Document_and_Entity_Informatio
Document and Entity Information | 9 Months Ended |
Sep. 30, 2013 | |
Document And Entity Information | ' |
Entity Registrant Name | 'Boston Therapeutics, Inc. |
Entity Central Index Key | '0001473579 |
Document Type | 'S-1 |
Document Period End Date | 30-Sep-13 |
Amendment Flag | 'true |
Amendment Description | 'This amendment is being filed to comply with regulations. |
Current Fiscal Year End Date | '--12-31 |
Is Entity a Well-known Seasoned Issuer? | 'No |
Is Entity a Voluntary Filer? | 'No |
Is Entity's Reporting Status Current? | 'Yes |
Entity Filer Category | 'Smaller Reporting Company |
Balance_Sheet_Unaudited
Balance Sheet (Unaudited) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 | Dec. 31, 2011 |
ASSETS | ' | ' | ' |
Cash | $3,863,556 | $552,315 | $225,995 |
Accounts receivable | 217,118 | 17,351 | 0 |
Prepaid expenses and other current assets | 69,136 | 9,073 | 5,331 |
Inventory, net | 189,972 | 16,809 | 23,596 |
Total current assets | 4,339,782 | 595,548 | 254,922 |
Property and equipment, net | 10,277 | 7,075 | 0 |
Intangible assets | 712,500 | 760,714 | 825,000 |
Goodwill | 69,782 | 69,782 | 69,782 |
Other assets | 2,125 | 2,125 | ' |
Total assets | 5,134,466 | 1,435,244 | 1,149,704 |
LIABILITIES AND STOCKHOLDERS' EQUITY | ' | ' | ' |
Accounts payable | 114,819 | 294,187 | 341,873 |
Accrued expenses and other current liabilities | 227,502 | 146,774 | 125,316 |
Total current liabilities | 342,321 | 440,961 | 467,189 |
Advances - related party | 297,820 | 297,820 | 257,820 |
Total liabilities | 640,141 | 738,781 | 725,009 |
COMMITMENTS AND CONTINGENCIES (Note 7) | ' | ' | ' |
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, 200,000,000,100,000,000 and 100,000,000 shares authorized at September 30, 2013, December 31, 2012 and 2011, respectively, 37,094,546, 18,745,706 and 16,223,206 shares issued and outstanding at September 30, 2013, December 31, 2012 and 2011, respectively | 37,094 | 18,746 | 16,223 |
Additional paid-in capital | 9,458,162 | 3,375,116 | 1,621,756 |
Accumulated deficit | -5,000,931 | -2,697,399 | -1,213,284 |
Total stockholders' equity | 4,494,325 | 696,463 | 424,695 |
Total liabilities and stockholders' equity | $5,134,466 | $1,435,244 | $1,149,704 |
Balance_Sheet_Unaudited_Parent
Balance Sheet (Unaudited) (Parenthetical) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 | Dec. 31, 2011 |
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 | 100,000,000 | 100,000,000 |
Common Stock, shares issued | 37,094,546 | 18,745,706 | 16,223,206 |
Common Stock, shares outstanding | 37,094,546 | 18,745,706 | 16,223,206 |
Statement_of_Operations_Unaudi
Statement of Operations (Unaudited) (USD $) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Dec. 31, 2012 | Dec. 31, 2011 | |
Income Statement [Abstract] | ' | ' | ' | ' | ' | ' |
Revenue | $217,520 | $2,520 | $242,974 | $23,750 | $42,254 | $4,112 |
Cost of goods sold | 118,515 | 9,120 | 174,424 | 40,877 | 56,859 | 6,375 |
Gross margin | 99,005 | -6,600 | 68,550 | -17,127 | -14,605 | -2,263 |
Operating expenses: | ' | ' | ' | ' | ' | ' |
Research and development | 151,946 | 26,116 | 200,428 | 145,668 | 178,938 | 194,276 |
Sales and marketing | 102,840 | 93,519 | 251,236 | 227,597 | 232,411 | 206,517 |
General and administrative | 954,261 | 234,632 | 1,904,008 | 498,603 | 1,036,566 | 408,454 |
Total operating expenses | 1,209,047 | 354,267 | 2,355,672 | 871,868 | 1,447,915 | 809,247 |
Operating loss | -1,110,042 | -360,867 | -2,287,122 | -888,995 | -1,462,520 | -811,510 |
Interest Expense | -4,842 | -5,166 | -14,431 | -13,522 | -18,384 | -15,658 |
Foreign currency loss | -1,979 | -301 | -1,979 | -3,211 | -3,211 | 0 |
Net loss | ($1,116,863) | ($366,334) | ($2,303,532) | ($905,728) | ($1,484,115) | ($827,168) |
Net loss per share - basic and diluted | ($0.04) | ($0.02) | ($0.11) | ($0.05) | ($0.09) | ($0.05) |
Weighted average shares outstanding - basic and diluted | 26,025,815 | 17,348,206 | 21,411,649 | 16,619,598 | 16,873,903 | 15,147,196 |
Statement_of_Changes_in_Stockh
Statement of Changes in Stockholders' Equity (Deficit) (USD $) | Common Stock | Additional Paid-In Capital | Accum earnings (deficit) | Total |
Beginning Balance, Amount at Dec. 31, 2010 | $14,041 | $905,964 | ($386,116) | $533,889 |
Beginning Balance, Shares at Dec. 31, 2010 | 14,041,236 | ' | ' | ' |
Issuance of common stock, Amount | 2,091 | 520,906 | ' | 522,997 |
Issuance of common stock, Shares | 2,091,470 | ' | ' | ' |
Issuance of common stock in exchange for consulting services, Amount | 91 | 45,159 | ' | 45,250 |
Issuance of common stock in exchange for consulting services, Shares | 90,500 | ' | ' | ' |
Stock based compensation | ' | 149,727 | ' | 149,727 |
Net loss | ' | ' | -827,168 | -827,168 |
Ending Balance, Amount at Dec. 31, 2011 | 16,223 | 1,621,756 | -1,213,284 | 424,695 |
Ending Balance, Shares at Dec. 31, 2011 | 16,223,206 | ' | ' | ' |
Issuance of common stock, Amount | 2,270 | 1,011,957 | ' | 1,014,227 |
Issuance of common stock, Shares | 2,270,000 | ' | ' | ' |
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 | ' | ' | ' |
Statement_of_Cash_Flows_Unaudi
Statement of Cash Flows (Unaudited) (USD $) | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2013 | Sep. 30, 2012 | Dec. 31, 2012 | Dec. 31, 2011 | |
Cash flows from operating activities: | ' | ' | ' | ' |
Net loss | ($2,303,532) | ($905,728) | ($1,484,115) | ($827,168) |
Adjustments to reconcile net loss to net cash used in operating activities: | ' | ' | ' | ' |
Depreciation and amortization | 49,710 | 48,526 | 64,968 | 64,286 |
Stock based compensation | 857,851 | 161,504 | 480,108 | 149,727 |
Issuance of common stock in exchange for consulting services | 104,115 | 53,550 | 128,775 | 45,250 |
Changes in operating assets and liabilities: | ' | ' | ' | ' |
Accounts receivable | -199,767 | 0 | -17,351 | 0 |
Inventory | -173,163 | -398 | 6,787 | -19,447 |
Prepaid expenses and other current assets | -60,063 | -11,358 | -3,742 | -3,603 |
Other assets | 0 | 0 | -2,125 | 0 |
Accounts payable | -179,368 | 9,947 | -47,686 | 295,956 |
Accrued expenses | 80,728 | 33,039 | 21,458 | -97,196 |
Net cash used in operating activities | -1,823,489 | -610,918 | -852,923 | -392,195 |
Cash flows from investing activities: | ' | ' | ' | ' |
Purchase of property and equipment | -4,698 | -7,756 | -7,757 | 0 |
Net cash used in investing activities | -4,698 | -7,756 | -7,757 | 0 |
Cash flows from financing activities: | ' | ' | ' | ' |
Proceeds from advances-related parties | 0 | 40,000 | 40,000 | 80,000 |
Proceeds from issuance of common stock and warrants | 5,139,428 | 522,000 | 1,147,000 | 522,997 |
Net cash provided by financing activities | 5,139,428 | 562,000 | 1,187,000 | 602,997 |
Net increase (decrease) in cash and cash equivalents | 3,311,241 | -56,674 | 326,320 | 210,802 |
Cash and cash equivalents, beginning of period | 552,315 | 225,995 | 225,995 | 15,193 |
Cash and cash equivalents, end of period | 3,863,556 | 169,321 | 552,315 | 225,995 |
Supplemental disclosure of cash flow information: | ' | ' | ' | ' |
Cash paid during the period for:Interest | 0 | 0 | 0 | 0 |
Cash paid during the period for:Income taxes | $0 | $0 | $0 | $0 |
1_GENERAL_ORGANIZATION_AND_BUS
1. GENERAL ORGANIZATION AND BUSINESS | 12 Months Ended |
Dec. 31, 2012 | |
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 Target 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 Target in exchange for 100% of the outstanding common stock of Target, and the change of the Company’s name to Boston Therapeutics, Inc. David Platt, the Company’s Chief Executive Officer and Chief Financial Officer, is a founder of Target and was a director and minority stockholder of Target 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 Target 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(R) to market and have begun to make initial sales. We are currently focused on the clinical development of two additional drug products: PAZ320, a non-systemic, chewable tablet for reduction of post-meal blood glucose in people living with diabetes and prediabetes 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 resources and operating history. As shown in the accompanying financial statements, the Company has an accumulated deficit of approximately $2,697,000 as of December 31, 2012. The future of the Company is dependent upon its ability to obtain financing and upon future profitable operations from the development of its new business opportunities. | |
Management has plans to seek additional capital through private placements and public offerings of its 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 cease operations. | |
These conditions raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue in existence. | |
The Company has reassessed its status as a development stage entity in accordance with Accounting Standards Codification (ASC) 915, Development Stage Entities, as defined by Financial Accounting Standards Board (FASB), and has determined that its emergence from the development stage occurred during the year ended December 31, 2012 based on the accumulation of significant events that occurred through December 31, 2012. Since inception the Company has sold approximately $46,794 of its over-the-counter product SUGARDOWN® . Furthermore, the Company has completed development of one consumer product for which it has executed distribution agreements with companies in Asia and Europe and established a web presence through which the Company sells directly to consumers. The Company has also completed development of one pharmaceutical drug candidate, for which it has completed Phase 2 clinical trials. The Company has raised approximately $1,147,000 in 2012 and has recently engaged a an investment banking firm to raise additional funds for supporting additional clinical studies and to expand the company’s operations capabilities. Accordingly, the Company has determined that it has commenced planned principal operations and is no longer a development stage entity. Previously, the Company has reported as a development stage entity through September 30, 2012. As a result of this change in reporting status, the Company has removed from these financial statements all 'cumulative since inception' financial information that is required by ASC 915. |
