Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2015 | Aug. 14, 2015 | |
Document And Entity Information | ||
Entity Registrant Name | SPECTRASCIENCE INC | |
Entity Central Index Key | 727,672 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2015 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Is Entity a Well-known Seasoned Issuer? | No | |
Is Entity a Voluntary Filer? | No | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 198,039,192 | |
Document Fiscal Period Focus | Q2 | |
Document Fiscal Year Focus | 2,015 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets (Unaudited) - USD ($) | Jun. 30, 2015 | Dec. 31, 2014 |
Current assets: | ||
Cash | $ 42,235 | $ 223,529 |
Inventory | 289,223 | 283,624 |
Deferred debt issuance costs | 84,315 | 107,636 |
Prepaid expenses and other current assets | 203,597 | 244,173 |
Total current assets | 619,370 | 858,962 |
Fixed assets, net | 1,990 | 3,665 |
Patents, net | 1,266,682 | 1,347,894 |
TOTAL ASSETS | 1,888,042 | 2,210,521 |
Current liabilities: | ||
Accounts payable | 944,889 | 836,136 |
Note payable | 115,000 | 100,000 |
Convertible debt, net of discounts of $534,726 as of June 30, 2015 and $576,502 as of December 31, 2014 | 4,705,738 | 3,920,100 |
Derivative liability | 1,786,154 | 1,061,839 |
Accrued expenses | 850,611 | 673,012 |
Total current liabilities | $ 8,402,392 | $ 6,591,087 |
COMMITMENTS AND CONTINGENCIES | ||
Stockholders' deficit | ||
Common stock, $.01 par value; 746,915,000 shares authorized; 198,039,192 and 194,355,277 shares issued and outstanding as of June 30, 2015 and December 31, 2014 | $ 1,980,392 | $ 1,943,553 |
Additional paid in capital | 39,791,443 | 39,509,115 |
Accumulated deficit | (48,317,035) | (45,864,084) |
Total stockholders' deficit | (6,514,350) | (4,380,566) |
TOTAL LIABILITIES AND SHAREHOLDERS' (DEFICIT) | $ 1,888,042 | $ 2,210,521 |
Series A Convertible Preferred Stock [Member] | ||
Stockholders' deficit | ||
Convertible Preferred Stock, value | ||
Series B Convertible Preferred Stock [Member] | ||
Stockholders' deficit | ||
Convertible Preferred Stock, value | $ 25,850 | $ 25,850 |
Series C Convertible Preferred Stock [Member] | ||
Stockholders' deficit | ||
Convertible Preferred Stock, value | $ 5,000 | $ 5,000 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) | Jun. 30, 2015 | Dec. 31, 2014 |
Convertible debt, net of discounts | $ 534,726 | $ 576,502 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, authorized (in shares) | 746,915,000 | 746,915,000 |
Common stock, shares issued (in shares) | 198,039,192 | 194,355,277 |
Common stock, shares outstanding (in shares) | 198,039,192 | 194,355,277 |
Series A Convertible Preferred Stock [Member] | ||
Convertible Preferred Stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Convertible Preferred Stock, authorized (in shares) | ||
Convertible Preferred Stock, shares issued (in shares) | ||
Convertible Preferred Stock, shares outstanding (in shares) | ||
Convertible Preferred Stock, liquidation value | ||
Convertible Preferred Stock, accumulated and unpaid dividends | ||
Series B Convertible Preferred Stock [Member] | ||
Convertible Preferred Stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Convertible Preferred Stock, authorized (in shares) | 2,585,000 | 2,585,000 |
Convertible Preferred Stock, shares issued (in shares) | 2,585,000 | 2,585,000 |
Convertible Preferred Stock, shares outstanding (in shares) | 2,585,000 | 2,585,000 |
Convertible Preferred Stock, liquidation value | $ 517,000 | $ 517,000 |
Convertible Preferred Stock, accumulated and unpaid dividends | $ 106,931 | $ 106,931 |
Series C Convertible Preferred Stock [Member] | ||
Convertible Preferred Stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Convertible Preferred Stock, authorized (in shares) | 1,000,000 | 1,000,000 |
Convertible Preferred Stock, shares issued (in shares) | 500,000 | 500,000 |
Convertible Preferred Stock, shares outstanding (in shares) | 500,000 | 500,000 |
Convertible Preferred Stock, liquidation value | $ 100,000 | $ 100,000 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operation (Unaudited) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | |
Income Statement [Abstract] | ||||
Revenue | ||||
Cost of revenue | $ (6,000) | $ (12,000) | $ (6,000) | |
Gross profit | 6,000 | 12,000 | 6,000 | |
Operating expenses: | ||||
Research and development | 157,329 | $ 276,188 | 332,009 | 534,368 |
General and administrative | 344,811 | 292,858 | 726,265 | 812,689 |
Sales and marketing | 94,098 | 140,791 | 133,960 | 230,351 |
Total operating expenses | 596,238 | 709,837 | 1,192,234 | 1,577,408 |
Loss from operations | (590,238) | (709,837) | (1,180,234) | (1,571,408) |
Other income (expense) | ||||
Interest expense | (147,041) | (116,770) | (291,543) | (215,741) |
Change in fair value of derivative and warrant liabilities | 277,361 | 30,880 | (400,223) | (2,051,760) |
Amortization of derivative and warrant liabilities discount | (233,187) | (303,105) | (523,296) | (453,838) |
Amortization of deferred debt issuance costs and original issue discount | (84,576) | $ (65,450) | (172,390) | $ (112,574) |
Gain on extinguishment of debt | 36,641 | 119,369 | ||
Other income (expense), net | (2,221) | $ (6,061) | (4,634) | $ (15,179) |
Total Other income (expense) | (153,023) | (460,506) | (1,272,717) | (2,849,092) |
Net loss | $ (743,261) | $ (1,170,343) | $ (2,452,951) | $ (4,420,500) |
Basic and diluted loss per share (in dollars per share) | $ 0 | $ (0.01) | $ (0.01) | $ (0.03) |
Weighted average common shares outstanding: Basic and diluted (in shares) | 197,124,162 | 167,953,254 | 195,747,368 | 167,583,031 |
Condensed Consolidated Stateme5
Condensed Consolidated Statement of Stockholders' Deficit (unaudited) - 6 months ended Jun. 30, 2015 - USD ($) | Series B Preferred Stock [Member] | Series C Preferred Stock [Member] | Common Stock [Member] | Additional Paid-In Capital [Member] | Accumulated Deficit [Member] | Total |
Balance at beginning at Dec. 31, 2014 | $ 25,850 | $ 5,000 | $ 1,943,553 | $ 39,509,115 | $ (45,864,084) | $ (4,380,566) |
Balance at beginning (in shares) at Dec. 31, 2014 | 2,585,000 | 500,000 | 194,355,277 | |||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Conversion of convertible debt | $ 32,339 | $ 63,863 | 96,202 | |||
Conversion of convertible debt (in shares) | 3,233,915 | |||||
Exercise of stock options | $ 4,500 | $ 4,500 | ||||
Exercise of stock options (in shares) | 450,000 | (450,000) | ||||
Non cash issuance of stock options | $ 97,521 | $ 97,521 | ||||
Non cash issuance of warrant for consulting services | 2,848 | 2,848 | ||||
Warrant valuation on issuance of convertible debt | $ 118,096 | 118,096 | ||||
Net loss | $ (2,452,951) | (2,452,951) | ||||
Balance at end at Jun. 30, 2015 | $ 25,850 | $ 5,000 | $ 1,980,392 | $ 39,791,443 | $ (48,317,035) | $ (6,514,350) |
Balance at end (in shares) at Jun. 30, 2015 | 2,585,000 | 500,000 | 198,039,192 |
Condensed Consolidated Stateme6
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 6 Months Ended | |
Jun. 30, 2015 | Jun. 30, 2014 | |
Operating activities: | ||
Net loss | $ (2,452,951) | $ (4,420,500) |
Adjustments to reconcile net loss to cash used in operating activities: | ||
Amortization and depreciation | 82,887 | 97,699 |
Non-cash issuance of stock options and warrants | 100,369 | 308,095 |
Amortization of derivative and warrant liabilities discount | 523,296 | 453,838 |
Amortization of deferred debt issuance costs and original issue discount | 172,390 | 112,574 |
Change in fair value of derivative and warrant liabilities | 400,223 | $ 2,051,760 |
Gain on extinguishment of debt | $ (119,369) | |
Fair market value of common stock issued for services | $ 50,000 | |
Changes in assets and liabilities: | ||
Accounts receivable | 60,000 | |
Inventory | $ (5,599) | (68,729) |
Prepaid expense and other assets | 40,576 | 39,211 |
Accounts payable | 108,753 | (31,894) |
Accrued expenses | 219,661 | 196,412 |
Net cash used in operating activities | $ (929,764) | (1,151,534) |
Investing activities: | ||
Purchases of fixed assets | (6,275) | |
Net cash used in investing activities | (6,275) | |
Financing activities: | ||
Proceeds from issuance of convertible notes payable | $ 820,750 | 1,506,376 |
Payments against note payable to affiliate | (30,000) | |
Proceeds from exercise of stock options | $ 4,500 | 18,624 |
Debt issuance costs | (76,780) | (130,000) |
Net cash provided by financing activities | 748,470 | 1,365,000 |
Net increase (decrease) in cash | (181,294) | 207,191 |
Cash, beginning of year | 223,529 | 236,597 |
Cash, end of period | $ 42,235 | $ 443,788 |
Cash paid during the period for: | ||
Interest | ||
Income taxes | ||
Non Cash Investing and Financing Activities: | ||
Conversion of convertible notes and accrued interest to common stock | $ 157,839 | |
Conversion of accrued interest to note payable | $ 15,000 |
Nature of Business and Basis of
Nature of Business and Basis of Presentation | 6 Months Ended |
