Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2015 | Nov. 11, 2015 | |
Document And Entity Information [Abstract] | ||
Entity Registrant Name | Enerpulse Technologies, Inc. | |
Entity Central Index Key | 1,495,899 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2015 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 15,512,381 | |
Trading Symbol | ENPT | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2,015 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 |
Current Assets | ||
Cash and cash equivalents | $ 849,400 | $ 17,077 |
Accounts receivable, net | 90,117 | 73,572 |
Inventory | 288,009 | 337,297 |
Other current assets | 19,520 | 22,981 |
Total current assets | 1,247,046 | 450,927 |
Intangible assets, net of accumulated amortization of $153,430 (2015) and $128,444 (2014) | 487,565 | 483,982 |
Property and equipment, net | 150,879 | 173,963 |
Other assets | 9,314 | 118,557 |
Total assets | 1,894,804 | 1,227,429 |
Current Liabilities | ||
Accounts payable | 313,784 | 554,747 |
Accrued expenses | 231,681 | $ 135,968 |
Current portion of notes payable | 216,271 | |
Current portion of capital lease obligations | 24,737 | $ 24,737 |
Total current liabilities | 786,473 | 715,452 |
Long-Term Liabilities | ||
Capital lease obligations, net of current portion | 2,609 | 20,778 |
Notes payable, net of offering costs, discounts and current portion | 1,407,006 | 248,225 |
Warrants liability | 949,016 | 817,250 |
Total noncurrent liabilities | 2,358,631 | 1,086,253 |
Total liabilities | $ 3,145,104 | $ 1,801,705 |
Commitments and Contingencies | ||
Stockholders' Deficit | ||
Preferred stock, 10,000,000 shares authorized; no shares issued and outstanding; $0.001 par value | ||
Common stock, 100,000,000 shares authorized; 15,022,381 and 13,732,381 shares issued and outstanding at September 30, 2015 and December 31, 2014, respectively; $0.001 par value | $ 15,023 | $ 13,733 |
Additional paid-in capital | 27,882,597 | 26,812,046 |
Note receivable, related party | (205,635) | (204,100) |
Accumulated deficit | (28,942,285) | (27,195,955) |
Total stockholders' deficit | (1,250,300) | (574,276) |
Total liabilities and stockholders' deficit | $ 1,894,804 | $ 1,227,429 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 |
Statement of Financial Position [Abstract] | ||
Accumulated amortization, Intangible assets | $ 153,430 | $ 128,444 |
Preferred Stock, par value | $ 0.001 | $ 0.001 |
Preferred Stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred Stock, shares issued | ||
Preferred Stock, shares outstanding | ||
Common Stock, shares authorized | 100,000,000 | 100,000,000 |
Common Stock, shares issued | 15,022,381 | 13,732,381 |
Common Stock, shares outstanding | 15,022,381 | 13,732,381 |
Common Stock, par value | $ 0.001 | $ 0.001 |
Consolidated Statements of Oper
Consolidated Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Income Statement [Abstract] | ||||
Sales | $ 102,283 | $ 64,355 | $ 316,732 | $ 254,884 |
Cost of sales | 58,918 | 63,818 | 178,016 | 237,812 |
Gross profit | 43,365 | 537 | 138,716 | 17,072 |
Selling, general and administrative expenses | 739,936 | 841,372 | 2,214,181 | 2,608,779 |
Loss from operations | (696,571) | (840,835) | (2,075,465) | (2,591,707) |
Other income (expense), net | ||||
Fair value adjustments of derivative liabilities | 446,312 | 23,497 | 765,790 | (299,236) |
Interest | (47,845) | $ (1,702) | (117,933) | $ (12,996) |
Amortization of debt discount | (170,531) | (402,858) | ||
Other income (expense) | 37,074 | $ 508 | 84,136 | $ (81,774) |
Other income (expense), net | 265,010 | 22,303 | 329,135 | (394,006) |
Net loss | $ (431,561) | $ (818,532) | $ (1,746,330) | $ (2,985,713) |
Net loss per common share (basic and diluted) | $ (0.03) | $ (0.06) | $ (0.12) | $ (0.27) |
Net loss per puttable common share (basic and diluted) | $ (0.06) | $ (0.27) | ||
Weighted average number of shares outstanding (basic and diluted) - common | 15,022,381 | 13,732,381 | 14,638,608 | 11,149,963 |
Weighted average number of shares outstanding (basic and diluted) - puttable common | 79,914 | 113,974 |
Consolidated Statement of Stock
Consolidated Statement of Stockholders' Deficit (Unaudited) - 9 months ended Sep. 30, 2015 - USD ($) | Common Stock [Member] | Additional Paid-in Capital [Member] | Notes Receivable Related Party [Member] | Accumulated Deficit [Member] | Total |
Balance at Dec. 31, 2014 | $ 13,733 | $ 26,812,046 | $ (204,100) | $ (27,195,955) | $ (574,276) |
Balance, shares at Dec. 31, 2014 | 13,732,381 | ||||
Issuance of common stock, net of offering costs | $ 800 | 159,200 | 160,000 | ||
Issuance of common stock, net of offering costs, shares | 800,000 | ||||
Beneficial conversion feature with issuance of senior secured convertible notes | 752,140 | 752,140 | |||
Issuance of common stock, consultant | $ 490 | $ 97,510 | 98,000 | ||
Issuance of common stock, consultant, shares | 490,000 | ||||
Accrued interest receivable | $ (1,535) | (1,535) | |||
Stock-based compensation expense | $ 61,701 | 61,701 | |||
Net loss | $ (1,746,330) | (1,746,330) | |||
Balance at Sep. 30, 2015 | $ 15,023 | $ 27,882,597 | $ (205,635) | $ (28,942,285) | $ (1,250,300) |
Balance, shares at Sep. 30, 2015 | 15,022,381 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 9 Months Ended | |
Sep. 30, 2015 | Sep. 30, 2014 | |
Cash Flows From Operating Activities | ||
Net loss | $ (1,746,330) | $ (2,985,713) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Stock-based compensation | 159,701 | 411,544 |
Amortization | 24,986 | 23,158 |
Depreciation | $ 41,304 | 40,023 |
Amortization of repricing of warrants on notes payable | 52,005 | |
Amortization of debt discounts | $ 404,358 | 788 |
Loss on modification of derivative liabilities | 31,356 | |
Fair value adjustments of derivative instruments | $ (765,790) | 299,236 |
Interest on note receivable, related party | (1,535) | (1,519) |
Provision for doubtful accounts | 8,971 | $ 2,952 |
Provision for obsolete inventory | 19,197 | |
Loss on disposal of equipment | 8,000 | |
Changes in operating assets and liabilities: | ||
Accounts receivable | (25,516) | $ 23,779 |
Inventory | 30,091 | (57,561) |
Accounts payable | (132,220) | (161,629) |
Accrued expenses | 95,713 | (66,382) |
Other | 3,960 | (8,915) |
Net cash used in operating activities | (1,875,110) | (2,396,878) |
Cash Flows From Investing Activities | ||
Purchase of property and equipment | (26,219) | (37,134) |
Purchase of intangible assets | (28,569) | (105,453) |
Net cash used in investing activities | $ (54,788) | (142,587) |
Cash Flows From Financing Activities | ||
Proceeds from issuance of common stock and related warrants, net of offering costs | 3,116,966 | |
Redemption of puttable common stock | (200,000) | |
Proceeds from notes payable, net of offering costs | $ 2,830,390 | 230,000 |
Payments on capital lease and notes payable | (68,169) | (237,775) |
Net cash provided by financing activities | 2,762,221 | 2,909,191 |
Net increase in cash and cash equivalents | 832,323 | 369,726 |
Cash and cash equivalents at beginning of year | 17,077 | 281,607 |
Cash and cash equivalents at end of year | 849,400 | 651,333 |
Supplement cash flow information: | ||
Cash paid for interest | 3,709 | 12,208 |
Noncash investing and financing activities: | ||
Warrants issued related to offering costs | 137,655 | $ 119,570 |
Common stock issued related to debt offering costs | 160,000 | |
Common stock issued related to consulting agreement | $ 98,000 | |
Deferred offering costs capitalized in 2013 | $ 65,771 | |
Adjustment resulting from change in value of puttable common stock | 93,780 | |
Note payable issued in conjunction with redemption of puttable common stock | 100,000 | |
Equipment acquired under capital lease | $ 21,595 |
Organization, Basis of Presenta
Organization, Basis of Presentation and Management's Plans | 9 Months Ended |
Sep. 30, 2015 | |
Accounting Policies [Abstract] | |