2_SUMMARY_OF_SIGNIFICANT_ACCOU
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2013 | Dec. 31, 2012 | ||||
Notes to Financial Statements | ' | ' | |||
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES | ' | ' | |||
Company Overview | Basis of Presentation | ||||
Boston Therapeutics, headquartered in Manchester, NH, (OTC: BTHE) is a leader in the field of complex carbohydrate chemistry. The Company's initial product pipeline is focused on developing and commercializing therapeutic molecules for diabetes: PAZ320, a non-systemic chewable therapeutic compound designed to reduce post-meal glucose elevation; IPOXYN™, an injectable anti-necrosis drug specifically designed to treat lower limb ischemia associated with diabetes; SUGARDOWN®, a non-systemic chewable complex carbohydrate designed to moderate post-meal blood glucose, and BTI-7, a new, chewable dose form of the diabetes drug metformin hydrochloride. | The financial statements have been prepared in conformity with accounting principles generally accepting in the United States of America (“US GAAP”). | ||||
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 $5,001,000 as of September 30, 2013. The future of the Company is dependent upon its ability to obtain financing and upon future profitable operations from the development of its new business opportunities. During 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 8,829,484 additional shares of common stock at an exercise price of $0.50 per share for total gross proceeds of $5,297,698. Management has plans to seek additional capital through private placements and public offerings of its 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 cease operations. | Use of Estimates | ||||
These conditions raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue in existence. | 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. | ||||
Basis of Presentation | Segment Information | ||||
The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("US GAAP") for interim financial information and the rules of the Securities and Exchange Commission for quarterly reports on Form 10-Q. It is suggested that these condensed financial statements be read in conjunction with the Company's financial statements for its year ended December 31, 2012 included in its Form 10-K. In the opinion of management, the statements contain all adjustments, including normal recurring adjustments necessary in order to present fairly the financial position as of September 30, 2013 and the results of operations for the three and nine month periods ended September 30, 2013 and 2012. | 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. | ||||
The year-end balance sheet data was derived from the audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America. The results disclosed in the Statements of Operations for the three and nine month periods ended September 30, 2013 are not necessarily indicative of the results to be expected for the full fiscal year. | Cash and Cash Equivalents | ||||
Use of Estimates | 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. | ||||
The preparation of financial statements in conformity with US 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. | Revenue Recognition | ||||
Accounts Receivable | 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. | ||||
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 September 30, 2013 and December 31, 2012. At September 30, 2013 the Company has one customer that accounts for 100% of its accounts receivable. The Company believes there is minimal risk associated with this receivable. | Revenue is recognized as product is shipped from an outside fulfillment operation. Terms of product sales contain no contractual rights of return or multiple elements. In practice, the Company has not experienced or granted returns of product. Revenues are recorded net of local sales tax collected. Shipping fees charged to customers are included in revenue and shipping costs are included in costs of sales. | ||||
Inventory | Accounts Receivable | ||||
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. | 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. As of December 31, 2012 and 2011 the allowance for doubtful accounts was $0. | ||||
Revenue Recognition | Inventory | ||||
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. | Inventory consists of raw materials 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 adjustments to the carrying value of inventory for the years ended December 31, 2012 and 2011 were $0 and $1,667, respectively. The Company continues to monitor the valuation of its inventories. | ||||
During the three and nine months ended September 30, 2013, one customer accounted for 100% and 97% of the Company’s revenue, respectively. | Property and Equipment | ||||
Stock-Based Compensation | Property and equipment is depreciated using the straight-line method over the following estimated useful lives: | ||||
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. | Asset Category | Estimated Useful Life | |||
Office Furniture and Equipment | 5 years | ||||
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 does not have a history of market prices of the common stock as, 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. | Computer Equipment and Software | 3 years | |||
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 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, 2012 and 2011, the Company recorded depreciation expense of $682 and $0, respectively. | ||||
Loss per Share | Intangible Assets | ||||
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 three and nine months ended September 30, 2013 did not include 5,886,400 and 11,633,337 options and warrants, respectively, because of their anti-dilutive effect. The weighted average number of common shares for the three and nine months ended September 30, 2012 did not include 1,878,400 and 20,000 options and warrants, respectively, because of their anti-dilutive effect. | 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. | |||||
The Company tests goodwill for impairment in the fourth quarter of each year or more frequently if events or changes in circumstances indicate that the asset might be impaired. The test is based on a comparison of the reporting unit’s book value to its estimated fair value. The Company has concluded that no impairment existed at the 2012 testing date. A considerable amount of judgment is required in calculating this impairment analysis, principally in determining financial forecasts and discount rates. Differences in actual cash flows as compared to the discounted cash flows could require the Company to record an impairment loss in the future. | |||||
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, 2012 did not include consideration of 8,353,400 common stock options and warrants because of their anti-dilutive effect. The weighted average number of shares for the year ended December 31, 2011 did not include consideration of 1,578,400 common stock options 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, 2012 and 2011. | |||||
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 | |||||
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 advances payable as of December 31, 2012 and 2011, is not materially different from the fair value of the advances 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. | |||||
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 vesting period of the award. | |||||
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 does not have a history of market prices of the common stock as, 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. | |||||
The fair value of stock options granted was calculated with the following assumptions: | |||||
2012 | 2011 | ||||
Risk-free interest rate | 0.43-1.27% | 0.28-0.77% | |||
Expected dividend yield | 0% | 0% | |||
Volatility factor | 85 - 90% | 90% | |||
Expected life of option | 3.5-7.0 years | 4.75-5.0 years | |||
The weighted-average fair value of stock options granted during the years ended December 31, 2012 and 2011, under the Black-Scholes option pricing model was $0.30 and $0.20 per share, respectively. For the years ended December 31, 2012 and 2011, the Company recorded stock-based compensation expense of $480,108 and $149,727, respectively, in connection with share-based payment awards. As of December 31, 2012, there was approximately $1,654,000 of unrecognized compensation expense related to non-vested stock option awards that is expected to be recognized over a weighted-average period of 2.50 years. | |||||
Recent Accounting Pronouncements | |||||