Jun. 30, 2015 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Nature of Business and Basis of Presentation | 1. Nature of Business and Basis of Presentation Description of Business SpectraScience, Inc. was incorporated in the State of Minnesota on May 4, 1983 as GV Medical, Inc. In October 1992, GV Medical discontinued its prior business, refocused its development efforts and changed its name to SpectraScience, Inc. The Company, hereinafter, refers to SpectraScience, Inc. and its wholly owned subsidiaries Luma Imaging Corporation (LUMA), Spectra Science International, Inc. (International) and SpectraScience (UK) Limited (SpectraUK). Since 1996, the Company has focused primarily on developing the WavSTAT Optical Biopsy System (the WavSTAT System). The Company has developed and received the European CE mark approval to market a proprietary, minimally invasive technology that optically illuminates tissue in real-time to distinguish between normal, pre-cancerous or cancerous cells without the need to remove the subject cell tissue from the body to make such determinations. The WavSTAT System operates by using cool, safe laser light to optically illuminate and analyze tissue, enabling the physician to make an instant diagnosis during endoscopy when screening for cancer, and if warranted, to begin immediate treatment during the same procedure. Beginning in December 2011, the WavSTAT 4 version of the product began to be sold in the European Union for colon cancer detection. In June 2012, the Company entered into a distribution agreement with PENTAX Europe, GmbH, for the sale of its systems internationally. On November 6, 2007, the Company acquired the assets of LUMA in an equity transaction accounted for as an acquisition of assets and now operates LUMA as a wholly-owned subsidiary of the Company. LUMA had acquired the assets from a predecessor company that had developed, and received FDA approval for, a non-invasive diagnostic imaging system that can detect cervical cancer precursors and which utilizes an underlying technology that is similar to that of the WavSTAT System. The addition of the LUMA technology to the Companys existing WavSTAT System technology provides the Company with a broad suite of fluorescence-based intellectual property and know-how. During the fiscal year ended December 31, 2010, the Company wrote off the remaining fair value of the LUMA inventory in order to focus on the continued development and marketing of the WavSTAT System. The Company retained the intellectual property of LUMA for use in the development of future generations of the WavSTAT System. The transaction was accounted for as an acquisition of assets that included intellectual property, inventory and equipment. The intellectual property consisted of a total of 34 issued U.S. patents and 28 additional patent applications. Basis of Presentation The accompanying unaudited financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q as they are prescribed for smaller reporting companies. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary to make the financial statements not misleading have been included. Operating results for the three and six month periods ended June 30, 2015 are not necessarily indicative of the results that may be expected for the year ending December 31, 2015. These statements should be read in conjunction with the financial statements and related notes, which are included in the Companys Annual Report on Form 10-K for the year ended December 31, 2014. Going Concern Historically, the Companys sources of cash have come from the issuance and sales of equity securities and convertible debentures. The Companys historical cash outflows have been primarily used for operating activities including research, development, administrative and sales activities. Fluctuations in the Companys working capital due to timing differences of its cash receipts and cash disbursements also impact its cash flow. The Company expects to incur significant additional operating losses through at least the end of 2015, as it completes proof-of-concept trials, conducts outcome-based clinical studies and increases sales and marketing efforts to commercialize the WavSTAT4 Systems in Europe. If the Company does not receive sufficient funding, there is substantial doubt that the Company will be able to continue as a going concern. The Company may incur unknown expenses or may not be able to meet its revenue forecast, and one or more of these circumstances would require the Company to seek additional capital. The Company may not be able to obtain equity capital or debt funding on terms that are acceptable. Even if the Company receives additional funding, such proceeds may not be sufficient to allow the Company to sustain operations until it becomes profitable and begins to generate positive cash flows from operations. As of June 30, 2015, the Company had a working capital deficit of $7,783,022 and cash of $42,235, compared to a working capital deficit of $5,732,125 and cash of $223,529 as of December 31, 2014. In December 2011, the Company entered into an Engagement Agreement with Laidlaw & Company (UK) Ltd., which Engagement Agreement was amended in July 2012. Under the Engagement Agreement, Laidlaw agreed to assist the Company in raising up to $20.0 million in capital over a two year period from the date of the Engagement Agreement. Subsequent to March 31, 2013, the Company has engaged other agents to assist the Company with raising capital and has commenced raising capital on its own. During the six months ended June 30, 2015, the Company raised $743,970, net of transaction costs of $76,780, under these agreements. However, if the Company does not receive additional funds in a timely manner, the Company could be in jeopardy as a going concern. The Company may not be able to find alternative capital or raise capital or debt on terms that are acceptable. Management believes that if the events defined in the Engagement Agreements occur as expected, or if the Company is otherwise able to raise a similar level of funds, such proceeds will be sufficient to allow the Company to sustain operations until it attains profitability and positive cash flows from operations. However, the Company may incur unknown expenses or may not be able to meet its revenue expectations requiring it to seek additional capital. In such event, the Company may not be able to find capital or raise capital or debt on terms that are acceptable. The holders of Convertible Debentures control the conversion of the Convertible Debentures and certain of the Convertible Debentures were not converted at their maturity constituting a potential default on the matured, but unconverted, Convertible Debentures. In the event of such default, principal, accrued interest and other related costs are immediately due and payable in cash. As of June 30, 2015, Convertible Debentures with a face value of $3,282,497 held by 55 individual investors are in default. None of these investors have served notice of default on the Convertible Debentures held by them. The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The 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. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 6 Months Ended |
Jun. 30, 2015 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | 2. Summary of Significant Accounting Policies Revenue recognition The Company recognizes revenues when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price is fixed or determinable and collectability is reasonably assured. Revenue from the sale of the Companys products is generally recognized when title and risk of loss transfers to the customer, the terms of which are generally free on board shipping point. The Company uses customer purchase orders to determine the existence of an arrangement. The Company uses shipping documents and third-party proof of delivery to verify that title has transferred. The Company assesses whether the price is fixed or determinable based upon the terms of the agreement associated with the transaction. To determine whether collection is probable, the Company assesses a number of factors, including past transaction history with the customer and the creditworthiness of the customer. Consolidation The accompanying consolidated financial statements include the accounts of SpectraScience, Inc. and its wholly-owned subsidiaries LUMA, International and Spectra UK. All significant intercompany balances and transactions have been eliminated in consolidation. Risks and Uncertainties The Company operates in an industry that is subject to intense competition, government regulation and rapid technological change. The Companys operations are subject to significant risk and uncertainties, including financial, operational, technological, regulatory and other risks associated with a short history of product sales, including the potential risk of business failure. Use of Estimates The Company prepares its consolidated