Organization, Basis of Presentation and Management's Plans | Note 1 - Organization, Basis of Presentation and Managements Plans Organization Enerpulse Technologies, Inc. was incorporated in the state of Nevada on May 3, 2010 and conducts its operations primarily through its wholly-owned subsidiary, Enerpulse, Inc. (collectively the Company, or Enerpulse). Enerpulse was incorporated in the state of Delaware on January 20, 2004. The Company engages in the design, development, manufacturing and marketing of an energy and efficiency enhancing product in the automotive industry. Company headquarters are located in Albuquerque, New Mexico. Basis of Presentation The interim consolidated financial statements have been prepared by management without audit. Pursuant to the rules and regulations of the United States Securities and Exchange Commission (the SEC), certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP) have been condensed or omitted pursuant to such rules and regulations. These interim consolidated financial statements should be read in conjunction with the Companys audited consolidated financial statements for the year ended December 31, 2014, included in the Companys Annual Report on Form 10-K filed with the SEC. All intercompany balances and transactions have been eliminated in consolidation. 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, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities. Actual results could differ from these estimates. In the opinion of the management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position as of the interim date, and the results of operations, changes in stockholders equity (deficit), and cash flows, for the interim periods presented, have been made. The interim results are not necessarily indicative of the operating results for the full year or future periods. Certain prior year amounts have been reclassified to conform to the current year presentation. Managements Plans The accompanying interim consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The Company reported a loss from operations of approximately $2,075,000 for the nine months ended September 30, 2015 and the Company anticipates a loss from operations for the remainder of 2015. The Company also used net cash in operations of approximately $1,875,000 for the nine months ended September 30, 2015 and has working capital of approximately $461,000 at September 30, 2015. As a result of the Companys history of losses from operations, cash flows used in operations and limited liquidity, the Companys independent registered public accounting firms report on the Companys consolidated financial statements as of and for the year ended December 31, 2014 includes an explanatory paragraph stating that these conditions raise substantial doubt about the Companys ability to continue as a going concern. The interim consolidated financial statements do not include any adjustments relating to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. Managements plans are to secure additional funding to cover working capital needs until positive cash flow from operations occurs, which is anticipated to commence in 2016. The Company has a history of securing funding from various venture capital firms (approximately $22 million) since 2004. In addition, the Company filed with the SEC, a Registration Statement on Form S-1 (the Offering), which was declared effective by the SEC on May 13, 2014 for the public offering of 5,000,000 shares of common stock and 5,000,000 warrants to purchase up to an aggregate of 7,500,000 shares of common stock. On May 16, 2014, the Company announced the pricing of the Offering, and on May 21, 2014, the Company closed the Offering for 5,000,000 shares of its common stock and 5,000,000 warrants at an offering price of $0.75 per share and $0.05 per warrant, resulting in gross proceeds of $4.0 million. During March 2014, the Company also received $230,000 in financing in exchange for promissory notes with warrants, which funded the Company prior to the closing of the Offering. In addition, on February 20, 2015, the Company closed on approximately $3,049,000 in thirty-six month convertible notes at a 6% interest rate and 50% warrant coverage. Warrants were issued for 7,621,875 common shares at an exercise price of $0.20 per share. The notes are convertible into 15,243,750 shares of the Companys common stock. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2015 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Note 2 - Summary of Significant Accounting Policies Accounts Receivable and Allowance for Doubtful Accounts Accounts receivable represent the amount billed to, but uncollected from customers. Accounts receivable are carried at original invoice amount less an estimate made for doubtful receivables based on a review of all outstanding amounts on a monthly basis. Management determines the allowance for doubtful accounts by identifying past due accounts. Accounts receivable are written off when deemed uncollectible. A receivable is considered to be past due if any portion of the receivable balance is outstanding for more than 90 days past each respective customers terms. The allowance for doubtful accounts was approximately $9,000 and $6,900, as of September 30, 2015 and December 31, 2014, respectively. No interest is charged on late accounts. No material amounts were written off during the three and nine months ended September 30, 2015 and 2014. Revenue Recognition The Company recognizes revenue when all of the following have occurred: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the sales price is fixed or determinable; and (4) collectability is reasonably assured. This generally occurs upon shipment to the customer. Substantially all of the Companys revenue is generated from direct sales of its product to the automotive and powersports aftermarkets. Fair Value Measurements The carrying value of cash and cash equivalents, accounts receivable, and accounts payable approximate fair value due to their short maturities. The carrying value of debt approximates fair value, as the interest rates on the outstanding borrowings are at rates that approximate market rates for borrowings with similar terms and maturities. The fair value amounts of receivables from and notes payable to related parties are not practicable to estimate based on the related party nature of the underlying transactions. Fair Value of Financial Instruments The Company accounts for financial instruments utilizing a framework for measuring fair value in generally accepted accounting principles. To increase consistency and comparability in fair value measurements, a fair value hierarchy is used that prioritizes the inputs to valuation techniques used to measure fair value into three levels as follows: Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2 - observable inputs other than Level 1, quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, and model-derived prices whose inputs are observable or whose significant value drivers are observable; and Level 3 - assets and liabilities whose significant value drivers are unobservable. Observable inputs are based on market data obtained from independent sources, while unobservable inputs are based on the Companys market assumptions. Unobservable inputs require significant management judgment or estimation. In some cases, the inputs used to measure an asset or liability may fall into different levels of the fair value hierarchy. In those instances, the fair value measurement is required to be classified using the lowest level of input that is significant to the fair value measurement. Such determination requires significant management judgment. As of September 30, 2015 and December 31, 2014, cash and cash equivalents measured at fair value were classified as Level 1 and the warrants liability measured at fair value was classified as Level 2 and Level 3, as appropriate (see Note 7). Offering Costs Offering costs consist principally of legal, accounting and underwriters fees incurred that are directly attributable to equity and debt offerings. Offering costs related to the equity offering were charged against the gross proceeds received upon the completion of the Offering. Offering costs attributable to debt offerings are amortized over the term of the related debt. At December 31, 2014, deferred offering costs of approximately $104,000 were included in other non-current assets. Research and Development Research and development costs are charged to operations when incurred and are included in selling and administrative expenses. The amounts charged for the three months ended September 30, 2015 and 2014 were approximately $129,000 and $96,000, respectively. The amounts charged for the nine months ended September 30, 2015 and 2014 were approximately $313,000 and $268,000, respectively. Net Income (Loss) Per Share Net income (loss) per share is calculated using the two-class method per U.S. GAAP. Under the two-class method, the Company treats only the portion of the periodic adjustment to the puttable common stocks carrying amount that reflects redemption in excess of fair value like a dividend. Basic and diluted net income (loss) per share has been computed using the weighted-average number of shares of common stock outstanding during the periods as follows: For the three months ended September 30, 2015 2014 Common Common Puttable Weighted average