,000 |
Prior Plan | ' | ' |
Stock options outstanding | ' | ' |
Options outstanding, ending | 11,795 | 11,795 |
2011 Stock Incentive Option Plan | ' | ' |
Stock options outstanding | ' | ' |
Options outstanding, beginning | 1,199,000 | 61,000 |
Options Granted | 3,305,000 | 1,150,000 |
Options cancelled, forfeited and expired | ' | -12,000 |
Options outstanding, ending | 4,504,000 | 1,199,000 |
INCOME_TAXES_Details_Narrative
INCOME TAXES (Details Narrative) (USD $) | 12 Months Ended | ||||
Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2013 | Dec. 31, 2012 | |
Federal | Federal | State and Local | State and Local | ||
Statutory federal tax rate (in percent) | 34.00% | ' | ' | ' | ' |
Operating loss carryforwards expiry year | '2033 | ' | ' | ' | ' |
Net operating loss carryforwards | ' | $29,107,000 | $23,256,000 | $27,602,000 | $21,331,000 |
INCOME_TAXES_Details
INCOME TAXES (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Current | ' | ' |
U.S. | $2,550 | $3,405 |
International | 725 | 3,841 |
Deferred | ' | ' |
U.S. | -185,713 | ' |
INCOME TAXES (BENEFIT) | ($182,438) | $7,246 |
INCOME_TAXES_Details_1
INCOME TAXES (Details 1) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Income Taxes Details 1 | ' | ' |
Net operating loss carryforward | $11,406,675 | $9,082,282 |
General business tax credit | 4,737,477 | 3,519,185 |
Stock options | 2,966,286 | 1,129,163 |
Charitable contribution | 77,659 | 70,077 |
Accrued expenses | 236,159 | 34,060 |
Deferred compensation | 130,633 | 128,008 |
Other | 120,236 | 64,088 |
Total gross deferred tax assets | 19,675,125 | 14,026,863 |
Less valuation allowance | -19,461,748 | -14,026,863 |
Net deferred tax assets | $213,377 | ' |
INCOME_TAXES_Details_2
INCOME TAXES (Details 2) (USD $) | Dec. 31, 2013 |
Income Taxes Details 2 | ' |
Unrealized gain on foreign exchange translation and others | ($29,154) |
Unrealized (gain) loss on available-for-sale securities | -184,223 |
Total deferred tax liability | ($213,377) |
INCOME_TAXES_Details_3
INCOME TAXES (Details 3) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Income Taxes Details 3 | ' | ' |
Tax benefit at statutory federal rate | ($4,844,588) | ($4,807,897) |
State taxes, net of federal tax benefit | -532,099 | -706,261 |
Increase (decrease) in valuation allowance | 5,434,885 | 6,115,445 |
Permanent Items | 997,820 | 1,397,123 |
General business tax credit | -1,218,292 | -1,483,292 |
Other | -20,164 | -507,872 |
INCOME TAXES (BENEFIT) | ($182,438) | $7,246 |
COMMITMENTS_AND_CONTINGENCIES_1
COMMITMENTS AND CONTINGENCIES (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Commitments And Contingencies Details Narrative | ' | ' |
Monthly commercialization management fee | $5,000 | ' |
Rent expense | $137,147 | $139,302 |
COMMITMENTS_AND_CONTINGENCIES_2
COMMITMENTS AND CONTINGENCIES (Details) (USD $) | Dec. 31, 2013 |
Future minimum lease payments | ' |
2014 | $97,597 |
2015 | 17,195 |
Total Future Minimum Lease Payments Due | $114,792 |