financial statements in conformity with accounting principles generally accepted in the United States of America, which requires management to make estimates and assumptions that affect the amounts reported in the financial statements and disclosures made in the accompanying notes to the financial statements. Significant estimates made by management include, among others, realization of long-lived assets including intangible assets, assumptions used to value stock options, assumptions used to value the common stock issued and assumptions related to the determination of the fair value of the derivative components associated with the Companys Convertible Debentures. Actual results could differ from those estimates. Inventory Valuation The Company states its inventory at the lower of cost or market value, determined on a specific cost basis. The Company provides inventory allowances when conditions indicate that the selling price could be less than cost due to obsolescence and reductions in estimated future demand. The Company balances the need to maintain strategic inventory levels with the risk of obsolescence due to changing technology and customer demand levels. Unfavorable changes in market conditions may result in a need for additional inventory reserves that could adversely impact the Companys gross margins. Conversely, favorable changes in demand could result in higher gross margins when the Company sells products. Valuation of Long-lived Assets The Companys long-lived assets consist of property and equipment and intangible assets. Equipment is carried at cost and is depreciated over the estimated useful lives of the assets, which are generally two to three years, and leasehold improvements are amortized over the lesser of the lease term or the estimated useful lives of the improvements. The straight-line method is used for depreciation and amortization. Intangible assets consist of patents, which are amortized using the straight-line method over the estimated useful lives of the patents. The Company does not capitalize external legal costs and filing fees associated with obtaining patents on its new discoveries. Acquired intellectual property is recorded at cost and is amortized over its estimated useful life. The Company believes the useful lives assigned to these assets are reasonable. The Company assesses the recoverability of long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. These computations utilize judgments and assumptions inherent in managements estimate of future cash flows to determine recoverability of these assets. If managements assumptions about these assets were to change as a result of events or circumstances, the Company may be required to record an impairment loss. Stock-Based Compensation The Company accounts for stock-based compensation under the provisions of FASB ASC Topic 718, CompensationStock Compensation The Company accounts for stock-based compensation awards to non-employees in accordance with FASB ASC Topic 505-50, Equity-Based Payments to Non-Employees All issuances of stock options or other equity instruments to employees and non-employees as the consideration for goods or services received by the Company are accounted for based on the fair value of the equity instruments issued. Any stock options issued to non-employees are recorded in expense and additional paid-in capital in shareholders equity over the applicable service periods using variable accounting through the vesting dates based on the fair value of the options at the end of each reporting period. As of June 30, 2015, the Company had one stock-based employee compensation plan under which it makes grants, the 2011 Equity Incentive Plan (the EIP). The EIP provides for the grant of incentive stock options (ISOs), nonqualified stock options (NQSOs) and restricted stock awards to full-time employees (who may also be directors) and NQSOs and restricted stock awards to non-employee directors, consultants, customers, vendors or providers of services. The exercise price of any ISO may not be less than the fair market value of the common stock on the date of grant and the term shall not exceed ten years. The amount reserved under the 2011 EIP is 40,000,000 shares of common stock. At June 30, 2015, the Company had options outstanding exercisable into up to 39,718,802 shares of stock under the EIP and the Companys prior Amended 2001 Stock Plan of which up to 18,454,489 shares were exercisable. Awards under the Companys EIP generally vest over four years. The fair value of options granted are estimated at the date of grant using a Black-Scholes Model which includes several variables including expected life, risk free interest rate, expected stock price volatility, stock option exercise patterns and expected dividend yield. The Company also must estimate forfeitures for employee stock options. Management used the following weighted average assumptions to value stock options granted during the three and six month periods ended June 30, 2015 and 2014: Three months ended June 30, Six months ended June 30, 2015 2014 2015 2014 Expected term None None 5 years 5 years Exercise price None None $0.01 $0.02 Expected volatility None None 210% 187% Expected dividends None None None None Risk-free interest rate None None 1.48% 1.64% Forfeitures None None None None Earnings (Loss) Per Share Basic loss per share is computed by dividing loss available to common shareholders by the weighted-average number of common shares outstanding. Diluted loss per share is computed similar to basic loss per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. Common equivalent shares are excluded from the computation if their effect is anti-dilutive. For the six month periods ended June 30, 2015 and 2014, the following common equivalent shares were excluded from the computation of loss per share since their effects are anti-dilutive. June 30, June 30, 2015 2014 Preferred Stock 3,085,000 3,085,000 Convertible debentures 101,009,574 90,505,370 Options 39,718,802 35,468,800 Warrants 99,995,693 105,719,939 Total 243,809,069 234,779,109 The following table sets forth the computation of basic and diluted loss per share for the three and six month periods ended June 30, 2015 and 2014: Three Months Ended Six Months Ended June 30, June 30, 2015 2014 2015 2014 Numerator: Net loss for basic earnings per share $ (743,261 ) $ (1,170,343 ) $ (2,452,951 ) $ (4,420,500 ) Net loss for diluted earnings per share $ (743,261 ) $ (1,170,343 ) $ (2,452,951 ) $ (4,420,500 ) Denominator: Weighted average basic shares outstanding 197,124,162 167,953,254 195,747,368 167,583,031 Denominator for diluted earnings per share- Adjusted weighted average shares 197,124,162 167,953,254 195,747,368 167,583,031 Income (loss) per share Basic $ (0.00 ) $ (0.01 ) $ (0.01 ) $ (0.03 ) Diluted $ (0.00 ) $ (0.01 ) $ (0.01 ) $ (0.03 ) Inventory Inventory consisted of the following at June 30, 2015 and December 31, 2014: June 30, December 31, 2015 2014 Raw materials $ 238,959 $ 238,441 Finished goods 50,264 45,183 289,223 283,624 Reserve for obsolescence $ 289,223 $ 283,624 |
Liabilities
Liabilities | 6 Months Ended |
Jun. 30, 2015 | |
Liabilities [Abstract] | |
Liabilities | 3. Liabilities Note Payable In November 2014, the Company issued for cash of $100,000 an unsecured note payable and a five year warrant with an exercise price of $0.09 per share for the purchase of up to 50,000 shares of common stock. The terms of the note were a repayment of $115,000 if paid by February 18, 2015 and, if paid thereafter, the principal balance of the note was to be increased to $115,000 and interest will accrue at 20% from February 18, 2015 until paid. The note remained outstanding at June 30, 2015 and is accruing interest at 20%. The warrant was valued at $1,659 using the Black-Scholes Pricing Model and was recorded as additional paid-in capital and expensed to non-cash interest in 2014. Convertible Debentures As of June 30, 2015, the Company has issued and outstanding Convertible Debentures (Debentures) with original terms of six months to one year, an interest rate ranging from 10-20% per year and an original issue discount ranging from 5% to 10% which, at the option of the holder, may convert into common stock at an initial conversion price ranging from $0.03 to $0.099 per share. The Debentures were issued with detachable five year cashless Holders Warrants that allow the holders to purchase one share of stock for each two shares available under the converted Debentures at an exercise price ranging from $0.06 to $0.1287 per share. In addition, the Company issued five year cashless Agent Warrants equal to 10% of the total number of shares issuable under the Debentures and Holders Warrants at an exercise price ranging from $0.0745 to $0.1287 per share. For debentures issued through March 31, 2013, at the option of the Debenture holder, the terms of the Debentures and Holders Warrants are subject to an exchange feature in the event that