shares of stock used in basic and diluted loss per share 15,022,381 13,732,381 79,914 Allocation of net loss $ (431,561 ) $ (813,796 ) $ (4,736 ) Basic and diluted net loss per share $ (0.03 ) $ (0.06 ) $ (0.06 ) For the nine months ended September 30, 2015 2014 Common Common Puttable Weighted average shares of stock used in basic and diluted loss per share 14,638,608 11,149,963 113,974 Allocation of net loss $ (1,746,330 ) $ (2,955,502 ) $ (30,211 ) Basic and diluted net loss per share $ (0.12 ) $ (0.27 ) $ (0.27 ) The weighted average number of shares used to compute diluted net loss per share excludes any potentially dilutive securities and assumed exercise of stock options and warrants as they were either out-of-the money or the effect would be antidilutive. Common stock equivalents of approximately 35.1 million and 11.1 million as of September 30, 2015 and 2014, respectively, were excluded from the calculation because of their antidilutive effect. Stock-Based Compensation The Company accounts for stock options to employees and nonemployee board members based on the estimated fair value at the option grant date. The Company measures the cost of employee services received in exchange for stock options based on the grant date fair value of the award and recognizes the cost over the period the employee is required to provide services for the award. The Company generally utilizes the Black-Scholes option-pricing model to determine fair value of stock option awards. Key assumptions include applicable volatility rates, risk-free interest rates and the instruments expected remaining life. As allowed by U.S. GAAP, for companies with a short period of publicly traded stock history, the Companys estimate of expected volatility and expected term are primarily based on the average volatilities and expected terms of identified companies with similar attributes to the Company, including industry, stage of life cycle, size and financial leverage. The risk-free rate for periods within the contractual life of the warrant is based on the U.S. Treasury yield curve in effect at the time of grant valuation. These assumptions require significant management judgment. Recent Accounting Pronouncements In April 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2015-03, Simplifying the Presentation of Debt Issuance Costs. ASU 2015-03 requires that debt issuance costs be presented in the balance sheet as a direct deduction of the carrying value of the associated debt liability. Under the existing guidance, debt issuance costs are required to be presented in the balance sheet as a deferred charge (i.e., an asset). The new standard is effective for periods beginning after December 15, 2015. Early adoption is permitted for financial statements that have not been previously issued. The new standard should be applied retrospectively to all periods presented in the financial statements. The Company early adopted the standard during the three months ended March 31, 2015 and thus debt financing costs are presented as a deduction of the carrying value of its convertible note payable instead of presenting such costs as an asset in the consolidated balance sheets. In January 2015, the FASB issued ASU 2015-01, Income Statement Extraordinary and Unusual Items. ASU 2015-01, removes the concept of extraordinary items from U.S. GAAP. Under the existing guidance, an entity is required to separately disclose extraordinary items, net of tax, in the income statement after income from continuing operations if an event or transaction is unusual and occurs infrequently. This separate, net-of-tax presentation will no longer be allowed. The existing requirement to separately disclose events or transactions that are unusual or occur infrequently on a pre-tax basis within continuing operations in the income statement has been retained. The new guidance requires similar separate presentation of items that are both unusual and infrequent. The new standard is effective for periods beginning after December 15, 2015. Early adoption is permitted, but only as of the beginning of the fiscal year of adoption. Upon adoption, the Company will present transactions that are both unusual and infrequent, if any, on a pre-tax basis within continuing operations in the consolidated statement of operations. In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements - Going Concern - Disclosures of Uncertainties about an Entitys Ability to Continue as a Going Concern. ASU 2014-15 provides new guidance related to managements responsibility to evaluate whether there is substantial doubt about an entitys ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards and to provide related footnote disclosures. This new guidance is effective for annual reporting periods ending after December 15, 2016, and for interim periods thereafter. Early adoption is permitted. The Company is currently assessing the impact that adopting this new accounting guidance may have on its consolidated financial statements and footnote disclosures. In June 2014, the FASB, issued ASU No. 2014-12, Compensation - Stock Compensation (Topic 718): Accounting for Share- Based Payments When the Terms of an Award Provide that a Performance Target Could be Achieved after the Requisite Service Period. ASU 2014-12 requires that a performance target that affects vesting, and that could be achieved after the requisite service period, be treated as a performance condition. As such, the performance target should not be reflected in estimating the grant date fair value of the award. This update further clarifies that compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. The updated guidance is effective for annual reporting periods beginning after December 15, 2015, including interim periods within that reporting period. Early adoption is permitted. The Company does not anticipate that the adoption of this standard will have a material impact on its consolidated financial statements. In May 2014, the Financial Accounting Standards Board (FASB) issued ASU No. 2014-09, Revenue from Contracts from Customers |
Inventory
Inventory | 9 Months Ended |
Sep. 30, 2015 | |
Inventory Disclosure [Abstract] | |
Inventory | Note 3 - Inventory Inventory is stated at the lower of average cost or market and consists of various ignition components, high voltage cables, spark plugs, and high voltage capacitors. The inventory cost method is first-in, first-out. Indirect overhead and indirect labor are allocated on a per unit basis during the work in progress and finished goods stage of production. The Company monitors inventory for turnover and obsolescence and reduces the carrying value of total inventory for excess and obsolete inventory as deemed necessary. Inventory consisted of the following: September 30, 2015 December 31, 2014 Raw materials $ 187,153 $ 219,449 Work in process 35,171 38,962 Finished goods 65,685 78,886 Total inventory $ 288,009 $ 337,297 |
Property and Equipment, Net
Property and Equipment, Net | 9 Months Ended |
Sep. 30, 2015 | |
Property, Plant and Equipment, Net [Abstract] | |
Property and Equipment, Net | Note 4 - Property and Equipment, Net Property and equipment, net, consisted of the following: September 30, 2015 December 31, 2014 Vehicles $ 22,679 $ 22,679 Software and equipment 817,996 802,849 Furniture and fixtures 26,143 23,071 Leasehold improvements 254,137 254,137 1,120,955 1,102,736 Less accumulated depreciation (970,076 ) (928,773 ) Total property and equipment, net $ 150,879 $ 173,963 |
Notes Payable
Notes Payable | 9 Months Ended |
Sep. 30, 2015 | |
Debt Disclosure [Abstract] | |