AMOUNTS_RECLASSIFIED_OUT_OF_AC2
AMOUNTS RECLASSIFIED OUT OF ACCUMULATED OTHER COMPREHENSIVE INCOME (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Other Comprehensive Income (Loss), Available-for-sale Securities Adjustment, Net of Tax, Portion Attributable to Parent [Abstract] | ' | ' |
Balance - beginning | ($4,386) | $255,340 |
Other comprehensive income before reclassifications | 692,843 | -284,216 |
Amounts reclassified from accumulated other comprehensive income | -399,068 | 24,490 |
Net current period other comprehensive income | 293,775 | -259,726 |
Balance - end | 289,389 | -4,386 |
Other Comprehensive Income (Loss), Foreign Currency Transaction and Translation Adjustment, Net of Tax, Portion Attributable to Parent [Abstract] | ' | ' |
Balance - beginning | -8,046 | -2,927 |
Other comprehensive income before reclassifications | -18,660 | -5,119 |
Net current period other comprehensive income | -18,660 | -5,119 |
Balance - end | -26,706 | -8,046 |
Other Comprehensive Income (Loss), Net of Tax, Portion Attributable to Parent [Abstract] | ' | ' |
Balance - beginning | -12,432 | 252,413 |
Other comprehensive income before reclassifications | 674,183 | -289,335 |
Amounts reclassified from accumulated other comprehensive income | -399,068 | 24,490 |
Net current period other comprehensive income | -13,791,234 | -14,412,964 |
Balance - end | $262,683 | ($12,432) |
RELATED_PARTY_TRANSACTIONS_Det
RELATED PARTY TRANSACTIONS (Details Narrative) | 0 Months Ended |
Jun. 27, 2013 | |
Related Party Transactions Details Narrative | ' |
Number of shares cancelled | 2,504,249 |
RELATED_PARTY_TRANSACTIONS_Det1
RELATED PARTY TRANSACTIONS (Details) (USD $) | 12 Months Ended | |||
Dec. 31, 2013 | Dec. 31, 2012 | |||
Principal Amount Outstanding | $11,220,477 | $10,372,771 | ||
Shares Underlying Principal | 2,505,809 | 1,721,640 | ||
Less discount | 246,792 | 932,126 | ||
Total | 11,467,269 | ' | ||
Hope IntBl Hospice | ' | ' | ||
Annual Interest Rate | 8.00% | [1] | 8.00% | [1] |
Date of Loan | 17-Jan-12 | [1] | 12-Jan-11 | [1] |
Term of Loan | 'On Demand | [1] | '2 years | [1] |
Principal Amount Outstanding | 200,000 | [1] | 200,000 | |
Highest Principal Outstanding | 200,000 | [1] | 200,000 | [1] |
Amount of Interest Paid | 20,000 | [1] | 12,000 | [1] |
Lan T. Tran | ' | ' | ||
Annual Interest Rate | 11.00% | [2] | 11.00% | [2] |
Date of Loan | 10-Feb-12 | [2] | 10-Feb-12 | [2] |
Term of Loan | '2 years | [2],[3] | '2 years | [2],[3] |
Principal Amount Outstanding | 80,000 | 80,000 | ||
Highest Principal Outstanding | 205,000 | [2] | 205,000 | [2] |
Amount of Principal Repaid | 125,000 | [2] | 125,000 | [2] |
Hideki & Eiko Uehara | ' | ' | ||
Annual Interest Rate | 11.00% | [4] | 11.00% | [4] |
Date of Loan | 15-Feb-12 | [4] | 15-Feb-12 | [4] |
Term of Loan | '2 years | [3],[4] | '2 years | [3],[4] |
Principal Amount Outstanding | 133,333 | 133,333 | ||
Highest Principal Outstanding | 133,333 | [4] | 133,333 | [4] |
Amount of Interest Paid | 14,433 | [4] | 11,204 | [4] |