the Company issues securities with terms more favorable than those of the then outstanding Debentures and Holders Warrants. Debentures issued subsequent to March 31, 2013 do not contain such an exchange clause. The gross amount of Debentures outstanding is $4,818,603 as of June 30, 2015. During the three months ended June 30, 2015, the Company has issued and outstanding Convertible Debentures (Variable Debentures) with original terms of 9 months to one year, an interest rate ranging from 0-10% per year and original issue discount rate ranging from 0-10% which contain variable conversion rates ranging from discounts of 40-50% of the Companys common stock based on the lowest trading prices ranging from 10-25 days previous to conversion. The Variable Debentures contain prepayment options which enable the Company to prepay the notes for periods of 0-180 days subsequent to issuance at premiums ranging from 0-50%. The gross amount of Variable Debentures outstanding is $421,861 as of June 30, 2015. As of June 30, 2015 and December 31, 2014, the balances of the Debentures are as follows: June 30, December 31, 2015 2014 Balance at beginning of period $ 4,496,602 $ 2,951,629 Issuance of debentures for cash 820,750 2,506,376 Original issue discount 53,889 128,071 Debentures surrendered in exchange transactions Debentures issued in exchange transactions Debentures converted to common stock (130,777 ) (1,089,474 ) Convertible debt 5,240,464 4,496,602 Less unamortized costs of financing 534,726 576,502 Convertible debt, net of unamortized costs $ 4,705,738 $ 3,920,100 Convertible debt in default $ 3,282,497 $ 1,862,160 Derivative Liability Since the Company issued Convertible Debentures which included Holders Warrants, Agent Warrants and a conversion option that includes a possible exchange feature in the event of a future financing on terms more favorable than those of the existing warrants and debentures, this results in the warrants and conversion feature of the debentures being recorded as a liability and measured at fair value. In addition, Variable Debentures issued during the three months ended June 30, 2015, contained variable conversion rates based on unknown future prices of the Companys common stock resulting in a conversion feature. The Company measures these warrants and conversion features using a combination of Black-Scholes option valuation models and Binomial Lattice option valuation models using similar assumptions to those described under Stock-Based Compensation. The time period over which the Company will be required to evaluate the fair value of the warrants is approximately five years and the time period over which the Company will be required to evaluate the fair value of the conversion features are six to twelve months or conversion. The assumptions used in determining fair value represent managements best estimates, but these estimates involve inherent uncertainties and the application of managements judgment. As a result, if factors change, including changes in the market value of the Companys common stock, managements assessment of the probability of a more favorably priced future financing or significant fluctuations in the volatility of the trading market for the Companys common stock, the Companys fair value estimates could be materially different in the future. The Company computes the fair value of the derivative liability at each reporting period and the change in the fair value is recorded as non-cash expense or non-cash income. The key component in the value of the derivative liability is the Companys stock price, which is subject to significant fluctuation and is not under its control. The resulting effect on net loss is therefore subject to significant fluctuation and will continue to be so until the Companys Debentures, which the convertible feature is associated with, are converted into common stock or paid in full with cash. Assuming all other fair value inputs remain constant, the Company will record non-cash expense when its stock price increases and non-cash income when its stock price decreases. As of June 30, 2015 and December 31, 2014, the balances of the Derivative Liability are as follows: Conversion Warrants Feature Total Balance at December 31, 2013 $ 803,484 $ 300,939 $ 1,104,423 Elimination on extinguishment of debt (197,482 ) (197,482 ) Change in fair value at year end (38,526 ) 193,424 154,898 Balance at December 31, 2014 764,958 296,881 1,061,839 Elimination on extinguishment of debt (57,732 ) (57,732 ) Initial value on issuance of debt 381,824 381,824 Change in fair value at period end (3,567 ) 403,790 400,223 Balance at June 30, 2015 $ 761,391 $ 1,024,763 $ 1,786,154 Debentures with warrants attached issued subsequent to March 31, 2013 did not contain an exchange provision and were accounted for using the equity method of valuing the note and warrant. For the six months ended June 30, 2015, $118,096 was recorded as additional paid-in capital. |
Shareholders' Deficit
Shareholders' Deficit | 6 Months Ended |
Jun. 30, 2015 | |
Equity [Abstract] | |
Shareholders' Deficit | 4. Shareholders Deficit Common Stock During the six months ended June 30, 2015, holders of Convertible Debentures with a face value of $130,777 converted their debentures into 2,705,306 shares of restricted common stock. In addition, associated with these debentures, the Company paid $27,062 in accrued interest by issuing 528,609 shares of restricted common stock and recorded a gain on extinguishment of debt of $119,369. Warrants During the six months ended June 30, 2015, in conjunction with the sale of Convertible Debentures, the Company issued five year common stock purchase warrants to acquire up to 5,725,312 shares to holders of the Debentures. These warrants have exercise prices ranging from $0.06 to $0.09 per share. In January 2015, the Company issued a warrant exercisable into up to 300,000 shares of common stock in exchange for services provided by a consultant. The value of these warrants, $2,848, was determined using the Black-Sholes Option pricing model and was included as non-cash expenses and additional paid-in capital during the six months ended June 30, 2015. The balance of all warrants outstanding as of June 30, 2015 is as follows: Weighted Average Exercise Warrants Price Outstanding at January 1, 2015 103,430,075 $ 0.11 Granted 6,025,312 $ 0.08 Exchanged cancelled - $ - Exchanged issued - $ - Cancelled (9,459,694 ) $ 0.31 Exercised - $ - Outstanding at June 30, 2015 99,995,693 $ 0.08 Exercisable at June 30, 2015 99,995,693 $ 0.08 Stock Options Options outstanding as of June 30, 2015 are as follows: Weighted Average Weighted Average Aggregate Exercise Price Remaining Contractual Intrinsic Options Per Share Term (years) Value (1) Outstanding at January 1, 2015 34,293,800 $ 0.02 8.74 Granted 5,900,002 $ 0.01 9.61 Cancelled (25,000 ) $ 0.90 - Exercised (450,000 ) $ 0.01 - Outstanding at June 30, 2015 39,718,802 $ 0.02 8.66 $ 54,500 Exercisable at June 30, 2015 18,454,489 $ 0.02 8.56 $ 12,000 Weighted average fair value of options granted during the period 5,900,002 $ 0.01 (1) These amounts represent the excess, if any, between the exercise price and $0.01, the closing market price of the Companys common stock on June 30, 2015 as quoted on the Over-the-Counter Bulletin Board under the symbol SCIE. In February 2015, the Companys Board of Directors authorized the issuance of stock options exercisable into up to 5,900,002 shares of common stock at an exercise price of $0.01 per share to a group of employees, directors and consultants. A portion of the options contained vesting criteria conditioned on certain milestones being achieved by the Company. If the milestones are not achieved, the options are subject to being cancelled. During the three months ended June 30, 2015, two directors exercised stock options into 450,000 shares of common stock at an exercise price of $0.01 per share At June 30, 2015, total unrecognized estimated employee compensation cost related to non-vested stock options granted prior to that date is $458,722, which we expect to be recognized over the next four years. |
Fair Value Measurements
Fair Value Measurements | 6 Months Ended |