Notes Payable | Note 5 - Notes Payable Notes payable consist of the following: September 30, 2015 December 31, 2014 LWM, LLC, with an annual interest rate equal to the Federal Funds Rate (as announced by the Federal Reserve Bank of New York) for the first day of the calendar year, 1.0% at September 30, 2015 and December 31, 2014; unsecured; due with interest on September 5, 2016 $ 166,271 $ 166,271 Senior secured convertible notes; payable with interest at 6.0% per annum; secured by all of the Companys assets; due with interest on February 20, 2018 3,048,750 - Promissory note; payable without interest (interest imputed at 12.0% per annum); unsecured; due on August 25, 2016 50,000 100,000 3,265,021 266,271 Discount (1,224,049 ) (18,046 ) Offering Costs (417,695 ) - Current Portion (216,271 ) - Long-term portion $ 1,407,006 $ 248,225 On February 20, 2015, the Company issued approximately $3,049,000 in senior secured convertible notes with 50% warrant coverage (see Note 7). The notes convert into 15,243,750 shares of the Companys common stock (see Note 6), are secured by all of the Companys assets, and are due with interest on February 20, 2018. The convertible notes bear interest at the rate of 6% per annum compounded annually, are payable at maturity, and the principal and interest outstanding under the convertible notes are convertible into shares of our common stock at any time after issuance, at the option of the purchaser, at a conversion price equal to $0.20 per share, subject to adjustment upon the occurrence of certain events, including stock dividends, stock splits and the issuance of common stock equivalents at a price below the conversion price. Subject to the Company fulfilling certain conditions, including beneficial ownership limits, the convertible notes are subject to a mandatory conversion if the closing price of our common stock for any 30 consecutive days commencing after the issue date of the convertible notes equals or exceeds $0.60 per share. Unless waived in writing by the purchaser, no conversion of the convertible notes can be effected to the extent that as a result of such conversion the purchaser would beneficially own more than 9.99% in the aggregate of our issued and outstanding common stock immediately after giving effect to the issuance of common stock upon conversion. For so long as the Company has any obligation under the convertible notes, the Company has agreed to certain restrictions regarding, among other things, incurrence of additional debt, liens, amendments to charter documents, repurchase of stock, payment of cash dividends, affiliated transactions. The Company is also prohibited from entering into certain variable priced agreements until the convertible notes are repaid in full. The Company determined that the embedded conversion feature did not meet the criteria for bifurcation because of the limited trading volume of the Companys common stock relative to the number of shares to be converted. As a result, the shares to be issued upon conversion are not readily convertible to cash. The Company determined that the discount upon conversion required recognition of a beneficial conversion feature. Accordingly, the Company recognized a beneficial conversion feature and debt discount of approximately $752,000 on the issuance date, February 20, 2015. The debt discount is being accreted to interest expense over the life of the convertible notes using the effective interest method. The Company utilized a binomial option pricing model (BOPM) to develop its assumptions for determining the fair value of the beneficial conversion feature. The beneficial conversion feature was measured at the effective conversion price of the debt, after considering the relative fair value assigned to the warrants with the debt. In conjunction with the February 20, 2015 debt offering, the Company paid its placement agent, and/or its designees a commission equal to $210,000 consisting of (i) $50,000 in cash, (ii) 800,000 shares of the Companys common stock and (iii) warrants exercisable for up to 1,050,000 common shares at an exercise price of $0.20 per share. Total debt offering costs of approximately $509,000 included placement agent commissions, underwriters commissions, legal fees, consulting services, and audit and accounting services, and filing service fees, and were netted against the gross proceeds received. On August 25, 2014, the Company entered into a promissory note with the shareholders of the Companys puttable common stock. As a result of the debt offering on February 20, 2015, the Company repaid $50,000 on the promissory note and agreed to pay the remaining $50,000 by the due date, August 25, 2016. During March 2014, under the terms of a note purchase agreement, the Company received $130,000 in financing from two employees and an affiliate of a stockholder in exchange for three bridge loans. The lenders also received warrants to purchase 17,334 shares of common stock at an initial exercise price of $3.75 per share. The note purchase agreement allowed the Company to borrow up to $400,000 through the issuance of promissory notes. The bridge loans matured on May 19, 2014. Two of the loans accrued interest at an annual rate equal to 12%, due upon repayment. The third loan accrued $6,000 of interest, due upon repayment. The loans and associated interest were repaid by May 29, 2014 with proceeds from the Offering. On March 27, 2014, Freepoint Commerce Marketing LLC (Freepoint) extended $100,000 in financing in exchange for a note and received a warrant to purchase 16,667 shares of common stock at an initial exercise price of $3.00 per share. The note accrued interest at an annual rate equal to 12% per annum, due upon repayment. The financing and associated interest were repaid by May 29, 2014 with proceeds from the Offering. The Company estimated the relative fair value of the warrants issued with the March 2014 notes to be $37,127 (see Note 7), which was recognized as additional interest expense over the term of the outstanding related notes. |
Capital Stock
Capital Stock | 9 Months Ended |
Sep. 30, 2015 | |
Equity [Abstract] | |
Capital Stock | Note 6 - Capital Stock As disclosed in Note 5, the Company issued approximately $3,049,000 in 6% senior secured convertible notes with warrants. The notes convert into 15,243,750 shares of the Companys common stock and the warrants are exercisable for up to 7,621,875 common shares at an exercise price of $0.20 per share. In addition, the Company paid its placement agent and/or its designees a commission, which included (i) 800,000 shares of the Companys common stock and (ii) warrants exercisable for up to 1,050,000 common shares at an exercise price of $0.20 per share. The Company estimated the fair value of the common stock issued to be $160,000 (see Note 7), which is recognized as debt offering costs. The fair value of the warrants was determined to be approximately $138,000. On April 3, 2015, the Company issued 490,000 shares of common stock to a third party market advisory service. The Company estimated the fair value of the common stock issued to be $98,000 (see Note 8). |
Warrants
Warrants | 9 Months Ended |
Sep. 30, 2015 | |
Warrants and Rights Note Disclosure [Abstract] | |
Warrants | Note 7 - Warrants As disclosed in Note 5, on February 20, 2015, the Company issued approximately $3,049,000 in 6% senior secured convertible notes with warrants for 7,621,875 common shares at an exercise price of $0.20 per share and the Company paid its placement agent and/or its designees a commission, which included warrants exercisable for up to 1,050,000 common shares at an exercise price of $0.20 per share. The Company estimated the fair value of the warrants issued with the convertible notes to be approximately $890,000, which is recognized as additional interest expense over the term of the outstanding related notes. The February 20, 2015 warrant agreements contain anti-dilutive provisions that adjust the exercise price if the Company issues any common stock, securities convertible into common stock, or other securities (subject to certain exceptions) at a value below the exercise price of the warrants. The warrants may also be exercised on a cashless basis if the fair market value of one share of common stock on the calculation date is greater than the exercise price of the warrant. Accordingly, the warrants have been classified as a derivative liability. On January 15, 2015, the Company issued 75,000 warrants to a consultant to purchase common stock at an initial exercise price of $0.75 per share. The warrants vested immediately. The warrants expire in 5 years from the date of their issuance. The warrants may also be exercised on a cashless basis if the fair market value of one share of common stock on the calculation date is greater than the exercise price of the warrant, and include net cash settlement for fractional shares. As a result, the warrants are deemed to be subject to potential net cash settlement and must be classified as derivative liabilities. The January/February 2015 warrants combined with prior years non-equity offering warrants are collectively referred to as the Non-Equity Offering Warrants. The May 2014 Publicly Registered Warrants agreement contain anti-dilutive provisions that adjust the exercise price if the Company issues any common stock, securities convertible into common stock, or other securities (subject to certain exceptions) at a value below the then-existing exercise price of the May 2014 Publicly Registered Warrants. As a result of the February 20, 2015, 6% senior secured convertible notes transaction, the exercise price of the May 2014 Publicly Registered Warrants was reset to $0.20 per share. Accounting