Document_and_Entity_Informatio
Document and Entity Information | 12 Months Ended |
Dec. 31, 2014 | |
Document And Entity Information | |
Entity Registrant Name | Boston Therapeutics, Inc. |
Entity Central Index Key | 1473579 |
Document Type | S-1 |
Document Period End Date | 31-Dec-14 |
Amendment Flag | TRUE |
Amendment description | This amendment is being filed to comply with regulations. |
Current Fiscal Year End Date | -19 |
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 |
Balance_Sheet
Balance Sheet (USD $) | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
ASSETS | |||
Cash and cash equivalents | $157,278 | $3,387,428 | $552,315 |
Accounts receivable | 0 | 99,786 | 17,351 |
Prepaid expenses and other current assets | 89,408 | 153,681 | 9,073 |
Inventory, net | 197,969 | 110,625 | 16,809 |
Total current assets | 444,655 | 3,751,520 | 595,548 |
Property and equipment, net | 14,417 | 15,176 | 7,075 |
Intangible assets | 632,143 | 696,429 | 760,714 |
Goodwill | 69,782 | 69,782 | 69,782 |
Other assets | 2,125 | 2,125 | 2,125 |
Total assets | 1,163,122 | 4,535,032 | 1,435,244 |
LIABILITIES AND STOCKHOLDERS' EQUITY | |||
Accounts payable | 410,787 | 170,977 | 294,187 |
Accrued expenses and other current liabilities | 278,177 | 720,965 | 146,774 |
Deferred revenue | 101,675 | 0 | 0 |
Total current liabilities | 790,639 | 891,942 | 440,961 |
Notes payable - related party | 297,820 | 297,820 | 297,820 |
Total liabilities | 1,088,459 | 1,189,762 | 738,781 |
COMMITMENTS AND CONTINGENCIES (Note 10) | |||
Stockholders' equity: | |||
Preferred stock, $0.001 par value, 5,000,000 shares authorized, none issued and outstanding | 0 | 0 | 0 |
Common stock, $0.001 par value, 200,000,000 shares authorized at 2014 and 2013 and 100,000,000 shares authorized at 2012, 38,512,516, 37,362,160 and 18,745,706 shares issued and outstanding at December 31, 2014, 2013 and 2012, respectively | 38,512 | 37,362 | 18,746 |
Additional paid-in capital | 12,034,992 | 10,606,810 | 3,375,116 |
Accumulated deficit | -11,998,841 | -7,298,902 | -2,697,399 |
Total stockholders' equity | 74,663 | 3,345,270 | 696,463 |
Total liabilities and stockholders' equity | $1,163,122 | $4,535,032 | $1,435,244 |
Balance_Sheet_Parenthetical
Balance Sheet (Parenthetical) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
Stockholders' equity : | |||
Preferred Stock, par or stated value | $0.00 | $0.00 | $0.00 |
Preferred Stock, shares authorized | 5,000,000 | 5,000,000 | 5,000,000 |
Preferred Stock, shares issued | 0 | 0 | 0 |
Preferred Stock, shares outstanding | 0 | 0 | 0 |
Common Stock, par or stated value | $0.00 | $0.00 | $0.00 |
Common Stock, shares authorized | 200,000,000 | 200,000,000 | 100,000,000 |
Common Stock, shares issued | 38,512,516 | 37,362,160 | 18,745,706 |
Common Stock, shares outstanding | 38,512,516 | 37,362,160 | 18,745,706 |
Statement_of_Operations
Statement of Operations (USD $) | 12 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
Income Statement [Abstract] | |||
Revenue | $199,582 | $323,412 | $42,254 |
Cost of goods sold | 175,829 | 278,205 | 56,859 |
Gross margin | 23,753 | 45,207 | -14,605 |
Operating expenses: | |||
Research and development | 1,432,669 | 542,492 | 178,938 |
Sales and marketing | 320,353 | 329,218 | 232,411 |
General and administrative | 2,945,078 | 3,753,742 | 1,036,566 |
Total operating expenses | 4,698,100 | 4,625,452 | 1,447,915 |
Operating loss | -4,674,347 | -4,580,245 | -1,462,520 |
Interest Expense | -20,009 | -19,692 | -18,384 |
Other (expense) income | -4,749 | 1,505 | 0 |
Foreign currency loss | -834 | -3,071 | -3,211 |
Net loss | ($4,699,939) | ($4,601,503) | ($1,484,115) |
Net loss per share - basic and diluted | ($0.12) | ($0.18) | ($0.09) |
Weighted average shares outstanding - basic and diluted | 38,192,363 | 25,370,626 | 16,873,903 |
Statement_of_Changes_in_Stockh
Statement of Changes in Stockholders' Equity (Deficit) (USD $) | Common Stock | Additional Paid-In Capital | Accumulated Earnings (Deficit) | Total |
Beginning Balance, Amount at Dec. 31, 2011 | $16,223 | $1,621,756 | ($1,213,284) | $424,695 |
Beginning Balance, Shares at Dec. 31, 2011 | 16,223,206 | |||
Issuance of common stock, net of issuance costs, Amount | 2,270 | 1,011,957 | 1,014,227 | |
Issuance of common stock, net of issuance costs, Shares | 2,270,000 | |||
Issuance of common stock warrants | 132,773 | 132,773 | ||
Issuance of common stock in exchange for consulting services, Amount | 253 | 128,522 | 128,775 | |
Issuance of common stock in exchange for consulting services, Shares | 252,500 | |||
Stock based compensation | 480,108 | 480,108 | ||
Net loss | -1,484,115 | -1,484,115 | ||
Ending Balance, Amount at Dec. 31, 2012 | 18,746 | 3,375,116 | -2,697,399 | 696,463 |
Ending Balance, Shares at Dec. 31, 2012 | 18,745,706 | |||
Issuance of common stock, net of issuance costs, Amount | 18,312 | 3,551,056 | 3,569,368 | |
Issuance of common stock, net of issuance costs, Shares | 18,312,341 | |||
Issuance of common stock warrants | 1,616,062 | 1,616,062 | ||
Issuance of common stock warrants in exchange for consulting services | 282,901 | 282,901 | ||
Cashless exercise of common stock options, Amount | 13 | -13 | ||
Cashless exercise of common stock options, Shares | 13,104 | |||
Issuance of common stock in exchange for consulting services, Amount | 291 | 226,775 | 227,066 | |
Issuance of common stock in exchange for consulting services, Shares | 291,009 | |||
Stock based compensation | 1,554,913 | 1,554,913 | ||
Net loss | -4,601,503 | -1,484,115 | ||
Ending Balance, Amount at Dec. 31, 2013 | 37,362 | 10,606,810 | -7,298,902 | 3,345,270 |
Ending Balance, Shares at Dec. 31, 2013 | 37,362,160 | |||
Issuance of common stock, net of issuance costs, Amount | 833 | 373,916 | 374,749 | |
Issuance of common stock, net of issuance costs, Shares | 833,340 | |||
Issuance of common stock warrants | 161,087 | 161,087 | ||
Cashless exercise of common stock options, Amount | 79 | -79 | ||
Cashless exercise of common stock options, Shares | 79,016 | |||
Issuance of common stock in exchange for consulting services, Amount | 233 | 130,758 | 130,991 | |
Issuance of common stock in exchange for consulting services, Shares | 233,000 | |||
Stock based compensation | 762,005 | 762,005 | ||
Exercise of common stock options, Amount | 5 | 495 | 500 | |
Exercise of common stock options, Shares | 5,000 | |||
Net loss | -4,699,939 | -4,699,939 | ||
Ending Balance, Amount at Dec. 31, 2014 | $38,512 | $12,034,992 | ($11,998,841) | $74,663 |
Ending Balance, Shares at Dec. 31, 2014 | 38,512,516 |
Statement_of_Cash_Flows
Statement of Cash Flows (USD $) | 12 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
Cash flows from operating activities: | |||
Net loss | ($4,699,939) | ($4,601,503) | ($1,484,115) |
Adjustments to reconcile net loss to net cash used in operating activities: | |||
Depreciation and amortization | 70,948 | 67,103 | 64,968 |
Loss on disposal of property and equipment | 607 | 0 | 0 |
Stock based compensation | 762,005 | 1,554,913 | 480,108 |
Issuance of common stock and common stock warrants in exchange for consulting services | 130,991 | 509,967 | 128,775 |
Issuance of common stock warrants | 35,836 | 0 | 0 |
Changes in operating assets and liabilities: | |||
Accounts receivable | 99,786 | -82,435 | -17,351 |
Inventory | -87,344 | -93,816 | 6,787 |
Prepaid expenses and other current assets | 64,273 | -144,608 | -5,867 |
Accounts payable | 239,810 | -123,210 | -47,686 |
Accrued expenses | -192,788 | 574,191 | 21,458 |
Deferred revenue | 101,675 | 0 | 0 |
Net cash used in operating activities | -3,474,140 | -2,339,398 | -852,923 |
Cash flows from investing activities: | |||
Purchase of property and equipment | -6,510 | -10,919 | -7,757 |
Net cash used in investing activities | -6,510 | -10,919 | -7,757 |
Cash flows from financing activities: | |||
Proceeds from notes payable - related parties | 0 | 0 | 40,000 |
Proceeds from issuance of common stock upon option exercises | 500 | 0 | 0 |
Proceeds from issuance of common stock and common stock warrants (net of issuance costs) | 250,000 | 5,185,430 | 1,147,000 |
Net cash provided by financing activities | 250,500 | 5,185,430 | 1,187,000 |
Net (decrease) increase in cash and cash equivalents | -3,230,150 | 2,835,113 | 326,320 |
Cash and cash equivalents, beginning of year | 3,387,428 | 552,315 | 225,995 |
Cash and cash equivalents, end of year | 157,278 | 3,387,428 | 552,315 |
Supplemental disclosure of cash flow information: | |||
Cash paid during the year for:Interest | 0 | 0 | 0 |
Cash paid during the year for:Income taxes | 4,283 | 0 | 0 |
Non-cash financing activities | |||
Issuance of common stock for stock subscription received in 2013 | 250,000 | 0 | 0 |
Value of common stock issued to settle accrued liabilities | $0 | $14,000 | $0 |
1_GENERAL_ORGANIZATION_AND_BUS
1. GENERAL ORGANIZATION AND BUSINESS | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Notes to Financial Statements | ||
NOTE 1 - GENERAL ORGANIZATION AND BUSINESS | Boston Therapeutics, Inc. (the “Company”) was formed as a Delaware corporation on August 24, 2009 under the name Avanyx Therapeutics, Inc. On November 10, 2010, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Boston Therapeutics, Inc., a New Hampshire corporation (“BTI”) providing for the merger of BTI into the Company with the Company being the surviving entity (the “Merger”), the issuance by the Company of 4,000,000 shares of common stock to the stockholders of BTI in exchange for 100% of the outstanding common stock of BTI, and the change of the Company’s name to Boston Therapeutics, Inc. David Platt, the Company’s Chief Executive Officer, is a founder of BTI and was a director and minority stockholder of BTI at the time of the Merger. Dr. Platt received 400,000 shares of the Company’s common stock in connection with the Merger. Kenneth A. Tassey, Jr., the Company’s former President, was the Chief Executive Officer, President and principal stockholder of BTI at the time of the Merger. Mr. Tassey received 3,200,000 shares of our common stock in connection with the Merger. | |
Boston Therapeutics, Inc. (the “Company”) was formed as a Delaware corporation on August 24, 2009 under the name Avanyx Therapeutics, Inc. On November 10, 2010, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Boston Therapeutics, Inc., a New Hampshire corporation (“BTI”) providing for the merger of BTI into the Company with the Company being the surviving entity (the “Merger”), the issuance by the Company of 4,000,000 shares of common stock to the stockholders of BTI in exchange for 100% of the outstanding common stock of BTI, and the change of the Company’s name to Boston Therapeutics, Inc. David Platt, the Company’s Chief Executive Officer, is a founder of BTI and was a director and minority stockholder of BTI at the time of the Merger. Dr. Platt received 400,000 shares of the Company’s common stock in connection with the Merger. Kenneth A. Tassey, Jr., who became the Company’s President shortly after the Merger, was the Chief Executive Officer, President and principal stockholder of BTI at the time of the Merger. Mr. Tassey received 3,200,000 shares of our common stock in connection with the Merger. | ||
The Company’s primary business is the development, manufacture and commercialization of therapeutic drugs with a focus on complex carbohydrate chemistry to address unmet medical needs in diabetes and inflammatory diseases. We have brought one product, SUGARDOWN®, to market and have begun to make initial sales. We are currently focused on the development of two additional drug products: BTI-320, a non-systemic, non-toxic, tablet for reduction of post-meal blood glucose in people living with diabetes that is fully developed, and IPOXYN, an injectable anti-necrosis, anti-hypoxia drug that we are currently developing. | ||
The Company’s primary business is the development, manufacture and commercialization of therapeutic drugs with a focus on complex carbohydrate chemistry to address unmet medical needs in diabetes and inflammatory diseases. We have brought one product, SUGARDOWN®, to market and have begun to make initial sales. We are currently focused on the development of two additional drug products: BTI320, a non-systemic, non-toxic, chewable tablet for reduction of post-meal blood glucose in people living with diabetes that is fully developed, and IPOXYN, an injectable anti-necrosis, anti-hypoxia drug that we are currently developing. | ||
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. The Company has limited cash resources, recurring cash used in operations and operating losses history. As shown in the accompanying financial statements, the Company has an accumulated deficit of approximately $12 million as of December 31, 2014 and used cash in operations of approximately $3.5 million during the year ended December 31, 2014. | ||
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. The Company has limited resources and operating history. As shown in the accompanying financial statements, the Company has an accumulated deficit of approximately $7.3 million as of December 31, 2013 and used cash in operations of approximately $2.3 million during the year ended December 31, 2013. | ||
The Company has incurred recurring operating losses since inception as it has worked to bring its SUGARDOWN® product to market and develop BTI-320 and IPOXYN. Management expects such operating losses will continue until such time that substantial revenues are received from SUGARDOWN® or the regulatory and clinical development of BTI-320 or IPOXYN is completed. The Company has $157,000 cash on hand at December 31, 2014. In March 2015, the Company entered into four different convertible promissory note agreements with an aggregate proceeds balance of $432,000, net of discounts and fees, as referenced in Note 11. Management anticipates that our cash resources will be sufficient to fund our planned operations through the second quarter of 2015 as a result of additional cost cutting measures surrounding the use of consultants and payroll associated costs reduced by the Company during the fourth quarter of fiscal 2014 and into fiscal 2015. Management plans to seek additional capital through private placements and public offerings of the Company’s common stock. In addition, management may seek to raise additional capital through public or private debt or equity financings in order to fund its operations. There can be no assurance that the Company will be successful in accomplishing its objectives. Without such additional capital, the Company may be required to curtail or cease operations. | ||
The Company has incurred recurring operating losses since inception as it has worked to bring its SUGARDOWN® product to market and develop BTI320 and IPOXYN. Management expects such operating losses will continue until such time that substantial revenues are received from SUGARDOWN® or the regulatory and clinical development of BTI320 or IPOXYN is completed. Management anticipates that the Company’s cash resources will be sufficient to fund its planned operations into the second half of fiscal 2014. Management plans to seek additional capital through private placements and public offerings of the Company’s common stock. There can be no assurance that the Company will be successful in accomplishing its objectives. Without such additional capital, the Company may be required to curtail or cease operations. |
2_SUMMARY_OF_SIGNIFICANT_ACCOU
2. SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES | 12 Months Ended | |||
Dec. 31, 2014 | Dec. 31, 2013 | |||
Notes to Financial Statements | ||||
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES | Basis of Presentation | Basis of Presentation | ||
The financial statements have been prepared in conformity with accounting principles generally accepting in the United States of America (“US GAAP”). | The financial statements have been prepared in conformity with accounting principles generally accepting in the United States of America (“US GAAP”). | |||
Use of Estimates | Use of Estimates | |||
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. | The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. | |||
Segment Information | Segment Information | |||
Operating segments are identified as components of an enterprise about which separate, discrete financial information is available for evaluation by the chief operating decision-maker, or decision-making group, in making decisions on how to allocate resources and assess performance. The Company views its operations and manages its business as one operating segment. | Operating segments are identified as components of an enterprise about which separate, discrete financial information is available for evaluation by the chief operating decision-maker, or decision-making group, in making decisions on how to allocate resources and assess performance. The Company views its operations and manages its business as one operating segment. | |||
Cash and Cash Equivalents | ||||
Cash and Cash Equivalents | ||||
For purposes of reporting within the statement of cash flows, the Company considers all cash on hand, cash accounts not subject to withdrawal restrictions or penalties, and all highly liquid investments with original maturities of 90 days or less at the time of acquisition to be cash equivalents. The Company maintains its cash in institutions insured by the Federal Deposit Insurance Corporation. | ||||
For purposes of reporting within the statement of cash flows, the Company considers all cash on hand, cash accounts not subject to withdrawal restrictions or penalties, and all highly liquid investments with original maturities of 90 days or less at the time of acquisition to be cash equivalents. The Company maintains its cash in institutions insured by the Federal Deposit Insurance Corporation. | ||||
Revenue Recognition | ||||
Revenue Recognition | ||||
The Company generates revenues from sales of SUGARDOWN®. Revenue is recognized when there is persuasive evidence that an arrangement exists, the price is fixed and determinable, the product is shipped in accordance with the customers’ Free On Board (FOB) shipping point terms and collectability is reasonably assured. In practice, the Company has not experienced or granted significant returns of product. Shipping fees charged to customers are included in revenue and shipping costs are included in costs of sales. | ||||
The Company generates revenues from sales of SUGARDOWN®. Revenue is recognized when there is persuasive evidence that an arrangement exists, the price is fixed and determinable, the product is shipped and collectability is reasonably assured. Revenue is recognized as product is shipped from an outside fulfillment operation. In practice, the Company has not experienced or granted significant returns of product. Shipping fees charged to customers are included in revenue and shipping costs are included in costs of sales. | ||||
As disclosed in Note 7, Advance Pharmaceutical Company Ltd., a related party, accounted for 91% and 97%, during the years ended December 31, 2014 and 2013, respectively. | ||||
During the years ended December 31, 2013 and 2012, one customer accounted for 97% and 40%, respectively, of the Company’s revenue. During the year ended December 31, 2012, one additional customer accounted for 35% of the Company's revenue. | ||||
Accounts Receivable | ||||
Accounts Receivable | ||||
Accounts receivable is stated at the amount management expects to collect from outstanding balances. Management establishes a reserve for doubtful accounts based on its assessment of the current status of individual accounts. Balances that remain outstanding after management has used reasonable collection efforts are written off against the allowance. There were no allowances for doubtful accounts as of December 31, 2014 and 2013. At December 31, 2014, there were no accounts receivable. At December 31, 2013, the Company had one customer that accounted for 100% of its accounts receivable. | ||||
Accounts receivable is stated at the amount management expects to collect from outstanding balances. Management establishes a reserve for doubtful accounts based on its assessment of the current status of individual accounts. Balances that remain outstanding after management has used reasonable collection efforts are written off against the allowance. There were no allowances for doubtful accounts as of December 31, 2013 and 2012. At December 31, 2013 and 2012, the Company has one customer that accounts for 100% of its accounts receivable. The Company believes there is minimal risk associated with this receivable. | ||||
Inventory | ||||
Inventory | ||||
Inventory consists of raw materials, work-in-process and finished goods of SUGARDOWN®. Inventories are stated at the lower of cost (first-in, first-out) or market, not in excess of net realizable value. The Company adjusts the carrying value of its inventory for excess and obsolete inventory. The Company continues to monitor the valuation of its inventory. | ||||