Jun. 30, 2015 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | 5. Fair Value Measurements Accounting guidance on fair value measurements and disclosures defines fair value, establishes a framework for measuring the fair value of assets and liabilities using a hierarchy system, and defines required disclosures. It clarifies that fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the market in which the reporting entity transacts business. The Companys balance sheet contains derivative and warrant liabilities that are recorded at fair value on a recurring basis. The three-level valuation hierarchy for disclosure of fair value is as follows: Level 1: uses quoted market prices in active markets for identical assets or liabilities. Level 2: uses observable market-based inputs or unobservable inputs that are corroborated by market data. Level 3: uses unobservable inputs that are not corroborated by market data. The fair value of the Companys recorded derivative and warrant liabilities is determined based on unobservable inputs that are not corroborated by market data, which require a Level 3 classification. A Binomial Lattice option valuation model was used to determine the fair value with similar assumptions to those described under Stock-Based Compensation. The Company records derivative and warrant liabilities on the condensed consolidated balance sheets at fair value with changes in fair value recorded in the condensed consolidated statements of operation. The following table presents the balances of liabilities measured at fair value on a recurring basis by level as of June 30, 2015: Fair Value Measurements Using Quoted Prices in Significant Other Significant Active Markets for Observable Unobservable Identical Assets Inputs Inputs (Level 1) (Level 2) (Level 3) Total As of June 30, 2015 Derivative liability $ $ $ 1,024,763 $ 1,024,763 Warrant liability 761,391 761,391 Total $ $ $ 1,786,154 $ 1,786,154 The following table presents changes in the liabilities with significant unobservable inputs (Level 3) for the six months ended June 30, 2015: Warrant Derivative Total Liability Liability Liability Balance December 31, 2014 $ 764,958 $ 296,881 $ 1,061,839 Elimination on extinguishment of debt (57,732 ) (57,732 ) Initial value on issuance of debt 381,824 381,824 Change in estimated fair value (1) (3,567 ) 403,790 400,223 Balance June 30, 2015 $ 761,391 $ 1,024,763 $ 1,786,154 (1) Included in the Condensed Statements of Operation on the line Change in fair value of derivative and warrant liabilities. Management used the following inputs to value the Derivative and Warrant Liabilities for the six months ended June 30, 2015: Derivative Liability Warrant Liability Expected term 1 year 5 years Exercise price $0.01 - $0.099 $0.075 - $0.1287 Expected volatility 286% to 294% 219% to 221% Expected dividends None None Risk-free interest rate 0.22% to 0.28% 1.32% to 1.63% Forfeitures None None In computing the fair value of the derivative and warrant liability at June 30, 2015 for instruments under the Binomial Lattice option-pricing model, management estimated a 40% probability of a down round financing event at a price of $0.025 and a 20% to 75% probability that existing note holders with exchange privileges would exchange their existing debentures and warrants for new debentures and warrants. |
Contingencies
Contingencies | 6 Months Ended |
Jun. 30, 2015 | |
Commitments and Contingencies Disclosure [Abstract] | |
Contingencies | 6. Contingencies None |
Subsequent Events
Subsequent Events | 6 Months Ended |
Jun. 30, 2015 | |
Subsequent Events [Abstract] | |
Subsequent Events | 7. Subsequent Events Convertible Debentures and Warrants During July and August 2015, the Company sold $277,778 of Unsecured Convertible Debentures (the Debentures) to an accredited investor for aggregate consideration of $250,000. The Debentures mature in twelve months, carry a fixed conversion price of $.045, an annual interest rate of 10% and are convertible into 6,172,840 shares of common stock at maturity. The Company received net cash proceeds of approximately $230,000 after payment of fees and expenses of $20,000. In addition, the Company issued the holder of the Debentures detachable five-year warrants to purchase 3,086,420 additional shares of common stock at an exercise price of $0.090 per share. Variable Debentures In July 2015, the Company entered into two notes accumulating $74,500 that can be repaid for $85,675 to $104,300 if paid within 90-180 days. If paid subsequent to 180 days, the notes are convertible into common stock at a discount to the market price. Management estimates that the notes will be paid within the 90-180 days. Subsequent events have been evaluated through the date financial statements are filed with the Securities and Exchange Commission. |
Summary of Significant Accoun14
Summary of Significant Accounting Policies (Policies) | 6 Months Ended |
Jun. 30, 2015 | |
Accounting Policies [Abstract] | |
Revenue recognition | Revenue recognition The Company recognizes revenues when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price is fixed or determinable and collectability is reasonably assured. Revenue from the sale of the Companys products is generally recognized when title and risk of loss transfers to the customer, the terms of which are generally free on board shipping point. The Company uses customer purchase orders to determine the existence of an arrangement. The Company uses shipping documents and third-party proof of delivery to verify that title has transferred. The Company assesses whether the price is fixed or determinable based upon the terms of the agreement associated with the transaction. To determine whether collection is probable, the Company assesses a number of factors, including past transaction history with the customer and the creditworthiness of the customer. |
Consolidation | Consolidation The accompanying consolidated financial statements include the accounts of SpectraScience, Inc. and its wholly-owned subsidiaries LUMA, International and Spectra UK. All significant intercompany balances and transactions have been eliminated in consolidation. |
Risks and Uncertainties | Risks and Uncertainties The Company operates in an industry that is subject to intense competition, government regulation and rapid technological change. The Company's operations are subject to significant risk and uncertainties, including financial, operational, technological, regulatory and other risks associated with a short history of product sales, including the potential risk of business failure. |
Use of Estimates | Use of Estimates The Company prepares its consolidated financial statements in conformity with accounting principles generally accepted in the United States of America, which requires management to make estimates and assumptions that affect the amounts reported in the financial statements and disclosures made in the accompanying notes to the financial statements. Significant estimates made by management include, among others, realization of long-lived assets including intangible assets, assumptions used to value stock options, assumptions used to value the common stock issued and assumptions related to the determination of the fair value of the derivative components associated with the Companys Convertible Debentures. Actual results could differ from those estimates. |
Inventory Valuation | Inventory Valuation The Company states its inventory at the lower of cost or market value, determined on a specific cost basis. The Company provides inventory allowances when conditions indicate that the selling price could be less than cost due to obsolescence and reductions in estimated future demand. The Company balances the need to maintain strategic inventory levels with the risk of obsolescence due to changing technology and customer demand levels. Unfavorable changes in market conditions may result in a need for additional inventory reserves that could adversely impact the Companys gross margins. Conversely, favorable changes in demand could result in higher gross margins when the Company sells products. |
Valuation of Long-lived Assets | Valuation of Long-lived Assets The Companys long-lived assets consist of property and equipment and intangible assets. Equipment is carried at cost and is depreciated over the estimated useful lives of the assets, which are generally two to three years, and leasehold improvements are amortized over the lesser of the lease term or the estimated useful lives of the improvements. The straight-line method is used for depreciation and amortization. Intangible assets consist of patents, which are amortized using the straight-line method over the estimated useful lives of the patents. The Company does not capitalize external legal costs and filing fees associated with obtaining patents on its new discoveries. Acquired intellectual property is recorded at cost and is amortized over its estimated useful life. The Company believes the useful lives assigned to these assets are reasonable. The Company assesses the recoverability of long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. These computations utilize judgments and assumptions inherent in managements estimate of future cash flows to determine recoverability of these assets. If managements assumptions about these assets were to change as a result of events or circumstances, the Company may be required to record an impairment loss. |