Standards Codification (ASC) 815 - Derivatives and Hedging provides guidance to determine what types of instruments, or embedded features in an instrument, are considered derivatives. This guidance can affect the accounting for convertible instruments that contain provisions to protect holders from a decline in the stock price, referred to as anti-dilution or down-round protection. Down-round provisions reduce the exercise price of a convertible instrument if a company either issues equity shares for a price that is lower than the exercise price of those instruments, or issues new convertible instruments that have a lower exercise price. The Company has determined that the Non-Equity Offering, Resale, Compensation (related to the Offering), and Publicly Registered Warrants, with their related down-round and/or net cash settlement provisions, should be treated as a derivative and thus classified as warrants liability in the accompanying September 30, 2015 (unaudited) and December 31, 2014 consolidated balance sheets. The Company is required to report derivatives at fair value and record the fluctuations in fair value in current operations. The Company recognizes the warrants liability at their respective fair values at inception and on each reporting date. The Company utilized a BOPM to develop its assumptions for determining the fair value of the warrants. Changes in the fair value of the derivative instrument liabilities and key assumptions at the issue date and each reporting date are as follows: Non-Equity Offering Resale Compensation Publicly Registered Warrants Warrants Warrants Warrants Total Balance at December 31, 2014 $ 27,750 $ 19,800 $ 19,700 $ 750,000 $ 817,250 Orgination of derivative instrument 897,556 - - - 897,556 Adjustment resulting from change in value of underlying (378,860 ) (19,290 ) (17,640 ) (350,000 ) (765,790 ) Balance at September 30, 2015 $ 546,446 $ 510 $ 2,060 $ 400,000 $ 949,016 Non-Equity Offering Resale Compensation Warrants Warrants Warrants September 30, 2015: Annual volatility 82% - 85 % 83 % 85 % Risk-free rate 0.64% - 1.37 % 0.92 % 0.92 % Dividend rate - % - % - % Contractual term 1.59 - 4.39 2.93 3.63 Closing price of common stock $ 0.12 $ 0.12 $ 0.12 Conversion/exercise price $ 0.20 - 1.00 $ 2.66 $ 1.00 Origination: Annual volatility 82 % Risk-free rate 1.22% - 1.61% Dividend rate - % Contractual term 4.75 - 5.00 Closing price of common stock $ 0.200 - 0.235 Conversion/exercise price $ 0.20 - 0.75 The warrants liability associated with the Non-Equity Offering, Resale and Compensation warrants is considered a Level 3 liability on the fair value hierarchy as the determination of fair values includes various assumptions about future activities, stock price, and historical volatility inputs. The warrants liability associated with the Publicly Registered Warrants is considered Level 2 liability on the fair value hierarchy as the determination of fair values includes quoted warrants price, in a market that is not active. Significant unobservable inputs for the Level 3 warrants liability include (1) the estimated probability of the occurrence of a down round financing during the term over which the related warrants are exercisable, (2) the estimated magnitude of the down round and (3) the estimated magnitude of any net cash fractional share settlement. There were no transfers between Levels 1, 2, and 3 during the three and nine months ended September 30, 2015 or 2014. |
Stock Based Compensation
Stock Based Compensation | 9 Months Ended |
Sep. 30, 2015 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock Based Compensation | Note 8 - Stock-Based Compensation Stock-based compensation cost is included in selling, general and administrative expense in the accompanying unaudited consolidated statements of operations and totaled approximately $21,900 and $12,400, for the three months ended September 30, 2015 and 2014, respectively, and $61,700 and $411,500, for the nine months ended September 30, 2015 and 2014, respectively. During the nine months ended September 30, 2015, the Company issued 490,000 shares of common stock to a third party market advisory service. The Company estimated the fair value of the common stock issued for services to be $98,000, which was recorded in other assets as a deferred cost, and was amortized over the six month term of service to be provided, of which $98,000 was expensed in the nine months ended September 30, 2015. The Company issued 246,998 options during the nine months ended September 30, 2015, with a grant date fair value of $36,714. At September 30, 2015, total unrecognized compensation expense related to unvested stock based awards granted prior to that date was approximately $166,500, which is expected to be recognized over a weighted average period of 2.1 years. During the nine months ended September 30, 2015, the Company granted contingent stock-based awards for 50,000 shares to a consultant. As of September 30, 2015, the performance criteria had not been met. The Company will begin recording expense for the fair value of the equity instrument at the date it becomes probable that the performance target will be achieved. |
Subsequent Event
Subsequent Event | 9 Months Ended |
Sep. 30, 2015 | |
Subsequent Events [Abstract] | |
Subsequent Event | Note 9 - Subsequent Event On October 20, 2015, the Company issued 490,000 shares of its common stock to a third party for market advisory services. |
Summary of Significant Accoun16
Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2015 | |
Accounting Policies [Abstract] | |
Accounts Receivable and Allowance for Doubtful Accounts | Accounts Receivable and Allowance for Doubtful Accounts Accounts receivable represent the amount billed to, but uncollected from customers. Accounts receivable are carried at original invoice amount less an estimate made for doubtful receivables based on a review of all outstanding amounts on a monthly basis. Management determines the allowance for doubtful accounts by identifying past due accounts. Accounts receivable are written off when deemed uncollectible. A receivable is considered to be past due if any portion of the receivable balance is outstanding for more than 90 days past each respective customers terms. The allowance for doubtful accounts was approximately $9,000 and $6,900, as of September 30, 2015 and December 31, 2014, respectively. No interest is charged on late accounts. No material amounts were written off during the three and nine months ended September 30, 2015 and 2014. |
Revenue Recognition | Revenue Recognition The Company recognizes revenue when all of the following have occurred: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the sales price is fixed or determinable; and (4) collectability is reasonably assured. This generally occurs upon shipment to the customer. Substantially all of the Companys revenue is generated from direct sales of its product to the automotive and powersports aftermarkets. |
Fair Value Measurements | Fair Value Measurements The carrying value of cash and cash equivalents, accounts receivable, and accounts payable approximate fair value due to their short maturities. The carrying value of debt approximates fair value, as the interest rates on the outstanding borrowings are at rates that approximate market rates for borrowings with similar terms and maturities. The fair value amounts of receivables from and notes payable to related parties are not practicable to estimate based on the related party nature of the underlying transactions. |
Fair Value of Financial Instruments. | Fair Value of Financial Instruments The Company accounts for financial instruments utilizing a framework for measuring fair value in generally accepted accounting principles. To increase consistency and comparability in fair value measurements, a fair value hierarchy is used that prioritizes the inputs to valuation techniques used to measure fair value into three levels as follows: Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2 - observable inputs other than Level 1, quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, and model-derived prices whose inputs are observable or whose significant value drivers are observable; and Level 3 - assets and liabilities whose significant value drivers are unobservable. Observable inputs are based on market data obtained from independent sources, while unobservable inputs are based on the Companys market assumptions. Unobservable inputs require significant management judgment or estimation. In some cases, the inputs used to measure an asset or liability may fall into different levels of the fair value hierarchy. In those instances, the fair value measurement is required to be classified using the lowest level of input that is significant to the fair value measurement. Such determination requires significant management judgment. As of September 30, 2015 and December 31, 2014, cash and cash equivalents measured at fair value were classified as Level 1 and the warrants liability measured at fair value was classified as Level 2 and Level 3, as appropriate (see Note 7). |