Inventory consists of raw materials, work-in-process and finished goods of SUGARDOWN®. Inventories are stated at the lower of cost (first-in, first-out) or market, not in excess of net realizable value. The Company adjusts the carrying value of its inventory for excess and obsolete inventory. The Company continues to monitor the valuation of its inventory. | ||||
Property and Equipment | ||||
Property and Equipment | ||||
Property and equipment is depreciated using the straight-line method over the following estimated useful lives: | ||||
Property and equipment is depreciated using the straight-line method over the following estimated useful lives: | ||||
Asset Category | Estimated Useful Life | |||
Office Furniture and Equipment | 5 years | Asset Category | Estimated Useful Life | |
Computer Equipment and Software | 3 years | Office Furniture and Equipment | 5 years | |
Computer Equipment and Software | 3 years | |||
The Company begins to depreciate assets when they are placed in service. The costs of repairs and maintenance are expensed as incurred; major renewals and betterments are capitalized. Upon sale or retirement, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the statement of operations. For the years ended December 31, 2014 and 2013, the Company recorded depreciation expense of $6,662 and $2,818, respectively. | ||||
The Company begins to depreciate assets when they are placed in service. The costs of repairs and maintenance are expensed as incurred; major renewals and betterments are capitalized. Upon sale or retirement, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the statement of operations. For the years ended December 31, 2013 and 2012, the Company recorded depreciation expense of $2,818 and $682, respectively. | ||||
Intangible Assets | ||||
Intangible Assets | ||||
Intangible assets consist of identifiable finite-lived assets acquired in business acquisitions. Acquired intangible assets are recorded at fair value on the date of acquisition and are amortized over their economic useful lives on a straight line basis. | ||||
Intangible assets consist of identifiable finite-lived assets acquired in business acquisitions. Acquired intangible assets are recorded at fair value on the date of acquisition and are amortized over their economic useful lives on a straight line basis. | ||||
Goodwill | ||||
Goodwill | ||||
The Company follows the guidance of Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 350, Goodwill and Other Intangible Assets. Under ASC 350, goodwill and certain other intangible assets with indefinite lives are not amortized, but instead are reviewed for impairment at least annually. | ||||
The Company follows the guidance of Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 350, Goodwill and Other Intangible Assets. Under ASC 350, goodwill and certain other intangible assets with indefinite lives are not amortized, but instead are reviewed for impairment at least annually. | ||||
As the Company operates its business in one operating segment and one reporting unit, the Company’s goodwill is assessed at the Company level for impairment in the fourth quarter of each year or more frequently if events or changes in circumstances indicate that impairment may exist. The Company has the option to first assess qualitative factors to determine whether it is necessary to perform the two-step impairment test. If the Company’s qualitative assessment reveals that goodwill impairment is more likely than not, the Company performs the two-step impairment test. Alternatively, the Company may bypass the qualitative test and initiate goodwill impairment testing with the first step of the two-step goodwill impairment test. | ||||
As the Company operates its business in one operating segment and one reporting unit, the Company’s goodwill is assessed at the Company level for impairment in the fourth quarter of each year or more frequently if events or changes in circumstances indicate that impairment may exist. The Company has the option to first assess qualitative factors to determine whether it is necessary to perform the two-step impairment test. If the Company’s qualitative assessment reveals that goodwill impairment is more likely than not, the Company performs the two-step impairment test. Alternatively, the Company may bypass the qualitative test and initiate goodwill impairment testing with the first step of the two-step goodwill impairment test. | ||||
During the first step of the goodwill impairment test, the Company compares the fair value of the reporting unit to its carrying value, including goodwill. If the fair value of a reporting unit exceeds its carrying value, then the Company concludes that no goodwill impairment has occurred. If the carrying value of the reporting unit exceeds its fair value, the Company performs the second step of the goodwill impairment test to measure possible goodwill impairment loss. If the carrying value of the reporting unit’s goodwill exceeds its implied fair value, then we would record an impairment loss equal to the difference. | ||||
During the first step of the goodwill impairment test, the Company compares the fair value of the reporting unit to its carrying value, including goodwill. If the fair value of a reporting unit exceeds its carrying value, then the Company concludes that no goodwill impairment has occurred. If the carrying value of the reporting unit exceeds its fair value, the Company performs the second step of the goodwill impairment test to measure possible goodwill impairment loss. If the carrying value of the reporting unit’s goodwill exceeds its implied fair value, then we would record an impairment loss equal to the difference. | ||||
The Company performed its impairment review of goodwill for the years ended December 31, 2014 and 2013, and concluded that no impairment existed. | ||||
The Company performed its impairment review of goodwill utilizing the qualitative assessment method for the year ended December 31, 2013 and concluded that no impairment existed. The Company performed its impairment review of goodwill utilizing the quantitative assessment method for the year ended December 31, 2012 and concluded no impairment existed. | ||||
Impairment of Long-lived Assets | ||||
Impairment of Long-lived Assets | ||||
The Company reviews long-lived assets, which include the Company’s intangible assets, for impairment whenever events or changes in business circumstances indicate that the carrying amounts of the assets may not be fully recoverable. Future undiscounted cash flows of the underlying assets are compared to the assets’ carrying values. Adjustments to fair value are made if the sum of expected future undiscounted cash flows is less than book value. To date, no adjustments for impairment have been made. | ||||
The Company reviews long-lived assets, which include the Company’s intangible assets, for impairment whenever events or changes in business circumstances indicate that the carrying amounts of the assets may not be fully recoverable. Future undiscounted cash flows of the underlying assets are compared to the assets’ carrying values. Adjustments to fair value are made if the sum of expected future undiscounted cash flows is less than book value. To date, no adjustments for impairment have been made. | ||||
Loss per Share | ||||
Loss per Share | ||||
Basic net loss per share is computed based on the net loss for the period divided by the weighted average actual shares outstanding during the period. Diluted net loss per share is computed based on the net loss for the period divided by the weighted average number of common shares and common equivalent shares outstanding during each period unless the effect of such common equivalent shares would be anti-dilutive. Common stock equivalents represent the dilutive effect of the assumed exercise of certain outstanding stock options using the treasury stock method. The weighted average number of common shares for the year ended December 31, 2014 did not include 6,483,400 and 12,516,669 options and warrants, respectively, because of their anti-dilutive effect. The weighted average number of common shares for the year ended December 31, 2013 did not include 5,741,400 and 11,974,999 options and warrants, respectively, because of their anti-dilutive effect. | ||||
Basic net loss per share is computed based on the net loss for the period divided by the weighted average actual shares outstanding during the period. Diluted net loss per share is computed based on the net loss for the period divided by the weighted average number of common shares and common equivalent shares outstanding during each period unless the effect of such common equivalent shares would be anti-dilutive. Common stock equivalents represent the dilutive effect of the assumed exercise of certain outstanding stock options using the treasury stock method. The weighted average number of common shares for the year ended December 31, 2013 did not include 5,741,400 and 11,974,999 options and warrants, respectively, because of their anti-dilutive effect. The weighted average number of common shares for the year ended December 31, 2012 did not include 7,708,400 and 645,000 options and warrants, respectively, because of their anti-dilutive effect. | ||||
Income Taxes | ||||
The Company accounts for income taxes under the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to 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 in effect for the year in which those temporary differences are expected to be recovered or be settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is provided when it is more likely than not that some portion of the gross deferred tax asset will not be realized. The Company records interest and penalties related to income taxes as a component of provision for income taxes. The Company did not recognize any interest and penalty expense for the years ended December 31, 2014 and 2013. | Income Taxes | |||
Advertising Costs | The Company accounts for income taxes under the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to 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 in effect for the year in which those temporary differences are expected to be recovered or be settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is provided when it is more likely than not that some portion of the gross deferred tax asset will not be realized. The Company records interest and penalties related to income taxes as a component of provision for income taxes. The Company did not recognize any interest and penalty expense for the years ended December 31, 2013 and 2012. | |||
Advertising costs are expensed as incurred and are reported as a component of selling, general and administrative expenses in the selling and marketing expenses in the statements of operations. The Company did not incur any advertising costs for the year ended December 31, 2014, primarily due to its marketing agreement with Benchworks who bears the expense for marketing initiatives. The Company incurred advertising costs of $25,068 for the year ended December 31, 2013. | Advertising Costs | |||
Research and Development Costs | Advertising costs are expensed as incurred and are reported as a component of selling, general and administrative expenses in the selling and marketing expenses in the statements of operations. Advertising costs for the years ended December 31, 2013 and 2012 were $25,068 and $51,497, respectively. | |||
Research and development expenditures are charged to the statement of operations as incurred. Such costs include proprietary research and development activities, purchased research and development, and expenses associated with research and development contracts, whether performed by the Company or contracted with independent third parties. | Research and Development Costs | |||
Fair Value of Financial Instruments | Research and development expenditures are charged to the statement of operations as incurred. Such costs include proprietary research and development activities, purchased research and development, and expenses associated with research and development contracts, whether performed by the Company or contracted with independent third parties. | |||
Fair values determined by Level 1 inputs utilize observable data such as quoted prices in active markets. Fair values determined by Level 2 inputs utilize data points other than quoted prices in active markets that are observable either directly or indirectly. Fair values determined by Level 3 inputs utilize unobservable data points in which there is little or no market data, which require the reporting entity to develop its own assumptions. The Company’s financial instruments consist of cash and cash equivalents, accounts payable, accrued expenses, and notes payable. The carrying value of cash and cash equivalents, accounts payable and accrued expenses approximates fair value due to their short-term nature using level 3 inputs as defined above. The carrying value of the notes payable as of December 31, 2014 and 2013, evaluated using level 2 inputs defined above based on quoted market prices on rates available to the Company for debt with similar terms and maturities, approximates the fair value. | Fair Value of Financial Instruments | |||
Concentration of Credit Risk | The Company’s financial instruments consist of cash and cash equivalents, accounts payable, accrued expenses, and notes payable. The carrying value of cash and cash equivalents, accounts payable and accrued expenses approximates fair value due to their short-term nature. | |||
Financial instruments that potentially subject the Company to concentrations of credit risk are principally cash and cash equivalents. The Company places its cash and cash equivalents in highly rated financial institutions. The Company maintains cash and cash equivalent balances with financial institutions that occasionally exceed federally insured limits. The Company has not experienced any losses related to these balances, and management believes its credit risk to be minimal. | The carrying value of the notes payable as of December 31, 2013 and 2012, is not materially different from the fair value of the notes payable. | |||
Stock-Based Compensation | Concentration of Credit Risk | |||
Stock–based compensation, including grants of employee and non-employee stock options and modifications to existing stock options, is recognized in the income statement based on the estimated fair value of the awards. The Company uses the Black-Scholes option pricing model to determine the fair value of options granted and recognizes the compensation cost of share-based awards on a straight-line basis over the requisite service period, which is generally the vesting period of the award. | Financial instruments that potentially subject the Company to concentrations of credit risk are principally cash and cash equivalents. The Company places its cash and cash equivalents in highly rated financial institutions. The Company maintains cash and cash equivalent balances with financial institutions that occasionally exceed federally insured limits. The Company has not experienced any losses related to these balances, and management believes its credit risk to be minimal. | |||
The determination of the fair value of share-based payment awards utilizing the Black-Scholes model is affected by the stock price and a number of assumptions, including expected volatility, expected life, risk-free interest rate and expected dividends. The Company has a limited history of market prices of its common stock and as such volatility is estimated using historical volatilities of similar public entities. The expected life of the awards is estimated based on the simplified method. The risk-free interest rate assumption is based on observed interest rates appropriate for the terms of our awards. The dividend yield assumption is based on history and expectation of paying no dividends. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Stock-based compensation expense is recognized in the financial statements on a straight-line basis over the requisite service period, based on awards that are ultimately expected to vest. | Stock-Based Compensation | |||
The Company grants stock options to non-employee consultants from time to time in exchange for services performed for the Company. Equity instruments granted to non-employees are subject to periodic revaluation over their vesting terms. In general, the options vest over the contractual period of the respective consulting arrangement and, therefore, the Company revalues the options periodically and records additional compensation expense related to these options over the remaining vesting period. | Stock–based compensation, including grants of employee and non-employee stock options and modifications to existing stock options, is recognized in the income statement based on the estimated fair value of the awards. The Company uses the Black-Scholes option pricing model to determine the fair value of options granted and recognizes the compensation cost of share-based awards on a straight-line basis over the vesting period of the award. | |||
Recently Adopted Accounting Pronouncements | The determination of the fair value of share-based payment awards utilizing the Black-Scholes model is affected by the stock price and a number of assumptions, including expected volatility, expected life, risk-free interest rate and expected dividends. The Company has a limited history of market prices of its common stock and as such volatility is estimated using historical volatilities of similar public entities. The expected life of the awards is estimated based on the simplified method. The risk-free interest rate assumption is based on observed interest rates appropriate for the terms of our awards. The dividend yield assumption is based on history and expectation of paying no dividends. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Stock-based compensation expense is recognized in the financial statements on a straight-line basis over the vesting period, based on awards that are ultimately expected to vest. | |||
In July 2013, the FASB issued ASU 2013-11, “Income Taxes, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists” (“ASU 2013-11”). ASU 2013-11 states that an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward when settlement is available under the tax law of the applicable taxing jurisdiction as of the balance sheet reporting date. The adoption of ASU 2013-11 in 2014 did not affect the Company's results of operations, cash flows, or financial position. | The Company grants stock options to non-employee consultants from time to time in exchange for services performed for the Company. Equity instruments granted to non-employees are subject to periodic revaluation over their vesting terms. In general, the options vest over the contractual period of the respective consulting arrangement and, therefore, the Company revalues the options periodically and records additional compensation expense related to these options over the remaining vesting period. | |||
Recent Accounting Pronouncements | Recent Accounting Pronouncements | |||
In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers (Topic 606).” ASU No 2014-09 supersedes the revenue recognition requirements in “Topic 605, Revenue Recognition” and requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 is effective retrospectively for annual or interim reporting periods beginning after December 15, 2016, with early application not permitted. The Company is currently evaluating the impact of this standard on its financial statements. | In July 2013, the FASB issued ASU 2013-11, “Income Taxes, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists” (“ASU 2013-11”). ASU 2013-11 states that an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except as follows. To the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. The amendments in ASU 2013-11 are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013, with early adoption permitted. The amendments should be applied prospectively to all unrecognized tax benefits that exist at the effective date. Retrospective application is permitted. The adoption of this guidance is not expected to have a material impact on the Company’s financial statements. | |||
In August 2014, the FASB issued Accounting Standard Update (ASU) 2014-15, Presentation of Financial Statements – Going Concern. The new standard addresses management’s responsibility to evaluate whether there is a substantial doubt about the Company’s ability to continue as a going concern. It requires management to perform interim and annual assessments of the Company ability to continue as a going concern and to provide related disclosures. The standard will be effective for annual periods ending after December 15, 2016, and interim periods within annual periods beginning after December 15, 2016. The Company is currently evaluating the impact of this standard on its financial statements. |