In July 2012, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, No. 2012-02, Intangibles – Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment. This ASU allows an entity to first assess qualitative factors to determine whether it is necessary to perform the quantitative impairment test for indefinite-lived intangible assets. An organization that elects to perform a qualitative assessment is required to perform the quantitative impairment test for an indefinite-lived intangible asset if it is more likely than not that the asset is impaired. This ASU, which applies to all public, private, and not-for-profit organizations, is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted, including for annual and interim impairment tests performed as of a date before July 27, 2012, if a public entity’s financial statements for the most recent annual or interim period have not yet been issued or, for nonpublic entities, have not yet been made available for issuance. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements, as it was intended to simplify the impairment assessment for indefinite-lived intangible assets. In February 2013, the FASB issued Accounting Standards Update No. 2013-2, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. The amendment, required to be applied prospectively for reporting periods beginning afte December 15, 2012, requires entities to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line item of net income. Early adoption is permitted. Our financial statement presentation complies with this standards update. | |||||
3_INVENTORIES
3. INVENTORIES | 9 Months Ended | 12 Months Ended | ||||||||||||||||
Sep. 30, 2013 | Dec. 31, 2012 | |||||||||||||||||
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 September 30, 2013 and December 31, 2012, net of inventory reserves, were as follows: | The components of inventories at December 31, 2012 and 2011, net of inventory reserves, were as follows: | |||||||||||||||||
2013 | 2012 | 2012 | 2011 | |||||||||||||||
Raw materials | $ | 31,311 | $ | 13,125 | Raw materials | $ | 13,125 | $ | 23,034 | |||||||||
Work in process | 2,077 | - | ||||||||||||||||
Finished goods | 156,584 | 3,684 | Finished goods | 3,684 | 562 | |||||||||||||
$ | 189,972 | $ | 16,809 | Total | $ | 16,809 | $ | 23,596 | ||||||||||
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_STOCKHOLDERS_EQUITY
4. STOCKHOLDERS' EQUITY | 9 Months Ended | 12 Months Ended |
Sep. 30, 2013 | Dec. 31, 2012 | |
Notes to Financial Statements | ' | ' |
NOTE 4 - 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. On May 31, 2013, record holders of 56% of the issued and outstanding voting common stock authorized the Company to amend 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 100,000,000 shares of its $0.001 par value common stock. | |
Common Stock | Preferred Stock | |
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 associated with the subscription 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 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. | No shares of preferred stock have been issued and the terms of such preferred stock have not been designated by the Board of Directors. | |
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 has 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 is included in the accompanying December 31, 2012 balance sheet. | Common Stock | |
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 August 26, 2009 the Company issued 10,000,000 shares of its $0.001 par value common stock to its two founders. Eight million shares were issued to the Company’s Chief Executive Officer (CEO), Chairman of the Board of Directors and co-founder, in exchange for a patent, a provisional patent and know-how. In accordance with ASC 845-10-S99, Transfers of Non-monetary Assets from Promoters or Shareholders, the transfer of nonmonetary assets to a company by its shareholders in exchange for stock prior to the Company’s initial public offering should be recorded at the transferor’s historical cost basis determined under GAAP. As a result, the value of the patent, provisional patent and know-how was valued at the CEO’s historical cost basis of zero because no records exist to support an historical cost basis in accordance with GAAP. The patent and provisional patent were assigned to the Company on December 10, 2009. The remaining 2,000,000 shares were issued to the co-founder for $10,000 in cash. | |
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. | On March 31, 2010 the Company issued 20,000 shares of common stock for $10,000 cash to an investor. On April 9, 2010, the Company issued 11,236 shares of common stock in exchange for $11,236 to a related party. On October 4, 2010, the Company issued 10,000 shares for $10,000 cash to an investor. On November 6, 2010, the Company issued 4,000,000 shares of common stock in connection with the merger transaction described in Note 7. | |
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. | On June 21, 2011 the Company sold 2,035,470 shares for $508,867 in a private placement offering. During August 2011, an additional 56,000 shares were sold for $14,130 in the private placement. On November 1, 2011, 80,500 shares were issued to a consultant for marketing services valued at $40,250. On December 22, 2011, 10,000 shares were issued to a consultant for services rendered valued at $5,000. No other issuances of preferred or common stock have been made. | |
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 associated with the subscription 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 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. | 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 associated with the subscription agreement is exercisable immediately and has a five year term. 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 January 22, 2013 the Company issued 45,833 shares of its common stock with a fair value of $19,250 in exchange for consulting services incurred in fiscal 2012 and January of 2013. As of December 31, 2012, the Company had accrued $14,000 representing the fair value of the 33,333 unissued shares for services rendered in December 2012 which was included in the accompanying December 31, 2012 balance sheet. The agreement was terminated in January 2013. | Common Stock…continued | |
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. The warrant associated with the subscription 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 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 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 has 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 is included in the accompanying December 31, 2012 balance sheet. | |
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 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 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 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. | |
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 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. | |
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 exercisable immediately 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. | On December 12, 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 associated with the subscription agreement is exercisable immediately and has a five year term. 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 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. |
5_STOCK_OPTION_PLAN_AND_STOCKB
5. STOCK OPTION PLAN AND STOCK-BASED COMPENSATION | 9 Months Ended | 12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Sep. 30, 2013 | Dec. 31, 2012 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Notes to Financial Statements | ' | ' | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NOTE 5 - 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 September 30, 2013 and December 31, 2012, there were 578,400 options outstanding under the 2010 Plan. | 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. As of 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 September 30, 2013 and December 31, 2012, there were 5,308,000 and 7,130,000 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 and restated to increase the number of shares of common stock issuable under the 2011 Plan to 12,000,000 shares. As of December 31, 2012, there were 7,130,000 options outstanding under the 2011 Plan. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 expire ten years from the date of grant. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The following table summarizes the activity under the Stock Plans. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The fair value of stock options granted or revalued for three and nine months ended September 30, 2013 and 2012 was calculated with the following assumptions: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares | Price per Share | Weighted Average Exercise Price | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2013 | 2012 | Outstanding, December 31, 2010 | 78,400 | $ | 1.85 | $ | 1.85 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Risk-free interest rate | 0.47% - 1.55 | % | 0.31% - 1.27 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expected dividend yield | 0 | % | 0 | % | Granted | 1,921,237 | 0.10 to 0.25 | 0.13 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Volatility factor | 85 | % | 90 | % | Exercised | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||
Expected life of option | 3.25 to 6 years | 2.90 to 7 years | Options forfeited/cancelled | (421,237 | ) | - | 0.25 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Outstanding, December 31, 2011 | 1,578,400 | 0.10 to 1.85 | 0.19 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
The weighted-average fair value of stock options granted during the periods ended September 30, 2013 and 2012, under the Black-Scholes option pricing model was $0.21 per share. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Granted | 6,130,000 | 0.10 to 0.50 | 0.48 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