Offering Costs | Offering Costs Offering costs consist principally of legal, accounting and underwriters fees incurred that are directly attributable to equity and debt offerings. Offering costs related to the equity offering were charged against the gross proceeds received upon the completion of the Offering. Offering costs attributable to debt offerings are amortized over the term of the related debt. At December 31, 2014, deferred offering costs of approximately $104,000 were included in other non-current assets. |
Research and Development | Research and Development Research and development costs are charged to operations when incurred and are included in selling and administrative expenses. The amounts charged for the three months ended September 30, 2015 and 2014 were approximately $129,000 and $96,000, respectively. The amounts charged for the nine months ended September 30, 2015 and 2014 were approximately $313,000 and $268,000, respectively. |
Net Income (Loss) Per Share | Net Income (Loss) Per Share Net income (loss) per share is calculated using the two-class method per U.S. GAAP. Under the two-class method, the Company treats only the portion of the periodic adjustment to the puttable common stocks carrying amount that reflects redemption in excess of fair value like a dividend. Basic and diluted net income (loss) per share has been computed using the weighted-average number of shares of common stock outstanding during the periods as follows: For the three months ended September 30, 2015 2014 Common Common Puttable Weighted average shares of stock used in basic and diluted loss per share 15,022,381 13,732,381 79,914 Allocation of net loss $ (431,561 ) $ (813,796 ) $ (4,736 ) Basic and diluted net loss per share $ (0.03 ) $ (0.06 ) $ (0.06 ) For the nine months ended September 30, 2015 2014 Common Common Puttable Weighted average shares of stock used in basic and diluted loss per share 14,638,608 11,149,963 113,974 Allocation of net loss $ (1,746,330 ) $ (2,955,502 ) $ (30,211 ) Basic and diluted net loss per share $ (0.12 ) $ (0.27 ) $ (0.27 ) The weighted average number of shares used to compute diluted net loss per share excludes any potentially dilutive securities and assumed exercise of stock options and warrants as they were either out-of-the money or the effect would be antidilutive. Common stock equivalents of approximately 35.1 million and 11.1 million as of September 30, 2015 and 2014, respectively, were excluded from the calculation because of their antidilutive effect. |
Stock-Based Compensation | Stock-Based Compensation The Company accounts for stock options to employees and nonemployee board members based on the estimated fair value at the option grant date. The Company measures the cost of employee services received in exchange for stock options based on the grant date fair value of the award and recognizes the cost over the period the employee is required to provide services for the award. The Company generally utilizes the Black-Scholes option-pricing model to determine fair value of stock option awards. Key assumptions include applicable volatility rates, risk-free interest rates and the instruments expected remaining life. As allowed by U.S. GAAP, for companies with a short period of publicly traded stock history, the Companys estimate of expected volatility and expected term are primarily based on the average volatilities and expected terms of identified companies with similar attributes to the Company, including industry, stage of life cycle, size and financial leverage. The risk-free rate for periods within the contractual life of the warrant is based on the U.S. Treasury yield curve in effect at the time of grant valuation. These assumptions require significant management judgment. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In April 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2015-03, Simplifying the Presentation of Debt Issuance Costs. ASU 2015-03 requires that debt issuance costs be presented in the balance sheet as a direct deduction of the carrying value of the associated debt liability. Under the existing guidance, debt issuance costs are required to be presented in the balance sheet as a deferred charge (i.e., an asset). The new standard is effective for periods beginning after December 15, 2015. Early adoption is permitted for financial statements that have not been previously issued. The new standard should be applied retrospectively to all periods presented in the financial statements. The Company early adopted the standard during the three months ended March 31, 2015 and thus debt financing costs are presented as a deduction of the carrying value of its convertible note payable instead of presenting such costs as an asset in the consolidated balance sheets. In January 2015, the FASB issued ASU 2015-01, Income Statement Extraordinary and Unusual Items. ASU 2015-01, removes the concept of extraordinary items from U.S. GAAP. Under the existing guidance, an entity is required to separately disclose extraordinary items, net of tax, in the income statement after income from continuing operations if an event or transaction is unusual and occurs infrequently. This separate, net-of-tax presentation will no longer be allowed. The existing requirement to separately disclose events or transactions that are unusual or occur infrequently on a pre-tax basis within continuing operations in the income statement has been retained. The new guidance requires similar separate presentation of items that are both unusual and infrequent. The new standard is effective for periods beginning after December 15, 2015. Early adoption is permitted, but only as of the beginning of the fiscal year of adoption. Upon adoption, the Company will present transactions that are both unusual and infrequent, if any, on a pre-tax basis within continuing operations in the consolidated statement of operations. In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements - Going Concern - Disclosures of Uncertainties about an Entitys Ability to Continue as a Going Concern. ASU 2014-15 provides new guidance related to managements responsibility to evaluate whether there is substantial doubt about an entitys ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards and to provide related footnote disclosures. This new guidance is effective for annual reporting periods ending after December 15, 2016, and for interim periods thereafter. Early adoption is permitted. The Company is currently assessing the impact that adopting this new accounting guidance may have on its consolidated financial statements and footnote disclosures. In June 2014, the FASB, issued ASU No. 2014-12, Compensation - Stock Compensation (Topic 718): Accounting for Share- Based Payments When the Terms of an Award Provide that a Performance Target Could be Achieved after the Requisite Service Period. ASU 2014-12 requires that a performance target that affects vesting, and that could be achieved after the requisite service period, be treated as a performance condition. As such, the performance target should not be reflected in estimating the grant date fair value of the award. This update further clarifies that compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. The updated guidance is effective for annual reporting periods beginning after December 15, 2015, including interim periods within that reporting period. Early adoption is permitted. The Company does not anticipate that the adoption of this standard will have a material impact on its consolidated financial statements. In May 2014, the Financial Accounting Standards Board (FASB) issued ASU No. 2014-09, Revenue from Contracts from Customers |
Summary of Significant Accoun17
Summary of Significant Accounting Policies (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Accounting Policies [Abstract] | |