3_INVENTORIES
3. INVENTORIES | 12 Months Ended | |||||||||||||||||
Dec. 31, 2014 | Dec. 31, 2013 | |||||||||||||||||
Inventory Disclosure [Abstract] | ||||||||||||||||||
NOTE 3 - INVENTORIES | Inventories consist of material, labor and manufacturing overhead and are recorded at the lower of cost, using the weighted average cost method, or net realizable value. | Inventories consist of material, labor and manufacturing overhead and are recorded at the lower of cost, using the weighted average cost method, or net realizable value. | ||||||||||||||||
The components of inventories at December 31, 2014 and 2013, net of inventory reserves, were as follows: | The components of inventories at December 31, 2013 and 2012, net of inventory reserves, were as follows: | |||||||||||||||||
2014 | 2013 | 2013 | 2012 | |||||||||||||||
Raw materials | $ | 85,133 | $ | 7,672 | Raw materials | $ | 7,672 | $ | 13,125 | |||||||||
Work in process | - | - | Work in process | - | - | |||||||||||||
Finished goods | 112,836 | 102,953 | Finished goods | 102,953 | 3,684 | |||||||||||||
Total | $ | 197,969 | $ | 110,625 | Total | $ | 110,625 | $ | 16,809 | |||||||||
The Company periodically reviews quantities of inventory on hand and compares these amounts to expected usage of each particular product or product line. The Company records, as a charge to cost of sales, any amounts required to reduce the carrying value to net realizable value. | The Company periodically reviews quantities of inventory on hand and compares these amounts to expected usage of each particular product or product line. The Company records, as a charge to cost of sales, any amounts required to reduce the carrying value to net realizable value. |
4_ACCRUED_EXPENSES
4. ACCRUED EXPENSES | 12 Months Ended | |||||||||||||||||
Dec. 31, 2014 | Dec. 31, 2013 | |||||||||||||||||
Payables and Accruals [Abstract] | ||||||||||||||||||
4. ACCRUED EXPENSES | The following table represents the major components of accrued expenses and other current liabilities at December 31, 2014 and 2013: | The following table represents the major components of accrued expenses at December 31, 2013 and 2012: | ||||||||||||||||
2014 | 2013 | 2013 | 2012 | |||||||||||||||
Professional fees | $ | 132,243 | $ | 331,494 | Professional fees | $ | 331,494 | $ | 95,567 | |||||||||
Stock subscription | - | 270,000 | Stock subscription | 270,000 | - | |||||||||||||
Interest | 82,760 | 63,447 | Interest | 63,447 | 44,090 | |||||||||||||
Other current liabilities | 63,174 | 56,024 | Other current liabilities | 56,024 | 7,117 | |||||||||||||
Total | $ | 278,177 | $ | 720,965 | Total | $ | 720,965 | $ | 146,774 | |||||||||
5_STOCKHOLDERS_EQUITY
5. STOCKHOLDERS' EQUITY | 12 Months Ended | ||||||||||||
Dec. 31, 2014 | Dec. 31, 2013 | ||||||||||||
Notes to Financial Statements | |||||||||||||
NOTE 5 - STOCKHOLDERS' EQUITY | The Company is authorized to issue up to 5,000,000 shares of its $0.001 par value preferred stock and up to 200,000,000 shares of its $0.001 par value common stock. During the year ended December 31, 2013, the Company amended its certificate of incorporation to increase the number of common shares from 100,000,000 to 200,000,000. The amendment went into effect September 7, 2013. | ||||||||||||
The Company is authorized to issue up to 5,000,000 shares of its $0.001 par value preferred stock and up to 200,000,000 shares of its $0.001 par value common stock. During the year ended December 31, 2013, the Company amended its certificate of incorporation to increase the number of common shares from 100,000,000 to 200,000,000. The amendment went into effect September 7, 2013. | |||||||||||||
Preferred Stock | |||||||||||||
Preferred Stock | |||||||||||||
No shares of preferred stock have been issued and the terms of such preferred stock have not been designated by the Board of Directors. | |||||||||||||
No shares of preferred stock have been issued and the terms of such preferred stock have not been designated by the Board of Directors. | |||||||||||||
Common Stock | |||||||||||||
Common Stock | |||||||||||||
On March 14, 2013, the Company issued 500,000 shares of its common stock at a price per share of $0.50 and issued a warrant to purchase 250,000 additional shares for $1.00 per share for gross proceeds of $250,000 to CJY Holdings Limited, a company controlled by Conroy Cheng's brother Cheng Chi Him. The warrant is exercisable immediately and has a five year term. The Company has evaluated these warrants for proper classification based on terms of the warrant agreement and has determined that equity classification is appropriate. The Company estimated the relative fair value of the warrant to be $35,457 using the Black Scholes model, which has been recorded as a component of permanent equity in additional paid in capital. | |||||||||||||
On May 7, 2012 the Company issued 20,000 shares of common stock at a price per share of $1.10 and issued a warrant to purchase an additional 20,000 shares of common stock at $1.15 per share for gross proceeds of $22,000. The warrant is exercisable immediately and has a five year term. The Company has evaluated these warrants for proper classification based on terms of the warrant agreement and has determined that equity classification is appropriate. The Company estimated the relative fair value of the warrant to be $8,754 using the Black Scholes model, which has been recorded as a component of permanent equity in additional paid in capital. | |||||||||||||
On April 29, 2013, the Company issued a warrant to purchase 100,000 of common stock for $1.00 per share in exchange for consulting services rendered. The warrant associated with the consulting agreement is exercisable immediately and has a five year term. The Company has evaluated these warrants for proper classification based on terms of the warrant agreement and has determined that equity classification is appropriate. The Company estimated the fair value of the warrant to be $19,865 using the Black Scholes model, which has been recorded as a component of permanent equity in additional paid in capital. | |||||||||||||
During May 2012 the Company entered into a consulting agreement under which it is required to pay the consultant a monthly fee consisting of 25,000 shares of restricted common stock beginning May 21, 2012 through May 21, 2013. As of December 31, 2012 the Company had issued 150,000 shares due under this agreement for services rendered during June through November 2012 with a fair value of $76,500. An accrual in the amount of $14,000 representing the fair value of the 33,333 unissued shares for services rendered in December 2012 was included in the accompanying December 31, 2012 balance sheet. The 33,333 shares were subsequently issued during the year ended December 31, 2013. An additional 12,000 shares were issued in January 2013 for services performed in January. The agreement was terminated in January 2013. | |||||||||||||
On April 30, 2013, the Company issued 52,000 shares of its common stock with a fair value of $28,080 in exchange for consulting services rendered during February through April 2013 in connection with two separate consulting agreements. | |||||||||||||
During June 2012 the Company issued 80,000 shares of its common stock with a fair value of $40,800 in exchange for professional consulting services. | |||||||||||||
On June 28, 2013, the Company issued 40,000 shares of its common stock with a fair value of $14,000 in exchange for consulting services rendered during May and June in connection with two separate consulting agreements. | |||||||||||||
On June 29, 2012 the Company issued 1,000,000 shares to an affiliate of Advance Pharmaceutical Co., Ltd. (APC) in a private placement for net proceeds of $500,000. APC is licensed to distribute SUGARDOWN® in Hong Kong, China and Macau. The Company reviewed the private placement issuance and determined that the issuance price of $0.50 per share approximates fair value as of the date of issuance. | |||||||||||||
Between July and September 2013, the Company conducted four closings of its private placement of securities with accredited investors pursuant to which the investors purchased in aggregate 17,659,007 shares of the Company’s common stock and warrants to purchase an additional 8,829,484 shares of common stock at an exercise price of $0.50 per share (the Investor Warrants) for total gross proceeds of $5,297,698. In addition, the Company issued warrants to the Placement Agent in exchange for services to purchase in aggregate 1,808,849 shares for $0.30 per share (the Placement Agent Warrants). The Investor Warrants and Placement Agent Warrants are currently exercisable and have a five year term. The Company has evaluated these warrants for proper classification based on terms of the warrant agreements and has determined that equity classification is appropriate. The Company estimated the relative fair value of the Investor Warrants associated with the investor subscription agreements and Placement Agent Warrants as $1,279,093 and $288,101, respectively, using the Black Scholes model, which has been recorded as a component of permanent equity in additional paid in capital. In addition, issuance costs paid by the Company in connection with the private placement offering totaled $408,270. CJY Holdings Limited purchased 6,666,660 shares and 3,333,320 Investor Warrants included in this Private Placement on the same terms as the other participants purchasing shares in the transaction. | |||||||||||||
During July 2012 the Company entered into a consulting agreement under which it is required to pay the consultant a monthly fee consisting of $4,000 paid in cash and 7,500 shares of restricted common stock. As of December 31, 2012 the Company has issued the 22,500 total shares due under this agreement for services rendered during July, August and September 2012 with an aggregate fair value of $11,475. The agreement was terminated as of September 30, 2012. | |||||||||||||
During September 2013, the Company issued 52,000 shares of its common stock with a fair value of $22,920 in exchange for consulting services rendered during July through September 2013 in connection with two separate consulting agreements. | |||||||||||||
On November 13, 2012 the Company issued 1,250,000 shares of its common stock at a price per share of $0.50 and issued a warrant to purchase 625,000 additional shares for $1.00 per share for gross proceeds of $625,000. The warrant is exercisable immediately and has a five year term. The Company has evaluated these warrants for proper classification based on terms of the warrant agreement and has determined that equity classification is appropriate. The Company estimated the relative fair value of the warrant to be $124,019 using the Black Scholes model, which has been recorded as a component of permanent equity in additional paid in capital. | |||||||||||||
During October 2013, the Company conducted an additional closing of its private placement of securities to related parties and affiliates resulting in the purchase of 153,334 shares of the Company’s common stock and warrants to purchase 76,666 additional shares of common stock at an exercise price of $0.50 per share for total gross proceeds of $46,000. The warrant associated with the subscription agreement is exercisable immediately and has a five year term. The Company estimated the relative fair value of the warrants as $13,411 using the Black Scholes model which has been recorded as a component of permanent equity in additional paid in capital. | |||||||||||||
On March 14, 2013 the Company issued 500,000 shares of its common stock at a price per share of $0.50 and issued a warrant to purchase 250,000 additional shares for $1.00 per share for gross proceeds of $250,000 to CJY Holdings Limited, a company controlled by Conroy Cheng's brother Cheng Chi Him. The warrant is exercisable immediately and has a five year term. The Company has evaluated these warrants for proper classification based on terms of the warrant agreement and has determined that equity classification is appropriate. The Company estimated the relative fair value of the warrant to be $35,457 using the Black Scholes model, which has been recorded as a component of permanent equity in additional paid in capital. | |||||||||||||
During October 2013, the Company issued 43,860 shares of its common stock with a fair value of $61,404 in exchange for consulting services rendered during August through October 2013 in connection with a consulting agreement. | |||||||||||||
On April 29, 2013 the Company issued a warrant to purchase 100,000 of common stock for $1.00 per share in exchange for consulting services rendered. The warrant associated with the consulting agreement is exercisable immediately and has a five year term. The Company has evaluated these warrants for proper classification based on terms of the warrant agreement and has determined that equity classification is appropriate. The Company estimated the fair value of the warrant to be $19,865 using the Black Scholes model, which has been recorded as a component of permanent equity in additional paid in capital. | |||||||||||||
During October 2013, the Company entered into a consulting agreement under which it is required to pay the consultant a monthly fee consisting of $10,000 paid in cash and a warrant to purchase 265,000 shares of common stock at an exercise price of $0.50 per share. The warrant associated with the consulting agreement is exercisable immediately and has a five year term. The Company estimated the fair value of the warrant at $263,036 using the Black Scholes model which has been recorded as a component of permanent equity in additional paid in capital. | |||||||||||||
On April 30, 2013 the Company issued 52,000 shares of its common stock with a fair value of $28,080 in exchange for consulting services rendered during February through April 2013 in connection with two separate consulting agreements. | |||||||||||||
On November 18, 2013, the Company issued 22,000 shares of its common stock with a fair value of $32,120 in exchange for consulting services rendered during November 2013 in connection with a consulting agreement. | |||||||||||||
On June 28, 2013 the Company issued 40,000 shares of its common stock with a fair value of $14,000 in exchange for consulting services rendered during May and June in connection with two separate consulting agreements. | |||||||||||||
During December 2013, the Company issued 35,316 shares of its common stock with a fair value of $49,292 in exchange for consulting services rendered during September through December 2013 in connection with two separate consulting agreements. | |||||||||||||
Between July and September 2013, the Company conducted four closings of its private placement of securities with accredited investors pursuant to which the investors purchased in aggregate 17,659,007 shares of the Company’s common stock and warrants to purchase an additional 8,829,484 shares of common stock at an exercise price of $0.50 per share (the Investor Warrants) for total gross proceeds of $5,297,698. In addition, the Company issued warrants to the Placement Agent in exchange for services to purchase in aggregate 1,808,849 shares for $0.30 per share (the Placement Agent Warrants). The Investor Warrants and Placement Agent Warrants are currently exercisable and have a five year term. The Company has evaluated these warrants for proper classification based on terms of the warrant agreements and has determined that equity classification is appropriate. The Company estimated the relative fair value of the Investor Warrants associated with the investor subscription agreements and Placement Agent Warrants as $1,279,093 and $288,101, respectively, using the Black Scholes model, which has been recorded as a component of permanent equity in additional paid in capital. In addition, issuance costs paid by the Company in connection with the private placement offering totaled $408,270. CJY Holdings Limited purchased 6,666,660 shares and 3,333,320 Investor Warrants included in this Private Placement on the same terns as the other participants purchasing shares in the transaction. | |||||||||||||
During the year ended December 31, 2013, the Company received $270,000 of cash proceeds in connection with a potential private placement financing expected to be executed during 2014. As of December 31, 2013, the terms of the private placement were not secured and the Company had recorded the $270,000 of proceeds as a stock subscription in accrued expenses and other current liabilities within the accompanying balance sheet. Subsequent to the year ended December 31, 2013, the Company returned $20,000 of cash proceeds as the terms of the private placement were not secured. | |||||||||||||
During September 2013 the Company issued 52,000 shares of its common stock with a fair value of $22,920 in exchange for consulting services rendered during July through September 2013 in connection with two separate consulting agreements. | |||||||||||||
During the three months ended March 31, 2014, the Company issued 99,000 shares of its common stock with a fair value of $74,160 in exchange for consulting services rendered during those periods in connection with three separate consulting agreements. | |||||||||||||
During October 2013 the Company conducted an additional closing of its private placement of securities to related parties and affiliates resulting in the purchase of 153,334 shares of the Company’s common stock and warrants to purchase 76,666 additional shares of common stock at an exercise price of $0.50 per share for total gross proceeds of $46,000. The warrant associated with the subscription agreement is exercisable immediately and has a five year term. The Company estimated the relative fair value of the warrants as $13,411 using the Black Scholes model which has been recorded as a component of permanent equity in additional paid in capital. | |||||||||||||
On March 31, 2014, the Company issued 833,340 shares of common stock at a price per share of $0.60 and issued warrants to purchase 416,670 additional shares of common stock with an exercise price of $1.00 per share for gross proceeds of $500,000. The Company had received $250,000 of these proceeds during the fourth quarter of 2013 which was recorded as a stock subscription in accrued expenses and other current liabilities in the accompanying balance sheet as of December 31, 2013. The warrants are exercisable immediately and have a five year term. The Company has evaluated these warrants for proper classification based on terms of the warrant agreement and has determined that equity classification is appropriate. The Company estimated the relative fair value of the warrant to be $125,251 using the Black Scholes model, which has been recorded as a component of permanent equity in additional paid in capital. | |||||||||||||
During October 2013 the Company issued 43,860 shares of its common stock with a fair value of $61,404 in exchange for consulting services rendered during August through October 2013 in connection with a consulting agreement. | |||||||||||||
During the three months ended June 30, 2014, the Company issued 36,000 shares of its common stock with a fair value of $21,540 in exchange for consulting services rendered during those periods in connection with two separate consulting agreements. | |||||||||||||
During October 2013 the Company entered into a consulting agreement under which it is required to pay the consultant a monthly fee consisting of $10,000 paid in cash and a warrant to purchase 265,000 shares of common stock at an exercise price of $0.50 per share. The warrant associated with the consulting agreement is exercisable immediately and has a five year term. The Company estimated the fair value of the warrant at $263,036 using the Black Scholes model which has been recorded as a component of permanent equity in additional paid in capital. | |||||||||||||
In August 2014, the Company issued warrants to purchase 125,000 of common stock with an exercise price of $0.60 to the March 2014 common stock investors in lieu of their registration rights. The warrants are exercisable immediately and have a five year term. The Company has evaluated these warrants for proper classification based on terms of the warrant agreement to be $35,836 using the Black Scholes model, which has been recorded as a component of permanent equity in additional paid-in capital. | |||||||||||||
On November 18, 2013 the Company issued 22,000 shares of its common stock with a fair value of $32,120 in exchange for consulting services rendered during November 2013 in connection with a consulting agreement. | |||||||||||||