The Company recognized $472,820 and $44,638 of stock-based compensation costs in the accompanying statement of operations for the three months ended September 30, 2013 and 2012, respectively. The three months ended September 30, 2013 includes additional compensation expense of $252,345 relating to the future vesting of options per the terms of a terminated employee’s employment agreement. The Company recognized $857,851 and $161,504 of stock-based compensation costs in the accompanying statement of operations for the nine months ended September 30, 2013 and 2012, respectively. No actual tax benefit was realized from stock option exercises during these periods. As of September 30, 2013, there was approximately $213,000 of unrecognized compensation expense related to non-vested stock option awards that is expected to be recognized over a weighted average period of 1.06 years. | Exercised | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Options forfeited/cancelled | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
The following table summarizes the Company’s stock option activity during the nine months ended September 30, 2013: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Outstanding, December 31, 2012 | 7,708,400 | $ | 0.10 to 1.85 | $ | 0.42 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Granted | 708,000 | 0.42-1.00 | 0.68 | The following table summarizes information about stock options that are vested or expected to vest at December 31, 2012: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Exercised | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Options forfeited/cancelled | (2,530,000 | ) | 0.50-1.00 | 0.51 | Vested or Expected to Vest | Exercisable Options | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Outstanding as of September 30, 2013 | 5,886,400 | $ | 0.10-1.85 | $ | 0.42 | Weighted | Weighted | |||||||||||||||||||||||||||||||||||||||||||||||||||
Average | Weighted | Weighted | Average | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
The following table summarizes information about stock options that are vested or expected to vest at September 30, 2013: | Exercise | Average | Average | Remaining | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Number | Price | Remaining | Aggregate | Number | Exercise | Contractual | Aggregate | |||||||||||||||||||||||||||||||||||||||||||||||||||
Vested or Expected to Vest | Exercisable Options | Exercise | of | Per | Contractual | Intrinsic | of | Price | Life | Intrinsic | ||||||||||||||||||||||||||||||||||||||||||||||||
Weighted | Weighted | Weighted | Weighted | Price | Options | Share | Life (Years) | Value | Options | Per Share | (Years) | Value | ||||||||||||||||||||||||||||||||||||||||||||||
Average | Average | Average | Average | $ | 0.1 | 1,800,000 | $ | 0.1 | 3.87 | $ | 576,000 | 1,306,250 | $ | 0.1 | 3.93 | $ | 418,000 | |||||||||||||||||||||||||||||||||||||||||
Exercise | Remaining | Aggregate | Number | Exercise | Remaining | Aggregate | 1.85 | 78,400 | 1.85 | 2.75 | - | 78,400 | 1.85 | 2.75 | - | |||||||||||||||||||||||||||||||||||||||||||
Exercise | Number of | Price Per | Contractual | Intrinsic | of | Price | Contractual | Intrinsic | 0.5 | 5,830,000 | 0.5 | 5.13 | - | 934,167 | 0.5 | 5.95 | - | |||||||||||||||||||||||||||||||||||||||||
Price | Options | Share | Life (Years) | Value | Options | Per Share | Life (Years) | Value | $ | 0.10-1.85 | 7,708,400 | $ | 0.42 | 4.81 | $ | 576,000 | 2,318,817 | $ | 0.32 | 4.71 | $ | 418,000 | ||||||||||||||||||||||||||||||||||||
$ | 0.1 | 1,800,000 | $ | 0.1 | 3.13 | $ | 1,026,000 | 1,612,500 | $ | 0.1 | 3.15 | $ | 919,125 | |||||||||||||||||||||||||||||||||||||||||||||
0.42 | 98,000 | 0.42 | 7.26 | 24,500 | - | 0.42 | - | - | The weighted-average remaining contractual life for options exercisable at December 31, 2012 is 4.71 years. At December 31, 2012 the Company has 4,870,000 and 4,421,600 options available for grant under the 2011 Plan and 2010 Plan, respectively. | |||||||||||||||||||||||||||||||||||||||||||||||||
0.5 | 3,330,000 | 0.5 | 2.09 | 566,100 | 2,371,668 | 0.5 | 2.34 | 403,184 | ||||||||||||||||||||||||||||||||||||||||||||||||||
0.57 | 400,000 | 0.57 | 4.87 | 40,000 | 83,280 | 0.57 | 4.87 | 8,328 | The intrinsic value for fully vested, exercisable options was $418,000 and $96,206 at December 31, 2012 and 2011, respectively. No actual tax benefit was realized from stock option exercises during these periods. | |||||||||||||||||||||||||||||||||||||||||||||||||
1 | 180,000 | 1 | 2.32 | - | 135,000 | 1 | 1.63 | - | ||||||||||||||||||||||||||||||||||||||||||||||||||
1.85 | 78,400 | 1.85 | 2 | - | 78,400 | 1.85 | 2 | - | ||||||||||||||||||||||||||||||||||||||||||||||||||
$ | 0.10-1.85 | 5,886,400 | $ | 0.41 | 2.69 | $ | 1,656,600 | 4,280,848 | $ | 0.39 | 2.67 | $ | 1,330,637 | |||||||||||||||||||||||||||||||||||||||||||||
The weighted-average remaining contractual life for stock options exercisable at September 30, 2013 is 2.67 years. At September 30, 2013, the Company has 12,192,000 and 6,921,600 options available for grant under the 2011 Plan and 2010 Plan, respectively. The intrinsic value for fully vested, exercisable options was $1,330,637 and $418,000 at September 30, 2013 and December 31, 2012, respectively. No actual tax benefit was realized from stock option exercises during these periods. |
6_RELATED_PARTY_TRANSACTIONS
6. RELATED PARTY TRANSACTIONS | 9 Months Ended | 12 Months Ended |
Sep. 30, 2013 | Dec. 31, 2012 | |
Notes to Financial Statements | ' | ' |
NOTE 6 - RELATED PARTY TRANSACTIONS | ' | ' |
Through December 31, 2011, the CEO advanced $257,820 to BTI to fund start-up costs and operations of the Company. Advances by the CEO carry an interest rate of 6.5% and were due on June 29, 2013. On May 7, 2012, the Company’s CEO and 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. | Through December 31, 2011, the CEO advanced $257,820 to BTI to fund start-up costs and operations of the Company. Advances by the CEO carry an interest rate of 6.5% and were due on June 29, 2013. On May 7, 2012, the Company’s CEO and 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. As of December 31, 2012, and December 31, 2011, $44,090 and $25,641, respectively, of accrued interest had been included in accrued expenses on the accompanying balance sheet. On August 6, 2012, the outstanding notes of $297,820 were amended to extend the maturity dates to June 29, 2014. The CEO and President intend to, but are not legally obligated, to fund the Company’s operations in this manner until the Company raises sufficient capital. | |
As of September 30, 2013 and December 31, 2012, $58,568 and $44,090, respectively, of accrued interest had been included in accrued expenses on the accompanying balance sheet. |
7_INTANGIBLE_ASSETS
7. INTANGIBLE ASSETS | 9 Months Ended | 12 Months Ended | ||||||||||||||||
Sep. 30, 2013 | Dec. 31, 2012 | |||||||||||||||||
Notes to Financial Statements | ' | ' | ||||||||||||||||
NOTE 7 - INTANGIBLE ASSETS | ' | ' | ||||||||||||||||
The SUGARDOWN® technology and provisional patents are being amortized on a straight-line basis over their useful lives of 14 years. Goodwill is not amortized, but is evaluated annually for impairment. | The SUGARDOWN® technology and provisional patents, which were obtained through the acquisition of the Target in 2010 are being amortized on a straight-line basis over their estimated useful lives of 14 years. | |||||||||||||||||
Intangible assets consist of the following at September 30, 2013 and December 31, 2012: | Intangible assets consist of the following: | |||||||||||||||||
2013 | 2012 | December 31, | ||||||||||||||||
SUGARDOWN® technology and provisional patents | $ | 900,000 | $ | 900,000 | 2012 | 2011 | ||||||||||||
Less accumulated amortization | -187,500 | (139,286 | ) | SUGARDOWN® technology and provisional patents | $ | 900,000 | $ | 900,000 | ||||||||||
Intangible assets, net | $ | 712,500 | $ | 760,714 | ||||||||||||||
Less accumulated amortization | (139,286 | ) | (75,000 | ) | ||||||||||||||
Amortization expense was $16,071 and $48,213 for the three and nine months ended September 30, 2013 and 2012, respectively. | ||||||||||||||||||
Intangible assets, net | $ | 760,714 | $ | 825,000 | ||||||||||||||
Amortization expense for each of the years ended December 31, 2012 and 2011 was $64,286. | ||||||||||||||||||
The estimated remaining amortization expense related to intangible assets with finite lives for each of the five succeeding years and thereafter is as follows: | ||||||||||||||||||
Year ending December 31: | ||||||||||||||||||
2013 | $ | 64,286 | ||||||||||||||||
2014 | 64,286 | |||||||||||||||||
2015 | 64,286 | |||||||||||||||||
2016 | 64,286 | |||||||||||||||||
2017 | 64,286 | |||||||||||||||||
Thereafter | 439,284 | |||||||||||||||||
$ | 760,714 | |||||||||||||||||
8_PROVISION_FOR_INCOME_TAXES
8. PROVISION FOR INCOME TAXES | 12 Months Ended | ||||||||
Dec. 31, 2012 | |||||||||
Notes to Financial Statements | ' | ||||||||
NOTE 8 - PROVISION FOR INCOME TAXES | ' | ||||||||
Temporary differences that give rise to significant deferred tax assets are as follows: | |||||||||
December 31, | |||||||||
2012 | 2011 | ||||||||
Start-up costs | $ | 21,786 | $ | 21,786 | |||||
Net operating loss carryforward | 1,064,457 | 466,803 | |||||||
Valuation allowance | (1,086,243 | ) | (488,589 | ) | |||||
Net deferred tax asset | $ | - | $ | - | |||||
As of December 31, 2012 and 2011, the Company had a deferred tax asset of $21,786 related to start-up costs which are amortizable for tax purposes. The Company also had a deferred tax asset related to net operating loss carryforwards of $2,697,399 and $ 1,213,284 that expire through 2032 as of December 31, 2012 and 2011, respectively. | |||||||||