Schedule of Basic and Diluted Net Loss Per Share | Basic and diluted net income (loss) per share has been computed using the weighted-average number of shares of common stock outstanding during the periods as follows: For the three months ended September 30, 2015 2014 Common Common Puttable Weighted average shares of stock used in basic and diluted loss per share 15,022,381 13,732,381 79,914 Allocation of net loss $ (431,561 ) $ (813,796 ) $ (4,736 ) Basic and diluted net loss per share $ (0.03 ) $ (0.06 ) $ (0.06 ) For the nine months ended September 30, 2015 2014 Common Common Puttable Weighted average shares of stock used in basic and diluted loss per share 14,638,608 11,149,963 113,974 Allocation of net loss $ (1,746,330 ) $ (2,955,502 ) $ (30,211 ) Basic and diluted net loss per share $ (0.12 ) $ (0.27 ) $ (0.27 ) |
Inventory (Tables)
Inventory (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Inventory Disclosure [Abstract] | |
Schedule of Inventory | Inventory consisted of the following: September 30, 2015 December 31, 2014 Raw materials $ 187,153 $ 219,449 Work in process 35,171 38,962 Finished goods 65,685 78,886 Total inventory $ 288,009 $ 337,297 |
Property and Equipment, Net (Ta
Property and Equipment, Net (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Property, Plant and Equipment, Net [Abstract] | |
Schedule of Property and Equipment, Net | Property and equipment, net, consisted of the following: September 30, 2015 December 31, 2014 Vehicles $ 22,679 $ 22,679 Software and equipment 817,996 802,849 Furniture and fixtures 26,143 23,071 Leasehold improvements 254,137 254,137 1,120,955 1,102,736 Less accumulated depreciation (970,076 ) (928,773 ) Total property and equipment, net $ 150,879 $ 173,963 |
Notes Payable (Tables)
Notes Payable (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Debt Disclosure [Abstract] | |
Schedule of Notes Payable | Notes payable consist of the following: September 30, 2015 December 31, 2014 LWM, LLC, with an annual interest rate equal to the Federal Funds Rate (as announced by the Federal Reserve Bank of New York) for the first day of the calendar year, 1.0% at September 30, 2015 and December 31, 2014; unsecured; due with interest on September 5, 2016 $ 166,271 $ 166,271 Senior secured convertible notes; payable with interest at 6.0% per annum; secured by all of the Companys assets; due with interest on February 20, 2018 3,048,750 - Promissory note; payable without interest (interest imputed at 12.0% per annum); unsecured; due on August 25, 2016 50,000 100,000 3,265,021 266,271 Discount (1,224,049 ) (18,046 ) Offering Costs (417,695 ) - Current Portion (216,271 ) - Long-term portion $ 1,407,006 $ 248,225 |
Warrants (Tables)
Warrants (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Warrants and Rights Note Disclosure [Abstract] | |
Schedule of Changes in the Fair Value of the Derivative Instrument Liabilities | Changes in the fair value of the derivative instrument liabilities and key assumptions at the issue date and each reporting date are as follows: Non-Equity Offering Resale Compensation Publicly Registered Warrants Warrants Warrants Warrants Total Balance at December 31, 2014 $ 27,750 $ 19,800 $ 19,700 $ 750,000 $ 817,250 Orgination of derivative instrument 897,556 - - - 897,556 Adjustment resulting from change in value of underlying (378,860 ) (19,290 ) (17,640 ) (350,000 ) (765,790 ) Balance at September 30, 2015 $ 546,446 $ 510 $ 2,060 $ 400,000 $ 949,016 |
Schedule of Key Assumptions for Determining the Fair Value of the Warrants | Non-Equity Offering Resale Compensation Warrants Warrants Warrants September 30, 2015: Annual volatility 82% - 85 % 83 % 85 % Risk-free rate 0.64% - 1.37 % 0.92 % 0.92 % Dividend rate - % - % - % Contractual term 1.59 - 4.39 2.93 3.63 Closing price of common stock $ 0.12 $ 0.12 $ 0.12 Conversion/exercise price $ 0.20 - 1.00 $ 2.66 $ 1.00 Origination: Annual volatility 82 % Risk-free rate 1.22% - 1.61% Dividend rate - % Contractual term 4.75 - 5.00 Closing price of common stock $ 0.200 - 0.235 Conversion/exercise price $ 0.20 - 0.75 |
Organization, Basis of Presen22
Organization, Basis of Presentation and Management's Plans (Details Narrative) - USD ($) | Feb. 20, 2015 | May. 21, 2014 | May. 16, 2014 | May. 13, 2014 | Mar. 31, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 |
Management''s Plans [Line Items] | ||||||||||
Loss from operations | $ 696,571 | $ 840,835 | $ 2,075,465 | $ 2,591,707 | ||||||
Net cash in operations | 1,875,110 | $ 2,396,878 | ||||||||
Working capital | $ 461,000 | $ 461,000 | $ 461,000 | |||||||
Total funding proceeds from various venture capital firms since Inception | $ 22,000,000 | |||||||||
Proceeds from financing | $ 230,000 | |||||||||
IPO [Member] | ||||||||||
Management''s Plans [Line Items] | ||||||||||
Issuance of common stock, shares | 5,000,000 | 5,000,000 | ||||||||
Warrants issued | 5,000,000 | 5,000,000 | ||||||||
Number of shares called by warrants | 7,500,000 | |||||||||
Warrants at an offering price | $ 0.75 | |||||||||
Warrant exercise price | $ 0.05 | |||||||||
Proceeds from issuance of stock and warrants in offering | $ 4,000,000 | |||||||||
Senior Secured Convertible Notes [Member] | ||||||||||
Management''s Plans [Line Items] | ||||||||||
Number of shares called by warrants | 7,621,875 | |||||||||
Warrant exercise price | $ 0.20 | |||||||||
Convertible note issuance date | Feb. 20, 2015 | |||||||||
Debt face amount | $ 3,049,000 | |||||||||
Debt Term | 36 months | |||||||||
Debt interest rate | 6.00% | |||||||||
Convertible debt, warrant coverage | 50.00% | |||||||||
Note are convert into number of common stock shares | 15,243,750 |
Summary of Significant Accoun23
Summary of Significant Accounting Policies (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | Dec. 31, 2014 | |
Accounting Policies [Abstract] | |||||
Allowance for doubtful accounts | $ 9,000 | $ 9,000 | $ 6,900 | ||
Deferred offering costs | $ 104,000 | ||||
Research and development expense | $ 129,000 | $ 96,000 | $ 313,000 | $ 268,000 | |
Common stock equivalents | 35,100,000 | 11,100,000 | |||
Interest charged on late accounts | |||||
Accounts Receivable and Allowance for Doubtful Accounts Written off |
Summary of Significant Accoun24
Summary of Significant Accounting Policies - Schedule of Basic and Diluted Net Loss Per Share (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Weighted average shares of stock used in basic and diluted loss per share | 15,022,381 | 13,732,381 | 14,638,608 | 11,149,963 |
Allocation of net loss | $ (431,561) | $ (813,796) | $ (1,746,330) | $ (2,955,502) |
Basic and diluted net loss per share | $ (0.03) | $ (0.06) | $ (0.12) | $ (0.27) |
Puttable [Member] | ||||
Weighted average shares of stock used in basic and diluted loss per share | 79,914 | 113,974 | ||
Allocation of net loss | $ (4,736) | $ (30,211) | ||
Basic and diluted net loss per share | $ (0.06) | $ (0.27) |
Inventory - Schedule of Invento
Inventory - Schedule of Inventory (Details) - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 |
Inventory Disclosure [Abstract] | ||
Raw materials | $ 187,153 | $ 219,449 |
Work in process | 35,171 | 38,962 |
Finished goods | 65,685 | 78,886 |
Total inventory | $ 288,009 | $ 337,297 |
Property and Equipment, Net - S
Property and Equipment, Net - Schedule of Property and Equipment, Net (Details) - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 |
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | $ 1,120,955 | $ 1,102,736 |
Less accumulated depreciation | (970,076) | (928,773) |
Total property and equipment, net | 150,879 | 173,963 |
Vehicles [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 22,679 | 22,679 |
Software and Equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 817,996 | 802,849 |
Furniture and Fixtures [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 26,143 | 23,071 |
Leasehold Improvements [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | $ 254,137 | $ 254,137 |
Notes Payable (Details Narrativ
Notes Payable (Details Narrative) - USD ($) | Feb. 20, 2015 | Mar. 27, 2014 | Mar. 31, 2014 |
Fair value of warrants | $ 37,127 | ||
Senior Secured Convertible Notes [Member] | |||
Debt face amount | $ 3,049,000 | ||
Convertible debt, warrant coverage | 50.00% | ||
Notes convertible into number of common stock shares | 15,243,750 | ||
Note maturity date | Feb. 20, 2018 | ||
Note interest rate | 6.00% | ||
Conversion price equal to per share | $ 0.20 | ||
Convertible notes consecutive days | 30 days | ||
Convertible notes equals or exceeds per share | $ 0.60 | ||
Percentage of beneficially own | 9.99% | ||
Beneficial conversion feature and debt discount | $ 752,000 | ||
Number of shares called by warrants | 7,621,875 | ||
Warrant exercise price | $ 0.20 | ||
Senior Secured Convertible Notes [Member] | Placement Agent [Member] | |||
Commission paid | $ 210,000 | ||
Cash payment | $ 50,000 | ||
Issuance of common stock, shares | 800,000 | ||
Number of shares called by warrants | 1,050,000 | ||
Warrant exercise price | $ 0.20 | ||