Stock-Based Compensation | Stock-Based Compensation The Company accounts for stock-based compensation under the provisions of FASB ASC Topic 718, CompensationStock Compensation The Company accounts for stock-based compensation awards to non-employees in accordance with FASB ASC Topic 505-50, Equity-Based Payments to Non-Employees All issuances of stock options or other equity instruments to employees and non-employees as the consideration for goods or services received by the Company are accounted for based on the fair value of the equity instruments issued. Any stock options issued to non-employees are recorded in expense and additional paid-in capital in shareholders equity over the applicable service periods using variable accounting through the vesting dates based on the fair value of the options at the end of each reporting period. As of June 30, 2015, the Company had one stock-based employee compensation plan under which it makes grants, the 2011 Equity Incentive Plan (the EIP). The EIP provides for the grant of incentive stock options (ISOs), nonqualified stock options (NQSOs) and restricted stock awards to full-time employees (who may also be directors) and NQSOs and restricted stock awards to non-employee directors, consultants, customers, vendors or providers of services. The exercise price of any ISO may not be less than the fair market value of the common stock on the date of grant and the term shall not exceed ten years. The amount reserved under the 2011 EIP is 40,000,000 shares of common stock. At June 30, 2015, the Company had options outstanding exercisable into up to 39,718,802 shares of stock under the EIP and the Companys prior Amended 2001 Stock Plan of which up to 18,454,489 shares were exercisable. Awards under the Companys EIP generally vest over four years. The fair value of options granted are estimated at the date of grant using a Black-Scholes Model which includes several variables including expected life, risk free interest rate, expected stock price volatility, stock option exercise patterns and expected dividend yield. The Company also must estimate forfeitures for employee stock options. Management used the following weighted average assumptions to value stock options granted during the three and six month periods ended June 30, 2015 and 2014: Three months ended June 30, Six months ended June 30, 2015 2014 2015 2014 Expected term None None 5 years 5 years Exercise price None None $0.01 $0.02 Expected volatility None None 210% 187% Expected dividends None None None None Risk-free interest rate None None 1.48% 1.64% Forfeitures None None None None |
Earnings (Loss) Per Share | Earnings (Loss) Per Share Basic loss per share is computed by dividing loss available to common shareholders by the weighted-average number of common shares outstanding. Diluted loss per share is computed similar to basic loss per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. Common equivalent shares are excluded from the computation if their effect is anti-dilutive. For the six month periods ended June 30, 2015 and 2014, the following common equivalent shares were excluded from the computation of loss per share since their effects are anti-dilutive. June 30, June 30, 2015 2014 Preferred Stock 3,085,000 3,085,000 Convertible debentures 101,009,574 90,505,370 Options 39,718,802 35,468,800 Warrants 99,995,693 105,719,939 Total 243,809,069 234,779,109 The following table sets forth the computation of basic and diluted loss per share for the three and six month periods ended June 30, 2015 and 2014: Three Months Ended Six Months Ended June 30, June 30, 2015 2014 2015 2014 Numerator: Net loss for basic earnings per share $ (743,261 ) $ (1,170,343 ) $ (2,452,951 ) $ (4,420,500 ) Net loss for diluted earnings per share $ (743,261 ) $ (1,170,343 ) $ (2,452,951 ) $ (4,420,500 ) Denominator: Weighted average basic shares outstanding 197,124,162 167,953,254 195,747,368 167,583,031 Denominator for diluted earnings per share- Adjusted weighted average shares 197,124,162 167,953,254 195,747,368 167,583,031 Income (loss) per share Basic $ (0.00 ) $ (0.01 ) $ (0.01 ) $ (0.03 ) Diluted $ (0.00 ) $ (0.01 ) $ (0.01 ) $ (0.03 ) |
Inventory | Inventory Inventory consisted of the following at June 30, 2015 and December 31, 2014: June 30, December 31, 2015 2014 Raw materials $ 238,959 $ 238,441 Finished goods 50,264 45,183 289,223 283,624 Reserve for obsolescence - - $ 289,223 $ 283,624 |
Summary of Significant Accoun15
Summary of Significant Accounting Policies (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Summary Of Significant Accounting Policies Tables | |
Schedule of weighted average assumptions to value stock options granted | Management used the following weighted average assumptions to value stock options granted during the three and six month periods ended June 30, 2015 and 2014: Three months ended June 30, Six months ended June 30, 2015 2014 2015 2014 Expected term None None 5 years 5 years Exercise price None None $0.01 $0.02 Expected volatility None None 210% 187% Expected dividends None None None None Risk-free interest rate None None 1.48% 1.64% Forfeitures None None None None |
Schedule of antidilutive securities excluded from computation of earnings per share | For the six month periods ended June 30, 2015 and 2014, the following common equivalent shares were excluded from the computation of loss per share since their effects are anti-dilutive. June 30, June 30, 2015 2014 Preferred Stock 3,085,000 3,085,000 Convertible debentures 101,009,574 90,505,370 Options 39,718,802 35,468,800 Warrants 99,995,693 105,719,939 Total 243,809,069 234,779,109 |
Schedule Of earnings per share basic And diluted | The following table sets forth the computation of basic and diluted loss per share for the three and six month periods ended June 30, 2015 and 2014: Three Months Ended Six Months Ended June 30, June 30, 2015 2014 2015 2014 Numerator: Net loss for basic earnings per share $ (743,261 ) $ (1,170,343 ) $ (2,452,951 ) $ (4,420,500 ) Net loss for diluted earnings per share $ (743,261 ) $ (1,170,343 ) $ (2,452,951 ) $ (4,420,500 ) Denominator: Weighted average basic shares outstanding 197,124,162 167,953,254 195,747,368 167,583,031 Denominator for diluted earnings per share- Adjusted weighted average shares 197,124,162 167,953,254 195,747,368 167,583,031 Income (loss) per share Basic $ (0.00 ) $ (0.01 ) $ (0.01 ) $ (0.03 ) Diluted $ (0.00 ) $ (0.01 ) $ (0.01 ) $ (0.03 ) |
Schedule of inventory | Inventory Inventory consisted of the following at June 30, 2015 and December 31, 2014: June 30, December 31, 2015 2014 Raw materials $ 238,959 $ 238,441 Finished goods 50,264 45,183 289,223 283,624 Reserve for obsolescence - - $ 289,223 $ 283,624 |
Liabilities (Tables)
Liabilities (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Liabilities [Abstract] | |
Schedule of balance of debentures | As of June 30, 2015 and December 31, 2014, the balances of the Debentures are as follows: June 30, December 31, 2015 2014 Balance at beginning of period $ 4,496,602 $ 2,951,629 Issuance of debentures for cash 820,750 2,506,376 Original issue discount 53,889 128,071 Debentures surrendered in exchange transactions Debentures issued in exchange transactions Debentures converted to common stock (130,777 ) (1,089,474 ) Convertible debt 5,240,464 4,496,602 Less unamortized costs of financing 534,726 576,502 Convertible debt, net of unamortized costs $ 4,705,738 $ 3,920,100 Convertible debt in default $ 3,282,497 $ 1,862,160 |
Schedule of balances of derivative liability | As of June 30, 2015 and December 31, 2014, the balances of the Derivative Liability are as follows: Conversion Warrants Feature Total Balance at December 31, 2013 $ 803,484 $ 300,939 $ 1,104,423 Elimination on extinguishment of debt (197,482 ) (197,482 ) Change in fair value at year end (38,526 ) 193,424 154,898 Balance at December 31, 2014 764,958 296,881 1,061,839 Elimination on extinguishment of debt (57,732 ) (57,732 ) Initial value on issuance of debt 381,824 381,824 Change in fair value at period end (3,567 ) 403,790 400,223 Balance at June 30, 2015 $ 761,391 $ 1,024,763 $ 1,786,154 |
Shareholders' Deficit (Tables)
Shareholders' Deficit (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Equity [Abstract] | |
Schedule of balance of all warrants outstanding | The balance of all warrants outstanding as of June 30, 2015 is as follows: Weighted Average Exercise Warrants Price Outstanding at January 1, 2015 103,430,075 $ 0.11 Granted 6,025,312 $ 0.08 Exchanged cancelled - $ - Exchanged issued - $ - Cancelled (9,459,694 ) $ 0.31 Exercised - $ - Outstanding at June 30, 2015 99,995,693 $ 0.08 Exercisable at June 30, 2015 99,995,693 $ 0.08 |
Schedule of stock options outstanding | Options outstanding as of June 30, 2015 are as follows: Weighted Average Weighted Average Aggregate Exercise Price Remaining Contractual Intrinsic Options Per Share Term (years) Value (1) Outstanding at January 1, 2015 34,293,800 $ 0.02 8.74 Granted 5,900,002 $ 0.01 9.61 Cancelled (25,000 ) $ 0.90 - Exercised (450,000 ) $ 0.01 - Outstanding at June 30, 2015 39,718,802 $ 0.02 8.66 $ 54,500 Exercisable at June 30, 2015 18,454,489 $ 0.02 8.56 $ 12,000 Weighted average fair value of options granted during the period 5,900,002 $ 0.01 |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Fair Value Measurements [Abstract] | |