The Company has provided a full valuation allowance for deferred tax assets since, based on the weight of available evidence, it is more likely than not that these benefits will not be realized. During 2012, the Company increased its valuation allowance by $597,654 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, 2012. | |||||||||
The primary factors affecting the Company’s income tax rate for the years ended December 31, 2012 and 2011 are as follows: | |||||||||
2012 | 2011 | ||||||||
Tax benefit at U.S. statutory rate | -34 | % | -34 | % | |||||
State tax benefit | -6.3 | % | -6.3 | % | |||||
Valuation allowance | 40.3 | % | 40.3 | % | |||||
0 | % | 0 | % | ||||||
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. |
9_COMMITMENTS_AND_CONTINGENCIE
9. COMMITMENTS AND CONTINGENCIES | 9 Months Ended | 12 Months Ended | ||||||||
Sep. 30, 2013 | Dec. 31, 2012 | |||||||||
Notes to Financial Statements | ' | ' | ||||||||
NOTE 9 - COMMITMENTS AND CONTINGENCIES | ' | ' | ||||||||
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 $10,132 and $59,372 during the three and nine months ended September 30, 2013, respectively. The Company recognized rent expense of $7,326 and $9,890 during the three and nine months ended September 30, 2012, respectively. As of September 30, 2013 and December 31, 2012, there was $25,635 and $2,267, respectively, of deferred rent included in accrued expenses and other current liabilities in the accompanying balance sheets. | ||||||||||
The Company entered into a three year lease agreement for their office facility commencing July 1, 2012, with escalating rental payments. 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 $15,759 and $4,746 for the years ended December 31, 2012 and 2011, respectively. As of December 31, 2012, there was $2,267 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 September 30, 2013 are as follows: | ||||||||||
Future minimum lease payments under all non-cancelable operating leases as of December 31, 2012, are as follows: | ||||||||||
Fiscal year | ||||||||||
2013 | $ | 14,634 | Fiscal year | |||||||
2014 | 60,093 | 2013 | $ | 25,917 | ||||||
2015 | 62,169 | 2014 | 26,917 | |||||||
2016 | 64,299 | 2015 | 16,042 | |||||||
2017 | 66,519 | $ | 68,876 | |||||||
2018 | 16,770 | |||||||||
$ | 284,484 |
10_SUBSEQUENT_EVENTS
10. SUBSEQUENT EVENTS | 9 Months Ended | 12 Months Ended |
Sep. 30, 2013 | Dec. 31, 2012 | |
Notes to Financial Statements | ' | ' |
NOTE 10 - SUBSEQUENT EVENTS | ' | ' |
The Company has evaluated events and transactions that occurred through November 13, 2013, 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 through April 4, 2013, 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. | |
In 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. | On December 20, 2012, the Board of Directors approved a grant of non-qualified stock options to the independent directors of the Company to purchase an aggregate of 98,000 shares of the Company’s common stock, with the grant to be effective January 1, 2013. 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, 2013, 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 2013 calendar year. | |
Effective January 1, 2013, the Company granted a consultant a non-qualified stock option to purchase up to 120,000 shares of the Company’s common stock at an exercise price of $1.00 per share as partial compensation for professional services. The option vests in four equal quarterly installments with the first installment vesting on March 31, 2013. The option expires on December 31, 2018. | ||
In February 2013, the Company agreed to increase the amount of office space it will lease effective April 1, 2013 and to increase the lease term through March 31, 2018. As a result of this amendment to its lease agreement the Company agreed to increase its monthly minimum rent to $4,878 for the period April 1, 2013 through March 31, 2014, $5,051 for the period April 1, 2014 through March 31, 2015, $5,225 for the period April 1, 2015 through March 31, 2016, $5,404 for the period April 1, 2016 through March 31, 2017 and $5,591 for the period April 1, 2017 through March 31, 2018. | ||
On February 27, 2013, CJY Holdings Limited, an affiliate of Advance Pharmaceutical Co. Ltd., made a $250,000 investment in the Company pursuant to the S-1 Registration Statement. CJY Holdings Limited received 500,000 shares of common stock priced at $0.50 and 250,000 warrants to purchase common stock with an exercise price of $1.00 and a five-year term. | ||
In March 2013, the Company’s Board of Directors voted to amend its Certificate of Incorporation to increase the authorized number of common shares from 100,000,000 to 200,000,000; and to submit the amendment to the Company’s stockholders for their approval. The amendment will not take effect unless approved by the stockholders. | ||
In March 2013, the Company’s Board of Directors amended the Company’s 2010 Stock Plan to increase the number of shares in the plan to 7,500,000; and to increase the Company’s 2011 Non-Qualified Stock Option Plan to increase the number of shares in the plan from 12,000,000 to 17,500,000. The amendment to the 2010 Stock Plan will not take effect unless approved by the stockholders. The amendment to the 2011 Non-Qualified Stock Option Plan took effect upon approval by the Board of Directors. | ||
2_SUMMARY_OF_SIGNIFICANT_ACCOU1
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2013 | Dec. 31, 2012 | ||||
Summary Of Significant Accounting Policies Policies | ' | ' | |||
Company Overview | ' | ' | |||
Boston Therapeutics, headquartered in Manchester, NH, (OTC: BTHE) is a leader in the field of complex carbohydrate chemistry. The Company's initial product pipeline is focused on developing and commercializing therapeutic molecules for diabetes: PAZ320, a non-systemic chewable therapeutic compound designed to reduce post-meal glucose elevation; IPOXYN™, an injectable anti-necrosis drug specifically designed to treat lower limb ischemia associated with diabetes; SUGARDOWN®, a non-systemic chewable complex carbohydrate designed to moderate post-meal blood glucose, and BTI-7, a new, chewable dose form of the diabetes drug metformin hydrochloride. | The financial statements have been prepared in conformity with accounting principles generally accepting in the United States of America (“US GAAP”). | ||||
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 $5,001,000 as of September 30, 2013. The future of the Company is dependent upon its ability to obtain financing and upon future profitable operations from the development of its new business opportunities. During 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 8,829,484 additional shares of common stock at an exercise price of $0.50 per share for total gross proceeds of $5,297,698. Management has plans to seek additional capital through private placements and public offerings of its 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 cease operations. | |||||
These conditions raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue in existence. | |||||
Basis of Presentation | ' | ' | |||
The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("US GAAP") for interim financial information and the rules of the Securities and Exchange Commission for quarterly reports on Form 10-Q. It is suggested that these condensed financial statements be read in conjunction with the Company's financial statements for its year ended December 31, 2012 included in its Form 10-K. In the opinion of management, the statements contain all adjustments, including normal recurring adjustments necessary in order to present fairly the financial position as of September 30, 2013 and the results of operations for the three and nine month periods ended September 30, 2013 and 2012. | 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 year-end balance sheet data was derived from the audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America. The results disclosed in the Statements of Operations for the three and nine month periods ended September 30, 2013 are not necessarily indicative of the results to be expected for the full fiscal year. | |||||
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. | |||||
Use of Estimates | ' | ' | |||
The preparation of financial statements in conformity with US 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. | |||||
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 September 30, 2013 and December 31, 2012. At September 30, 2013 the Company has one customer that accounts for 100% of its accounts receivable. The Company believes there is minimal risk associated with this 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. As of December 31, 2012 and 2011 the allowance for doubtful accounts was $0. | ||||
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 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 adjustments to the carrying value of inventory for the years ended December 31, 2012 and 2011 were $0 and $1,667, respectively. The Company continues to monitor the valuation of its inventories. | ||||
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 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. | 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. | ||||
During the three and nine months ended September 30, 2013, one customer accounted for 100% and 97% of the Company’s revenue, respectively. | Revenue is recognized as product is shipped from an outside fulfillment operation. Terms of product sales contain no contractual rights of return or multiple elements. In practice, the Company has not experienced or granted returns of product. Revenues are recorded net of local sales tax collected. Shipping fees charged to customers are included in revenue and shipping costs are included in costs of sales. | ||||