Hope IntBl Hospice | ' | ' | ||
Annual Interest Rate | 8.00% | [1] | 8.00% | [1] |
Date of Loan | 14-Jun-12 | [1] | 17-Jan-12 | [1] |
Term of Loan | 'On Demand | [1] | 'On Demand | [1] |
Principal Amount Outstanding | 200,000 | 200,000 | ||
Highest Principal Outstanding | 200,000 | [1] | 200,000 | [1] |
Amount of Interest Paid | 20,000 | [1] | 8,000 | [1] |
Hope IntBl Hospice | ' | ' | ||
Annual Interest Rate | 8.00% | [1] | 8.00% | [1] |
Date of Loan | 21-Jun-12 | [1] | 14-Jun-12 | [1] |
Term of Loan | 'On Demand | [1] | 'On Demand | [1] |
Principal Amount Outstanding | 100,000 | 200,000 | ||
Highest Principal Outstanding | 100,000 | [1] | 200,000 | [1] |
Amount of Interest Paid | 10,000 | [1] | ' | |
Cuc T. Tran | ' | ' | ||
Annual Interest Rate | 11.00% | [4] | 11.00% | [4] |
Date of Loan | 27-Jun-12 | [4] | 27-Jun-12 | [4] |
Term of Loan | '1 year | [4] | '1 year | [4] |
Principal Amount Outstanding | 10,000 | 10,000 | ||
Highest Principal Outstanding | 10,000 | [4] | 10,000 | [4] |
Yasushi Nagasaki | ' | ' | ||
Annual Interest Rate | 10.00% | [2] | 10.00% | [2] |
Date of Loan | 29-Jun-12 | [2] | 29-Jun-12 | [2] |
Term of Loan | 'On Demand | [2] | 'On Demand | [2] |
Principal Amount Outstanding | 373,000 | 388,800 | ||
Highest Principal Outstanding | 388,800 | [2] | 388,800 | [2] |
Amount of Principal Repaid | 15,800 | [2] | ' | |
Conversion price (in dollars per share) | $3.30 | [2] | $3.30 | [2] |
Shares Underlying Principal | 113,030 | [2] | 117,818 | [2] |
Yutaka Niihara | ' | ' | ||
Annual Interest Rate | 10.00% | [2],[5] | 6.50% | [2],[5] |
Date of Loan | 5-Dec-12 | [2],[5] | 12-Jan-09 | [2],[5] |
Term of Loan | 'On Demand | [2],[5] | 'On Demand | [2],[5] |
Principal Amount Outstanding | 156,730 | 272,800 | ||
Highest Principal Outstanding | 1,213,700 | [2],[5] | 350,000 | [2],[5] |
Amount of Principal Repaid | 1,056,970 | [2],[5] | ' | |
Amount of Interest Paid | ' | 18,763 | [2],[5] | |
Hope IntBl Hospice | ' | ' | ||
Annual Interest Rate | 8.00% | [1] | 8.00% | [1] |
Date of Loan | 11-Feb-13 | [1] | 21-Jun-12 | [1] |
Term of Loan | 'On Demand | [1] | 'On Demand | [1] |
Principal Amount Outstanding | 50,000 | 100,000 | ||
Highest Principal Outstanding | 50,000 | [1] | 100,000 | [1] |
Amount of Interest Paid | 3,000 | [1] | ' | |
Hideki & Eiko Uehara | ' | ' | ||
Annual Interest Rate | 10.00% | [4] | 11.00% | [4] |
Date of Loan | 7-Sep-13 | [4] | 7-Sep-12 | [4] |
Term of Loan | '1 year | [4] | '1 year | [4] |
Principal Amount Outstanding | 35,640 | 32,400 | ||
Highest Principal Outstanding | 35,640 | [4] | 32,400 | [4] |
Conversion price (in dollars per share) | $3.60 | [4] | $3.60 | [4] |
Shares Underlying Principal | 9,900 | [4] | 9,000 | [4] |
MLPF&S Cust. FBO Willis C.Lee | ' | ' | ||
Annual Interest Rate | 10.00% | [2],[5] | 10.00% | [2],[5] |
Date of Loan | 5-Oct-13 | [2],[5] | 5-Oct-12 | [2],[5] |
Term of Loan | '1 year | [2],[5] | '1 year | [2],[5] |
Principal Amount Outstanding | 152,066 | 138,242 | ||