During the three months ended September 30, 2014, the Company issued 54,500 shares of its common stock with a fair value of $21,715 in exchange for consulting services rendered during those periods in connection with seven separate consulting agreements. | |||||||||||||
During December 2013 the Company issued 35,316 shares of its common stock with a fair value of $49,292 in exchange for consulting services rendered during September through December 2013 in connection with two separate consulting agreements. | |||||||||||||
During the three months ended December 31, 2014, the Company issued 43,500 shares of its common stock with a fair value of $13,575 in exchange for consulting services rendered during those periods in connection with three separate consulting agreements. | |||||||||||||
During the year ended December 31, 2013, the Company received $270,000 of cash proceeds in connection with a potential private placement financing expected to be executed during 2014. As of December 31, 2013, the terms of the private placement were not secured and the Company had recorded the $270,000 of proceeds as a stock subscription in accrued expenses and other current liabilities within the accompanying balance sheet. | |||||||||||||
Common Stock Warrants | |||||||||||||
The Company accounts for warrants as either equity instruments or liabilities depending on the specific terms of the warrant agreement. As of December 31, 2014, the Company had 12,516,669 warrants outstanding which are all classified as equity instruments and are fully exercisable as of December 31, 2014. The following table summarizes outstanding and exercisable common stock warrants as of December 31, 2014: | |||||||||||||
Offering | Number of Shares Issuable | Exercise Price | Expiration Date | ||||||||||
March 2012 Private Placement | 20,000 | $ | 1.15 | 20-Mar-17 | |||||||||
November 2012 Private Placement | 625,000 | $ | 1 | November 13, 2017 | |||||||||
February 2013 Issued to Consultant | 100,000 | $ | 1 | 1-Feb-18 | |||||||||
February 2013 Private Placement | 250,000 | $ | 1 | 27-Feb-18 | |||||||||
July 2013 Private Placement | 3,333,320 | $ | 0.5 | 23-Jul-18 | |||||||||
August 2013 Private Placement | 1,414,113 | $ | 0.5 | 6-Aug-18 | |||||||||
August 2013 Private Placement | 1,130,223 | $ | 0.5 | 30-Aug-18 | |||||||||
August 2013 Issued to Placement Agent | 1,808,849 | $ | 0.3 | 30-Aug-18 | |||||||||
September 2013 Private Placement | 2,951,828 | $ | 0.5 | 30-Sep-18 | |||||||||
October 2013 Private Placement | 76,666 | $ | 0.50 | 30-Sep-18 | |||||||||
October 2013 Issued to Consultant | 265,000 | $ | 0.5 | 15-Oct-18 | |||||||||
March 2014 Private Placement | 416,670 | $ | 1 | 31-Mar-19 | |||||||||
August 2014 Private Placement | 125,000 | $ | 0.6 | 7-Aug-19 | |||||||||
12,516,669 |
6_STOCK_OPTION_PLAN_AND_STOCKB
6. STOCK OPTION PLAN AND STOCK-BASED COMPENSATION | 12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dec. 31, 2014 | Dec. 31, 2013 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Notes to Financial Statements | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NOTE 6 - STOCK OPTION PLAN AND STOCK-BASED COMPENSATION | During the year ended December 31, 2010, the Company adopted a stock option plan entitled “The 2010 Stock Plan” (2010 Plan) under which the Company may grant options to purchase up to 5,000,000 shares of common stock. On September 7, 2013, the 2010 plan was amended to increase the number of shares of common stock issuable under the 2010 Plan to 7,500,000. As of December 31, 2014 and December 31, 2013, there were 1,328,400 and 578,400 options outstanding under the 2010 Plan, respectively. | During the year ended December 31, 2010, the Company adopted a stock option plan entitled “The 2010 Stock Plan” (2010 Plan) under which the Company may grant options to purchase up to 5,000,000 shares of common stock. On September 7, 2013, the 2010 plan was amended to increase the number of shares of common stock issuable under the 2010 Plan to 7,500,000. As of December 31, 2013 and December 31, 2012, there were 578,400 options outstanding under the 2010 Plan. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
During the year ended December 31, 2011, the Company adopted a non-qualified stock option plan entitled “2011 Non-Qualified Stock Plan” (2011 Plan) under which the Company may grant options to purchase 2,100,000 shares of common stock. In December 2012, the 2011 Plan was amended to increase the number of shares of common stock issuable under the 2011 Plan to 12,000,000 shares. During the period ended March 31, 2013, the 2011 Plan was amended to increase the number of shares of common stock issuable under the 2011 Plan to 17,500,000. As of December 31, 2014 and December 31, 2013, there were 5,155,000 and 5,163,000 options outstanding under the 2011 Plan, respectively | During the year ended December 31, 2011, the Company adopted a non-qualified stock option plan entitled “2011 Non-Qualified Stock Plan” (2011 Plan) under which the Company may grant options to purchase 2,100,000 shares of common stock. In December 2012, the 2011 Plan was amended to increase the number of shares of common stock issuable under the 2011 Plan to 12,000,000 shares. During the period ended March 31, 2013, the 2011 Plan was amended to increase the number of shares of common stock issuable under the 2011 Plan to 17,500,000. As of December 31, 2013 and December 31, 2012, there were 5,163,000 and 7,130,000 options outstanding under the 2011 Plan, respectively | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Under the terms of the stock plans, the Board of Directors shall specify the exercise price and vesting period of each stock option on the grant date. Vesting of the options is typically three to four years and the options typically expire in five to seven years. | Under the terms of the stock plans, the Board of Directors shall specify the exercise price and vesting period of each stock option on the grant date. Vesting of the options is typically three to four years and the options typically expire in five to seven years. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The fair value of stock options granted and revaluation of non-employee consultant options for years ended December 31, 2014 and 2013 was calculated with the following assumptions: | The fair value of stock options granted for years ended December 31, 2013 and 2012 was calculated with the following assumptions: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2014 | 2013 | 2013 | 2012 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Risk-free interest rate | 0.5% - 2.3 | % | 0.5% - 1.6 | % | Risk-free interest rate | 0.47% - 1.55 | % | 0.43% - 1.27 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expected dividend yield | 0 | % | 0 | % | Expected dividend yield | 0 | % | 0 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Volatility factor | 85% - 98 | % | 85 - 96 | % | Volatility factor | 85% - 96 | % | 85 - 90 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expected life of option | 2.50 to 7 years | 3.25 to 6 years | Expected life of option | 3.25 to 6 years | 3.50 to 7 years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The weighted-average fair value of stock options granted during the years ended December 31, 2014 and 2013, under the Black-Scholes option pricing model was $0.68 and $0.21 per share, respectively. For the years ended December 31, 2014 and 2013, the Company recorded stock-based compensation expense of $762,005 and $1,554,913, respectively, in connection with share-based payment awards. As of December 31, 2014, there was approximately $171,000 of unrecognized compensation expense related to non-vested stock option awards that is expected to be recognized over a weighted-average period of 2.5 years. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The weighted-average fair value of stock options granted during the years ended December 31, 2013 and 2012, under the Black-Scholes option pricing model was $0.21 and $0.30 per share, respectively. For the years ended December 31, 2013 and 2012, the Company recorded stock-based compensation expense of $1,554,913 and $480,108, respectively, in connection with share-based payment awards. As of December 31, 2013, there was approximately $173,000 of unrecognized compensation expense related to non-vested stock option awards that is expected to be recognized over a weighted-average period of 0.70 years. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The following table summarizes the Company’s stock option activity during the years ended December 31, 2014 and 2013: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The following table summarizes the Company’s stock option activity during the years ended December 31, 2013 and 2012: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares | Exercise Price per Share | Weighted Average Exercise Price per Share | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Outstanding as of December 31, 2012 | 7,708,400 | $ | 0.10-1.85 | $ | 0.42 | Shares | Exercise Price per Share | Weighted Average Exercise Price per Share | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Granted | 708,000 | 0.42-1.00 | 0.68 | Outstanding as of December 31, 2011 | 1,578,400 | $ | 0.10-1.85 | $ | 0.19 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Exercised | (13,104 | ) | 0.5 | 0.5 | Granted | 6,130,000 | 0.10-0.50 | 0.48 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Options forfeited/cancelled | (2,661,896 | ) | 0.42-1.00 | 0.52 | Exercised | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Outstanding as of December 31, 2013 | 5,741,400 | $ | 0.10-1.85 | $ | 0.4 | Options forfeited/cancelled | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Granted | 1,777,000 | 0.37-1.21 | 0.94 | Outstanding as of December 31, 2012 | 7,708,400 | $ | 0.10-1.85 | $ | 0.42 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Exercised | (84,016 | ) | 0.10-0.57 | 0.54 | Granted | 708,000 | 0.42-1.00 | 0.68 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Options forfeited/cancelled | (950,984 | ) | 0.57-1.21 | 0.95 | Exercised | (13,104 | ) | 0.5 | 0.5 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Outstanding as of December 31, 2014 | 6,483,400 | $ | 0.10-1.85 | $ | 0.47 | Options forfeited/cancelled | (2,661,896 | ) | 0.42-1.00 | 0.52 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Outstanding as of December 31, 2013 | 5,741,400 | $ | 0.10-1.85 | $ | 0.4 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
During the year ended December 31, 2014, the Company received a notice of cashless stock options exercise in which the holder elected to exercise 133,280 common stock options. The stock options which were exercised had an exercise price of $0.57 per share. Based upon the Company’s stock price on the date of exercise, as well as the cashless exercise formula, 79,016 shares were issued to the holder during the year ended December 31, 2014 with the remaining 54,264 options forfeited. In addition, the Company also received $500 in proceeds in connection with the exercise of 5,000 common stock options with an exercise price of $0.10 per share. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
During the year ended December 31, 2013, the Company received a notice of cashless stock options exercise in which the holder elected to exercise 20,000 vested options. The stock options which were exercised had an exercise price of $0.50 per share. Based upon the Company’s stock price on the date of exercise, as well as the cashless exercise formula, 13,104 shares were issued to the holder with the remaining 6,896 stock options forfeited during the year ended December 31, 2013. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
During the year ended December 31, 2013, the Company received a notice of cashless stock options exercise in which the holder elected to exercise 20,000 vested options. The stock options which were exercised had an exercise price of $0.50 per share. Based upon the Company’s stock price on the date of exercise, as well as the cashless exercise formula, 13,104 shares were issued to the holder with the remaining 6,896 stock options forfeited during the year ended December 31, 2013. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The following table summarizes information about stock options that are vested or expected to vest at December 31, 2013: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The following table summarizes information about stock options that are vested or expected to vest at December 31, 2014: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Vested or Expected to Vest | Exercisable Options | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Vested or Expected to Vest | Exercisable Options | Weighted | Weighted | Weighted | Weighted | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Weighted | Weighted | Weighted | Weighted | Average | Average | Average | Average | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Average | Average | Average | Average | Exercise | Remaining | Aggregate | Number | Exercise | Remaining | Aggregate | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Exercise | Remaining | Aggregate | Exercise | Remaining | Aggregate | Exercise | Number of | Price Per | Contractual | Intrinsic | of | Price | Contractual | Intrinsic | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Exercise | Number of | Price Per | Contractual | Intrinsic | Number of | Price | Contractual | Intrinsic | Price | Options | Share | Life (Years) | Value | Options | Per Share | Life (Years) | Value | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Price | Options | Share | Life (Years) | Value | Options | Per Share | Life (Years) | Value | $ | 0.1 | 1,800,000 | $ | 0.1 | 2.87 | $ | 2,376,000 | 1,706,250 | $ | 0.1 | 2.88 | $ | 2,252,250 | ||||||||||||||||||||||||||||||||||||||||||||||||
$ | 0.1 | 1,795,000 | $ | 0.1 | 1.87 | $ | 987,250 | 1,795,000 | $ | 0.1 | 1.87 | $ | 987,250 | 0.42 | 63,000 | 0.42 | 7.01 | 63,000 | 63,000 | 0.42 | 7.01 | 63,000 | ||||||||||||||||||||||||||||||||||||||||||||||||
0.37 | 58,000 | 0.37 | 7.67 | 16,240 | 38,000 | 0.37 | 8.16 | 10,640 | 0.5 | 3,310,000 | 0.5 | 4.33 | 3,045,200 | 2,830,835 | 0.5 | 4.37 | 2,604,368 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
0.42 | 63,000 | 0.42 | 6.01 | 14,490 | 63,000 | 0.42 | 6.01 | 14,490 | 0.57 | 400,000 | 0.57 | 4.62 | 340,000 | 133,280 | 0.57 | 4.62 | 113,288 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
0.43 | 100,000 | 0.43 | 9.61 | 22,000 | - | 0.43 | - | - | 1 | 90,000 | 1 | 4.14 | 37,800 | 67,500 | 1 | 4.14 | 28,350 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
0.5 | 3,710,000 | 0.5 | 4 | 556,500 | 3,376,666 | 0.5 | 3.45 | 506,500 | 1.85 | 78,400 | 1.85 | 1.75 | - | 78,400 | 1.85 | 1.75 | - | |||||||||||||||||||||||||||||||||||||||||||||||||||||
0.69 | 100,000 | 0.69 | 9.21 | - | 100,000 | 0.69 | 9.21 | - | $ | 0.10-1.85 | 5,741,400 | $ | 0.4 | 3.89 | $ | 5,862,000 | 4,879,265 | $ | 0.39 | 3.85 | $ | 5,061,256 | ||||||||||||||||||||||||||||||||||||||||||||||||
1.21 | 579,000 | 1.21 | 9.07 | - | 497,750 | 1.21 | 9.06 | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
1.85 | 78,400 | 1.85 | 0.75 | - | 78,400 | 1.85 | 0.75 | - | The following table sets forth the status of the Company’s non-vested stock options as of December 31, 2013: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
$ | 0.10-1.85 | 6,483,400 | $ | 0.47 | 4.04 | $ | 1,596,480 | 5,948,816 | $ | 0.46 | 3.56 | $ | 1,518,880 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Number of | Weighted-Average | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The following table sets forth the status of the Company’s non-vested stock options as of December 31, 2014: | Options | Grant-Date | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Number of | Weighted-Average | Non-vested as of December 31, 2011 | 882,950 | $ | 0.2 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Options | Grant-Date | Granted | 6,130,000 | 0.3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value | Forfeited | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Non-vested as of December 31, 2012 | 5,389,583 | $ | 0.3 | Vested | (1,623,367 | ) | 0.27 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Granted | 708,000 | 0.21 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Forfeited | (2,655,000 | ) | 0.3 | Non-vested as of December 31, 2012 | 5,389,583 | $ | 0.3 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Vested | (2,580,448 | ) | 0.29 | Granted | 708,000 | 0.21 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Non-vested as of December 31, 2013 | 862,135 | $ | 0.25 | Forfeited | (2,655,000 | ) | 0.3 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Granted | 1,777,000 | 0.68 | Vested | (2,580,448 | ) | 0.29 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Forfeited | (552,970 | ) | 0.62 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Vested | (1,601,581 | ) | 0.55 | Non-vested as of December 31, 2013 | 862,135 | $ | 0.25 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Non-vested as of December 31, 2014 | 484,584 | $ | 0.39 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The weighted-average remaining contractual life for options exercisable at December 31, 2013 is 3.89 years. At December 31, 2013 the Company has 12,337,000 and 6,921,600 options available for grant under the 2011 Plan and 2010 Plan, respectively. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The weighted-average remaining contractual life for options exercisable at December 31, 2014 is 3.56 years. At December 31, 2014 the Company has 12,247,880 and 6,171,600 options available for grant under the 2011 Plan and 2010 Plan, respectively. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The aggregate intrinsic value for fully vested, exercisable options was $5,061,256 and $418,000 at December 31, 2013 and 2012, respectively. The aggregate intrinsic value of options exercised during the year ended December 31, 2013 was $12,449. There were no options exercised during the year ended December 31, 2012. The actual tax benefit realized from stock option exercises during the year ended December 31, 2013 was $19,000. There was no actual tax benefit realized from stock options exercises during fiscal 2012. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The aggregate intrinsic value for fully vested, exercisable options was $1,518,880 and $5,061,256 at December 31, 2014 and 2013, respectively. The aggregate intrinsic value of options exercised during the years ended December 31, 2014 and 2013 was $71,083 and $12,449, respectively. The actual tax benefit realized from stock option exercises during the years ended December 31, 2014 and 2013 were $45,996 and $19,000, respectively. |
7_RELATED_PARTY_TRANSACTIONS
7. RELATED PARTY TRANSACTIONS | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Notes to Financial Statements | ||
NOTE 7 - RELATED PARTY TRANSACTIONS | Through December 31, 2011, Dr. Platt advanced $257,820 to the Company to fund start-up costs and operations. Advances by Dr. Platt carry an interest rate of 6.5% and were due on June 29, 2013. On May 7, 2012, Dr. Platt and the Company's former President entered into promissory notes to advance to the Company an aggregate of $40,000. The notes accrue interest at 6.5% per year and were due June 30, 2013. On August 6, 2012, the outstanding notes of $297,820 were amended to extend the maturity dates to June 29, 2014. On August 2, 2013, the outstanding notes of $297,820 were amended to extend the maturity dates to June 29, 2015. Effective June 30, 2014, the outstanding notes of $297,820 were amended to extend the maturity dates to June 30, 2016. As of December 31, 2014 and 2013, $82,760 and $63,447, respectively, of accrued interest had been included in accrued expenses and other current liabilities on the accompanying balance sheet. | |
Through December 31, 2011, Dr. Platt advanced $257,820 to BTI to fund start-up costs and operations of the Company. Advances by Dr. Platt carry an interest rate of 6.5% and were due on June 29, 2013. On May 7, 2012, Dr. Platt and the Company's President entered into promissory notes to advance to the Company an aggregate of $40,000. The notes accrue interest at 6.5% per year were due June 30, 2013. On August 6, 2012, the outstanding notes of $297,820 were amended to extend the maturity dates to June 29, 2014. On August 2, 2013, the outstanding notes of $297,820 were amended to extend the maturity dates to June 29, 2015. As of December 31, 2013 and 2012, $63,447 and $44,090, respectively, of accrued interest had been included in accrued expenses on the accompanying balance sheet. | ||