Property and Equipment | ' | ' | |||
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 | ||||
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, 2012 and 2011, the Company recorded depreciation expense of $682 and $0, 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. | |||||
Certain acquired intangible assets, including developed technology, products and trade names, 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. | |||||
The Company tests goodwill for impairment in the fourth quarter of each year or more frequently if events or changes in circumstances indicate that the asset might be impaired. The test is based on a comparison of the reporting unit’s book value to its estimated fair value. The Company has concluded that no impairment existed at the 2012 testing date. A considerable amount of judgment is required in calculating this impairment analysis, principally in determining financial forecasts and discount rates. Differences in actual cash flows as compared to the discounted cash flows could require the Company to record an impairment loss in the future. | |||||
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. | |||||
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, 2012 and 2011. | |||||
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 | ' | ' | |||
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, 2012 and 2011, 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. | |||||
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 vesting period of the award. | 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 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 does not have a history of market prices of the common stock as, 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 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 does not have a history of market prices of the common stock as, 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. | 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 fair value of stock options granted was calculated with the following assumptions: | |||||
2012 | 2011 | ||||
Risk-free interest rate | 0.43-1.27% | 0.28-0.77% | |||
Expected dividend yield | 0% | 0% | |||
Volatility factor | 85 - 90% | 90% | |||
Expected life of option | 3.5-7.0 years | 4.75-5.0 years | |||
The weighted-average fair value of stock options granted during the years ended December 31, 2012 and 2011, under the Black-Scholes option pricing model was $0.30 and $0.20 per share, respectively. For the years ended December 31, 2012 and 2011, the Company recorded stock-based compensation expense of $480,108 and $149,727, respectively, in connection with share-based payment awards. As of December 31, 2012, there was approximately $1,654,000 of unrecognized compensation expense related to non-vested stock option awards that is expected to be recognized over a weighted-average period of 2.50 years. | |||||
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 three and nine months ended September 30, 2013 did not include 5,886,400 and 11,633,337 options and warrants, respectively, because of their anti-dilutive effect. The weighted average number of common shares for the three and nine months ended September 30, 2012 did not include 1,878,400 and 20,000 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, 2012 did not include consideration of 8,353,400 common stock options and warrants because of their anti-dilutive effect. The weighted average number of shares for the year ended December 31, 2011 did not include consideration of 1,578,400 common stock options because of their anti-dilutive effect. | ||||
Recent Accounting Pronouncements | ' | ' | |||
In July 2012, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, No. 2012-02, Intangibles – Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment. This ASU allows an entity to first assess qualitative factors to determine whether it is necessary to perform the quantitative impairment test for indefinite-lived intangible assets. An organization that elects to perform a qualitative assessment is required to perform the quantitative impairment test for an indefinite-lived intangible asset if it is more likely than not that the asset is impaired. This ASU, which applies to all public, private, and not-for-profit organizations, is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted, including for annual and interim impairment tests performed as of a date before July 27, 2012, if a public entity’s financial statements for the most recent annual or interim period have not yet been issued or, for nonpublic entities, have not yet been made available for issuance. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements, as it was intended to simplify the impairment assessment for indefinite-lived intangible assets. In February 2013, the FASB issued Accounting Standards Update No. 2013-2, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. The amendment, required to be applied prospectively for reporting periods beginning afte December 15, 2012, requires entities to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line item of net income. Early adoption is permitted. Our financial statement presentation complies with this standards update. |
2_SUMMARY_OF_SIGNIFICANT_ACCOU2
2. SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES (Tables) | 12 Months Ended | |||
Dec. 31, 2012 | ||||
Summary Of Significant Accounting Practices Tables | ' | |||
Property and Equipment | ' | |||
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 | |||
Computer Equipment and Software | 3 years | |||
Fair value of stock options granted | ' | |||
The fair value of stock options granted was calculated with the following assumptions: | ||||
2012 | 2011 | |||
Risk-free interest rate | 0.43-1.27% | 0.28-0.77% | ||
Expected dividend yield | 0% | 0% | ||
Volatility factor | 85 - 90% | 90% | ||
Expected life of option | 3.5-7.0 years | 4.75-5.0 years | ||
3_INVENTORIES_Tables
3. INVENTORIES (Tables) | 9 Months Ended | 12 Months Ended | ||||||||||||||||
Sep. 30, 2013 | Dec. 31, 2012 | |||||||||||||||||
Inventory Disclosure [Abstract] | ' | ' | ||||||||||||||||
Components of inventories | ' | ' | ||||||||||||||||
2013 | 2012 | The components of inventories at December 31, 2012 and 2011, net of inventory reserves, were as follows: | ||||||||||||||||
Raw materials | $ | 31,311 | $ | 13,125 | ||||||||||||||
Work in process | 2,077 | - | 2012 | 2011 | ||||||||||||||
Finished goods | 156,584 | 3,684 | Raw materials | $ | 13,125 | $ | 23,034 | |||||||||||
$ | 189,972 | $ | 16,809 | Finished goods | 3,684 | 562 | ||||||||||||
Total | $ | 16,809 | $ | 23,596 | ||||||||||||||
5_STOCK_OPTION_PLAN_AND_STOCKB1
5. STOCK OPTION PLAN AND STOCK-BASED COMPENSATION (Tables) | 9 Months Ended | 12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Sep. 30, 2013 | Dec. 31, 2012 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock Option Plan And Stock-Based Compensation Tables | ' | ' | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Assumptions for fair value of stock options | ' | ' | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2013 | 2012 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Risk-free interest rate | 0.47% - 1.55 | % | 0.31% - 1.27 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expected dividend yield | 0 | % | 0 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Volatility factor | 85 | % | 90 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expected life of option | 3.25 to 6 years | 2.90 to 7 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Activity under Stock Plans | ' | ' | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares | Exercise Price per Share | Weighted Average Exercise Price per Share | The following table summarizes the activity under the Stock Plans. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Outstanding as of December 31, 2012 | 7,708,400 | $ | 0.10-1.85 | $ | 0.42 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Granted | 708,000 | 0.42-1.00 | 0.68 | Shares | Price per Share | Weighted Average Exercise Price | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Exercised | - | - | - | Outstanding, December 31, 2010 | 78,400 | $ | 1.85 | $ | 1.85 | |||||||||||||||||||||||||||||||||||||||||||||||||
Options forfeited/cancelled | (2,530,000 | ) | 0.50-1.00 | 0.51 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Outstanding as of September 30, 2013 | 5,886,400 | $ | 0.10-1.85 | $ | 0.42 | Granted | 1,921,237 | 0.10 to 0.25 | 0.13 | |||||||||||||||||||||||||||||||||||||||||||||||||
Exercised | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Options forfeited/cancelled | (421,237 | ) | - | 0.25 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Outstanding, December 31, 2011 | 1,578,400 | 0.10 to 1.85 | 0.19 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Granted | 6,130,000 | 0.10 to 0.50 | 0.48 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Exercised | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Options forfeited/cancelled | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Outstanding, December 31, 2012 | 7,708,400 | $ | 0.10 to 1.85 | $ | 0.42 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Information about stock options vested or expected to vest | ' | ' | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The following table summarizes information about stock options that are vested or expected to vest at December 31, 2012: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Vested or Expected to Vest | Exercisable Options | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Weighted | Weighted | Weighted | Weighted | Vested or Expected to Vest | Exercisable Options | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Average | Average | Average | Average | Weighted | Weighted | Weighted | Weighted | |||||||||||||||||||||||||||||||||||||||||||||||||||