Debt offering costs | $ 509,000 | ||
Fair value of warrants | $ 138,000 | ||
Promissory Note [Member] | |||
Note maturity date | Aug. 25, 2016 | ||
Repayment of promissory note | $ 50,000 | ||
Outstanding amount | $ 50,000 | ||
Note Purchase Agreement [Member] | |||
Note maturity date | May 19, 2014 | ||
Note interest rate | 12.00% | ||
Number of shares called by warrants | 17,334 | ||
Warrant exercise price | $ 3.75 | ||
Proceeds from financing | $ 130,000 | ||
Maximum borrowing capacity per note purchase agreement | 400,000 | ||
Interest due upon repayment | $ 6,000 | ||
Freepoint Commerce Marketing LLC [Member] | |||
Note maturity date | May 29, 2014 | ||
Note interest rate | 12.00% | ||
Number of shares called by warrants | 16,667 | ||
Warrant exercise price | $ 3 | ||
Proceeds from financing | $ 100,000 |
Notes Payable - Schedule of Not
Notes Payable - Schedule of Notes Payable (Details) - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 |
Notes payable | $ 3,265,021 | $ 266,271 |
Discount | (1,224,049) | $ (18,046) |
Offering costs | (417,695) | |
Current Portion | (216,271) | |
Long-term portion | 1,407,006 | $ 248,225 |
Notes Payable One [Member] | ||
Notes payable | 166,271 | $ 166,271 |
Notes Payable Two [Member] | ||
Notes payable | 3,048,750 | |
Notes Payable Three [Member] | ||
Notes payable | $ 50,000 | $ 100,000 |
Notes Payable - Schedule of N29
Notes Payable - Schedule of Notes Payable (Details) (Parenthetical) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2015 | Dec. 31, 2014 | |
Notes Payable One [Member] | ||
Interest rate | 1.00% | 1.00% |
Maturity date | Sep. 5, 2016 | Sep. 5, 2016 |
Notes Payable Two [Member] | ||
Interest rate | 6.00% | 6.00% |
Maturity date | Feb. 20, 2018 | Feb. 20, 2018 |
Notes Payable Three [Member] | ||
Interest rate | 12.00% | 12.00% |
Maturity date | Aug. 25, 2016 | Aug. 25, 2016 |
Capital Stock (Details Narrativ
Capital Stock (Details Narrative) - USD ($) | Apr. 03, 2015 | Feb. 20, 2015 | Mar. 31, 2014 | Sep. 30, 2015 |
Issuance of common stock | $ 160,000 | |||
Fair value of warrants | $ 37,127 | |||
Issuance of common stock for services | $ 98,000 | |||
Third Party Advisory Service [Member] | ||||
Issuance of common stock for services, shares | 490,000 | 490,000 | ||
Issuance of common stock for services | $ 98,000 | $ 98,000 | ||
Senior Secured Convertible Notes [Member] | ||||
Debt face amount | $ 3,049,000 | |||
Debt interest rate | 6.00% | |||
Note are convert into number of common stock shares | 15,243,750 | |||
Number of shares called by warrants | 7,621,875 | |||
Warrant exercise price | $ 0.20 | |||
Senior Secured Convertible Notes [Member] | Placement Agent [Member] | ||||
Number of shares called by warrants | 1,050,000 | |||
Issuance of common stock, shares | 800,000 | |||
Warrant exercise price | $ 0.20 | |||
Issuance of common stock | $ 160,000 | |||
Fair value of warrants | $ 138,000 |
Warrants (Details Narrative)
Warrants (Details Narrative) - USD ($) | Feb. 20, 2015 | Jan. 15, 2015 | Mar. 31, 2014 |
Fair value of warrants | $ 37,127 | ||
Consultant [Member] | |||
Number of shares called by warrants | 75,000 | ||
Warrant exercise price | $ 0.75 | ||
Warrants expire term | 5 years | ||
Senior Secured Convertible Notes [Member] | |||
Debt face amount | $ 3,049,000 | ||
Debt interest rate | 6.00% | ||
Number of shares called by warrants | 7,621,875 | ||
Warrant exercise price | $ 0.20 | ||
Senior Secured Convertible Notes [Member] | Placement Agent [Member] | |||
Number of shares called by warrants | 1,050,000 | ||
Warrant exercise price | $ 0.20 | ||
Fair value of warrants | $ 138,000 | ||
Convertible Notes [Member] | |||
Fair value of warrants | $ 890,000 | ||
6% Senior Secured Convertible Notes [Member] | May 2014 Publicly Registered Warrants Agreement [Member] | |||
Debt interest rate | 6.00% | ||
Warrant exercise price | $ 0.20 |
Warrants - Schedule of Changes
Warrants - Schedule of Changes in the Fair Value of the Derivative Instrument Liabilities (Details) | 9 Months Ended |
Sep. 30, 2015USD ($) | |
Class of Warrant or Right [Line Items] | |
Balance at the beginning of the period | $ 817,250 |
Origination of derivative instrument | 897,556 |
Adjustment resulting from change in value of underlying asset | (765,790) |
Balance at the end of the period | 949,016 |
Non-Equity Offering Warrants [Member] | |
Class of Warrant or Right [Line Items] | |
Balance at the beginning of the period | 27,750 |
Origination of derivative instrument | 897,556 |
Adjustment resulting from change in value of underlying asset | (378,860) |
Balance at the end of the period | 546,446 |
Resale Warrants [Member] | |
Class of Warrant or Right [Line Items] | |
Balance at the beginning of the period | $ 19,800 |
Origination of derivative instrument | |
Adjustment resulting from change in value of underlying asset | $ (19,290) |
Balance at the end of the period | 510 |
Compensation Warrants [Member] | |
Class of Warrant or Right [Line Items] | |
Balance at the beginning of the period | $ 19,700 |
Origination of derivative instrument | |
Adjustment resulting from change in value of underlying asset | $ (17,640) |
Balance at the end of the period | 2,060 |
Publicly Registered Warrants [Member] | |
Class of Warrant or Right [Line Items] | |
Balance at the beginning of the period | $ 750,000 |
Origination of derivative instrument | |
Adjustment resulting from change in value of underlying asset | $ (350,000) |
Balance at the end of the period | $ 400,000 |
Warrants - Schedule of Key Assu
Warrants - Schedule of Key Assumptions for Determining the Fair Value of the Warrants (Details) | 9 Months Ended |
Sep. 30, 2015$ / shares | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Annual volatility | 82.00% |
Dividend rate | |
Minimum [Member] | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Risk-free rate | 1.22% |
Contractual term | 4 years 9 months |
Closing price of common stock | $ 0.200 |
Conversion/exercise price | $ 0.20 |
Maximum [Member] | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Risk-free rate | 1.61% |
Contractual term | 5 years |
Closing price of common stock | $ 0.235 |
Conversion/exercise price | $ 0.75 |
Non-Equity Offering Warrants [Member] | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Dividend rate | |
Closing price of common stock | $ 0.12 |
Non-Equity Offering Warrants [Member] | Minimum [Member] | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Annual volatility | 82.00% |
Risk-free rate | 0.64% |
Contractual term | 1 year 7 months 2 days |
Conversion/exercise price | $ 0.20 |
Non-Equity Offering Warrants [Member] | Maximum [Member] | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Annual volatility | 85.00% |
Risk-free rate | 1.37% |
Contractual term | 4 years 4 months 21 days |
Conversion/exercise price | $ 1 |
Resale Warrants [Member] | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Annual volatility | 83.00% |
Risk-free rate | 0.92% |
Dividend rate | |
Contractual term | 2 years 11 months 5 days |
Closing price of common stock | $ 0.12 |
Conversion/exercise price | $ 2.66 |
Compensation Warrants [Member] | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Annual volatility | 85.00% |
Risk-free rate | 0.92% |
Dividend rate | |
Contractual term | 3 years 7 months 17 days |
Closing price of common stock | $ 0.12 |
Conversion/exercise price | $ 1 |
Stock Based Compensation (Detai
Stock Based Compensation (Details Narrative) - USD ($) | Apr. 03, 2015 | Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Stock-based compensation | $ 21,900 | $ 12,400 | $ 61,700 | $ 411,500 | |
Issuance of common stock, consultant | $ 98,000 | ||||
Options granted | 246,998 | ||||
Grand date fair value of options | $ 36,714 | ||||
Unrecognized compensation cost related to unvested stock-based awards | $ 166,500 | $ 166,500 | |||
Unrecognized compensation cost, recognition period | 2 years 1 month 6 days | ||||
Third Party Advisory Service [Member] | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Issuance of common stock, consultant, shares | 490,000 | 490,000 | |||
Issuance of common stock, consultant | $ 98,000 | $ 98,000 | |||
Consultant [Member] | Performance Shares [Member] | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Performance-based stock-based awards granted | 50,000 |
Subsequent Event (Details Narra
Subsequent Event (Details Narrative) - Third Party Advisory Service [Member] - shares | Oct. 20, 2015 | Apr. 03, 2015 | Sep. 30, 2015 |
Subsequent Event [Line Items] | |||
Issuance of common stock, consultant, shares | 490,000 | 490,000 | |
Subsequent Event [Member] | |||
Subsequent Event [Line Items] | |||
Issuance of common stock, consultant, shares | 490,000 |