On June 24, 2011, the Company entered into a definitive Licensing and Manufacturing Agreement (the "Agreement") with Advance Pharmaceutical Company Ltd. ("Advance Pharmaceutical"), a Hong Kong-based privately-held company. Under terms of the Agreement, the Company manufactures and supplies product in bulk for Advance Pharmaceutical. Advance Pharmaceutical is responsible for the packaging, marketing and distribution of SUGARDOWN® in certain territories within Asia. Advance Pharmaceutical, through a wholly owned subsidiary, has purchased an aggregate 1,799,800 shares of the Company’s common stock in conjunction with the Company’s private placement offerings during the years ended December 31, 2012 and 2011. The shares were purchased on the same terms as the other participants acquiring shares in the respective offerings. Conroy Chi-Heng Cheng is a director of Advance Pharmaceutical and joined the Company’s Board in December 2013. Revenue generated pursuant to the Agreement for the years ended December 31, 2014 and 2013 were $182,000 and $315,000, respectively. | ||
On June 24, 2011, the Company entered into a definitive Licensing and Manufacturing Agreement (the "Agreement") with Advance Pharmaceutical Company Ltd. ("Advance Pharmaceutical"), a Hong Kong-based privately-held company. Under terms of the Agreement, the Company manufactures and supplies product in bulk for Advance Pharmaceutical. Advance Pharmaceutical is responsible for the packaging, marketing and distribution of SUGARDOWN® in China. Advance Pharmaceutical, through a wholly owned subsidiary, has purchased an aggregate 1,799,800 shares of the Company’s common stock in conjunction with the Company’s private placement offerings during the years ended December 31, 2012 and 2011. The shares were purchased on the same terms as the other participants acquiring shares in the respective offerings. Conroy Chi-Heng Cheng is a director of Advance Pharmaceutical and joined the Company’s Board in December 2013. Revenue generated pursuant to the Agreement for the years ended December 31, 2013 and 2012 were $315,000 and $17,000, respectively. | ||
On March 14, 2013 the Company issued 500,000 shares of its common stock at a price per share of $0.50 and issued a warrant to purchase 250,000 additional shares for $1.00 per share for gross proceeds of $250,000 to CJY Holdings Limited ("CJY"). The warrant is exercisable immediately and has a five year term. In July 2013 CJY Holdings Limited purchased 6,666,660 shares of the Company’s common stock and warrants to purchase an aggregate of 3,333,320 shares of the Company’s common stock for an aggregate purchase price of $2,000,000 in the private placement conducted by the Company between July 2013 and September 2013 discussed in Note 5. The warrants are exercisable immediately over a five year term with an exercise price of $0.50 per share. CJY is an entity that is controlled by the sibling of our Director Conroy Chi-Heng Cheng. | ||
On March 14, 2013 the Company issued 500,000 shares of its common stock at a price per share of $0.50 and issued a warrant to purchase 250,000 additional shares for $1.00 per share for gross proceeds of $250,000 to CJY Holdings Limited ("CJY"). The warrant is exercisable immediately and has a five year term. In July 2013 CJY Holdings Limited purchased 6,666,660 shares of the Company’s common stock and warrants to purchase an aggregate of 3,333,320 shares of the Company’s common stock for an aggregate purchase price of $2,000,000 in the private placement conducted by the Company between July 2013 and September 2013 discussed in Note 5. The warrants are exercisable immediately over a five year term with an exercise price of $0.50 per share. CJY is an entity that is controlled by the sibling of our Director Conroy Chi-Heng Cheng. | ||
In December 2013, the Board of Directors agreed to indemnify Dr. Platt for legal costs incurred in connection with an arbitration (now concluded) initiated before the American Arbitration Association by Galectin Therapeutics, Inc. (formerly named Pro-Pharmaceuticals, Inc.) for which Dr. Platt previously served as CEO and Chairman. Galectin sought to rescind or reform the Separation Agreement entered into with Dr. Platt upon his resignation from Galectin to remove a $1.0 million milestone payment which Dr. Platt asserted he was entitled to receive and to be repaid all separation benefits paid to Dr. Platt. The Company initially capped the amount for which it would indemnify Dr. Platt at $150,000 in December 2013 and Dr. Platt agreed to reimburse the indemnification amounts paid by the Company should he prevail in the arbitration. The Board decided to indemnify Dr. Platt after considering a number of factors, including the scope of the Company’s existing indemnification obligations to officers and directors and the potential impact of the arbitration on the Company. In May 2014, the Board approved a $50,000 increase in indemnification support, solely for the payment of outside legal expenses. The Company recorded a total of $182,697 in costs associated with Dr. Platt’s indemnification, of which $119,401 was recorded in the year ended December 31, 2013 and $63,296 was recorded in the year ended December 31, 2014. In July 2014, the arbitration was concluded in favor of Dr. Platt, confirming the effectiveness of the separation agreement and payment was made to Dr. Platt in July 2014. On March 2, 2015, the Board voted to rescind the requirement that Dr. Platt reimburse the Company the entire $182,697. The Board determined that interest should be charged to Dr. Platt from the time he received the funds in July 2014 to the date of the board meeting and that this amount would be offset against interest the Company owes Dr. Platt. The remaining amount would be considered settled in full by the Company. | ||
In December 2013, the Board of Directors agreed to indemnify Dr. Platt for legal costs incurred in connection with an arbitration initiated before the American Arbitration Association by Galectin Therapeutics, Inc. for which Dr. Platt previously served as CEO and Chairman. Galectin seeks to rescind or reform the Separation Agreement entered into with Dr. Platt upon his resignation from Galectin to remove a $1.0 million milestone payment which Dr. Platt asserts he is owed and to be repaid all separation benefits paid to Dr. Platt to date. The Company capped the amount for which it will indemnify Dr. Platt at an initial maximum of $150,000 and Dr. Platt has agreed to reimburse the indemnification amounts paid by the Company should he prevail in the arbitration. The Board decided to indemnify Dr. Platt after considering a number of factors, including the scope of the Company’s existing indemnification obligations to officers and directors, the potential impact of the arbitration on the Company and Dr. Platt’s agreement to reimburse the Company should he prevail. As of December 31, 2013, the Company recorded legal expense associated with this indemnification of $119,401. |
8_INTANGIBLE_ASSETS
8. INTANGIBLE ASSETS | 12 Months Ended | |||||||||||||||||
Dec. 31, 2014 | Dec. 31, 2013 | |||||||||||||||||
Notes to Financial Statements | ||||||||||||||||||
NOTE 8 - INTANGIBLE ASSETS | The SUGARDOWN® technology and patent applications, which were obtained through the acquisition of BTI in 2010, are being amortized on a straight-line basis over their estimated useful lives of 14 years. | The SUGARDOWN® technology and provisional patents, which were obtained through the acquisition of BTI in 2010, are being amortized on a straight-line basis over their estimated useful lives of 14 years. | ||||||||||||||||
Intangible assets consist of the following as of December 31: | Intangible assets consist of the following as of December 31: | |||||||||||||||||
2014 | 2013 | 2013 | 2012 | |||||||||||||||
SUGARDOWN® technology and patent applications | $ | 900,000 | $ | 900,000 | SUGARDOWN® technology and provisional patents | $ | 900,000 | $ | 900,000 | |||||||||
Less accumulated amortization | (267,857 | ) | (203,571 | ) | Less accumulated amortization | (203,571 | ) | (139,286 | ) | |||||||||
Intangible assets, net | $ | 632,143 | $ | 696,429 | Intangible assets, net | $ | 696,429 | $ | 760,714 | |||||||||
Amortization expense for each of the years ended December 31, 2014 and 2013 was $64,286 and $64,285, respectively. | Amortization expense for each of the years ended December 31, 2013 and 2012 was $64,285. | |||||||||||||||||
The estimated remaining amortization expense related to intangible assets with finite lives for each of the five succeeding years and thereafter is as follows: | The estimated remaining amortization expense related to intangible assets with finite lives for each of the five succeeding years and thereafter is as follows: | |||||||||||||||||
Fiscal year | Fiscal year | |||||||||||||||||
2015 | $ | 64,286 | 2014 | $ | 64,286 | |||||||||||||
2016 | 64,286 | 2015 | 64,286 | |||||||||||||||
2017 | 64,286 | 2016 | 64,286 | |||||||||||||||
2018 | 64,286 | 2017 | 64,286 | |||||||||||||||
2019 | 64,286 | 2018 | 64,286 | |||||||||||||||
Thereafter | 310,713 | Thereafter | 374,999 | |||||||||||||||
$ | 632,143 | $ | 696,429 | |||||||||||||||
9_PROVISION_FOR_INCOME_TAXES
9. PROVISION FOR INCOME TAXES | 12 Months Ended | |||||||||||||||||
Dec. 31, 2014 | Dec. 31, 2013 | |||||||||||||||||
Income Tax Disclosure [Abstract] | ||||||||||||||||||
9. PROVISION FOR INCOME TAXES | During the years ended December 31, 2014 and 2013, no provision for income taxes was recorded as the Company generated net operating losses of $3,965,123 and $2,680,473, respectively. | During the years ended December 31, 2013 and 2012, no provision for income taxes was recorded as the Company generated net operating losses of $2,680,473 and $943,849, respectively. | ||||||||||||||||
A reconciliation of the U.S. federal statutory income tax rate to the Company’s effective income tax rate is as follows: | A reconciliation of the U.S. federal statutory income tax rate to the Company’s effective income tax rate is as follows: | |||||||||||||||||
2014 | 2013 | 2013 | 2012 | |||||||||||||||
Net operating loss carryforwards | 34 | % | 34 | % | Net operating loss carryforwards | 34.0% | 34.0% | |||||||||||
State taxes, net of federal benefit | 5.2 | % | 5.5 | % | State taxes, net of federal benefit | 5.5 | % | 6.3 | % | |||||||||
Federal research and development tax credit | 1.3 | % | 0.2 | % | Federal research and development tax credit | 0.2 | % | 0 | % | |||||||||
Other | (2.5) | % | (0.5) | % | Other | (0.5)% | 0 | % | ||||||||||
Change in deferred tax asset valuation allowance | -38 | % | -39.2 | % | Change in deferred tax asset valuation allowance | -39.2 | % | -40.3 | % | |||||||||
Effective income tax rate | 0 | % | 0 | % | Effective income tax rate | 0.00% | 0.0% | |||||||||||
Net deferred tax assets as of December 31, 2014 and 2013 consisted of the following: | Net deferred tax assets as of December 31, 2013 and 2012 consisted of the following: | |||||||||||||||||
2014 | 2013 | 2013 | 2012 | |||||||||||||||
Net operating loss carryforwards | $ | 3,326,788 | $ | 1,781,334 | Net operating loss carryforwards | $ | 1,781,334 | $ | 1,064,457 | |||||||||
Tax credit carryforwards | 72,685 | 12,499 | Tax credit carryforwards | 12,499 | - | |||||||||||||
Non-qualified stock options | 1,006,472 | 857,613 | Non-qualified stock options | 857,613 | - | |||||||||||||
Other temporary differences | 194,895 | 164,379 | Other temporary differences | 164,379 | 21,786 | |||||||||||||
Gross deferred tax assets | 4,600,840 | 2,815,825 | Gross deferred tax assets | 2,815,825 | 1,086,243 | |||||||||||||
Valuation allowance | (4,600,840 | ) | (2,815,825 | ) | Valuation allowance | -2,815,825 | (1,086,243 | ) | ||||||||||
Net deferred tax assets | $ | - | $ | - | ||||||||||||||
Net deferred tax assets | $ | - | $ | - | ||||||||||||||
As of December 31, 2014, the Company had net operating loss carryforwards for federal and state income tax purposes of $8,398,858, which begin to expire in years 2029 and 2019, respectively. The Company also has available research and development tax credit carryforwards for federal income tax purposes of $72,685, which begin to expire in year 2032. | ||||||||||||||||||
Pursuant to the Internal Revenue Code Section 382 (“Section 382”), certain ownership changes may subject the net operating loss carryforwards (“carryforwards”) and research and development tax credit carryforwards to annual limitations which could reduce or defer the carryforwards. Section 382 imposes limitations on a corporation’s ability to utilize carryforwards if it experiences an ownership change. An ownership change may result from transactions increasing the ownership of certain stockholders in the stock of a corporation by more than 50 percentage points over a three-year period. In the event of an ownership change, utilization of the carryforwards would be subject to an annual limitation under Section 382 determined by multiplying the value of its stock at the time of the ownership change by the applicable long-term tax-exempt rate. Any unused annual limitation may be carried over to later years. The imposition of this limitation on its ability to use the carryforwards to offset future taxable income could cause the Company to pay U.S. federal income taxes earlier than if such limitation were not in effect and could cause such carryforwards to expire unused, reducing or eliminating the benefit of such carryforwards. The Company has not completed a Section 382 study to determine if there have been one or more ownership changes due to the costs associated with such a study. Until a study is completed and the extent of the limitations, if any, is able to be determined, no additional amounts have been written off or are being presented as an uncertain tax position. | As of December 31, 2013, the Company had net operating loss carryforwards for federal and state income tax purposes of $4,497,182, which begin to expire in years 2029 and 2019, respectively. The Company also has available research and development tax credit carryforwards for federal income tax purposes of $12,499, which begin to expire in year 2032. Utilization of the net operating loss carryforwards and research and development tax credit carryforwards may be subject to a substantial annual limitation under Section 382 of the Internal Revenue Code of 1986 due to ownership changes that could occur in the future. These ownership changes may limit the amount of carryforwards that can be utilized annually to offset future taxable income. | |||||||||||||||||
The Company provided a full valuation allowance for deferred tax assets generated since, based on the weight of available evidence; it is more likely than not that these benefits will not be realized. During the year ended December 31, 2014, the Company increased its valuation allowance by $1,785,015 due to the continued likelihood that realization of any future benefit from deductible temporary differences and net operating loss carryforwards cannot be sufficiently assured at December 31, 2014. Management reevaluates the positive and negative evidence at each reporting period. | The Company provided a full valuation allowance for deferred tax assets generated since, based on the weight of available evidence; it is more likely than not that these benefits will not be realized. During the year ended December 31, 2013, the Company increased its valuation allowance by $1,729,582 due to the continued likelihood that realization of any future benefit from deductible temporary differences and net operating loss carryforwards cannot be sufficiently assured at December 31, 2013. Management reevaluates the positive and negative evidence at each reporting period. | |||||||||||||||||
The Company applies the provisions of ASC 740-10, Income Taxes. The Company has not recognized any liability for unrecognized tax benefits and does not believe there is any uncertainty with respect to its tax position. The Company’s policy with respect to unrecognized tax benefits is to recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. | The Company applies the provisions of ASC 740-10, Income Taxes, (originally issued as FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes). The Company has not recognized any liability for unrecognized tax benefits and does not believe there is any uncertainty with respect to its tax position. The Company’s policy with respect to unrecognized tax benefits is to recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. | |||||||||||||||||
The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by federal and state jurisdictions, where applicable. There are currently no pending income tax examinations. The Company’s tax years are still open under statute from 2012 to the present. Earlier years may be examined to the extent that tax credit or net operating loss carryforwards are used in future periods. The Company’s policy is to record interest and penalties related to income taxes as part of its income tax provision. | The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by federal and state jurisdictions, where applicable. There are currently no pending income tax examinations. The Company’s tax years are still open under statute from 2010 to the present. Earlier years may be examined to the extent that tax credit or net operating loss carryforwards are used in future periods. The Company’s policy is to record interest and penalties related to income taxes as part of its income tax provision. |
10_COMMITMENTS_AND_CONTINGENCI
10. COMMITMENTS AND CONTINGENCIES | 12 Months Ended | |||||||||
Dec. 31, 2014 | Dec. 31, 2013 | |||||||||
Notes to Financial Statements | ||||||||||
NOTE 10 - COMMITMENTS AND CONTINGENCIES | Leases | |||||||||
The Company entered into a three year lease agreement for their office lease facility commencing July 1, 2012, with escalating rental payments. On February 21, 2013, the Company amended the lease agreement to extend the lease through March 2018 and increase rental space. The effects of variable rent disbursements have been expensed on a straight-line basis over the life of the lease. The Company recognized rent expense of $73,752 and $15,759 during the years ended December 31, 2013 and 2012, respectively. As of December 31, 2013 and 2012, there was $25,381 and $2,267, respectively, of deferred rent included in accrued expenses and other current liabilities in the accompanying balance sheets. | ||||||||||
Future minimum lease payments under all non-cancelable operating leases as of December 31, 2013, are as follows: | ||||||||||
The Company entered into a three year lease agreement for their office lease facility commencing July 1, 2012, with escalating rental payments. On February 21, 2013, the Company amended the lease agreement to extend the lease through March 2018 and increase rental space. The effects of variable rent disbursements have been expensed on a straight-line basis over the life of the lease. The Company recognized rent expense of $57,524 and $73,752 during the years ended December 31, 2014 and 2013, respectively. As of December 31, 2014 and 2013, there was $22,810 and $25,381, respectively, of deferred rent included in accrued expenses and other current liabilities in the accompanying balance sheets. | ||||||||||
Fiscal Year | ||||||||||
Future minimum lease payments under all non-cancelable operating leases as of December 31, 2014, are as follows: | 2014 | $ | 60,093 | |||||||
2015 | 62,169 | |||||||||
Fiscal Year | 2016 | 64,299 | ||||||||
2015 | $ | 62,169 | 2017 | 66,519 | ||||||
2016 | 64,299 | 2018 | 16,770 | |||||||
2017 | 66,519 | $ | 269,850 | |||||||
2018 | 16,770 | |||||||||
$ | 209,757 | |||||||||
Marketing Agreement | ||||||||||
On May 14, 2014, we entered into a definitive Marketing Agreement with Benchworks SD, LLC (Benchworks), a company engaged in the marketing, promotion and offering for distribution and sale of pharmaceutical, healthcare and consumer products. Under the terms of the agreement, we have granted Benchworks the exclusive right to promote, market, sell and distribute SUGARDOWN® in North America for an initial term of one year, subject to extension in accordance with the terms of the agreement. Benchworks is responsible and bears the expense for marketing and commercializing SUGARDOWN®, including the creation and payment for marketing, creative and promotional materials. The agreement defines certain minimum net sales levels that Benchworks must achieve to maintain exclusivity; and the agreement also provides for net sales splits with Benchworks receiving 65% of the first $10 million in net sales from the sale of SUGARDOWN® in North America, with a declining share to 50% for net sales in excess of $40 million. |
11_SUBSEQUENT_EVENTS
11. SUBSEQUENT EVENTS | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Notes to Financial Statements | ||