Exercise | Remaining | Aggregate | Number | Exercise | Remaining | Aggregate | Average | Average | Average | Average | ||||||||||||||||||||||||||||||||||||||||||||||||
Exercise | Number of | Price Per | Contractual | Intrinsic | of | Price | Contractual | Intrinsic | Exercise | Remaining | Aggregate | Exercise | Remaining | Aggregate | ||||||||||||||||||||||||||||||||||||||||||||
Price | Options | Share | Life (Years) | Value | Options | Per Share | Life (Years) | Value | Exercise | Number of | Price Per | Contractual | Intrinsic | Number of | Price | Contractual | Intrinsic | |||||||||||||||||||||||||||||||||||||||||
$ | 0.1 | 1,800,000 | $ | 0.1 | 3.13 | $ | 1,026,000 | 1,612,500 | $ | 0.1 | 3.15 | $ | 919,125 | Price | Options | Share | Life (Years) | Value | Options | Per Share | Life (Years) | Value | ||||||||||||||||||||||||||||||||||||
0.42 | 98,000 | 0.42 | 7.26 | 24,500 | - | 0.42 | - | - | $ | 0.1 | 1,800,000 | $ | 0.1 | 3.87 | $ | 576,000 | 1,306,250 | $ | 0.1 | 3.93 | $ | 418,000 | ||||||||||||||||||||||||||||||||||||
0.5 | 3,330,000 | 0.5 | 2.09 | 566,100 | 2,371,668 | 0.5 | 2.34 | 403,184 | 1.85 | 78,400 | 1.85 | 2.75 | - | 78,400 | 1.85 | 2.75 | - | |||||||||||||||||||||||||||||||||||||||||
0.57 | 400,000 | 0.57 | 4.87 | 40,000 | 83,280 | 0.57 | 4.87 | 8,328 | 0.5 | 5,830,000 | 0.5 | 5.13 | - | 934,167 | 0.5 | 5.95 | - | |||||||||||||||||||||||||||||||||||||||||
1 | 180,000 | 1 | 2.32 | - | 135,000 | 1 | 1.63 | - | $ | 0.10-1.85 | 7,708,400 | $ | 0.42 | 4.81 | $ | 576,000 | 2,318,817 | $ | 0.32 | 4.71 | $ | 418,000 | ||||||||||||||||||||||||||||||||||||
1.85 | 78,400 | 1.85 | 2 | - | 78,400 | 1.85 | 2 | - | ||||||||||||||||||||||||||||||||||||||||||||||||||
$ | 0.10-1.85 | 5,886,400 | $ | 0.41 | 2.69 | $ | 1,656,600 | 4,280,848 | $ | 0.39 | 2.67 | $ | 1,330,637 |
7_INTANGIBLE_ASSETS_Tables
7. INTANGIBLE ASSETS (Tables) | 9 Months Ended | 12 Months Ended | ||||||||||||||||
Sep. 30, 2013 | Dec. 31, 2012 | |||||||||||||||||
Intangible Assets Tables | ' | ' | ||||||||||||||||
Schedule of Intangible Assets | ' | ' | ||||||||||||||||
2013 | 2012 | Intangible assets consist of the following: | ||||||||||||||||
SUGARDOWN® technology and provisional patents | $ | 900,000 | $ | 900,000 | ||||||||||||||
Less accumulated amortization | -187,500 | (139,286 | ) | December 31, | ||||||||||||||
Intangible assets, net | $ | 712,500 | $ | 760,714 | 2012 | 2011 | ||||||||||||
SUGARDOWN® technology and provisional patents | $ | 900,000 | $ | 900,000 | ||||||||||||||
Less accumulated amortization | (139,286 | ) | (75,000 | ) | ||||||||||||||
Intangible assets, net | $ | 760,714 | $ | 825,000 | ||||||||||||||
Estimated remaining amortization expense related to intangible assets with finite lives | ' | ' | ||||||||||||||||
The estimated remaining amortization expense related to intangible assets with finite lives for each of the five succeeding years and thereafter is as follows: | ||||||||||||||||||
Year ending December 31: | ||||||||||||||||||
2013 | $ | 64,286 | ||||||||||||||||
2014 | 64,286 | |||||||||||||||||
2015 | 64,286 | |||||||||||||||||
2016 | 64,286 | |||||||||||||||||
2017 | 64,286 | |||||||||||||||||
Thereafter | 439,284 | |||||||||||||||||
$ | 760,714 | |||||||||||||||||
8_PROVISION_FOR_INCOME_TAXES_T
8. PROVISION FOR INCOME TAXES (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2012 | |||||||||
Provision For Income Taxes Tables | ' | ||||||||
Deferred tax assets | ' | ||||||||
Temporary differences that give rise to significant deferred tax assets are as follows: | |||||||||
December 31, | |||||||||
2012 | 2011 | ||||||||
Start-up costs | $ | 21,786 | $ | 21,786 | |||||
Net operating loss carryforward | 1,064,457 | 466,803 | |||||||
Valuation allowance | (1,086,243 | ) | (488,589 | ) | |||||
Net deferred tax asset | $ | - | $ | - | |||||
Income tax rate | ' | ||||||||
The primary factors affecting the Company’s income tax rate for the years ended December 31, 2012 and 2011 are as follows: | |||||||||
2012 | 2011 | ||||||||
Tax benefit at U.S. statutory rate | -34 | % | -34 | % | |||||
State tax benefit | -6.3 | % | -6.3 | % | |||||
Valuation allowance | 40.3 | % | 40.3 | % | |||||
0 | % | 0 | % | ||||||
9_COMMITMENTS_AND_CONTINGENCIE1
9. COMMITMENTS AND CONTINGENCIES (Tables) | 9 Months Ended | 12 Months Ended | ||||||||
Sep. 30, 2013 | Dec. 31, 2012 | |||||||||
Commitments And Contingencies Tables | ' | ' | ||||||||
Future minimum lease payments | ' | ' | ||||||||
Fiscal year | Fiscal year | |||||||||
2013 | $ | 14,634 | 2013 | $ | 25,917 | |||||
2014 | 60,093 | 2014 | 26,917 | |||||||
2015 | 62,169 | 2015 | 16,042 | |||||||
2016 | 64,299 | $ | 68,876 | |||||||
2017 | 66,519 | |||||||||
2018 | 16,770 | |||||||||
$ | 284,484 |
2_SUMMARY_OF_SIGNIFICANT_ACCOU3
2. SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES (Details) | 12 Months Ended |
Dec. 31, 2012 | |
Office Furniture and Equipment [Member] | ' |
Estimated Useful Life | '5 years |
Computer Equipment and Software [Member] | ' |
Estimated Useful Life | '3 years |
2_SUMMARY_OF_SIGNIFICANT_ACCOU4
2. SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES (Details 1) | 12 Months Ended | |
Dec. 31, 2012 | Dec. 31, 2011 | |
Expected dividend yield | 0.00% | 0.00% |
Volatility factor | ' | 90.00% |
Minimum [Member] | ' | ' |
Risk-free interest rate | 0.43% | 0.28% |
Volatility factor | 85.00% | ' |
Expected life of option | '3 years 5 months | '4 years 9 months |
Maximum [Member] | ' | ' |
Risk-free interest rate | 1.27% | 0.77% |
Volatility factor | 90.00% | ' |
Expected life of option | '7 years | '5 years |
2_SUMMARY_OF_SIGNIFICANT_ACCOU5
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) (USD $) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Dec. 31, 2012 | Dec. 31, 2011 | |
Summary Of Significant Accounting Policies Details Narrative | ' | ' | ' | ' | ' | ' |
Accumulated deficit | ($5,000,931) | ' | ($5,000,931) | ' | ($2,697,399) | ($1,213,284) |
Anti dilutive weighted average number of common shares | 5,886,400 | 1,878,400 | 11,633,337 | 20,000 | 8,353,400 | 1,578,400 |
Allowance for doubtful accounts | ' | ' | ' | ' | 0 | ' |
Adjustments to the carrying value of inventory | ' | ' | ' | ' | 0 | 1,667 |
Depreciation expense | ' | ' | ' | ' | 682 | 0 |
Interest and penalty expense | ' | ' | ' | ' | 0 | 0 |
Weighted-average fair value of stock options | ' | ' | ' | ' | $0.30 | $0.20 |
Stock-based compensation expense | ' | ' | ' | ' | 480,108 | 149,727 |
Unrecognized compensation expense related to non-vested stock option | ' | ' | ' | ' | $1,654,000 | ' |
weighted-average period unrecognized compensation expense related to non-vested stock option | ' | ' | ' | ' | '2 years 5 months | ' |
3_INVENTORIES_Details
3. INVENTORIES (Details) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 | Dec. 31, 2011 |
Inventory Disclosure [Abstract] | ' | ' | ' |
Raw materials | $31,311 | $13,125 | $23,034 |
Work-in-process | 2,077 | 0 | 0 |
Finished goods | 156,584 | 3,684 | 562 |
Inventory, net | $189,972 | $16,809 | $23,596 |
4_STOCKHOLDERS_EQUITY_Details_
4. STOCKHOLDERS' EQUITY (Details Narrative) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 | Dec. 31, 2011 |
Preferred Stock, shares authorized | 5,000,000 | 5,000,000 | 5,000,000 |
Preferred Stock, par or stated value | $0.00 | $0.00 | $0.00 |
Common Stock, par or stated value | $0.00 | $0.00 | $0.00 |
Common Stock, shares authorized | 200,000,000 | 100,000,000 | 100,000,000 |
June through November 2012 | ' | ' | ' |
Shares due under agreement for services rendered | ' | 150,000 | ' |
Fair value of Shares due under agreement for services rendered | ' | $76,500 | ' |
July, August and September 2012 | ' | ' | ' |
Shares due under agreement for services rendered | ' | 22,500 | ' |
Fair value of Shares due under agreement for services rendered | ' | $11,475 | ' |
5_STOCK_OPTION_PLAN_AND_STOCKB2
5. STOCK OPTION PLAN AND STOCK-BASED COMPENSATION (Details) | 9 Months Ended | |
Sep. 30, 2013 | Sep. 30, 2012 | |
Stock Option Plan And Stock-Based Compensation Details | ' | ' |
Risk-free interest rate, Minimum | 0.47% | 0.31% |
Risk-free interest rate, Maximum | 1.55% | 1.27% |
Expected dividend yield | 0.00% | 0.00% |
Volatility factor | 85.00% | 90.00% |
Expected life of option, Minimum | '3 years 3 months | '2 years 10 months 24 days |
Expected life of option, Maximum | '6 years | '7 years |
5_STOCK_OPTION_PLAN_AND_STOCKB3
5. STOCK OPTION PLAN AND STOCK-BASED COMPENSATION (Details 1) (USD $) | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | |
Stock Option Plan And Stock-Based Compensation Details 1 | ' | ' | ' |
Outstanding Beginning | 7,708,400 | 1,578,400 | 78,400 |
Granted, Shares | 708,000 | 6,130,000 | 1,921,237 |
Exercised, Shares | 0 | ' | ' |
Options forfeited/cancelled, Shares | -2,530,000 | ' | -421,237 |
Outstanding End | 5,886,400 | 7,708,400 | 1,578,400 |
Outstanding Beginning, Exercise Price Per Share, Minimum | $0.10 | $0.10 | ' |
Outstanding Beginning, Exercise Price Per Share, Maximum | $1.85 | $1.85 | $1.85 |
Granted, Exercise Price Per Share, Minimum | 0.42 | 0.1 | 0.1 |
Granted, Exercise Price Per Share, Maximum | 1 | 0.5 | 0.25 |
Exercised, Exercise Price Per Share | ' | ' | ' |
Options forfeited/cancelled, Exercise Price Per Share, Minimum | $0.50 | ' | ' |
Options forfeited/cancelled, Exercise Price Per Share, Maximum | $1 | ' | ' |
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 | $0.42 | $0.19 | $1.85 |