Highest Principal Outstanding | 152,066 | [2],[5] | 138,242 | [2],[5] |
Conversion price (in dollars per share) | $3.60 | [2],[5] | $3.60 | [2],[5] |
Shares Underlying Principal | 42,240 | [2],[5] | 38,400 | [2],[5] |
Notes payable and convertible notes payable - related party | ' | ' | ||
Principal Amount Outstanding | 1,490,769 | 4,347,375 | ||
Highest Principal Outstanding | 2,688,539 | 4,549,575 | ||
Amount of Principal Repaid | 1,197,770 | 125,000 | ||
Amount of Interest Paid | 67,433 | 49,967 | ||
Shares Underlying Principal | 165,170 | 195,218 | ||
Less discount | -4,422 | -635,177 | ||
Total | 1,486,347 | 3,712,198 | ||
Tracey & Mark Doi | ' | ' | ||
Annual Interest Rate | ' | 8.00% | [5] | |
Date of Loan | ' | 10-Feb-12 | [5] | |
Term of Loan | ' | '1 year | [5] | |
Principal Amount Outstanding | ' | 108,000 | ||
Highest Principal Outstanding | ' | 108,000 | [5] | |
Conversion price (in dollars per share) | ' | $3.60 | [5] | |
Shares Underlying Principal | ' | 30,000 | [5] | |
Yutaka Niihara | ' | ' | ||
Annual Interest Rate | ' | 1.00% | [2],[5] | |
Date of Loan | ' | 29-Aug-12 | [2],[5] | |
Term of Loan | ' | '1 year | [2],[5] | |
Principal Amount Outstanding | ' | 1,270,100 | ||
Highest Principal Outstanding | ' | 1,270,100 | [2],[5] | |
Yutaka Niihara | ' | ' | ||
Annual Interest Rate | ' | 10.00% | [2],[5] | |
Date of Loan | ' | 5-Dec-12 | [2],[5] | |
Term of Loan | ' | 'On Demand | [2],[5] | |
Principal Amount Outstanding | ' | 1,213,700 | ||
Highest Principal Outstanding | ' | $1,213,700 | [2],[5] | |
[1] | Dr. Niihara, who is the Company's CEO, is also the CEO of Hope International Hospice, Inc. | |||
[2] | Officer | |||
[3] | Due on Demand | |||
[4] | Family of Officer/Director | |||
[5] | Director |
GEOGRAPHIC_INFORMATION_Details
GEOGRAPHIC INFORMATION (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Japan | ' | ' |
Company revenue earned from countries outside of the U.S. | ' | ' |
Revenue | $171,054 | $265,913 |
Percentage of revenue (in percent) | 44.00% | 49.00% |
Taiwan | ' | ' |
Company revenue earned from countries outside of the U.S. | ' | ' |
Revenue | 63,254 | ' |
Percentage of revenue (in percent) | 16.00% | 0.00% |
South Korea | ' | ' |
Company revenue earned from countries outside of the U.S. | ' | ' |
Revenue | $12,000 | $92,000 |
Percentage of revenue (in percent) | 3.00% | 17.00% |
SUBSEQUENT_EVENTS_Details
SUBSEQUENT EVENTS (Details) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2013 |
Subsequent Event | Subsequent Event | Subsequent Event | Subsequent Event | Subsequent Event | |||
Convertible note | Convertible notes | Promissory notes | Promissory notes - related party | ||||
Principal Outstanding | $11,467,269 | $11,304,897 | $1,676,426 | $254,320 | $336,606 | $833,335 | $252,165 |
Annual Interest Rate (in percent) | ' | ' | ' | 10.00% | 10.00% | 11.00% | 11.00% |
Term of Notes | ' | ' | ' | ' | ' | ' | ' |
2 years | On Demand up to 1 year | 2 years | On Demand up to 2 years | ||||
Conversion price | ' | ' | ' | $3.05 | $3.60 | ' | ' |