NOTE 11 - SUBSEQUENT EVENTS | The Company has evaluated events and transactions that occurred from December 31, 2014 through March 27, 2015, the date these financial statements were issued, for possible disclosure and recognition in the financial statements. Except as discussed below, the Company did not have any material subsequent events that impact its financial statements or disclosures. | The Company has evaluated events and transactions that occurred from December 31, 2013 through the date of filing, for possible disclosure and recognition in the financial statements. Except as discussed below, the Company did not have any material subsequent events that impact its financial statements or disclosures. |
In January 2015, the Company issued 43,992 shares of common stock resulting from the cashless exercise of 92,000 placement agent warrants with an exercise price of $0.30. The remaining 48,008 common stock warrants were cancelled due to the cashless exercise. | In January 2014 the Company received a notice of cashless stock option exercise in which the holder elected to exercise 133,280 vested options. The stock options which were exercised had an exercise price of $0.57 per share. Based upon the Company’s stock price and the cashless exercise formula at the date of exercise, 79,016 shares were issued to the holder. | |
In February 2015, the Company issued 30,000 shares of its common stock with a fair value of $9,900 in exchange for consulting services rendered during January and February 2015 in connection with a consulting agreement. | In January 2014 the Company entered into a consulting agreement to market SUGARDOWN® in the United States. In addition to monthly cash payments, the Company will issue 500,000 shares of its common stock upon achievement of certain agreed upon milestones. | |
On March 12, 2015, the Company entered into a $225,000 convertible note agreement for $200,000 in net proceeds after discounts and fees. The note has a eleven month term with an annual interest rate of 10%. In connection with this convertible note, the Company issued a warrant to purchase 625,000 shares of the Company’s common stock. The warrant is immediately exercisable at an exercise price of $0.30 per share and expires in March 2020. The note is convertible into common stock at the Lender’s option pursuant to the conversion terms of the note agreement. | In January 2014 the Company entered into an investment banking agreement under which it is required to pay an engagement fee of $25,000 and issue a warrant to purchase 25,000 shares of common stock at an exercise price of $2.00 per share. Additionally, the Company will be required to pay fees subject to completion of certain financing transactions. | |
On March 13, 2015, the Company entered into a $100,000 convertible promissory note agreement for $94,000 in net proceeds after discounts and fees. The note has a twelve month term with an annual interest rate of 10%. Pursuant to the securities purchase agreement, the lender is obligated to enter into an additional convertible promissory note in the principal amount of $100,000 in May 2015 with an issuance discount of $10,000, unless the closing price of the Company’s common stock is below 50% of the closing price on the issuance date of March 13, 2015, in which case the lender may in its discretion determine not to fund all or any portion of the second convertible promissory note agreement. The promissory note is convertible into common stock at the Lender’s option at any time on or after June 12, 2015, pursuant to the conversion terms of the note. | During January and February 2014 the Company issued 6,000 shares of its common stock with a fair value of $7,200 in exchange for consulting services rendered during those periods in connection with a consulting agreement. During February and March 2014, the Company entered into three consulting agreements under which the Company is required to issue consultants monthly cash payments and a total of 300,000 shares of its common stock in exchange for consulting services over a period of one year. | |
On March 18, 2015, the Company entered into a $75,000 convertible promissory note agreement for $67,500 in net proceeds after issuance discounts. The promissory note has a two year term with an annual interest rate of 12%. The promissory note is convertible into common stock at the Lender’s option any time pursuant to the conversion terms of the note. | In February 2014 the Board of Directors approved a grant of non-qualified stock options to the independent directors of the Company to purchase an aggregate of 279,000 shares of the Company’s common stock, with the grant to be effective January 1, 2014. The options were allocated among the directors based on service in, and chairmanship of the Company’s committees and service as lead independent director. The options vest as of December 31, 2014, provided that the directors remain directors on that date and have attended at least 75% of the scheduled meetings of the Board and the committees on which such directors serve during the 2014 calendar year. | |
On March 20, 2015, the Company entered into a $79,000 convertible promissory note agreement for $70,500 in net proceeds after fees. The promissory note matures in December 2015 with an annual interest rate of 8%. The promissory note is convertible into common stock at the Lender’s option any time on or after September 20, 2015 pursuant to the conversion terms of the note. | In February 2014 the Company granted incentive stock options to members of management and non-management to purchase an aggregate of 700,000 shares of the Company’s common stock at the exercise price of $1.21 per share, of which 350,000 of these options vest immediately. The remainder vest quarterly over a period of one to two years. In addition, the Company granted a consultant a non-qualified stock option to purchase up to 50,000 shares of the Company’s common stock at the exercise price of $1.21 per share vesting quarterly over a two year period. | |
On March 12, 2014, a complaint against the Company and the Company's CEO, David Platt, was filed in Middlesex Superior Court in Massachusetts by Eliezer Zomer. Mr. Zomer alleges that the Company and Dr. Platt have refused to deliver 400,000 shares of the Company's Common Stock that Mr. Zomer believes are owed to him, and seeks delivery of the shares and damages. The Company and Dr. Platt intend to contest the allegations set forth in the complaint. | ||
2_SUMMARY_OF_SIGNIFICANT_ACCOU1
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended | |||
Dec. 31, 2014 | Dec. 31, 2013 | |||
Summary Of Significant Accounting Policies Policies | ||||
Basis of Presentation | The financial statements have been prepared in conformity with accounting principles generally accepting in the United States of America (“US GAAP”). | Basis of Presentation | ||
The financial statements have been prepared in conformity with accounting principles generally accepting in the United States of America (“US GAAP”). | ||||
Use of Estimates | The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. | Use of Estimates | ||
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. | ||||
Segment Information | Operating segments are identified as components of an enterprise about which separate, discrete financial information is available for evaluation by the chief operating decision-maker, or decision-making group, in making decisions on how to allocate resources and assess performance. The Company views its operations and manages its business as one operating segment. | Segment Information | ||
Operating segments are identified as components of an enterprise about which separate, discrete financial information is available for evaluation by the chief operating decision-maker, or decision-making group, in making decisions on how to allocate resources and assess performance. The Company views its operations and manages its business as one operating segment. | ||||
Cash and Cash Equivalents | For purposes of reporting within the statement of cash flows, the Company considers all cash on hand, cash accounts not subject to withdrawal restrictions or penalties, and all highly liquid investments with original maturities of 90 days or less at the time of acquisition to be cash equivalents. The Company maintains its cash in institutions insured by the Federal Deposit Insurance Corporation. | Cash and Cash Equivalents | ||
For purposes of reporting within the statement of cash flows, the Company considers all cash on hand, cash accounts not subject to withdrawal restrictions or penalties, and all highly liquid investments with original maturities of 90 days or less at the time of acquisition to be cash equivalents. The Company maintains its cash in institutions insured by the Federal Deposit Insurance Corporation. | ||||
Revenue Recognition | The Company generates revenues from sales of SUGARDOWN®. Revenue is recognized when there is persuasive evidence that an arrangement exists, the price is fixed and determinable, the product is shipped in accordance with the customers’ Free On Board (FOB) shipping point terms and collectability is reasonably assured. In practice, the Company has not experienced or granted significant returns of product. Shipping fees charged to customers are included in revenue and shipping costs are included in costs of sales. | Revenue Recognition | ||
As disclosed in Note 7, Advance Pharmaceutical Company Ltd., a related party, accounted for 91% and 97%, during the years ended December 31, 2014 and 2013, respectively. | The Company generates revenues from sales of SUGARDOWN®. Revenue is recognized when there is persuasive evidence that an arrangement exists, the price is fixed and determinable, the product is shipped and collectability is reasonably assured. Revenue is recognized as product is shipped from an outside fulfillment operation. In practice, the Company has not experienced or granted significant returns of product. Shipping fees charged to customers are included in revenue and shipping costs are included in costs of sales. | |||
During the years ended December 31, 2013 and 2012, one customer accounted for 97% and 40%, respectively, of the Company’s revenue. During the year ended December 31, 2012, one additional customer accounted for 35% of the Company's revenue. | ||||
Accounts Receivable | Accounts receivable is stated at the amount management expects to collect from outstanding balances. Management establishes a reserve for doubtful accounts based on its assessment of the current status of individual accounts. Balances that remain outstanding after management has used reasonable collection efforts are written off against the allowance. There were no allowances for doubtful accounts as of December 31, 2014 and 2013. At December 31, 2014, there were no accounts receivable. At December 31, 2013, the Company had one customer that accounted for 100% of its accounts receivable. | Accounts Receivable | ||
Accounts receivable is stated at the amount management expects to collect from outstanding balances. Management establishes a reserve for doubtful accounts based on its assessment of the current status of individual accounts. Balances that remain outstanding after management has used reasonable collection efforts are written off against the allowance. There were no allowances for doubtful accounts as of December 31, 2013 and 2012. At December 31, 2013 and 2012, the Company has one customer that accounts for 100% of its accounts receivable. The Company believes there is minimal risk associated with this receivable. | ||||
Inventory | Inventory consists of raw materials, work-in-process and finished goods of SUGARDOWN®. Inventories are stated at the lower of cost (first-in, first-out) or market, not in excess of net realizable value. The Company adjusts the carrying value of its inventory for excess and obsolete inventory. The Company continues to monitor the valuation of its inventory. | Inventory | ||
Inventory consists of raw materials, work-in-process and finished goods of SUGARDOWN®. Inventories are stated at the lower of cost (first-in, first-out) or market, not in excess of net realizable value. The Company adjusts the carrying value of its inventory for excess and obsolete inventory. The Company continues to monitor the valuation of its inventory. | ||||
Property and Equipment | Property and equipment is depreciated using the straight-line method over the following estimated useful lives: | Property and Equipment | ||
Asset Category | Estimated Useful Life | Property and equipment is depreciated using the straight-line method over the following estimated useful lives: | ||
Office Furniture and Equipment | 5 years | |||
Computer Equipment and Software | 3 years | Asset Category | Estimated Useful Life | |
Office Furniture and Equipment | 5 years | |||
The Company begins to depreciate assets when they are placed in service. The costs of repairs and maintenance are expensed as incurred; major renewals and betterments are capitalized. Upon sale or retirement, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the statement of operations. For the years ended December 31, 2014 and 2013, the Company recorded depreciation expense of $6,662 and $2,818, respectively. | Computer Equipment and Software | 3 years | ||
The Company begins to depreciate assets when they are placed in service. The costs of repairs and maintenance are expensed as incurred; major renewals and betterments are capitalized. Upon sale or retirement, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the statement of operations. For the years ended December 31, 2013 and 2012, the Company recorded depreciation expense of $2,818 and $682, respectively. | ||||
Intangible Assets | Intangible assets consist of identifiable finite-lived assets acquired in business acquisitions. Acquired intangible assets are recorded at fair value on the date of acquisition and are amortized over their economic useful lives on a straight line basis. | Intangible Assets | ||
Intangible assets consist of identifiable finite-lived assets acquired in business acquisitions. Acquired intangible assets are recorded at fair value on the date of acquisition and are amortized over their economic useful lives on a straight line basis. | ||||
Goodwill | The Company follows the guidance of Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 350, Goodwill and Other Intangible Assets. Under ASC 350, goodwill and certain other intangible assets with indefinite lives are not amortized, but instead are reviewed for impairment at least annually. | Goodwill | ||
As the Company operates its business in one operating segment and one reporting unit, the Company’s goodwill is assessed at the Company level for impairment in the fourth quarter of each year or more frequently if events or changes in circumstances indicate that impairment may exist. The Company has the option to first assess qualitative factors to determine whether it is necessary to perform the two-step impairment test. If the Company’s qualitative assessment reveals that goodwill impairment is more likely than not, the Company performs the two-step impairment test. Alternatively, the Company may bypass the qualitative test and initiate goodwill impairment testing with the first step of the two-step goodwill impairment test. | The Company follows the guidance of Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 350, Goodwill and Other Intangible Assets. Under ASC 350, goodwill and certain other intangible assets with indefinite lives are not amortized, but instead are reviewed for impairment at least annually. | |||
During the first step of the goodwill impairment test, the Company compares the fair value of the reporting unit to its carrying value, including goodwill. If the fair value of a reporting unit exceeds its carrying value, then the Company concludes that no goodwill impairment has occurred. If the carrying value of the reporting unit exceeds its fair value, the Company performs the second step of the goodwill impairment test to measure possible goodwill impairment loss. If the carrying value of the reporting unit’s goodwill exceeds its implied fair value, then we would record an impairment loss equal to the difference. | As the Company operates its business in one operating segment and one reporting unit, the Company’s goodwill is assessed at the Company level for impairment in the fourth quarter of each year or more frequently if events or changes in circumstances indicate that impairment may exist. The Company has the option to first assess qualitative factors to determine whether it is necessary to perform the two-step impairment test. If the Company’s qualitative assessment reveals that goodwill impairment is more likely than not, the Company performs the two-step impairment test. Alternatively, the Company may bypass the qualitative test and initiate goodwill impairment testing with the first step of the two-step goodwill impairment test. | |||
The Company performed its impairment review of goodwill for the years ended December 31, 2014 and 2013, and concluded that no impairment existed. | During the first step of the goodwill impairment test, the Company compares the fair value of the reporting unit to its carrying value, including goodwill. If the fair value of a reporting unit exceeds its carrying value, then the Company concludes that no goodwill impairment has occurred. If the carrying value of the reporting unit exceeds its fair value, the Company performs the second step of the goodwill impairment test to measure possible goodwill impairment loss. If the carrying value of the reporting unit’s goodwill exceeds its implied fair value, then we would record an impairment loss equal to the difference. | |||
The Company performed its impairment review of goodwill utilizing the qualitative assessment method for the year ended December 31, 2013 and concluded that no impairment existed. The Company performed its impairment review of goodwill utilizing the quantitative assessment method for the year ended December 31, 2012 and concluded no impairment existed. | ||||
Impairment of Long-lived Assets | The Company reviews long-lived assets, which include the Company’s intangible assets, for impairment whenever events or changes in business circumstances indicate that the carrying amounts of the assets may not be fully recoverable. Future undiscounted cash flows of the underlying assets are compared to the assets’ carrying values. Adjustments to fair value are made if the sum of expected future undiscounted cash flows is less than book value. To date, no adjustments for impairment have been made. | Impairment of Long-lived Assets | ||
The Company reviews long-lived assets, which include the Company’s intangible assets, for impairment whenever events or changes in business circumstances indicate that the carrying amounts of the assets may not be fully recoverable. Future undiscounted cash flows of the underlying assets are compared to the assets’ carrying values. Adjustments to fair value are made if the sum of expected future undiscounted cash flows is less than book value. To date, no adjustments for impairment have been made. | ||||
Loss per Share | Basic net loss per share is computed based on the net loss for the period divided by the weighted average actual shares outstanding during the period. Diluted net loss per share is computed based on the net loss for the period divided by the weighted average number of common shares and common equivalent shares outstanding during each period unless the effect of such common equivalent shares would be anti-dilutive. Common stock equivalents represent the dilutive effect of the assumed exercise of certain outstanding stock options using the treasury stock method. The weighted average number of common shares for the year ended December 31, 2014 did not include 6,483,400 and 12,516,669 options and warrants, respectively, because of their anti-dilutive effect. The weighted average number of common shares for the year ended December 31, 2013 did not include 5,741,400 and 11,974,999 options and warrants, respectively, because of their anti-dilutive effect. | Loss per Share | ||
Basic net loss per share is computed based on the net loss for the period divided by the weighted average actual shares outstanding during the period. Diluted net loss per share is computed based on the net loss for the period divided by the weighted average number of common shares and common equivalent shares outstanding during each period unless the effect of such common equivalent shares would be anti-dilutive. Common stock equivalents represent the dilutive effect of the assumed exercise of certain outstanding stock options using the treasury stock method. The weighted average number of common shares for the year ended December 31, 2013 did not include 5,741,400 and 11,974,999 options and warrants, respectively, because of their anti-dilutive effect. The weighted average number of common shares for the year ended December 31, 2012 did not include 7,708,400 and 645,000 options and warrants, respectively, because of their anti-dilutive effect. | ||||