Granted, Weighted Average Exercise Price | $0.68 | $0.48 | $0.13 |
Exercised, Weighted Average Exercise Price | ' | ' | ' |
Options forfeited/cancelled, Weighted Average Exercise Price | $0.51 | ' | $0.25 |
Outstanding End, Weighted Average Exercise Price | $0.42 | $0.42 | $0.19 |
5_STOCK_OPTION_PLAN_AND_STOCKB4
5. STOCK OPTION PLAN AND STOCK-BASED COMPENSATION (Details 2) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | Dec. 31, 2010 |
Vested or Expected to Vest | ' | ' | ' | ' |
Number of Options | 5,886,400 | 7,708,400 | 1,578,400 | 78,400 |
Weighted Average Exercise Price Per Share | $0.41 | $0.42 | ' | ' |
Weighted Average Remaining Contractual Life (Years) | '2 years 8 months 8 days | '4 years 9 months 22 days | ' | ' |
Aggregate Intrinsic Value | $1,656,600 | $576,000 | ' | ' |
Exercisable Options | ' | ' | ' | ' |
Number of Shares Exercisable | 4,280,848 | 2,318,817 | ' | ' |
Weighted Average Exercise Price Per Share | $0.39 | $0.32 | ' | ' |
Weighted Average Remaining Contractual Life (Years) | '2 years 8 months 8 days | '4 years 8 months 16 days | ' | ' |
Aggregate Intrinsic Value | 1,330,637 | 418,000 | 96,206 | ' |
Minimum [Member] | ' | ' | ' | ' |
Vested or Expected to Vest | ' | ' | ' | ' |
Exercise Price | '0.10 | ' | ' | ' |
Maximum [Member] | ' | ' | ' | ' |
Vested or Expected to Vest | ' | ' | ' | ' |
Exercise Price | '1.85 | ' | ' | ' |
Range 1 | ' | ' | ' | ' |
Vested or Expected to Vest | ' | ' | ' | ' |
Exercise Price | '0.10 | '0.10 | ' | ' |
Number of Options | 1,800,000 | 1,800,000 | ' | ' |
Weighted Average Exercise Price Per Share | $0.10 | $0.10 | ' | ' |
Weighted Average Remaining Contractual Life (Years) | '3 years 1 month 17 days | '3 years 10 months 13 days | ' | ' |
Aggregate Intrinsic Value | 1,026,000 | 576,000 | ' | ' |
Exercisable Options | ' | ' | ' | ' |
Number of Shares Exercisable | 1,612,500 | 1,306,250 | ' | ' |
Weighted Average Exercise Price Per Share | $0.10 | $0.10 | ' | ' |
Weighted Average Remaining Contractual Life (Years) | '3 years 1 month 24 days | '3 years 11 months 5 days | ' | ' |
Aggregate Intrinsic Value | 919,125 | 418,000 | ' | ' |
Range 2 | ' | ' | ' | ' |
Vested or Expected to Vest | ' | ' | ' | ' |
Exercise Price | '0.42 | ' | ' | ' |
Number of Options | 98,000 | ' | ' | ' |
Weighted Average Exercise Price Per Share | $0.42 | ' | ' | ' |
Weighted Average Remaining Contractual Life (Years) | '7 years 3 months 4 days | ' | ' | ' |
Aggregate Intrinsic Value | 24,500 | ' | ' | ' |
Exercisable Options | ' | ' | ' | ' |
Number of Shares Exercisable | 0 | ' | ' | ' |
Weighted Average Exercise Price Per Share | $0.42 | ' | ' | ' |
Aggregate Intrinsic Value | 0 | ' | ' | ' |
Range 3 | ' | ' | ' | ' |
Vested or Expected to Vest | ' | ' | ' | ' |
Exercise Price | '0.50 | '0.50 | ' | ' |
Number of Options | 3,330,000 | 5,830,000 | ' | ' |
Weighted Average Exercise Price Per Share | $0.50 | $0.50 | ' | ' |
Weighted Average Remaining Contractual Life (Years) | '2 years 1 month 2 days | '5 years 1 month 17 days | ' | ' |
Aggregate Intrinsic Value | 566,100 | ' | ' | ' |
Exercisable Options | ' | ' | ' | ' |
Number of Shares Exercisable | 2,371,668 | 934,167 | ' | ' |
Weighted Average Exercise Price Per Share | $0.50 | $0.50 | ' | ' |
Weighted Average Remaining Contractual Life (Years) | '2 years 4 months 2 days | '5 years 11 months 13 days | ' | ' |
Aggregate Intrinsic Value | 403,184 | 0 | ' | ' |
Range 4 | ' | ' | ' | ' |
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 10 months 13 days | ' | ' | ' |
Aggregate Intrinsic Value | 40,000 | ' | ' | ' |
Exercisable Options | ' | ' | ' | ' |
Number of Shares Exercisable | 83,280 | ' | ' | ' |
Weighted Average Exercise Price Per Share | $0.57 | ' | ' | ' |
Weighted Average Remaining Contractual Life (Years) | '4 years 10 months 13 days | ' | ' | ' |
Aggregate Intrinsic Value | 8,328 | ' | ' | ' |
Range 5 | ' | ' | ' | ' |
Vested or Expected to Vest | ' | ' | ' | ' |
Exercise Price | '1.00 | ' | ' | ' |
Number of Options | 180,000 | ' | ' | ' |
Weighted Average Exercise Price Per Share | $1 | ' | ' | ' |
Weighted Average Remaining Contractual Life (Years) | '2 years 3 months 25 days | ' | ' | ' |
Aggregate Intrinsic Value | 0 | ' | ' | ' |
Exercisable Options | ' | ' | ' | ' |
Number of Shares Exercisable | 135,000 | ' | ' | ' |
Weighted Average Exercise Price Per Share | $1 | ' | ' | ' |
Weighted Average Remaining Contractual Life (Years) | '1 year 7 months 17 days | ' | ' | ' |
Aggregate Intrinsic Value | 0 | ' | ' | ' |
Range 6 | ' | ' | ' | ' |
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) | '2 years | '2 years 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) | '2 years | '2 years 9 months | ' | ' |
Aggregate Intrinsic Value | $0 | $0 | ' | ' |
5_STOCK_OPTION_PLAN_AND_STOCKB5
5. STOCK OPTION PLAN AND STOCK-BASED COMPENSATION (Details Narrative) (USD $) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Dec. 31, 2012 | Dec. 31, 2011 | |
Stock Option Plan And Stock-Based Compensation Details Narrative | ' | ' | ' | ' | ' | ' |
Stock-based compensation relating to option grant | $472,820 | $44,638 | $857,851 | $161,504 | $480,108 | $149,727 |
Unrecognized compensation | 213,000 | ' | 213,000 | ' | 1,654,000 | ' |
Unrecognized compensation period for recognition | ' | ' | '1 year 22 days | ' | '2 years 6 months | ' |
Remaining contractual life of option | ' | ' | ' | ' | '4 years 8 months 16 days | ' |
Weighted-average remaining contractual life for options exercisable | ' | ' | '2 years 8 months 8 days | ' | '4 years 8 months 16 days | ' |
Intrinsic value for fully vested, exercisable options | $1,330,637 | ' | $1,330,637 | ' | $418,000 | $96,206 |
Weighted-average fair value | ' | ' | $0.21 | $0.21 | ' | ' |
5_STOCK_OPTION_PLAN_AND_STOCKB6
5. STOCK OPTION PLAN AND STOCK-BASED COMPENSATION (Details Narrative 1) | 12 Months Ended | 12 Months Ended | ||
Dec. 31, 2010 | Dec. 31, 2012 | Dec. 31, 2012 | Dec. 31, 2011 | |
2010 Stock Plan [Member] | 2010 Stock Plan [Member] | 2011 Non-Qualified Stock Plan [Member] | 2011 Non-Qualified Stock Plan [Member] | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ' | ' | ' | ' |
Stock option outstanding under the plan | ' | 578,400 | 7,130,000 | ' |
Number of stock option available for grant | ' | 4,421,600 | 4,870,000 | ' |
Option granted to purchase common stock | 5,000,000 | ' | 12,000,000 | 2,100,000 |
6_RELATED_PARTY_TRANSACTIONS_D
6. RELATED PARTY TRANSACTIONS (Details Narrative) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 | Dec. 31, 2011 |
Related Party Transactions Details Narrative | ' | ' | ' |
Accrued interest included in accrued expenses | $58,568 | $44,090 | $25,641 |
7_INTANGIBLE_ASSETS_Details
7. INTANGIBLE ASSETS (Details) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 | Dec. 31, 2011 |
Intangible assets consist | ' | ' | ' |
SUGARDOWN technology and provisional patents | $900,000 | $900,000 | $900,000 |
Less accumulated amortization | -187,500 | -139,286 | -75,000 |
Intangible assets, net | $712,500 | $760,714 | $825,000 |
7_INTANGIBLE_ASSETS_Details_1
7. INTANGIBLE ASSETS (Details 1) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 | Dec. 31, 2011 |
Intangible Assets Details 1 | ' | ' | ' |
2013 | ' | $64,286 | ' |
2014 | ' | 64,286 | ' |
2015 | ' | 64,286 | ' |
2016 | ' | 64,286 | ' |
2017 | ' | 64,286 | ' |
Thereafter | ' | 439,284 | ' |
Finite-Lived Intangible Assets, Net | $712,500 | $760,714 | $825,000 |
7_INTANGIBLE_ASSETS_Details_Na
7. INTANGIBLE ASSETS (Details Narrative) (USD $) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Dec. 31, 2012 | Dec. 31, 2011 | |
Intangible Assets Details Narrative | ' | ' | ' | ' | ' | ' |
Useful lives of intangible assets | ' | ' | '14 years | '14 years | '14 years | ' |
Amortization expense | $16,071 | $16,071 | $48,213 | $48,213 | $64,286 | $64,286 |
8_PROVISION_FOR_INCOME_TAXES_D
8. PROVISION FOR INCOME TAXES (Details) (USD $) | Dec. 31, 2012 | Dec. 31, 2011 |
Provision For Income Taxes Details | ' | ' |
Start-up costs | $21,786 | $21,786 |
Net operating loss carryforward | 1,064,457 | 466,803 |
Valuation allowance | -1,086,243 | -488,589 |
Net deferred tax asset | ' | ' |
8_PROVISION_FOR_INCOME_TAXES_D1
8. PROVISION FOR INCOME TAXES (Details 1) | 12 Months Ended | |
Dec. 31, 2012 | Dec. 31, 2011 | |
Provision For Income Taxes Details 1 | ' | ' |
Tax benefit at U.S. statutory rate | -34.00% | -34.00% |
State tax benefit | -6.30% | -6.30% |
Valuation allowance | 40.30% | 40.30% |
Income tax rate | 0.00% | 0.00% |
8_PROVISION_FOR_INCOME_TAXES_D2
8. PROVISION FOR INCOME TAXES (Details Narrative) (USD $) | Dec. 31, 2012 | Dec. 31, 2011 |
Provision For Income Taxes Details Narrative | ' | ' |
Deferred tax asset | $21,786 | $21,786 |
Deferred tax asset related to net operating loss carryforwards | $2,697,399 | $1,213,284 |
9_COMMITMENTS_AND_CONTINGENCIE2
9. COMMITMENTS AND CONTINGENCIES (Details) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
Commitments And Contingencies Details | ' | ' |
Future minimum lease payments in 2013 | $14,634 | $25,917 |
Future minimum lease payments in 2014 | 60,093 | 26,917 |
Future minimum lease payments in 2015 | 62,169 | 16,042 |
Future minimum lease payments in 2016 | 64,299 | ' |
Future minimum lease payments in 2017 | 66,519 | ' |
Future minimum lease payments in 2018 | 16,770 | ' |
Future minimum lease payments | $284,484 | $68,876 |
9_COMMITMENTS_AND_CONTINGENCIE3
9. COMMITMENTS AND CONTINGENCIES (Details Narrative) (USD $) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Dec. 31, 2012 | |
Commitments And Contingencies Details Narrative | ' | ' | ' | ' | ' |
Rent expense | $10,132 | $7,326 | $59,372 | $9,890 | ' |
Deferred rent | $25,635 | ' | $25,635 | ' | $2,267 |