Schedule of balances of liabilities measured at fair value on recurring basis | The following table presents the balances of liabilities measured at fair value on a recurring basis by level as of June 30, 2015: Fair Value Measurements Using Quoted Prices in Significant Other Significant Active Markets for Observable Unobservable Identical Assets Inputs Inputs (Level 1) (Level 2) (Level 3) Total As of June 30, 2015 Derivative liability $ $ $ 1,024,763 $ 1,024,763 Warrant liability 761,391 761,391 Total $ $ $ 1,786,154 $ 1,786,154 |
Schedule changes in liabilities with significant unobservable inputs | The following table presents changes in the liabilities with significant unobservable inputs (Level 3) for the six months ended June 30, 2015: Warrant Derivative Total Liability Liability Liability Balance December 31, 2014 $ 764,958 $ 296,881 $ 1,061,839 Elimination on extinguishment of debt (57,732 ) (57,732 ) Initial value on issuance of debt 381,824 381,824 Change in estimated fair value (1) (3,567 ) 403,790 400,223 Balance June 30, 2015 $ 761,391 $ 1,024,763 $ 1,786,154 (1) Included in the Condensed Statements of Operation on the line Change in fair value of derivative and warrant liabilities. |
Schedule of derivative and warrant liabilities | Management used the following inputs to value the Derivative and Warrant Liabilities for the six months ended June 30, 2015: Derivative Liability Warrant Liability Expected term 1 year 5 years Exercise price $0.01 - $0.099 $0.075 - $0.1287 Expected volatility 286% to 294% 219% to 221% Expected dividends None None Risk-free interest rate 0.22% to 0.28% 1.32% to 1.63% Forfeitures None None |
Nature of Business and Basis 19
Nature of Business and Basis of Presentation (Details Narrative) | Jul. 12, 2012USD ($) | Jun. 30, 2015USD ($)N | Dec. 31, 2014USD ($) | Jun. 30, 2014USD ($) | Dec. 31, 2013USD ($) |
Working capital deficit | $ 7,783,022 | $ 5,732,125 | |||
Cash and cash equivalents | 42,235 | 223,529 | $ 443,788 | $ 236,597 | |
Debt face amount | 3,282,497 | $ 1,862,160 | |||
Laidlaw & Company (UK) Ltd [Member] | |||||
Maximum capital raising | $ 20,000,000 | 743,970 | |||
Agreement period | 2 years | ||||
Payments of transaction costs | 76,780 | ||||
Convertible Debentures [Member] | |||||
Debt face amount | $ 3,282,497 | ||||
Number of individual default | N | 55 |
Summary of Significant Accoun20
Summary of Significant Accounting Policies (Details Narrative) - shares | 6 Months Ended | |
Jun. 30, 2015 | Dec. 31, 2014 | |
Options outstanding exercisable | 39,718,802 | 34,293,800 |
2011 Equity Incentive Plan [Member] | ||
Options outstanding exercisable | 39,718,802 | |
Vesting period | 4 years | |
Amended 2001 Equity Incentive Plan [Member] | ||
Number of shraes reserved | 40,000,000 | |
Options outstanding exercisable | 18,454,489 |
Summary of Significant Accoun21
Summary of Significant Accounting Policies (Details) - $ / shares | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | |
Accounting Policies [Abstract] | ||||
Expected term | 5 years | 5 years | ||
Exercise price | $ 0.01 | $ 0.02 | $ 0.01 | $ 0.02 |
Expected volatility | 210.00% | 187.00% | ||
Expected dividends | ||||
Risk-free interest rate | 0.48% | 1.64% | ||
Forfeitures |
Summary of Significant Accoun22
Summary of Significant Accounting Policies (Details 1) - shares | 6 Months Ended | |
Jun. 30, 2015 | Jun. 30, 2014 | |
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 243,809,069 | 234,779,109 |
Preferred Stock [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 3,085,000 | 3,085,000 |
Convertible Debentures [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 101,009,574 | 90,505,370 |
Options [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 39,718,802 | 35,468,800 |
Warrants [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 99,995,693 | 105,719,939 |
Summary of Significant Accoun23
Summary of Significant Accounting Policies (Details 2) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | |
Numerator: | ||||
Net loss for basic earnings per share | $ (743,261) | $ (1,170,343) | $ (2,452,951) | $ (4,420,500) |
Net loss for diluted earnings per share | $ (743,261) | $ (1,170,343) | $ (2,452,951) | $ (4,420,500) |
Denominator: | ||||
Weighted average basic shares outstanding | 197,124,162 | 167,953,254 | 195,747,368 | 167,583,031 |
Denominator for diluted earnings per share - Adjusted weighted average shares | 197,124,162 | 167,953,254 | 195,747,368 | 167,583,031 |
Income (loss) per share | ||||
Basic | $ 0 | $ (0.01) | $ (0.01) | $ (0.03) |
Diluted | $ 0 | $ (0.01) | $ (0.01) | $ (0.03) |
Summary of Significant Accoun24
Summary of Significant Accounting Policies (Details 3) - USD ($) | Jun. 30, 2015 | Dec. 31, 2014 |
Accounting Policies [Abstract] | ||
Raw materials | $ 238,959 | $ 238,441 |
Finished goods | 50,264 | 45,183 |
Inventory, gross | $ 289,223 | $ 283,624 |
Reserve for obsolescence | ||
Inventories, net | $ 289,223 | $ 283,624 |
Liabilities (Details Narrative)
Liabilities (Details Narrative) - USD ($) | 1 Months Ended | 3 Months Ended | 6 Months Ended | |
Nov. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2015 | Dec. 31, 2014 | |
Debt Instrument [Line Items] | ||||
Debt instrument, face amount | $ 53,889 | $ 53,889 | $ 128,071 | |
Adjustments to additional paid in capital, other | $ 118,096 | |||
Convertible Debentures [Member] | ||||
Debt Instrument [Line Items] | ||||
Warrant term | 5 years | |||
Debentures outstanding | $ 4,818,603 | |||
Convertible Debentures [Member] | Minimum [Member] | ||||
Debt Instrument [Line Items] | ||||
Debentures payment term | 6 months | |||
Accrued interest rate per year | 10.00% | 10.00% | ||
Original issue discount, percent | 5.00% | 5.00% | ||
Convertible debentures exercise price | $ 0.06 | |||
Common stock conversion price per share | $ 0.03 | 0.03 | ||
Warrant exercise price | $ 0.0745 | |||
Convertible Debentures [Member] | Maximum [Member] | ||||
Debt Instrument [Line Items] | ||||
Debentures payment term | 1 year | |||
Accrued interest rate per year | 20.00% | 20.00% | ||
Original issue discount, percent | 10.00% | 10.00% | ||
Convertible debentures exercise price | $ 0.1287 | |||
Common stock conversion price per share | $ 0.099 | 0.099 | ||
Warrant exercise price | $ 0.1287 | |||
Variable Debentures [Member] | ||||
Debt Instrument [Line Items] | ||||
Debentures outstanding | $ 421,861 | |||
Variable Debentures [Member] | Minimum [Member] | ||||
Debt Instrument [Line Items] | ||||
Debentures payment term | 9 months | |||
Accrued interest rate per year | 0.00% | 0.00% | ||
Original issue discount, percent | 0.00% | 0.00% | ||
Convertible debentures exercise price | $ 0.40 | |||
Variable issue discount, percent | 0.00% | 0.00% | ||
Variable Debentures [Member] | Maximum [Member] | ||||
Debt Instrument [Line Items] | ||||
Debentures payment term | 1 year | |||
Accrued interest rate per year | 10.00% | 10.00% | ||
Original issue discount, percent | 10.00% | 10.00% | ||
Convertible debentures exercise price | $ 0.50 | |||
Variable issue discount, percent | 10.00% | 10.00% | ||
Notes Payable, Other Payables [Member] | ||||
Debt Instrument [Line Items] | ||||
Accrued interest rate per year | 20.00% | |||
Debt instrument, face amount | $ 100,000 | |||
Stock Issued curing period shares for debt offering costs | 50,000 | |||
Warrant exercise price | $ 0.09 | |||
Remaining balance of notes payable | $ 115,000 | |||
Increased principal balance note payable | 115,000 | |||
Warrants valued | $ 1,659 | |||
Warrant term | 5 years |
Liabilities (Details)
Liabilities (Details) - USD ($) | Jun. 30, 2015 | Dec. 31, 2014 |
Liabilities [Abstract] | ||
Balance at beginning of period | $ 4,496,602 | $ 2,951,629 |
Issuance of debentures for cash | 820,750 | 2,506,376 |
Original issue discount | $ 53,889 | $ 128,071 |
Debentures surrendered in exchange transactions | ||
Debentures issued in exchange transactions | ||
Debentures converted to common stock | $ (130,777) | $ (1,089,474) |
Convertible debt | 5,240,464 | 4,496,602 |
Less unamortized costs of financing | 534,726 | 576,502 |
Convertible debt, net of unamortized costs | 4,705,738 | 3,920,100 |
Convertible debt in default | $ 3,282,497 | $ 1,862,160 |
Liability (Details 1)
Liability (Details 1) - USD ($) | 6 Months Ended | 12 Months Ended |
Jun. 30, 2015 | Dec. 31, 2014 | |
Debt Instrument [Line Items] | ||
Balance | $ 1,061,839 | $ 1,104,423 |
Elimination on extinguishment of debt | (57,732) | (197,482) |
Initial value on issuance of debt | 381,824 | |
Change in fair value at year end | 400,223 | 154,898 |
Balance | 1,786,154 | 1,061,839 |
Warrants [Member] | ||
Debt Instrument [Line Items] | ||
Balance | $ 764,958 | $ 803,484 |
Elimination on extinguishment of debt | ||
Initial value on issuance of debt | ||
Change in fair value at year end | $ (3,567) | $ (38,526) |
Balance | 761,391 | 764,958 |
Conversion Feature [Member] | ||