Income Taxes | The Company accounts for income taxes under the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to 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 in effect for the year in which those temporary differences are expected to be recovered or be settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is provided when it is more likely than not that some portion of the gross deferred tax asset will not be realized. The Company records interest and penalties related to income taxes as a component of provision for income taxes. The Company did not recognize any interest and penalty expense for the years ended December 31, 2014 and 2013. | Income Taxes | ||
The Company accounts for income taxes under the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to 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 in effect for the year in which those temporary differences are expected to be recovered or be settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is provided when it is more likely than not that some portion of the gross deferred tax asset will not be realized. The Company records interest and penalties related to income taxes as a component of provision for income taxes. The Company did not recognize any interest and penalty expense for the years ended December 31, 2013 and 2012. | ||||
Advertising Costs | Advertising costs are expensed as incurred and are reported as a component of selling, general and administrative expenses in the selling and marketing expenses in the statements of operations. The Company did not incur any advertising costs for the year ended December 31, 2014, primarily due to its marketing agreement with Benchworks who bears the expense for marketing initiatives. The Company incurred advertising costs of $25,068 for the year ended December 31, 2013. | Advertising Costs | ||
Advertising costs are expensed as incurred and are reported as a component of selling, general and administrative expenses in the selling and marketing expenses in the statements of operations. Advertising costs for the years ended December 31, 2013 and 2012 were $25,068 and $51,497, respectively. | ||||
Research and Development Costs | Research and development expenditures are charged to the statement of operations as incurred. Such costs include proprietary research and development activities, purchased research and development, and expenses associated with research and development contracts, whether performed by the Company or contracted with independent third parties. | Research and Development Costs | ||
Research and development expenditures are charged to the statement of operations as incurred. Such costs include proprietary research and development activities, purchased research and development, and expenses associated with research and development contracts, whether performed by the Company or contracted with independent third parties. | ||||
Fair Value of Financial Instruments | Fair values determined by Level 1 inputs utilize observable data such as quoted prices in active markets. Fair values determined by Level 2 inputs utilize data points other than quoted prices in active markets that are observable either directly or indirectly. Fair values determined by Level 3 inputs utilize unobservable data points in which there is little or no market data, which require the reporting entity to develop its own assumptions. The Company’s financial instruments consist of cash and cash equivalents, accounts payable, accrued expenses, and notes payable. The carrying value of cash and cash equivalents, accounts payable and accrued expenses approximates fair value due to their short-term nature using level 3 inputs as defined above. The carrying value of the notes payable as of December 31, 2014 and 2013, evaluated using level 2 inputs defined above based on quoted market prices on rates available to the Company for debt with similar terms and maturities, approximates the fair value. | Fair Value of Financial Instruments | ||
The Company’s financial instruments consist of cash and cash equivalents, accounts payable, accrued expenses, and notes payable. The carrying value of cash and cash equivalents, accounts payable and accrued expenses approximates fair value due to their short-term nature. | ||||
The carrying value of the notes payable as of December 31, 2013 and 2012, is not materially different from the fair value of the notes payable. | ||||
Concentration of Credit Risk | Financial instruments that potentially subject the Company to concentrations of credit risk are principally cash and cash equivalents. The Company places its cash and cash equivalents in highly rated financial institutions. The Company maintains cash and cash equivalent balances with financial institutions that occasionally exceed federally insured limits. The Company has not experienced any losses related to these balances, and management believes its credit risk to be minimal. | Concentration of Credit Risk | ||
Financial instruments that potentially subject the Company to concentrations of credit risk are principally cash and cash equivalents. The Company places its cash and cash equivalents in highly rated financial institutions. The Company maintains cash and cash equivalent balances with financial institutions that occasionally exceed federally insured limits. The Company has not experienced any losses related to these balances, and management believes its credit risk to be minimal. | ||||
Stock-Based Compensation | Stock–based compensation, including grants of employee and non-employee stock options and modifications to existing stock options, is recognized in the income statement based on the estimated fair value of the awards. The Company uses the Black-Scholes option pricing model to determine the fair value of options granted and recognizes the compensation cost of share-based awards on a straight-line basis over the requisite service period, which is generally the vesting period of the award. | Stock-Based Compensation | ||
The determination of the fair value of share-based payment awards utilizing the Black-Scholes model is affected by the stock price and a number of assumptions, including expected volatility, expected life, risk-free interest rate and expected dividends. The Company has a limited history of market prices of its common stock and as such volatility is estimated using historical volatilities of similar public entities. The expected life of the awards is estimated based on the simplified method. The risk-free interest rate assumption is based on observed interest rates appropriate for the terms of our awards. The dividend yield assumption is based on history and expectation of paying no dividends. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Stock-based compensation expense is recognized in the financial statements on a straight-line basis over the requisite service period, based on awards that are ultimately expected to vest. | Stock–based compensation, including grants of employee and non-employee stock options and modifications to existing stock options, is recognized in the income statement based on the estimated fair value of the awards. The Company uses the Black-Scholes option pricing model to determine the fair value of options granted and recognizes the compensation cost of share-based awards on a straight-line basis over the vesting period of the award. | |||
The Company grants stock options to non-employee consultants from time to time in exchange for services performed for the Company. Equity instruments granted to non-employees are subject to periodic revaluation over their vesting terms. In general, the options vest over the contractual period of the respective consulting arrangement and, therefore, the Company revalues the options periodically and records additional compensation expense related to these options over the remaining vesting period. | The determination of the fair value of share-based payment awards utilizing the Black-Scholes model is affected by the stock price and a number of assumptions, including expected volatility, expected life, risk-free interest rate and expected dividends. The Company has a limited history of market prices of its common stock and as such volatility is estimated using historical volatilities of similar public entities. The expected life of the awards is estimated based on the simplified method. The risk-free interest rate assumption is based on observed interest rates appropriate for the terms of our awards. The dividend yield assumption is based on history and expectation of paying no dividends. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Stock-based compensation expense is recognized in the financial statements on a straight-line basis over the vesting period, based on awards that are ultimately expected to vest. | |||
The Company grants stock options to non-employee consultants from time to time in exchange for services performed for the Company. Equity instruments granted to non-employees are subject to periodic revaluation over their vesting terms. In general, the options vest over the contractual period of the respective consulting arrangement and, therefore, the Company revalues the options periodically and records additional compensation expense related to these options over the remaining vesting period. | ||||
Recent Accounting Pronouncements | In July 2013, the FASB issued ASU 2013-11, “Income Taxes, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists” (“ASU 2013-11”). ASU 2013-11 states that an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward when settlement is available under the tax law of the applicable taxing jurisdiction as of the balance sheet reporting date. The adoption of ASU 2013-11 in 2014 did not affect the Company's results of operations, cash flows, or financial position. | Recent Accounting Pronouncements | ||
In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers (Topic 606).” ASU No 2014-09 supersedes the revenue recognition requirements in “Topic 605, Revenue Recognition” and requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 is effective retrospectively for annual or interim reporting periods beginning after December 15, 2016, with early application not permitted. The Company is currently evaluating the impact of this standard on its financial statements. | In July 2013, the FASB issued ASU 2013-11, “Income Taxes, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists” (“ASU 2013-11”). ASU 2013-11 states that an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except as follows. To the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. The amendments in ASU 2013-11 are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013, with early adoption permitted. The amendments should be applied prospectively to all unrecognized tax benefits that exist at the effective date. Retrospective application is permitted. The adoption of this guidance is not expected to have a material impact on the Company’s financial statements. | |||
In August 2014, the FASB issued Accounting Standard Update (ASU) 2014-15, Presentation of Financial Statements – Going Concern. The new standard addresses management’s responsibility to evaluate whether there is a substantial doubt about the Company’s ability to continue as a going concern. It requires management to perform interim and annual assessments of the Company ability to continue as a going concern and to provide related disclosures. The standard will be effective for annual periods ending after December 15, 2016, and interim periods within annual periods beginning after December 15, 2016. The Company is currently evaluating the impact of this standard on its financial statements. | ||||
2_SUMMARY_OF_SIGNIFICANT_ACCOU2
2. SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES (Tables) | 12 Months Ended | |||
Dec. 31, 2014 | Dec. 31, 2013 | |||
Summary Of Significant Accounting Practices Tables | ||||
Property and Equipment | Asset Category | Estimated Useful Life | Asset Category | Estimated Useful Life |
Office Furniture and Equipment | 5 years | Office Furniture and Equipment | 5 years | |
Computer Equipment and Software | 3 years | Computer Equipment and Software | 3 years |
3_INVENTORIES_Tables
3. INVENTORIES (Tables) | 12 Months Ended | |||||||||||||||||
Dec. 31, 2014 | Dec. 31, 2013 | |||||||||||||||||
Inventory Disclosure [Abstract] | ||||||||||||||||||
Components of inventories | 2014 | 2013 | 2013 | 2012 | ||||||||||||||
Raw materials | $ | 85,133 | $ | 7,672 | Raw materials | $ | 7,672 | $ | 13,125 | |||||||||
Work in process | - | - | Work in process | - | - | |||||||||||||
Finished goods | 112,836 | 102,953 | Finished goods | 102,953 | 3,684 | |||||||||||||
Total | $ | 197,969 | $ | 110,625 | Total | $ | 110,625 | $ | 16,809 |
4_ACCRUED_EXPENSES_Tables
4. ACCRUED EXPENSES (Tables) | 12 Months Ended | |||||||||||||||||
Dec. 31, 2014 | Dec. 31, 2013 | |||||||||||||||||
Payables and Accruals [Abstract] | ||||||||||||||||||
Schedule of accrued expenses | 2014 | 2013 | 2013 | 2012 | ||||||||||||||
Professional fees | $ | 132,243 | $ | 331,494 | Professional fees | $ | 331,494 | $ | 95,567 | |||||||||
Stock subscription | - | 270,000 | Stock subscription | 270,000 | - | |||||||||||||
Interest | 82,760 | 63,447 | Interest | 63,447 | 44,090 | |||||||||||||
Other current liabilities | 63,174 | 56,024 | Other current liabilities | 56,024 | 7,117 | |||||||||||||
Total | $ | 278,177 | $ | 720,965 | Total | $ | 720,965 | $ | 146,774 |
5_STOCKHOLDERS_EQUITY_Tables
5. STOCKHOLDERS' EQUITY (Tables) | 12 Months Ended | |||||||||||
Dec. 31, 2014 | ||||||||||||
Stockholders Equity Tables | ||||||||||||
Outstanding and exercisable common stock warrants | Offering | Number of Shares Issuable | Exercise Price | Expiration Date | ||||||||
March 2012 Private Placement | 20,000 | $ | 1.15 | 20-Mar-17 | ||||||||
November 2012 Private Placement | 625,000 | $ | 1 | November 13, 2017 | ||||||||
February 2013 Issued to Consultant | 100,000 | $ | 1 | 1-Feb-18 | ||||||||
February 2013 Private Placement | 250,000 | $ | 1 | 27-Feb-18 | ||||||||
July 2013 Private Placement | 3,333,320 | $ | 0.5 | 23-Jul-18 | ||||||||
August 2013 Private Placement | 1,414,113 | $ | 0.5 | 6-Aug-18 | ||||||||
August 2013 Private Placement | 1,130,223 | $ | 0.5 | 30-Aug-18 | ||||||||
August 2013 Issued to Placement Agent | 1,808,849 | $ | 0.3 | 30-Aug-18 | ||||||||
September 2013 Private Placement | 2,951,828 | $ | 0.5 | 30-Sep-18 | ||||||||
October 2013 Private Placement | 76,666 | $ | 0.50 | 30-Sep-18 | ||||||||
October 2013 Issued to Consultant | 265,000 | $ | 0.5 | 15-Oct-18 | ||||||||
March 2014 Private Placement | 416,670 | $ | 1 | 31-Mar-19 | ||||||||
August 2014 Private Placement | 125,000 | $ | 0.6 | 7-Aug-19 | ||||||||
12,516,669 |
6_STOCK_OPTION_PLAN_AND_STOCKB1
6. STOCK OPTION PLAN AND STOCK-BASED COMPENSATION (Tables) | 12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dec. 31, 2014 | Dec. 31, 2013 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock Option Plan And Stock-based Compensation Tables | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Assumptions for fair value of stock options | 2014 | 2013 | 2013 | 2012 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Risk-free interest rate | 0.5% - 2.3 | % | 0.5% - 1.6 | % | Risk-free interest rate | 0.47% - 1.55 | % | 0.43% - 1.27 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expected dividend yield | 0 | % | 0 | % | Expected dividend yield | 0 | % | 0 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Volatility factor | 85% - 98 | % | 85 - 96 | % | Volatility factor | 85% - 96 | % | 85 - 90 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expected life of option | 2.50 to 7 years | 3.25 to 6 years | Expected life of option | 3.25 to 6 years | 3.50 to 7 years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Activity under Stock Plans | Shares | Exercise Price per Share | Weighted Average Exercise Price per Share | Shares | Exercise Price per Share | Weighted Average Exercise Price per Share | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Outstanding as of December 31, 2012 | 7,708,400 | $ | 0.10-1.85 | $ | 0.42 | Outstanding as of December 31, 2011 | 1,578,400 | $ | 0.10-1.85 | $ | 0.19 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Granted | 708,000 | 0.42-1.00 | 0.68 | Granted | 6,130,000 | 0.10-0.50 | 0.48 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Exercised | (13,104 | ) | 0.5 | 0.5 | Exercised | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Options forfeited/cancelled | (2,661,896 | ) | 0.42-1.00 | 0.52 | Options forfeited/cancelled | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Outstanding as of December 31, 2013 | 5,741,400 | $ | 0.10-1.85 | $ | 0.4 | Outstanding as of December 31, 2012 | 7,708,400 | $ | 0.10-1.85 | $ | 0.42 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Granted | 1,777,000 | 0.37-1.21 | 0.94 | Granted | 708,000 | 0.42-1.00 | 0.68 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Exercised | (84,016 | ) | 0.10-0.57 | 0.54 | Exercised | (13,104 | ) | 0.5 | 0.5 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Options forfeited/cancelled | (950,984 | ) | 0.57-1.21 | 0.95 | Options forfeited/cancelled | (2,661,896 | ) | 0.42-1.00 | 0.52 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Outstanding as of December 31, 2014 | 6,483,400 | $ | 0.10-1.85 | $ | 0.47 | Outstanding as of December 31, 2013 | 5,741,400 | $ | 0.10-1.85 | $ | 0.4 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Information about stock options vested or expected to vest | Vested or Expected to Vest | Exercisable Options | Vested or Expected to Vest | Exercisable Options | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Weighted | Weighted | Weighted | Weighted | Weighted | Weighted | Weighted | Weighted | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Average | Average | Average | Average | Average | Average | Average | Average | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Exercise | Remaining | Aggregate | Exercise | Remaining | Aggregate | Exercise | Remaining | Aggregate | Number | Exercise | Remaining | Aggregate | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Exercise | Number of | Price Per | Contractual | Intrinsic | Number of | Price | Contractual | Intrinsic | Exercise | Number of | Price Per | Contractual | Intrinsic | of | Price | Contractual | Intrinsic | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Price | Options | Share | Life (Years) | Value | Options | Per Share | Life (Years) | Value | Price | Options | Share | Life (Years) | Value | Options | Per Share | Life (Years) | Value | |||||||||||||||||||||||||||||||||||||||||||||||||||||
$ | 0.1 | 1,795,000 | $ | 0.1 | 1.87 | $ | 987,250 | 1,795,000 | $ | 0.1 | 1.87 | $ | 987,250 | $ | 0.1 | 1,800,000 | $ | 0.1 | 2.87 | $ | 2,376,000 | 1,706,250 | $ | 0.1 | 2.88 | $ | 2,252,250 | |||||||||||||||||||||||||||||||||||||||||||
0.37 | 58,000 | 0.37 | 7.67 | 16,240 | 38,000 | 0.37 | 8.16 | 10,640 | 0.42 | 63,000 | 0.42 | 7.01 | 63,000 | 63,000 | 0.42 | 7.01 | 63,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
0.42 | 63,000 | 0.42 | 6.01 | 14,490 | 63,000 | 0.42 | 6.01 | 14,490 | 0.5 | 3,310,000 | 0.5 | 4.33 | 3,045,200 | 2,830,835 | 0.5 | 4.37 | 2,604,368 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
0.43 | 100,000 | 0.43 | 9.61 | 22,000 | - | 0.43 | - | - | 0.57 | 400,000 | 0.57 | 4.62 | 340,000 | 133,280 | 0.57 | 4.62 | 113,288 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
0.5 | 3,710,000 | 0.5 | 4 | 556,500 | 3,376,666 | 0.5 | 3.45 | 506,500 | 1 | 90,000 | 1 | 4.14 | 37,800 | 67,500 | 1 | 4.14 | 28,350 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
0.69 | 100,000 | 0.69 | 9.21 | - | 100,000 | 0.69 | 9.21 | - | 1.85 | 78,400 | 1.85 | 1.75 | - | 78,400 | 1.85 | 1.75 | - | |||||||||||||||||||||||||||||||||||||||||||||||||||||
1.21 | 579,000 | 1.21 | 9.07 | - | 497,750 | 1.21 | 9.06 | - | $ | 0.10-1.85 | 5,741,400 | $ | 0.4 | 3.89 | $ | 5,862,000 | 4,879,265 | $ | 0.39 | 3.85 | $ | 5,061,256 | ||||||||||||||||||||||||||||||||||||||||||||||||
1.85 | 78,400 | 1.85 | 0.75 | - | 78,400 | 1.85 | 0.75 | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