Debt Instrument [Line Items] | ||
Balance | 296,881 | 300,939 |
Elimination on extinguishment of debt | (57,732) | (197,482) |
Initial value on issuance of debt | 381,824 | |
Change in fair value at year end | 403,790 | 193,424 |
Balance | $ 1,024,763 | $ 296,881 |
Shareholders' Deficit (Details
Shareholders' Deficit (Details Narrative) | 1 Months Ended | 3 Months Ended | 6 Months Ended | |||
Jan. 31, 2015USD ($)shares | Jun. 30, 2015USD ($)$ / sharesshares | Jun. 30, 2014USD ($) | Jun. 30, 2015USD ($)N$ / sharesshares | Jun. 30, 2014USD ($) | Dec. 31, 2014USD ($) | |
Debt instrument, face amount | $ 53,889 | $ 53,889 | $ 128,071 | |||
Gain on extinguishment of debt | 36,641 | $ 119,369 | ||||
Exercised | shares | (450,000) | |||||
Exercised (in dollars per share) | $ / shares | $ 0.01 | |||||
Total unrecognized estimated employee compensation cost | $ 458,722 | $ 458,722 | ||||
Recognized period | 4 years | |||||
Two Directors [Member] | ||||||
Exercised | shares | 450,000 | |||||
Exercised (in dollars per share) | $ / shares | $ 0.01 | |||||
Warrant [Member] | ||||||
Warrant term | 5 years | |||||
Value of shares issued for consultant service | $ 2,848 | |||||
Warrant [Member] | Maximum [Member] | ||||||
Number of shares called | shares | 5,725,312 | 5,725,312 | ||||
Warrants exercise price | $ / shares | $ 0.09 | |||||
Number of shares issued for consultant service | shares | 300,000 | |||||
Warrant [Member] | Minimum [Member] | ||||||
Warrants exercise price | $ / shares | $ 0.06 | |||||
Convertible Debentures [Member] | ||||||
Debt instrument, face amount | $ 130,777 | $ 130,777 | ||||
Number of common stock converted | N | 2,705,306 | |||||
Accrued interest paid | $ 27,062 | |||||
Number of common stock converted for accrued interest | shares | 528,609 | |||||
Gain on extinguishment of debt | $ 119,369 |
Shareholders' Deficit (Details)
Shareholders' Deficit (Details) - Jun. 30, 2015 - Warrant [Member] - $ / shares | Total |
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward] | |
Outstanding at January 1, 2015 | 103,430,075 |
Granted | 6,025,312 |
Exchanged cancelled | 0 |
Exchanged issued | 0 |
Cancelled | (9,459,694) |
Exercised | 0 |
Outstanding at June 30, 2015 | 99,995,693 |
Exercisable at June 30, 2015 | 99,995,693 |
Share Based Compensation Arrangement by Share Based Payment Award Equity Instruments Other Than Options Nonvested Weighted Average Exercise Price [Roll Forward] | |
Outstanding at January 1, 2015 | $ 0.11 |
Granted | 0.08 |
Exchanged cancelled | 0 |
Exchanged issued | 0 |
Cancelled | 0.31 |
Exercised | 0 |
Outstanding at June 30, 2015 | 0.08 |
Exercisable at June 30, 2015 | $ 0.08 |
Shareholders' Deficit (Detail30
Shareholders' Deficit (Details 1) - Jun. 30, 2015 - USD ($) | Total | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward] | ||
Outstanding at January 1, 2015 | 34,293,800 | |
Granted | 5,900,002 | |
Cancelled | (25,000) | |
Exercised | (450,000) | |
Outstanding at June 30, 2015 | 39,718,802 | |
Exercisable at June 30, 2015 | 18,454,489 | |
Weighted average fair value of options granted during the period | 5,900,002 | |
Weighted Average Exercise Price Per Share | ||
Outstanding at January 1, 2015 | $ 0.02 | |
Granted | 0.01 | |
Cancelled | 0.90 | |
Exercised | 0.01 | |
Outstanding at June 30, 2015 | 0.02 | |
Exercisable at June 30, 2015 | 0.02 | |
Weighted average fair value of options granted during the period | $ 0.01 | |
Weighted Average Remaining Contractual Term (years) | ||
Outstanding at January 1, 2015 | 8 years 8 months 26 days | |
Granted | 9 years 7 months 9 days | |
Outstanding at June 30, 2015 | 8 years 7 months 27 days | |
Exercisable at June 30, 2015 | 8 years 6 months 21 days | |
Aggregate Intrinsic Value | ||
Outstanding at June 30, 2015 | [1] | $ 54,500 |
Exercisable at June 30, 2015 | [1] | $ 12,000 |
[1] | These amounts represent the excess, if any, between the exercise price and $0.01, the closing market price of the Company's common stock on June 30, 2015 as quoted on the Over-the-Counter Bulletin Board under the symbol "SCIE". |
Fair Value Measurements (Detail
Fair Value Measurements (Details) - Fair Value, Measurements, Recurring [Member] | Jun. 30, 2015USD ($) |
Total Liability | $ 1,786,154 |
Derivative liability [Member] | |
Total Liability | 1,024,763 |
Warrant liability [Member] | |
Total Liability | 761,391 |
Quoted Prices in Active Markets for Identical Assets (Level 1)[Member] | |
Total Liability | 0 |
Quoted Prices in Active Markets for Identical Assets (Level 1)[Member] | Derivative liability [Member] | |
Total Liability | 0 |
Quoted Prices in Active Markets for Identical Assets (Level 1)[Member] | Warrant liability [Member] | |
Total Liability | 0 |
Significant Other Observable Inputs (Level 2) [Member] | |
Total Liability | 0 |
Significant Other Observable Inputs (Level 2) [Member] | Derivative liability [Member] | |
Total Liability | 0 |
Significant Other Observable Inputs (Level 2) [Member] | Warrant liability [Member] | |
Total Liability | 0 |
Significant Unobservable Inputs (Level 3) [Member] | |
Total Liability | 1,786,154 |
Significant Unobservable Inputs (Level 3) [Member] | Derivative liability [Member] | |
Total Liability | 1,024,763 |
Significant Unobservable Inputs (Level 3) [Member] | Warrant liability [Member] | |
Total Liability | $ 761,391 |
Fair Value Measurements (Deta32
Fair Value Measurements (Details 1) - USD ($) | 6 Months Ended | 12 Months Ended | |
Jun. 30, 2015 | Dec. 31, 2014 | ||
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | |||
Balance | $ 1,061,839 | $ 1,104,423 | |
Initial value on issuance of debt | 381,824 | ||
Change in estimated fair value | (400,223) | (154,898) | |
Balance | 1,786,154 | 1,061,839 | |
Significant Unobservable Inputs (Level 3) [Member] | |||
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | |||
Balance | 1,061,839 | ||
Elimination on extinguishment of debt | (57,732) | ||
Initial value on issuance of debt | 381,824 | ||
Change in estimated fair value | [1] | 400,223 | |
Balance | 1,786,154 | 1,061,839 | |
Significant Unobservable Inputs (Level 3) [Member] | Warrant liability [Member] | |||
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | |||
Balance | $ 764,958 | ||
Elimination on extinguishment of debt | |||
Initial value on issuance of debt | |||
Change in estimated fair value | [1] | $ (3,567) | |
Balance | 761,391 | 764,958 | |
Significant Unobservable Inputs (Level 3) [Member] | Derivative liability [Member] | |||
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | |||
Balance | 296,881 | ||
Elimination on extinguishment of debt | (57,732) | ||
Initial value on issuance of debt | 381,824 | ||
Change in estimated fair value | [1] | 403,790 | |
Balance | $ 1,024,763 | $ 296,881 | |
[1] | Included in the Condensed Statements of Operation on the line "Change in fair value of derivative and warrant liabilities." |
Fair Value Measurements (Deta33
Fair Value Measurements (Details 2) - Jun. 30, 2015 - $ / shares | Total |
Derivative liability [Member] | |
Expected term | 1 year |
Expected dividends | 0.00% |
Forfeitures | 0.00% |
Derivative liability [Member] | Maximum [Member] | |
Exercise price | $ 0.099 |
Expected volatility | 294.00% |
Risk-free interest rate | 0.28% |
Derivative liability [Member] | Minimum [Member] | |
Exercise price | $ 0.01 |
Expected volatility | 286.00% |
Risk-free interest rate | 0.22% |
Warrant liability [Member] | |
Expected term | 5 years |
Expected dividends | 0.00% |
Forfeitures | 0.00% |
Warrant liability [Member] | Maximum [Member] | |
Exercise price | $ 0.1287 |
Expected volatility | 221.00% |
Risk-free interest rate | 1.63% |
Warrant liability [Member] | Minimum [Member] | |
Exercise price | $ 0.075 |
Expected volatility | 219.00% |
Risk-free interest rate | 1.32% |
Subsequent Events (Details Narr
Subsequent Events (Details Narrative) | 1 Months Ended | 2 Months Ended | ||
Jul. 31, 2015USD ($)N | Aug. 31, 2015USD ($)N$ / sharesshares | Jun. 30, 2015USD ($) | Dec. 31, 2014USD ($) | |
Debt face amount | $ 53,889 | $ 128,071 | ||
Subsequent Event [Member] | 10% Unsecured Convertible Debentures [Member] | Accredited Investor [Member] | ||||
Debt face amount | $ 277,778 | |||
Aggregate consideration | $ 250,000 | |||
Maturity period | 12 months | |||
Conversion price (in dollars per share) | $ / shares | $ .045 | |||
Number of shares converted | N | 6,172,840 | |||
Net cash proceeds | $ 230,000 | |||
Fees and expenses | $ 20,000 | |||
Warrant term | 5 years | |||
Number of shares called | shares | 3,086,420 | |||
Exercise price (in dollars per share) | $ / shares | $ 0.090 | |||
Subsequent Event [Member] | Variable Debentures [Member] | ||||
Debt face amount | $ 74,500 | |||
Number of notes | N | 2 | |||
Description of repayment terms | Repaid for $85,675 to $104,300 if paid within 90-180 days. If paid subsequent to 180 days, the notes are convertible into common stock at a discount to the market price. Management estimates that the notes will be paid within the 90-180 days. |