$ | 0.10-1.85 | 6,483,400 | $ | 0.47 | 4.04 | $ | 1,596,480 | 5,948,816 | $ | 0.46 | 3.56 | $ | 1,518,880 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of non-vested stock options | Number of | Weighted-Average | Number of | Weighted-Average | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Options | Grant-Date | Options | Grant-Date | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value | Fair Value | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Non-vested as of December 31, 2012 | 5,389,583 | $ | 0.3 | Non-vested as of December 31, 2011 | 882,950 | $ | 0.2 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Granted | 708,000 | 0.21 | Granted | 6,130,000 | 0.3 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Forfeited | (2,655,000 | ) | 0.3 | Forfeited | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Vested | (2,580,448 | ) | 0.29 | Vested | (1,623,367 | ) | 0.27 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Non-vested as of December 31, 2013 | 862,135 | $ | 0.25 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Granted | 1,777,000 | 0.68 | Non-vested as of December 31, 2012 | 5,389,583 | $ | 0.3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Forfeited | (552,970 | ) | 0.62 | Granted | 708,000 | 0.21 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Vested | (1,601,581 | ) | 0.55 | Forfeited | (2,655,000 | ) | 0.3 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Non-vested as of December 31, 2014 | 484,584 | $ | 0.39 | Vested | (2,580,448 | ) | 0.29 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Non-vested as of December 31, 2013 | 862,135 | $ | 0.25 |
8_INTANGIBLE_ASSETS_Tables
8. INTANGIBLE ASSETS (Tables) | 12 Months Ended | |||||||||||||||||
Dec. 31, 2014 | Dec. 31, 2013 | |||||||||||||||||
Intangible Assets Tables | ||||||||||||||||||
Schedule of Intangible Assets | 2014 | 2013 | 2013 | 2012 | ||||||||||||||
SUGARDOWN® technology and patent applications | $ | 900,000 | $ | 900,000 | SUGARDOWN® technology and provisional patents | $ | 900,000 | $ | 900,000 | |||||||||
Less accumulated amortization | (267,857 | ) | (203,571 | ) | Less accumulated amortization | (203,571 | ) | (139,286 | ) | |||||||||
Intangible assets, net | $ | 632,143 | $ | 696,429 | Intangible assets, net | $ | 696,429 | $ | 760,714 | |||||||||
Schedule of future amortization expense | Fiscal year | Fiscal year | ||||||||||||||||
2015 | $ | 64,286 | 2014 | $ | 64,286 | |||||||||||||
2016 | 64,286 | 2015 | 64,286 | |||||||||||||||
2017 | 64,286 | 2016 | 64,286 | |||||||||||||||
2018 | 64,286 | 2017 | 64,286 | |||||||||||||||
2019 | 64,286 | 2018 | 64,286 | |||||||||||||||
Thereafter | 310,713 | Thereafter | 374,999 | |||||||||||||||
$ | 632,143 | $ | 696,429 |
9_PROVISION_FOR_INCOME_TAXES_T
9. PROVISION FOR INCOME TAXES (Tables) | 12 Months Ended | |||||||||||||||||
Dec. 31, 2014 | Dec. 31, 2013 | |||||||||||||||||
Income Tax Disclosure [Abstract] | ||||||||||||||||||
Income tax rate reconciliation | ||||||||||||||||||
2014 | 2013 | 2013 | 2012 | |||||||||||||||
Net operating loss carryforwards | 34 | % | 34 | % | Net operating loss carryforwards | 34.0% | 34.0% | |||||||||||
State taxes, net of federal benefit | 5.2 | % | 5.5 | % | State taxes, net of federal benefit | 5.5 | % | 6.3 | % | |||||||||
Federal research and development tax credit | 1.3 | % | 0.2 | % | Federal research and development tax credit | 0.2 | % | 0 | % | |||||||||
Other | (2.5) | % | (0.5) | % | Other | (0.5)% | 0 | % | ||||||||||
Change in deferred tax asset valuation allowance | -38 | % | -39.2 | % | Change in deferred tax asset valuation allowance | -39.2 | % | -40.3 | % | |||||||||
Effective income tax rate | 0 | % | 0 | % | Effective income tax rate | 0.00% | 0.0% | |||||||||||
Schedule of deferred tax assets | ||||||||||||||||||
2014 | 2013 | 2013 | 2012 | |||||||||||||||
Net operating loss carryforwards | $ | 3,326,788 | $ | 1,781,334 | Net operating loss carryforwards | $ | 1,781,334 | $ | 1,064,457 | |||||||||
Tax credit carryforwards | 72,685 | 12,499 | Tax credit carryforwards | 12,499 | - | |||||||||||||
Non-qualified stock options | 1,006,472 | 857,613 | Non-qualified stock options | 857,613 | - | |||||||||||||
Other temporary differences | 194,895 | 164,379 | Other temporary differences | 164,379 | 21,786 | |||||||||||||
Gross deferred tax assets | 4,600,840 | 2,815,825 | Gross deferred tax assets | 2,815,825 | 1,086,243 | |||||||||||||
Valuation allowance | (4,600,840 | ) | (2,815,825 | ) | Valuation allowance | -2,815,825 | (1,086,243 | ) | ||||||||||
Net deferred tax assets | $ | - | $ | - | ||||||||||||||
Net deferred tax assets | $ | - | $ | - | ||||||||||||||
10_COMMITMENTS_AND_CONTINGENCI1
10. COMMITMENTS AND CONTINGENCIES (Tables) | 12 Months Ended | |||||||||
Dec. 31, 2014 | Dec. 31, 2013 | |||||||||
Commitments And Contingencies Tables | ||||||||||
Future minimum lease payments | Fiscal Year | Fiscal Year | ||||||||
2015 | $ | 62,169 | 2014 | $ | 60,093 | |||||
2016 | 64,299 | 2015 | 62,169 | |||||||
2017 | 66,519 | 2016 | 64,299 | |||||||
2018 | 16,770 | 2017 | 66,519 | |||||||
$ | 209,757 | 2018 | 16,770 | |||||||
$ | 269,850 |
2_SUMMARY_OF_SIGNIFICANT_ACCOU3
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) (USD $) | 12 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
Depreciation expense | $6,662 | $2,818 | $682 |
Advertising Costs | $0 | $25,068 | $51,497 |
Stock Options [Member] | |||
Anti dilutive weighted average number of common shares | 6,483,400 | 5,741,400 | 7,708,400 |
Warrant [Member] | |||
Anti dilutive weighted average number of common shares | 12,516,669 | 11,974,999 | 645,000 |
2_SUMMARY_OF_SIGNIFICANT_ACCOU4
2. SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES (Details) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Office Furniture and Equipment [Member] | ||
Estimated Useful Life | 5 years | 5 years |
Computer Equipment and Software [Member] | ||
Estimated Useful Life | 3 years | 3 years |
3_INVENTORIES_Details
3. INVENTORIES (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
Inventory Disclosure [Abstract] | |||
Raw materials | $85,133 | $7,672 | $13,125 |
Work-in-process | 0 | 0 | 0 |
Finished goods | 112,836 | 102,953 | 3,684 |
Inventory, net | $197,969 | $110,625 | $16,809 |
4_ACCRUED_EXPENSES_Details
4. ACCRUED EXPENSES (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
Payables and Accruals [Abstract] | |||
Professional fees | $132,243 | $331,494 | $95,567 |
Stock subscription | 0 | 270,000 | 0 |
Interest | 82,760 | 63,447 | 44,090 |
Other current liabilities | 63,174 | 56,024 | 7,117 |
Total | $278,177 | $720,965 | $146,774 |
6_STOCK_OPTION_PLAN_AND_STOCKB2
6. STOCK OPTION PLAN AND STOCK-BASED COMPENSATION (Details) | 12 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
Risk-free interest rate, Minimum | 0.50% | 0.50% | 0.43% |
Risk-free interest rate, Maximum | 2.30% | 1.60% | 1.27% |
Expected dividend yield | 0.00% | 0.00% | 0.00% |
Volatility factor, Minimum | 85.00% | 85.00% | 85.00% |
Volatility factor, Maximum | 98.00% | 96.00% | 90.00% |
Minimum [Member] | |||
Expected life of option | 2 years 6 months | 3 years 3 months | 3 years 6 months |
Maximum [Member] | |||
Expected life of option | 7 years | 6 years | 7 years |
6_STOCK_OPTION_PLAN_AND_STOCKB3
6. STOCK OPTION PLAN AND STOCK-BASED COMPENSATION (Details 1) (USD $) | 12 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
Stock Option Plan And Stock-based Compensation Details 1 | |||
Outstanding Beginning | 5,741,400 | 7,708,400 | 1,578,400 |
Granted, Shares | 1,777,000 | 708,000 | 6,130,000 |
Exercised, Shares | -84,016 | -13,104 | 0 |
Options forfeited/cancelled, Shares | -950,984 | -2,661,896 | 0 |
Outstanding End | 6,483,400 | 5,741,400 | 7,708,400 |
Outstanding Beginning, Exercise Price Per Share, Minimum | $0.10 | $0.10 | $0.10 |
Outstanding Beginning, Exercise Price Per Share, Maximum | $1.85 | $1.85 | $1.85 |
Granted, Exercise Price Per Share, Minimum | 0.37 | 0.42 | 0.1 |
Granted, Exercise Price Per Share, Maximum | 1.21 | 1 | 0.5 |
Exercised, Exercise Price Per Share | $0.50 | $0 | |
Exercised, Exercise Price Per Share, Minimum | $0.10 | ||
Exercised, Exercise Price Per Share, Maximum | $0.57 | ||
Options forfeited/cancelled, Exercise Price Per Share, Minimum | $0.57 | $0.42 | $0 |
Options forfeited/cancelled, Exercise Price Per Share, Maximum | $1.21 | $1 | $0 |
Outstanding End, Exercise Price Per Share, Minimum | $0.10 | $0.10 | $0.10 |
Outstanding End, Exercise Price Per Share, Maximum | $1.85 | $1.85 | $1.85 |
Outstanding Beginning, Weighted Average Exercise Price | $0.40 | $0.42 | $0.19 |
Granted, Weighted Average Exercise Price | $0.94 | $0.68 | $0.48 |
Exercised, Weighted Average Exercise Price | $0.54 | $0.50 | $0 |
Options forfeited/cancelled, Weighted Average Exercise Price | $0.95 | $0.52 | $0 |
Outstanding End, Weighted Average Exercise Price | $0.47 | $0.40 | $0.42 |
6_STOCK_OPTION_PLAN_AND_STOCKB4
6. STOCK OPTION PLAN AND STOCK-BASED COMPENSATION (Details 2) (USD $) | 12 Months Ended | |||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | |
Vested or Expected to Vest | ||||
Number of Options | 6,483,400 | 5,741,400 | 7,708,400 | 1,578,400 |
Exercisable Options | ||||
Aggregate Intrinsic Value | $1,518,880 | $5,061,256 | $418,000 | |
Minimum [Member] | ||||
Vested or Expected to Vest | ||||
Exercise Price | $0.10 | $0.10 | ||
Maximum [Member] | ||||
Vested or Expected to Vest | ||||
Exercise Price | $1.85 | $1.85 | ||
Range 1 | ||||
Vested or Expected to Vest | ||||
Exercise Price | $0.10 | $0.10 | ||
Number of Options | 1,795,000 | 1,800,000 | ||
Weighted Average Exercise Price Per Share | $0.10 | $0.10 | ||
Weighted Average Remaining Contractual Life (Years) | 1 year 10 months 13 days | 2 years 10 months 17 days | ||
Aggregate Intrinsic Value | 987,250 | 2,376,000 | ||
Exercisable Options | ||||
Number of Shares Exercisable | 1,795,000 | 1,706,250 | ||
Weighted Average Exercise Price Per Share | $0.10 | $0.10 | ||
Weighted Average Remaining Contractual Life (Years) | 1 year 10 months 13 days | 2 years 10 months 17 days | ||
Aggregate Intrinsic Value | 987,250 | 2,252,250 | ||
Range 2 | ||||
Vested or Expected to Vest | ||||
Exercise Price | $0.37 | |||
Number of Options | 58,000 | |||
Weighted Average Exercise Price Per Share | $0.37 | |||
Weighted Average Remaining Contractual Life (Years) | 7 years 8 months 9 days | |||
Aggregate Intrinsic Value | 16,240 | |||
Exercisable Options | ||||
Number of Shares Exercisable | 38,000 | |||
Weighted Average Exercise Price Per Share | $0.37 | |||
Weighted Average Remaining Contractual Life (Years) | 8 years 1 month 28 days | |||
Aggregate Intrinsic Value | 10,640 | |||
Range 3 | ||||
Vested or Expected to Vest | ||||
Exercise Price | $0.42 | $0.42 | ||
Number of Options | 63,000 | 63,000 | ||
Weighted Average Exercise Price Per Share | $0.42 | $0.42 | ||
Weighted Average Remaining Contractual Life (Years) | 6 years 4 days | 7 years 4 days | ||
Aggregate Intrinsic Value | 14,490 | 63,000 | ||
Exercisable Options | ||||
Number of Shares Exercisable | 63,000 | 63,000 | ||
Weighted Average Exercise Price Per Share | $0.42 | $0.42 | ||
Weighted Average Remaining Contractual Life (Years) | 6 years 4 days | 7 years 4 days | ||
Aggregate Intrinsic Value | 14,490 | 63,000 | ||
Range 4 | ||||
Vested or Expected to Vest | ||||
Exercise Price | $0.43 | |||
Number of Options | 100,000 | |||
Weighted Average Exercise Price Per Share | $0.43 | |||
Weighted Average Remaining Contractual Life (Years) | 9 years 7 months 10 days | |||
Aggregate Intrinsic Value | 22,000 | |||
Exercisable Options | ||||
Number of Shares Exercisable | 0 | |||
Weighted Average Exercise Price Per Share | $0.43 | |||
Aggregate Intrinsic Value | 0 | |||
Range 5 | ||||
Vested or Expected to Vest | ||||
Exercise Price | $0.50 | $0.50 | ||
Number of Options | 3,710,000 | 3,310,000 | ||
Weighted Average Exercise Price Per Share | $0.50 | $0.50 | ||
Weighted Average Remaining Contractual Life (Years) | 4 years | 4 years 4 months | ||
Aggregate Intrinsic Value | 556,500 | 3,045,200 | ||
Exercisable Options | ||||
Number of Shares Exercisable | 3,376,666 | 2,830,835 | ||
Weighted Average Exercise Price Per Share | $0.50 | $0.50 | ||
Weighted Average Remaining Contractual Life (Years) | 3 years 5 months 12 days | 4 years 4 months 13 days | ||
Aggregate Intrinsic Value | 506,500 | 2,604,368 | ||
Range 6 | ||||
Vested or Expected to Vest | ||||
Exercise Price | $0.69 | |||
Number of Options | 100,000 | |||
Weighted Average Exercise Price Per Share | $0.69 | |||
Weighted Average Remaining Contractual Life (Years) | 9 years 2 months 16 days | |||
Aggregate Intrinsic Value | 0 | |||
Exercisable Options | ||||
Number of Shares Exercisable | 100,000 | |||
Weighted Average Exercise Price Per Share | $0.69 | |||
Weighted Average Remaining Contractual Life (Years) | 9 years 2 months 16 days | |||
Aggregate Intrinsic Value | 0 | |||
Range 7 | ||||
Vested or Expected to Vest | ||||
Exercise Price | $1.21 | |||
Number of Options | 579,000 | |||
Weighted Average Exercise Price Per Share | $1.21 | |||
Weighted Average Remaining Contractual Life (Years) | 9 years 25 days | |||
Aggregate Intrinsic Value | 0 | |||
Exercisable Options | ||||
Number of Shares Exercisable | 497,750 | |||
Weighted Average Exercise Price Per Share | $1.21 | |||
Weighted Average Remaining Contractual Life (Years) | 9 years 22 days | |||
Aggregate Intrinsic Value | 0 | |||
Range 8 | ||||
Vested or Expected to Vest | ||||
Exercise Price | $1.85 | $1.85 | ||
Number of Options | 78,400 | 78,400 | ||
Weighted Average Exercise Price Per Share | $1.85 | $1.85 | ||
Weighted Average Remaining Contractual Life (Years) | 9 months | 1 year 9 months | ||
Aggregate Intrinsic Value | 0 | 0 | ||
Exercisable Options | ||||
Number of Shares Exercisable | 78,400 | 78,400 | ||
Weighted Average Exercise Price Per Share | $1.85 | $1.85 | ||
Weighted Average Remaining Contractual Life (Years) | 9 months | 1 year 9 months | ||
Aggregate Intrinsic Value | 0 | 0 | ||
Range Totals | ||||
Vested or Expected to Vest | ||||
Exercise Price | ||||
Number of Options | 6,483,400 | 5,741,400 | ||
Weighted Average Exercise Price Per Share | $0.47 | $0.40 | ||
Weighted Average Remaining Contractual Life (Years) | 4 years 14 days | 3 years 10 months 20 days | ||
Aggregate Intrinsic Value | 1,596,480 | 5,862,000 | ||
Exercisable Options | ||||
Number of Shares Exercisable | 5,948,816 | 4,879,265 | ||
Weighted Average Exercise Price Per Share | $0.46 | $0.39 | ||
Weighted Average Remaining Contractual Life (Years) | 3 years 6 months 22 days | 3 years 10 months 6 days | ||
Aggregate Intrinsic Value | 1,518,880 | 5,061,256 | ||
Range 9 | ||||
Vested or Expected to Vest | ||||
Exercise Price | $0.57 | |||
Number of Options | 400,000 | |||
Weighted Average Exercise Price Per Share | $0.57 | |||
Weighted Average Remaining Contractual Life (Years) | 4 years 7 months 13 days | |||
Aggregate Intrinsic Value | 340,000 | |||
Exercisable Options | ||||
Number of Shares Exercisable | 133,280 | |||
Weighted Average Exercise Price Per Share | $0.57 | |||
Weighted Average Remaining Contractual Life (Years) | 4 years 7 months 13 days | |||
Aggregate Intrinsic Value | 113,288 | |||
Range 10 | ||||
Vested or Expected to Vest | ||||
Exercise Price | $1 | |||
Number of Options | 90,000 | |||
Weighted Average Exercise Price Per Share | $1 | |||
Weighted Average Remaining Contractual Life (Years) | 4 years 1 month 20 days | |||
Aggregate Intrinsic Value | 37,800 | |||
Exercisable Options | ||||
Number of Shares Exercisable | 67,500 | |||
Weighted Average Exercise Price Per Share | $1 | |||
Weighted Average Remaining Contractual Life (Years) | 4 years 1 month 20 days | |||
Aggregate Intrinsic Value | $28,350 |
6_STOCK_OPTION_PLAN_AND_STOCKB5
6. STOCK OPTION PLAN AND STOCK-BASED COMPENSATION (Details 3) (USD $) | 12 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
Number of Options | |||
Non-vested as of beginning of period | 862,135 | 5,389,583 | 882,950 |
Granted | 1,777,000 | 708,000 | 6,130,000 |
Forfeited | -552,970 | -2,655,000 | 0 |
Vested | -1,601,581 | -2,580,448 | -1,623,367 |
Non-vested as of end of period | 484,584 | 862,135 | 5,389,583 |
Weighted-Average Grant-Date Fair Value, Non-vested, beginning of period | $0.25 | $0.30 | $0.20 |
Weighted-Average Grant-Date Fair Value, Granted | $0.68 | $0.21 | $0.30 |
Weighted-Average Grant-Date Fair Value, Forfeited | $0.62 | $0.30 | $0 |
Weighted-Average Grant-Date Fair Value, Vested | $0.55 | $0.29 | $0.27 |
Weighted-Average Grant-Date Fair Value, Non-vested, ending balance | $0.39 | $0.25 | $0.30 |
6_STOCK_OPTION_PLAN_AND_STOCKB6
6. STOCK OPTION PLAN AND STOCK-BASED COMPENSATION (Details Narrative) (USD $) | 12 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Stock-based compensation | $762,005 | $1,554,913 | $480,108 |
Unrecognized compensation | 171,000 | 173,000 | |
Unrecognized compensation period for recognition | 2 years 6 months | 8 months 12 days | |
Weighted-average remaining contractual life for options exercisable | 3 years 6 months 22 days | 3 years 10 months 20 days | |
Aggregate intrinsic value of options exercised | 71,083 | 12,449 | |
Intrinsic value for fully vested, exercisable options | 1,518,880 | 5,061,256 | 418,000 |
Tax benefit realized from stock option exercises during the year | $45,996 | $19,000 | |
Weighted average fair value of stock options granted | $0.68 | $0.21 | $0.30 |
2010 Stock Plan [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Stock options outstanding | 1,328,400 | 578,400 | 578,400 |
Options available for grant | 6,171,600 | 6,921,600 | |
2011 Stock Plan [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Stock options outstanding | 5,155,000 | 5,163,000 | 7,130,000 |
Options available for grant | 12,247,880 | 12,337,000 |
7_RELATED_PARTY_TRANSACTIONS_D
7. RELATED PARTY TRANSACTIONS (Details Narrative) (USD $) | 12 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
Related Party Transactions Details Narrative | |||
Accrued interest included in accrued expenses | $82,760 | $63,447 | $44,090 |
Revenue generated from agreement with Advance Pharmaceutical Company | 182,000 | 315,000 | 17,000 |
Expense associated with indemnification for Dr. Platt | $63,296 | $119,401 |
8_INTANGIBLE_ASSETS_Details
8. INTANGIBLE ASSETS (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
Intangible assets consist | |||
SUGARDOWN technology and provisional patents | $900,000 | $900,000 | $900,000 |
Less accumulated amortization | -267,857 | -203,571 | -139,286 |
Intangible assets, net | $632,143 | $696,429 | $760,714 |
8_INTANGIBLE_ASSETS_Details_1
8. INTANGIBLE ASSETS (Details 1) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
Intangible Assets Details 1 | |||
2015 | $64,286 | $64,286 | |
2016 | 64,286 | 64,286 | |
2017 | 64,286 | 64,286 | |
2018 | 64,286 | 64,286 | |
2019 | 64,286 | 64,286 | |
Thereafter | 310,713 | 374,999 | |
Finite-Lived Intangible Assets, Net | $632,143 | $696,429 | $760,714 |
8_INTANGIBLE_ASSETS_Details_Na
8. INTANGIBLE ASSETS (Details Narrative) (USD $) | 12 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
Intangible Assets Details Narrative | |||
Useful lives of intangible assets | 14 years | 14 years | |
Amortization expense | $64,286 | $64,285 | $64,285 |
9_PROVISION_FOR_INCOME_TAXES_D
9. PROVISION FOR INCOME TAXES (Details) | 12 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
Provision For Income Taxes Details | |||
Net operating loss carryforwards | 34.00% | 34.00% | 34.00% |
State taxes, net of federal benefit | 5.20% | 5.50% | 6.30% |
Federal research and development tax credit | 1.30% | 0.20% | 0.00% |
Other | -2.50% | -0.50% | 0.00% |
Change in deferred tax asset valuation allowance | -38.00% | -39.20% | -40.30% |
Effective income tax rate | 0.00% | 0.00% | 0.00% |
9_PROVISION_FOR_INCOME_TAXES_D1
9. PROVISION FOR INCOME TAXES (Details 1) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
Provision For Income Taxes Details 1 | |||
Net operating loss carryforwards | $3,326,788 | $1,781,334 | $1,064,457 |
Tax credit carryforwards | 72,685 | 12,499 | 0 |
Non-qualified stock options | 1,006,472 | 857,613 | 0 |
Other temporary differences | 194,895 | 164,379 | 21,786 |
Gross deferred tax assets | 4,600,840 | 2,815,825 | 1,086,243 |
Valuation allowance | -4,600,840 | -2,815,825 | -1,086,243 |
Net deferred tax assets | $0 | $0 | $0 |
10_COMMITMENTS_AND_CONTINGENCI2
10. COMMITMENTS AND CONTINGENCIES (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Commitments And Contingencies Details | ||
Future minimum lease payments in 2015 | $62,169 | $60,093 |
Future minimum lease payments in 2016 | 64,299 | 62,169 |
Future minimum lease payments in 2017 | 66,519 | 64,299 |
Future minimum lease payments in 2018 | 16,770 | 66,519 |
Future minimum lease payments | $209,757 | $269,850 |
10_COMMITMENTS_AND_CONTINGENCI3
10. COMMITMENTS AND CONTINGENCIES (Details 1) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Commitments And Contingencies Details | ||
Future minimum lease payments in 2014 | $62,169 | $60,093 |
Future minimum lease payments in 2015 | 64,299 | 62,169 |
Future minimum lease payments in 2016 | 66,519 | 64,299 |
Future minimum lease payments in 2017 | 16,770 | 66,519 |
Future minimum lease payments in 2018 | 16,770 | |
Future minimum lease payments | $209,757 | $269,850 |
10_COMMITMENTS_AND_CONTINGENCI4
10. COMMITMENTS AND CONTINGENCIES (Details Narrative) (USD $) | 12 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
Commitments And Contingencies Details Narrative | |||
Rent expense | $57,524 | $73,752 | $15,759 |
Deferred rent | $22,810 | $25,381 | $2,267 |